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EU regional policy and its theoretical foundations revisited

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  • Peter Schmidt

Abstract

This paper reconsiders the theoretical foundations of EU regional policy in economics. It begins with a discussion of the line of thought of its prevalent explanation in equilibrium economics which is focusing on market failures as its key underpinning and which is the major toolkit of economists for policy recommendations in this context. Subsequently, this view is contrasted with a non-equilibrium economics perspective on EU regional policy. Based on this, the existence of market failures and the relevance of equilibrium economics for a realistic understanding of and policy advice for EU regional policy are called into question. That is why, a more substantive politico-economic explanation and different policy conclusions for the regional policy of the EU are offered. The paper particularly focuses on the implications of the latter for the European Economic and Monetary Union in light of the persisting financial crisis and the vast economic disparities existing within it. Finally, the non-equilibrium economics perspective on EU regional policy is also animadverted, since market failure thinking still prevails in this branch of economics undermining its own criticism of equilibrium economics.

Suggested Citation

  • Peter Schmidt, 2014. "EU regional policy and its theoretical foundations revisited," ERSA conference papers ersa14p1560, European Regional Science Association.
  • Handle: RePEc:wiw:wiwrsa:ersa14p1560
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    File URL: http://www-sre.wu.ac.at/ersa/ersaconfs/ersa14/e140826aFinal01560.pdf
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    Cited by:

    1. Romeo-Victor Ionescu, 2016. "The Impact of the Regional Policy on the European Economy," EuroEconomica, Danubius University of Galati, issue 1(35), pages 26-35, may.
    2. Peter Schmidt, 2018. "Market failure vs. system failure as a rationale for economic policy? A critique from an evolutionary perspective," Journal of Evolutionary Economics, Springer, vol. 28(4), pages 785-803, September.
    3. Kalina Durova, 2018. "The impact of European Union funds on the economies of the Central and Eastern European countries," Economic Thought journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 1, pages 95-112.

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    More about this item

    Keywords

    circular and cumulative causation; structural funds; non-equilibrium economics; increasing returns; EU regional policy; market failures;
    All these keywords.

    JEL classification:

    • B52 - Schools of Economic Thought and Methodology - - Current Heterodox Approaches - - - Historical; Institutional; Evolutionary; Modern Monetary Theory;
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • H53 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Welfare Programs
    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General
    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General

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