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Regional economic growth by policy-induced capital flows: I. Theoretical approach

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Abstract

In view of regional income disparities this paper discusses alternative allocation strategies of regional economic growth policy: “movement of the workers to the jobs” (passive factor stocks adjustment) versus “jobs to the workers” (active factor stocks adjustment). For policy evaluation of this classical question a dynamic two-regions model is presented (Part I). Its implications will be analyzed on the basis of selected parameters to give an example of possible model applications (Part II). In Part I the analysis will start with general remarks on model construction (stressing the relevance of supply-side growth barriers), then describe the relationships of the model and finally refer to some selected aspects of possible extensions (introduction of a third region as the outside world of the two regions, modification of the model to deal with the no-growth case, consideration of the size of regions, and incorporation of independent regional investment functions). The concluding remarks will focus on the essential policy parameters of the model.

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Authors and Affiliations

  1. Department of Economics, University of Siegen, Hölderlinstrasse 3, D-57068, Siegen, Germany

    Walter Buhr

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  1. Walter Buhr
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The author wishes to thank Reiner Wolff, Paderborn, Georg Zink, Siegen, and Norbert Matthes, Bonn, for their permanent readiness to discuss earlier drafts of both parts of this paper. Also the author gratefully acknowledges the useful comments of an anonymous referee.

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Buhr, W. Regional economic growth by policy-induced capital flows: I. Theoretical approach. Ann Reg Sci 29, 17–40 (1995). https://doi.org/10.1007/BF01580361

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