Edited by Philip Cooke, Mario Davide Parrilli and José Luis Curbelo
Chapter 16: What Public Policies Can and Cannot do for Regional Development
Mikel Landabaso* Innovation is one of the most fundamental processes underpinning economic growth . . . The innovation process requires significant and appropriate public policy support to secure the social benefits it can deliver. (OECD, 2010, p. 15) Most economists, when confronted in the field with the challenge of designing regional economic development policies, would acknowledge the sheer difficulty of the task due to its complexity and multifaceted character. Most would focus on one particular aspect of the economic development process with the result being an economic analysis and policy choices based on a few interconnected economic problems. Most of the time we are aware of the limitations of our efforts and we feel somehow frustrated by our inability to apprehend the entire problem and provide a satisfactory response which will ‘solve it’. This begs the question: is calling for more labour market flexibility, deregulation, lower salaries and tax rebates to attract foreign direct investment, in regions with high levels of unemployment and little or no influence over macroeconomic policy tools, the best we can do to create jobs and stimulate economic growth? Are we in reality, simply asking the unemployed to emigrate, explaining, of course, that in time the market will adjust and that development will eventually take place in those regions they have left behind? This school of thought argues that after some unavoidable adjustments these regions will start catching up faster, surpassing others, and now ranked, in line with their comparative advantage (see for example World Bank, 2009). Graphs will...
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