policymakers demonstrate

358 Stef Proost and Jacques-François Thisse
welfare state is to reduce interpersonal inequalities that run counter to the principles
of social justice, and these principles do not refer to particular spatial
entities.
3. A key difficulty highlighted by NEG is that small differences may be sufficient
to trigger regional divergence. This leads to the following question: When
do small differences matter? As pointed out by Duranton et al. (2010), great
places are great because ‘they have managed to periodically reinvent themselves
after losing an important part of the economic fabric’. Since the reasons
for the success of these cities are often region or country-specific, it would be
futile to seek a universal recipe. Yet a few general principles may serve as a
guide. The historical and social background of a region, its economic strengths
and weaknesses, its education system, and its portfolio of amenities are the fundamental
ingredients to be accounted for when designing local development
policies.
Very much like firms that differentiate their products to relax competition,
regions must avoid head-to-head (fiscal) competition with well-established
areas. Instead, regional development strategies should identify areas of specialization
that exploit local sources of uniqueness. The aim of these strategies
is to strengthen regions’ comparative advantages and to give priority to finding
sustainable solutions to regions’ weakest links. For example, by differentiating
the infrastructure services they provide, regions can create niches that make
them attractive to a certain type of firms, which need not be high-tech firms.
The scope for such a strategy is increasing as the revolution in information
and communication technology has shifted firms’ needs towards more specialized
inputs. Implementing such a policy requires precise assessments of the
strengths and weaknesses of the regional socio-economic and political fabric.
For this to be possible, better data must be made available at various levels
(regional, local, household).
4. One should also bear in mind that a spray-gun distribution of increasingreturns
activities results in high investment expenditure and/or underutilization
of infrastructure and facilities. Spatial dispersion of public investments is often
inefficient because it prevents activities from reaching the critical mass needed
to be efficient enough to compete on the national or international marketplace.
What is more, for infrastructures to have an impact on the space-economy, they
must be available in only a few places. Once they become widespread across
locations, their impact is negligible because they no longer matter when firms
and workers compare different locations. This is one more reason for giving
up spray-gun policies. Regional policies fail to recognize that regional income
differences are often the result of scale economies. To a certain extent, this
explains the disillusion regarding the effectiveness of policies that aim for a
more balanced distribution of activities across the EU, which in turn affects the
credibility of the EU.