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Chapter 23: Regional Policy: Rationale, Foundations and Measurement of its Effects
23 Regional policy: rationale, foundations and measurement of its eﬀects Jouke van Dijk, Henk Folmer and Jan Oosterhaven 23.1 Introduction Since the 1930s generations of policy-makers have developed and implemented regional policies for both economic (eﬃciency) and social (equity) reasons. As regards eﬃciency, regional disparities in, for instance, unemployment and per capita income often have negative eﬀects on the eﬃcient operation of the national and regional economy. Armstrong and Taylor (2000) give several arguments. The whole nation is better oﬀ when unemployed in regions with high unemployment become employed, if the possible loss of jobs in other regions is smaller. A redistribution of jobs may lower the number of hard to ﬁll vacancies in regions with low levels of unemployment. Other beneﬁts are an increase in gross domestic product (GDP) at the national and regional level, and lower costs of social security. A more equal spread of economic activities may also reduce the negative cost of congestion, such as traﬃc jams and environmental damage in the more densely populated regions of a country. Finally, smaller regional diﬀerences in unemployment may also reduce inﬂationary pressure. As regards equity, reducing interregional disparities may contribute to the general objective of reducing all kinds of unwanted inequality between individuals. In this respect, two classical dilemmas (Stilwell, 1972) are still relevant. First, there is the dilemma of ‘place prosperity versus people prosperity’. At ﬁrst instance, a direct targeting of individual inequities by means of, for instance,...
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