GEOGRAPHICAL INCOME DISPARITIES WITHIN COUNTRIES: IS REGIONAL DEVELOPMENT POLICY THE ANSWER? - PowerPoint PPT Presentation

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GEOGRAPHICAL INCOME DISPARITIES WITHIN COUNTRIES: IS REGIONAL DEVELOPMENT POLICY THE ANSWER?

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GEOGRAPHICAL INCOME DISPARITIES WITHIN COUNTRIES: IS REGIONAL DEVELOPMENT POLICY THE ANSWER? What is regional policy? Is there a convincing case for regional policy? – PowerPoint PPT presentation

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Title: GEOGRAPHICAL INCOME DISPARITIES WITHIN COUNTRIES: IS REGIONAL DEVELOPMENT POLICY THE ANSWER?


1
GEOGRAPHICAL INCOME DISPARITIES WITHIN COUNTRIES
IS REGIONAL DEVELOPMENT POLICY THE ANSWER?
  • What is regional policy?
  • Is there a convincing case for regional policy?
  • What form should regional policy take?
  • Regional policy in practice success or failure?
  • Lessons for the future

2
WHAT IS REGIONAL POLICY?
  • Initially
  • - labour migration
  • - Special Areas
  • - location controls
  • Current
  • - FDI
  • - indigenous growth
  • - human capital
  • - de-centralisation

3
DO WE NEED A REGIONAL POLICY? THE CASE AGAINST
  • Unnecessary automatic convergence
  • - but convergence is very slow
  • Intervention is harmful
  • Regional policy has failed
  • - but expenditure has been very
  • low
  • Should stimulate out-migration
  • - but problems for origin and
  • destination regions

4
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5
THE CASE FOR REGIONAL POLICY
  • Regional convergence not inevitable
  • Equity
  • Unemployment lost output
  • Jobs training competitiveness

6
  • Social benefits
  • Net migration flows
  • (cumulative causation)
  • - selectivity may harm origin region
  • - population pressure in destination
  • region
  • Political cohesion
  • A zero sum game or real benefits?

7
REGIONAL POLICY OPTIONS
  • Market-based
  • - labour market flexibility
  • Government intervention
  • - to stimulate private sector
  • investment
  • Fiscal transfers

8
GOVERNMENT INTERVENTION
  • Objective to improve competitiveness
  • - private investment in industry
  • - public investment in
  • infrastructure
  • - public investment in human
  • capital

9
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10
REGIONAL POLICY IN PRACTICESUCCESSES AND
FAILURES
  • Location controls
  • - highly effective but adverse
  • effects
  • Investment incentives
  • - automatic costly deadweight
  • - discretionary good value
  • (strict criteria)
  • e.g. only 20 deadweight
  • cost / job 1/3 un-benefit
  • - failure to support incentives in
  • 1990s

11
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12
FDI
  • Rapid growth in 1990s
  • Increasingly important source of private
    investment for assisted areas (50 of grants to
    FDI in 1990s)
  • Seduced by wide range of policy instruments
  • - sites, subsidies, infrastructure, agencies
  • assisted areas highly successful in attracting FDI

13
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14
  • FDI into China
  • - domination of coastal Provinces
  • (economic development zones)
  • - inland Provinces need
  • infrastructure (low land labour
  • costs not enough)

15
INDIGENOUS REGIONAL DEVELOPMENT
  • Switch in policy to SMEs
  • - growth of interest in new small
  • firms (entrepreneurial, flexible,
  • innovative, competitive)
  • Spatial dispersion in NFF
  • - highly correlated with
  • unemployment skill
  • - need to stimulate NFF in high
  • unemployment regions (loans,
  • workshops, grants, advice)
  • - spatial correlation is static

16
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17
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18
COMMUNITY DEVELOPMENT INITIATIVES
  • Target most deprived localities
  • Small scale but growing
  • Bottom-up to engage local community
  • Focus is on economically inactive

19
  • Experimenting with new approaches
  • - step-by-step
  • - voluntary work
  • - intermediate labour market
  • - quasi-currencies (hours worked
  • credits)
  • Successful?
  • - too early to tell
  • - too few evaluations
  • - but low cost, good response
  • from local communities

20
LESSONS FOR THE FUTURE
  • 1. Location controls
  • - unlikely to be acceptable
  • - congestion / pollution taxes
  • more likely
  • 2. Investment incentives
  • - automatic grants only for small
  • firms
  • - discretionary grants should be
  • extended
  • 3. FDI
  • - crucial for assisted areas
  • - how can developing countries get
  • a bigger share?

21
  • 4. New small firms
  • - success national not regional
  • - scope for greater regional
  • discrimination
  • - must accept small firms are
  • vulnerable
  • - need to find target more
  • venture capital
  • 5. CED initiatives
  • - gaining in popularity
  • - local projects need kick-start
  • and sustained help

22
  • 6. Infrastructure
  • - attractiveness of lagging
  • regions is critical
  • - need both physical
  • infrastructure and investment in
  • education and training
  • 7. Geography
  • - spatial concentration needed to
  • benefit from localisation
  • economies
  • - spatial disparities inevitable
  • within regions

23
CONCLUSIONS
  • 1. Regional income disparities will not go away
  • 2. Concern is with relative not absolute
    disparities
  • 3. Governments becoming increasingly sensitive to
    spatial inequalities
  • 4. Regional policy offers possibility of
    efficiency gains
  • 5. Regional policy is not a temporary fix

24
  • Some further questions
  • Is regional policy a luxury that only rich
    nations can afford?
  • Can poor nations benefit from regional policy or
    should they simply ignore the consequences of
    their economic development policies for regional
    income disparities?
  • Can any country afford not to have a regional
    policy given the increasing demand at 'regional'
    level for greater involvement in economic
    development issues?
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