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Title:Growth effects of spatial redistribution policies PDF Logo
Authors:Arcalean, Calin
Glomm, Gerhard
Schiopu, Ioana Cosmina
Issue Date:2012
Series/Report no.:CESifo working paper: Public Finance 3728
Abstract: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, modelled 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.
Subjects:two-region economy
structural change
migration
regional policy
European Union
JEL:O10
H70
R58
R12
Document Type:Working Paper
Appears in Collections:CESifo Working Papers, CESifo Group Munich

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