The geography of inequalities in Europe Philippe Martin ... - ENPC

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Figure 6: GDP/head and regional disparities: 2000source: EurostatGDP/cap (EU=100)120110Neth.AustriaSweden Ger.100France UKFinlandItalyBelgium908070GreeceSpainPortugal605 15 25 35 45Disparities in GDP/head in PPS by region within member statesFigure 7: Growth and regional disparities: 1995-2000source EurostatGDP growth rate (in log)1,61,41,210,80,60,4AustriaItalyGreeceFranceGer.Port.SpainUKNeth.FinlandBelgiumSweden0 0,5 1 1,5 2 2,5 3annual growth rate of disparities in GDP/head by region withinmember stated (in log)The existence of such a tradeoff has consequences for the definition and quantification ofobjectives of regional policies in particular for the case of the new entrants. It implies that astrategic choice has to be made between the objective of lowering or stabilising the absolutedifferences in GDP per capita between regions inside countries and the objective of fast
convergence towards the rest of the EU. The decisions of which infrastructure projects to financeand where to locate them are obviously dependent on this strategic choice between external andinternal convergence. In this matter, an interesting choice was made by Ireland which decided tobe defined as a single NUTS II region rather than several small regions and therefore a highdegree of spatial inequalities. As emphasized by Davezies (1999), it therefore took the risk ofbeing more rapidly excluded from the benefit of the Structural Funds but it could choose todevelop projects in those regions which provided the highest national return.To sum up, spatial agglomeration of economic activities may (at least up to a certainpoint where congestion effects may become too large) have positive efficiency effects and maybe a welcome consequence of trade integration. This implies a trade-off for regional policiesbetween efficiency and equity.V. Inequalities between regions and inequalities between individualsThe equity motive behind regional policiesEquity is after efficiency the other traditional motivation of regional policies. Certaineconomic agents, be they workers or consumers, are not mobile and are therefore condemned tolive in poor or declining regions from which the mobile factors (capital and highly skilledworkers) have departed. Because of the lower labour demand in such regions, real wages willadjust downward, or, if real wages do not adjust because of labour market rigidities,unemployment will increase. In both cases, the welfare of the inhabitants will deteriorate. Asconsumers, those agents will also see their welfare deteriorate since certain goods and serviceswill no longer be produced locally (the businesses have left for more wealthy regions). In certaincases, in particular for certain services, the transaction costs will become so high that they can nolonger be consumed by those agents. Thus the diversity of consumable goods and services in thepoor region will decline. Moreover, the most mobile agents are in general those with the highestlevel of human capital (education, experience etc.). Such agents, thanks to the possession of“positive externalities” in the form of localized social interactions, have a positive impact on theproductivity and thus on the real wages of other workers. By leaving a region in decline, themost productive workers thus also have a negative impact on the productivity of the remaining
Page 7 and 8: average the regional inequality in
Page 9 and 10: in the three regions, or in only on
Page 11 and 12: Overall, this example suggests that
Page 13: appears (see Martin 1999a, b and Ba
Page 17 and 18: each earn 5.5 and 80% 1.5 so that t
Page 19 and 20: Table 2: Income inequality and spat
Page 21 and 22: example is the subsidy program prov
Page 23: - Dupont V. and P. Martin, 2003,

The geography of inequalities in Europe Philippe Martin ... - ENPC

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