The Regional Policy of the European Union

Abstract

When it comes to rationales for regional policy, the literature usually provides a blend of social, political and economic arguments (Armstrong and Taylor, 1993). Among the most frequently stated aims and rationales are:

• 1. Flattening ‘unjust’ spatial income distributions (equity or fairness argument).

• 2. Easing adjustment problems for economies undergoing major transformations or economic shocks.

• 3. Welfare increases due to the activation of previously unused factors of production.

• 4. Optimising the spatial allocation of production (for example, by internalising external agglomeration effects).

A clear separation of the different aims and rationales is often impossible. Literature on the growth effects of income distributions, for example, links equity and efficiency arguments by saying that there is a negative link between economic growth and inequality (Alesina and Rodrik, 1994; Galor and Zeira, 1993). The results of these studies, however, support inter-personal rather than inter-regional distribution policy.¹ Rationale (2) is also essentially a socio-political argument. In the context of the EU, however, adjustment problems can become an obstacle for integration.