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Public Policies, Regional Inequalities and Growth

Author

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  • Philippe Martin

    (CEPR - Center for Economic Policy Research)

Abstract
This paper constructs a two-region endogenous growth model where industrial location and public infrastructures play a key role. The model analyzes the contribution of different types of public policies on growth, economic geography and spatial income distribution. It implies that an improvement in infrastructures that reduces transaction costs inside the poorest region decreases both the spatial concentration of industries, and the growth rate, and increases the income gap between the two regions. Conversely, an improvement in infrastructure facilitating transactions between regions has the reverse effect. In this sense, the paper highlights a trade-off between growth and the spatial distribution of economic activities. Contrary to transfers and traditional regional policies, it is shown that public policies that reduce the cost of innovation can attain the objectives of higher growth and more even spatial distribution of both income and economic activities. From that point of view, these policies seem preferable to the regional policies now implemented in Europe.

Suggested Citation

  • Philippe Martin, 1999. "Public Policies, Regional Inequalities and Growth," Post-Print hal-03609271, HAL.
    • Handle: RePEc:hal:journl:hal-03609271
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    References listed on IDEAS

    as
    1. Benabou, Roland, 1994. "Human capital, inequality, and growth: A local perspective," European Economic Review, Elsevier, vol. 38(3-4), pages 817-826, April.
    2. Philippe Martin, 1998. "Can Regional Policies Affect Growth and Geography in Europe?," Post-Print hal-03416388, HAL.
    3. Martin, Philippe & Ottaviano, Gianmarco I P, 2001. "Growth and Agglomeration," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 42(4), pages 947-968, November.
    4. Adam B. Jaffe & Manuel Trajtenberg & Rebecca Henderson, 1993. "Geographic Localization of Knowledge Spillovers as Evidenced by Patent Citations," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 108(3), pages 577-598.
    5. Philippe Martin & Gianmarco I.P. Ottaviano, 2021. "Growing locations: Industry location in a model of endogenous growth," World Scientific Book Chapters, in: Firms and Workers in a Globalized World Larger Markets, Tougher Competition, chapter 1, pages 3-24, World Scientific Publishing Co. Pte. Ltd..
    6. Flam, Harry & Helpman, Elhanan, 1987. "Industrial policy under monopolistic competition," Journal of International Economics, Elsevier, vol. 22(1-2), pages 79-102, February.
    7. Fujita,Masahisa & Thisse,Jacques-François, 2013. "Economics of Agglomeration," Cambridge Books, Cambridge University Press, number 9781107001411.
    8. Philippe Martin, 1998. "Can Regional Policies Affect Growth and Geography in Europe?," The World Economy, Wiley Blackwell, vol. 21(6), pages 757-774, August.
    9. Henderson, Vernon & Kuncoro, Ari & Turner, Matt, 1995. "Industrial Development in Cities," Journal of Political Economy, University of Chicago Press, vol. 103(5), pages 1067-1090, October.
    10. Dixit, Avinash K & Stiglitz, Joseph E, 1977. "Monopolistic Competition and Optimum Product Diversity," American Economic Review, American Economic Association, vol. 67(3), pages 297-308, June.
    11. Audretsch, David B & Feldman, Maryann P, 1996. "R&D Spillovers and the Geography of Innovation and Production," American Economic Review, American Economic Association, vol. 86(3), pages 630-640, June.
    12. Ciccone, Antonio & Hall, Robert E, 1996. "Productivity and the Density of Economic Activity," American Economic Review, American Economic Association, vol. 86(1), pages 54-70, March.
    13. Krugman, Paul, 1991. "Increasing Returns and Economic Geography," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 483-499, June.
    14. Glaeser, Edward L & Hedi D. Kallal & Jose A. Scheinkman & Andrei Shleifer, 1992. "Growth in Cities," Journal of Political Economy, University of Chicago Press, vol. 100(6), pages 1126-1152, December.
      • Edward L. Glaeser & Hedi D. Kallal & Jose A. Scheinkman & Andrei Shleifer, 1991. "Growth in Cities," NBER Working Papers 3787, National Bureau of Economic Research, Inc.
      • Glaeser, Edward Ludwig & Kallal, Hedi D. & Scheinkman, Jose A. & Shleifer, Andrei, 1992. "Growth in Cities," Scholarly Articles 3451309, Harvard University Department of Economics.
    15. Richard E. Baldwin & Philippe Martin & Gianmarco I. P. Ottaviano, 2021. "Global Income Divergence, Trade, and Industrialization: The Geography of Growth Take-Offs," World Scientific Book Chapters, in: Firms and Workers in a Globalized World Larger Markets, Tougher Competition, chapter 2, pages 25-57, World Scientific Publishing Co. Pte. Ltd..
    16. Baldwin, Richard E., 1999. "Agglomeration and endogenous capital," European Economic Review, Elsevier, vol. 43(2), pages 253-280, February.
    17. Kiminori Matsuyama & Takaaki Takahashi, 1998. "Self-Defeating Regional Concentration," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 65(2), pages 211-234.
    18. Martin, Philippe & Rogers, Carol Ann, 1995. "Industrial location and public infrastructure," Journal of International Economics, Elsevier, vol. 39(3-4), pages 335-351, November.
    19. Roland Benabou, 1993. "Workings of a City: Location, Education, and Production," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 108(3), pages 619-652.
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    More about this item

    Keywords

    Growth; Geography; Infrastructure; Income inequalities; Public policies; Innovation;
    All these keywords.

    JEL classification:

    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)
    • R58 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Regional Development Planning and Policy

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