Public Policies, Regional Inequalities and Growth

CEPR Discussion Paper Series No. 1841

Posted: 19 Sep 1998

See all articles by Philippe Martin

Philippe Martin

Ecole Nationale des Ponts et Chaussées (ENPC) - Centre d'Enseignement et de Recherche en Analyse Socio-Economique (CERAS); Centre for Economic Policy Research (CEPR)

Date Written: March 1998

Abstract

This paper constructs a two-region endogenous growth model, where economic geography and public infrastructures play a key role. The model allows us to analyze the contribution of different types of redistributive public policies on growth, industrial geography and spatial income distribution. An improvement of infrastructures that helps decrease transaction costs inside the richest region increases spatial concentration of industries, increases the growth rate, and decreases the gap in income between the two regions. An improvement in infrastructure in the poor region has the exact reverse effect. In this sense, the paper highlights a non-trivial political trade-off between growth and spatial distribution of economic activities. Contrary to transfers and traditional regional policies, it is shown that a public policy that reduces the cost of innovation can attain the objectives of higher growth and more even spatial distribution of incomes and economic activities. From that point of view, these policies seem preferable to the regional policies that are now implemented in Europe.

JEL Classification: O40, R12, R58

Suggested Citation

Martin, Philippe, Public Policies, Regional Inequalities and Growth (March 1998). CEPR Discussion Paper Series No. 1841. Available at SSRN: https://ssrn.com/abstract=106385

Philippe Martin (Contact Author)

Ecole Nationale des Ponts et Chaussées (ENPC) - Centre d'Enseignement et de Recherche en Analyse Socio-Economique (CERAS) ( email )

28, rue des Saints-Peres
75007 Paris
France
+33 1 4313 6385 (Phone)
+33 1 4313 6382 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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