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On the optimal design of place-based policies: A structural evaluation of EU regional transfers

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  • Yashar Blouri, Maximilian v. Ehrlich

Abstract

We quantify general equilibrium effects of place-based policies in a multiregion framework with mobility, trade and agglomeration economies. Using detailed data on EU transfers, we infer the local effects of different transfer types on productivity, income and transportation cost. Based on these estimates and the general equilibrium model we derive the spatial distribution of economic activity and the resulting aggregate welfare effects if (i) no transfers were paid and taxes set to zero, (ii) transfers were distributed uniformly, (iii) transfers were welfare-optimally distributed. Characterizing the optimal distributions, we reveal complementarities between transfer types and between transfers and local endowments.

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  • Yashar Blouri, Maximilian v. Ehrlich, 2017. "On the optimal design of place-based policies: A structural evaluation of EU regional transfers," Diskussionsschriften dp1702, Universitaet Bern, Departement Volkswirtschaft.
  • Handle: RePEc:ube:dpvwib:dp1702
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    Keywords

    economic geography; place-based policies; structural estimation; subsidies; public investments; European structural funds;

    JEL classification:

    • R10 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General
    • R50 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - General
    • F10 - International Economics - - Trade - - - General
    • F20 - International Economics - - International Factor Movements and International Business - - - General
    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General

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