Space-neutral and place-based regional policies: The problem of choice

Abstract

This article analyzes the competing principles of regional policy and their applicability to the Russian economy. Two viewpoints are discussed. The World Bank school professes a space-neutral approach that excludes interventionist measures, while the European school promotes a place-based approach suggesting the use of different measures to stimulate growth in different regions. The schools’ arguments are based on different theoretical concepts: the new economic geography and the endogenous growth theory. The advocates of the first approach believe that the problems of regional economies are associated with an inefficient spatial distribution and insufficient mobility of production factors between regions. Hence, they recommend removing all regulatory restrictions that can distort market signals and limit mobility and reject any measures to support the economies of depressed regions. The alternative approach focuses on the unleashing and full use of the social and institutional capital in each region. The interactions between all stakeholders at the local level should follow the bottom-up principle, and specific development strategies should be designed for each region. European studies contain interesting methodological approaches, which fit into the increasingly complex structure of the modern regional economy with its complicated patterns of growth. World Bank experts are effective in promoting their views, which inevitably leads to simplification and schematization. Their views and recommendations have a visible influence on the regional policy debate in Russia. However, Russian regional policy has not yet attained a balance between spatial efficiency and regional equality, as evidenced by contradictions in the strategic development documents.