IDEAS home Printed from https://ideas.repec.org/p/zbw/kitwps/142.html
   My bibliography  Save this paper

Institutional design and spatial (in)equality: The Janus face of economic integration

Author

Listed:
  • Ott, Ingrid
  • Soretz, Susanne

Abstract

This paper analyzes within a spatial endogenous growth setting the impact of public policy coordination on agglomeration. Governments in each of the two symmetric regions provide a local public input that becomes globally effective due to integration. Micro-foundation of governmental behavior is based on three different coordination schemes: autarky, full or partial coordination. Scale effects act as agglomeration force and in addition to private capital agglomeration increase the concentration of the public input. Integration promotes dispersion forces with respect to the distribution of physical capital which are based on decreasing private returns. However, within the governments' decision on the concentration of the public input, increasing integration reinforces agglomeration because it promotes the interregional productive use of the public input. Taking feedback effects between the private and the public sector into account leads to mutual reinforcement, hence agglomeration forces almost always dominate and the spreading equilibrium becomes unstable. If convergence is a separate (additional) political objective, it needs sustained additional political effort.

Suggested Citation

  • Ott, Ingrid & Soretz, Susanne, 2020. "Institutional design and spatial (in)equality: The Janus face of economic integration," Working Paper Series in Economics 142, Karlsruhe Institute of Technology (KIT), Department of Economics and Management.
    • Handle: RePEc:zbw:kitwps:142
    DOI: 10.5445/IR/1000122442
    as

    Download full text from publisher

    File URL: https://www.econstor.eu/bitstream/10419/222926/1/1726607240.pdf
    Download Restriction: no
    File URL: https://libkey.io/10.5445/IR/1000122442?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Romer, Paul M, 1986. "Increasing Returns and Long-run Growth," Journal of Political Economy, University of Chicago Press, vol. 94(5), pages 1002-1037, October.
    2. Steven Brakman & Harry Garretsen (ed.), 2008. "Foreign Direct Investment and the Multinational Enterprise," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262026457, April.
    3. Chatterjee, Santanu, 2005. "Capital utilization, economic growth and convergence," Journal of Economic Dynamics and Control, Elsevier, vol. 29(12), pages 2093-2124, December.
    4. Francisco L. Rivera-Batiz & Luis A. Rivera-Batiz, 2018. "Economic Integration and Endogenous Growth," World Scientific Book Chapters, in: Francisco L Rivera-Batiz & Luis A Rivera-Batiz (ed.), International Trade, Capital Flows and Economic Development, chapter 1, pages 3-32, World Scientific Publishing Co. Pte. Ltd..
    5. Sala-i-Martin, Xavier X., 1996. "Regional cohesion: Evidence and theories of regional growth and convergence," European Economic Review, Elsevier, vol. 40(6), pages 1325-1352, June.
    6. Santanu Chatterjee & Sugata Ghosh, 2011. "The dual nature of public goods and congestion: the role of fiscal policy revisited," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 44(4), pages 1471-1496, November.
    7. Henderson, J V, 1974. "The Sizes and Types of Cities," American Economic Review, American Economic Association, vol. 64(4), pages 640-656, September.
    8. Norman Gemmell & Richard Kneller & Ismael Sanz, 2016. "Does the Composition of Government Expenditure Matter for Long-Run GDP Levels?," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 78(4), pages 522-547, August.
    9. Masahisa Fujita & Paul Krugman & Anthony J. Venables, 2001. "The Spatial Economy: Cities, Regions, and International Trade," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262561476, April.
    10. Krugman, Paul, 1991. "Increasing Returns and Economic Geography," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 483-499, June.
    11. Deeken, Tim & Ott, Ingrid, 2014. "Integration as a spatial institution: Implications for agglomeration and growth," Working Paper Series in Economics 59, Karlsruhe Institute of Technology (KIT), Department of Economics and Management.
    12. Jorgen Mortensen, 2013. "Economic Policy Coordination in the EMU: From Maastricht via SGP to the Fiscal Pact," CASE Network Studies and Analyses 0459, CASE-Center for Social and Economic Research.
    13. Brakman, Steven & Garretsen, Harry & Marrewijk, Charles van, 2002. "Locational competition and agglomeration: the role of government spending," CCSO Working Papers 200209, University of Groningen, CCSO Centre for Economic Research.
    14. Mr. Jonathan David Ostry & Mr. Atish R. Ghosh, 2013. "Obstacles to International Policy Coordination, and How to Overcome Them," IMF Staff Discussion Notes 2013/011, International Monetary Fund.
    15. repec:dgr:rugsom:02c75 is not listed on IDEAS
    16. Ott, Ingrid & Soretz, Susanne, 2010. "Productive public input, integration and agglomeration," Regional Science and Urban Economics, Elsevier, vol. 40(6), pages 538-549, November.
    17. Barro, Robert J, 1990. "Government Spending in a Simple Model of Endogenous Growth," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages 103-126, October.
    18. Chatterjee, Santanu & Turnovsky, Stephen J., 2012. "Infrastructure and inequality," European Economic Review, Elsevier, vol. 56(8), pages 1730-1745.
    19. Michael Bleaney & Norman Gemmell & Richard Kneller, 2001. "Testing the endogenous growth model: public expenditure, taxation, and growth over the long run," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 34(1), pages 36-57, February.
    20. Adam, Christopher S. & Bevan, David L., 2005. "Fiscal deficits and growth in developing countries," Journal of Public Economics, Elsevier, vol. 89(4), pages 571-597, April.
    21. Diego Puga, 2002. "European regional policies in light of recent location theories," Journal of Economic Geography, Oxford University Press, vol. 2(4), pages 373-406, October.
    22. F. A. Lutz, 1961. "The Theory of Capital," International Economic Association Series, Palgrave Macmillan, number 978-1-349-08452-4 edited by D. C. Hague, December.
    23. Marcus Miller & Mark Salmon, 1985. "Policy Coordination and Dynamic Games," NBER Chapters, in: International Economic Policy Coordination, pages 184-227, National Bureau of Economic Research, Inc.
    24. Mr. Jaromir Benes & Mr. Michael Kumhof & Mr. Douglas Laxton & Mr. Dirk V Muir & Susanna Mursula, 2013. "The Benefits of International Policy Coordination Revisited," IMF Working Papers 2013/262, International Monetary Fund.
    25. Hirte, Georg & Lessmann, Christian & Seidel, André, 2020. "International trade, geographic heterogeneity and interregional inequality," European Economic Review, Elsevier, vol. 127(C).
    26. Martin, Philippe & Rogers, Carol Ann, 1995. "Industrial location and public infrastructure," Journal of International Economics, Elsevier, vol. 39(3-4), pages 335-351, November.
    27. Tushar Bharati & Mohammad Farhad & Michael Jetter, 2023. "On the relationship between trade openness and government size," The World Economy, Wiley Blackwell, vol. 46(7), pages 2102-2133, July.
    28. Manfred M. Fischer & Peter Nijkamp (ed.), 2014. "Handbook of Regional Science," Springer Books, Springer, edition 127, number 978-3-642-23430-9, December.
    29. repec:dgr:rugccs:200209 is not listed on IDEAS
    30. Mr. Jeffrey R. Franks & Ms. Bergljot B Barkbu & Mr. Rodolphe Blavy & William Oman & Hanni Schoelermann, 2018. "Economic Convergence in the Euro Area: Coming Together or Drifting Apart?," IMF Working Papers 2018/010, International Monetary Fund.
    31. Mr. Hyun Park, 2006. "Expenditure Composition and Distortionary Tax for Equitable Economic Growth," IMF Working Papers 2006/165, International Monetary Fund.
    32. Brakman,Steven & Garretsen,Harry & van Marrewijk,Charles, 2009. "The New Introduction to Geographical Economics," Cambridge Books, Cambridge University Press, number 9780521875325, December.
    33. Jonathan David Ostry & Atish R. Ghosh, 2013. "Obstacles to International Policy Coordination, and How to Overcome Them," IMF Staff Discussion Notes 13/11, International Monetary Fund.
    34. Nicholas Kaldor, 1961. "Capital Accumulation and Economic Growth," International Economic Association Series, in: D. C. Hague (ed.), The Theory of Capital, chapter 0, pages 177-222, Palgrave Macmillan.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Soretz, Susanne & Ott, Ingrid, 2019. "Public expenditure, policy coordination, and regional inequality," VfS Annual Conference 2019 (Leipzig): 30 Years after the Fall of the Berlin Wall - Democracy and Market Economy 203624, Verein für Socialpolitik / German Economic Association.
    2. Ott, Ingrid & Soretz, Susanne, 2014. "Public policies, growth, and agglomeration," VfS Annual Conference 2014 (Hamburg): Evidence-based Economic Policy 100573, Verein für Socialpolitik / German Economic Association.
    3. Ott, Ingrid & Soretz, Susanne, 2010. "Productive public input, integration and agglomeration," Regional Science and Urban Economics, Elsevier, vol. 40(6), pages 538-549, November.
    4. Deeken, Tim & Ott, Ingrid, 2014. "Integration as a spatial institution: Implications for agglomeration and growth," Working Paper Series in Economics 59, Karlsruhe Institute of Technology (KIT), Department of Economics and Management.
    5. Ingrid Ott & Susanne Soretz, 2006. "Governmental activity, integration, and agglomeration," Working Paper Series in Economics 57, University of Lüneburg, Institute of Economics.
    6. Edgar Morgenroth, 2003. "What should Policy Makers Learn from Recent Advances in Growth Theory and New Economic Geography?," Papers WP150, Economic and Social Research Institute (ESRI).
    7. repec:ebl:ecbull:v:2:y:2002:i:1:p:1-15 is not listed on IDEAS
    8. Aykut Kibritçioglu, 2002. "On the Smithian origins of "new" trade and growth theories," Economics Bulletin, AccessEcon, vol. 2(1), pages 1-15.
    9. Tuan T. Chu & Jens Hölscher & Dermot McCarthy, 2020. "The impact of productive and non-productive government expenditure on economic growth: an empirical analysis in high-income versus low- to middle-income economies," Empirical Economics, Springer, vol. 58(5), pages 2403-2430, May.
    10. Wolfgang Eggert & Maximilian Von Ehrlich & Robert Fenge & Günther König, 2007. "Konvergenz‐ und Wachstumseffekte der europäischen Regionalpolitik in Deutschland," Perspektiven der Wirtschaftspolitik, Verein für Socialpolitik, vol. 8(2), pages 130-146, March.
    11. Eddery Lam & Chi-Yin Wu, 2016. "The Economics of Inter-City Competition in Financial and Distribution Markets," Journal of Economics and Management, College of Business, Feng Chia University, Taiwan, vol. 12(1), pages 85-117, February.
    12. Gianni Carvelli, 2023. "The long-run effects of government expenditure on private investments: a panel CS-ARDL approach," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 47(3), pages 620-645, September.
    13. Ortiz Quevedo Carlos Humberto & Jiménez Restrepo Diana Marcela, 2015. "El Crecimiento Económico Y El Poder Adquisitivo En Colombia," Documentos de Trabajo 12887, Universidad del Valle, CIDSE.
    14. Marie-Eve Mulquin & Katja Senger, 2011. "Interregional transfers and economic convergence of regions," Serie Politique Economique 58, Université de Namur, Centre de Recherches en Economie Regionale et Politique Economique.
    15. Ageliki Anagnostou & Ioannis Panteladis & Maria Tsiapa, 2015. "Disentangling different patterns of business cycle synchronicity in the EU regions," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 42(3), pages 615-641, August.
    16. Alberto Franco Pozzolo, 2004. "Research and Development, Regional Spillovers and the Location of Economic Activities," Manchester School, University of Manchester, vol. 72(4), pages 463-482, July.
    17. Boiscuvier, Éléonore, 2001. "Innovation, intégration et développement régional," L'Actualité Economique, Société Canadienne de Science Economique, vol. 77(2), pages 255-280, juin.
    18. G Cameron, 1996. "Innovation and Economic Growth," CEP Discussion Papers dp0277, Centre for Economic Performance, LSE.
    19. Klenert, David & Mattauch, Linus & Edenhofer, Ottmar & Lessmann, Kai, 2018. "Infrastructure And Inequality: Insights From Incorporating Key Economic Facts About Household Heterogeneity," Macroeconomic Dynamics, Cambridge University Press, vol. 22(4), pages 864-895, June.
    20. Theodore Tsekeris & Klimis Vogiatzoglou, 2014. "Public infrastructure investments and regional specialization: empirical evidence from Greece," Regional Science Policy & Practice, Wiley Blackwell, vol. 6(3), pages 265-289, August.
    21. Wolfgang Polasek & Richard Sellner, 2013. "The Does Globalization Affect Regional Growth? Evidence for NUTS-2 Regions in EU-27," DANUBE: Law and Economics Review, European Association Comenius - EACO, issue 1, pages 23-65, March.

    More about this item

    Keywords

    income convergence; integration; micro foundation of public policy; policycoordination; productive public input; multiple equilibria; bifurcation; spatial economicgrowth; stability of spatial equilibrium; global public input;
    All these keywords.

    JEL classification:

    • H10 - Public Economics - - Structure and Scope of Government - - - General
    • E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
    • R50 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - General

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:zbw:kitwps:142. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ZBW - Leibniz Information Centre for Economics (email available below). General contact details of provider: https://edirc.repec.org/data/fwkitde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.