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Regional Policy Design: An Analysis of Relocation, Efficiency and Equity

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  • Ulltveit-Moe, Karen Helene

Abstract

Despite substantial regional expenditures at both national and community level, European regional policies do not appear to deliver. The evidence suggests that neither efficiency gains nor reduced regional inequalities are attained. If there is any positive impact at all, then it is at the most a redistributional one. If transfers are mainly redistributional in nature, would policies based on non-distortionary financing be a better route to follow? We ask what are the alternatives to a distortionary regional policy forcing the delocation of activity. Are non-distortionary policies always more efficient than distortionary alternatives? We analyse these questions employing a new economic geography model, where we also take into account the importance of knowledge spillovers for productivity, industry location and policy. It is shown that the effectiveness of different regional policy depends on (i) intra-industry knowledge spillovers, (ii) inter-industry knowledge spillovers, and (iii) trade costs. Our analysis provides insight into what may be the reason for the lack of success of EU regional initiative.

Suggested Citation

  • Ulltveit-Moe, Karen Helene, 2004. "Regional Policy Design: An Analysis of Relocation, Efficiency and Equity," CEPR Discussion Papers 4321, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:4321
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    Cited by:

    1. Sheard, Nicholas, 2011. "Regional Policy in a Multiregional Setting: When the Poorest are Hurt by Subsidies," Research Papers in Economics 2011:11, Stockholm University, Department of Economics.
    2. Stilianos Alexiadis & Konstantinos Eleftheriou, 2011. "A note on the relation between inter-regional inequality and economic efficiency: evidence from the US states," Regional Science Policy & Practice, Wiley Blackwell, vol. 3(1), pages 37-44, March.
    3. Patricio Aroca & Carlos Azzoni & Mauricio Sarrias, 2018. "Regional concentration and national economic growth in Brazil and Chile," Letters in Spatial and Resource Sciences, Springer, vol. 11(3), pages 343-359, October.
    4. Gallo, Fredrik, 2010. "Resisting economic integration when industry location is uncertain," European Economic Review, Elsevier, vol. 54(3), pages 467-482, April.
    5. Becker, Johannes & Fuest, Clemens, 2010. "EU regional policy and tax competition," European Economic Review, Elsevier, vol. 54(1), pages 150-161, January.
    6. Andra-Madalina, PANTILIE, 2014. "Economic Development From The Perspective Of Regional Policies," Management Strategies Journal, Constantin Brancoveanu University, vol. 26(4), pages 104-110.
    7. Joeri Gorter & S. Brakman & Albert van der Horst & H.F.L. Garretsen & M. Schram, 2005. "New economic geography, empirics, and regional policy," CPB Special Publication 56, CPB Netherlands Bureau for Economic Policy Analysis.
    8. Alexiadis, Stilianos & Eleftheriou, Konstantinos, 2010. "The ‘Trade-off’ between Spatial Equity and Economic Efficiency Revisited: Evidence from the US States," MPRA Paper 24372, University Library of Munich, Germany.
    9. Schaeffer, Y. & Charlot, S., 2012. "Inequality aversion, income redistribution and economic geography," Working Papers 201204, Grenoble Applied Economics Laboratory (GAEL).
    10. Nicholas Sheard, 2012. "Regional policy in a multiregional setting: when the poorest are hurt by subsidies," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 148(2), pages 403-423, June.
    11. Julián Ramajo & José Manuel Cordero & Miguel Ángel Márquez, 2017. "European regional efficiency and geographical externalities: a spatial nonparametric frontier analysis," Journal of Geographical Systems, Springer, vol. 19(4), pages 319-348, October.
    12. Luisa Alamá-Sabater & Yolanda de Llanos & Miguel Á. Márquez & Emili Tortosa-Ausina, 2025. "Evaluating the spatial mismatch between population and factor endowments: The case of the European Union," Regional Studies, Taylor & Francis Journals, vol. 59(1), pages 2387811-238, December.
    13. Dietmar Meyer & Jörg Lackenbauer, 2005. "EU cohesion policy and the equity-efficiency trade-off - Adding dynamics to Martin's model," ERSA conference papers ersa05p564, European Regional Science Association.
    14. Sergio Destefanis & Vania Sena, 2009. "Public capital, productivity and trade balances: some evidence for the Italian regions," Empirical Economics, Springer, vol. 37(3), pages 533-554, December.

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    JEL classification:

    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)
    • R13 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General Equilibrium and Welfare Economic Analysis of Regional Economies
    • R30 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - General
    • R50 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - General

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