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Public Policies, Regional Inequalities and Growth

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  • Philippe Martin

    (CEPR - Center for Economic Policy Research)

Abstract

This paper constructs a two-region endogenous growth model where industrial location and public infrastructures play a key role. The model analyzes the contribution of different types of public policies on growth, economic geography and spatial income distribution. It implies that an improvement in infrastructures that reduces transaction costs inside the poorest region decreases both the spatial concentration of industries, and the growth rate, and increases the income gap between the two regions. Conversely, an improvement in infrastructure facilitating transactions between regions has the reverse effect. In this sense, the paper highlights a trade-off between growth and the spatial distribution of economic activities. Contrary to transfers and traditional regional policies, it is shown that public policies that reduce the cost of innovation can attain the objectives of higher growth and more even spatial distribution of both income and economic activities. From that point of view, these policies seem preferable to the regional policies now implemented in Europe.

Suggested Citation

  • Philippe Martin, 1999. "Public Policies, Regional Inequalities and Growth," Post-Print hal-03609271, HAL.
    • Handle: RePEc:hal:journl:hal-03609271
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    JEL classification:

    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)
    • R58 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Regional Development Planning and Policy

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