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Regional redistribution and growth

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Abstract

In the last twenty years, Interregional Transfers in the form of public infrastructures have been used as an instrument to reduce regional disparities in output levels. In this paper we provide theoretical foundation on the effects of such transfers on both regional output and regional welfare disparities. We conduct our analysis in a multiregional framework considering a model with endogenous growth. Our results show that when increasing redistribution a reduction in regional output disparities might be compatible with a loss in total welfare, even in the recipient. This result is due to the fact that such transfers force a reallocation of factors of production towards those regions with lower productivities and this has a negative effect on the growth rate of the economy.

Suggested Citation

  • Joan Rosselló, 2003. "Regional redistribution and growth," Investigaciones Economicas, Fundación SEPI, vol. 27(2), pages 369-392, May.
  • Handle: RePEc:iec:inveco:v:27:y:2003:i:2:p:369-392
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    More about this item

    Keywords

    Interregional transfers; endogenous growth; public investment;

    JEL classification:

    • H54 - Public Economics - - National Government Expenditures and Related Policies - - - Infrastructures
    • H73 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Interjurisdictional Differentials and Their Effects
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes
    • R53 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Public Facility Location Analysis; Public Investment and Capital Stock

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