Regional Regional EconomicsEconomics

Lecture 8Lecture 8Sedef AkgüngörSedef Akgüngör

The figures and tables in the previous slides are from:The figures and tables in the previous slides are from:Ketels, C, Ö Solwell, “Clusters in the EU10 New Member Countries”. Ketels, C, Ö Solwell, “Clusters in the EU10 New Member Countries”.

Europe Innova, 2006. Europe Innova, 2006.

http://en.wikipedia.org/wiki/Regional_policy

http://www.oecd.org/document/2/0,2340,en_2649_37429_37801602_1_1_1_37429,00.html

Regional Policy in Regional Policy in EuropeEurope

Although the Although the EuropeanEuropean UnionUnion is one of is one of the richest parts of the world, there are the richest parts of the world, there are large internal disparities of income and large internal disparities of income and opportunity between its regions. The opportunity between its regions. The May 2004May 2004 EnlargementEnlargement, has widened , has widened these gaps. Regional policy transfers these gaps. Regional policy transfers resources from richer to poorer regions.resources from richer to poorer regions.

The argument for regional policy is that it The argument for regional policy is that it is both an instrument of financial is both an instrument of financial solidarity and a powerful force for solidarity and a powerful force for economic integrationeconomic integration

Regional policy in Italy Regional policy in Italy The major Italian experience of regional policy The major Italian experience of regional policy

is the Casa per il Mezzogiorno, set up in the is the Casa per il Mezzogiorno, set up in the mid-1950s to foster economic development in mid-1950s to foster economic development in southern Italy. Originally intended to last for southern Italy. Originally intended to last for six months, it survived well into the 1980s.six months, it survived well into the 1980s.

New roads, irrigation projects and New roads, irrigation projects and developments in infrastructure were built in an developments in infrastructure were built in an area where local communities who had area where local communities who had suffered seriously from poverty, de-population suffered seriously from poverty, de-population and high levels of emigration. Tourism projects and high levels of emigration. Tourism projects attempted to exploit Calabria’s beaches.attempted to exploit Calabria’s beaches.

Regional Policy in the Regional Policy in the United Kingdom United Kingdom

UK regional policy was born during UK regional policy was born during the economic depression of the the economic depression of the 1930s, when heavy industries in the 1930s, when heavy industries in the north were devastated.north were devastated.

Assisted AreasAssisted Areas were established, were established, within which companies could acquire within which companies could acquire grants or capital allowances - know as grants or capital allowances - know as Regional Selective Assistance - in Regional Selective Assistance - in return for protecting jobs.return for protecting jobs.

The overall pattern of policy changed little in the The overall pattern of policy changed little in the next forty years. Despite criticism by a 1970s next forty years. Despite criticism by a 1970s Royal Commission that it was Royal Commission that it was "Empiricism run "Empiricism run mad; a game of hit and miss played with more mad; a game of hit and miss played with more enthusiasm than success"enthusiasm than success", governments of both , governments of both parties maintained Assisted Areas. It was not parties maintained Assisted Areas. It was not until the 1980s Thatcher government that until the 1980s Thatcher government that regional policy was significantly rolled back, regional policy was significantly rolled back, with Assisted Areas substantially reduced in size.with Assisted Areas substantially reduced in size.

Increasingly UK policy must operate within the Increasingly UK policy must operate within the EU regional policy framework, with its strong EU regional policy framework, with its strong injuctions against unfair competition (generally injuctions against unfair competition (generally meaning state aid).meaning state aid).

DiscussionDiscussion Regional Policy in the UK:Regional Policy in the UK:

Two opposite approaches:Two opposite approaches: Free market approachFree market approach Interventionist approachInterventionist approach

Handouts in class will be given for Handouts in class will be given for your information and base for your information and base for discussion…discussion…