TY - JOUR
T1 - Growth effects of spatial redistribution policies
AU - Arcalean, Calin
AU - Glomm, Gerhard
AU - Schiopu, Ioana
N1 - Funding Information:
We thank Dan Knudsen, Jens Suedekum and participants at the Conference on Subsidiarity and Economic Reform in Europe, Brussels, 2006 for helpful feedback. We also thank Christoph Helbach and participants at the International Workshop on the Economics of Education at the University of Duisburg, an anonymous referee and the editor Paul Klein for insightful comments. Glomm acknowledges financial support for this research through a Faculty Summer Grant by the West European Studies at Indiana University . Arcalean and Schiopu acknowledge financial assistance from Banc Sabadell , Barcelona Graduate School of Economics and the Government of Catalonia. Arcalean also acknowledges support from the Spanish Ministry of Education and Science under the project ECO2011-2492. All remaining errors are our own.
PY - 2012/7
Y1 - 2012/7
N2 - Regional income disparities have increased in many European countries recently, even as national and supra-national policy instruments were created to correct them. To explain these evolutions, we develop a two-region, two-sector model with migration and public investment in infrastructure and education. Accumulation and creation of new ideas and technologies as well as migration are at the core of differential regional growth. In this framework, we assess the effectiveness of structural funds, modeled on the EU policy. In a numerical example calibrated to Portugal, we find that, to diminish the initial gap in income per capita, the backward region needs to receive over 8% of its own GDP in structural funds, while the actual disbursements were around 4%. We also find that maximizing innovation in the backward region conflicts in the short run with the goal of maximizing its income per capita. Moreover, the rich region has an incentive to bias the allocation of structural funds towards human capital formation.
AB - Regional income disparities have increased in many European countries recently, even as national and supra-national policy instruments were created to correct them. To explain these evolutions, we develop a two-region, two-sector model with migration and public investment in infrastructure and education. Accumulation and creation of new ideas and technologies as well as migration are at the core of differential regional growth. In this framework, we assess the effectiveness of structural funds, modeled on the EU policy. In a numerical example calibrated to Portugal, we find that, to diminish the initial gap in income per capita, the backward region needs to receive over 8% of its own GDP in structural funds, while the actual disbursements were around 4%. We also find that maximizing innovation in the backward region conflicts in the short run with the goal of maximizing its income per capita. Moreover, the rich region has an incentive to bias the allocation of structural funds towards human capital formation.
KW - European Union
KW - Migration
KW - Regional policy
KW - Structural change
KW - Two-region economy
UR - http://www.scopus.com/inward/record.url?scp=84860480501&partnerID=8YFLogxK
U2 - 10.1016/j.jedc.2012.01.004
DO - 10.1016/j.jedc.2012.01.004
M3 - Article
AN - SCOPUS:84860480501
SN - 0165-1889
VL - 36
SP - 988
EP - 1008
JO - Journal of Economic Dynamics and Control
JF - Journal of Economic Dynamics and Control
IS - 7
ER -