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Regional policy design : an analysis of relocation, efficiency and equity

Midelfart, Karen Helene
Working paper
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URI
http://hdl.handle.net/11250/163288
Date
2004-02
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  • Discussion papers (SAM) [586]
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 analyze

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.
Publisher
Norwegian School of Economics and Business Administration. Department of Economics
Series
Discussion paper
2004:5

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