Regional Policy

区域政策

EU background for regional policy

Although the European Union is one of the richest parts of the world, there are
striking internal disparities of income and opportunity between its regions. The
entry of 10 new member countries in May 2004, whose incomes are well below the EU
average, has widened these gaps. Regional policy transfers resources from rich to
poorer regions. It is both an instrument of financial solidarity and a powerful
force for economic integration.

Why in General?
* Convergence or divergence?
Difference between regions: bigger? Disparities → divergence
Without regional policy → Convergence?

Reasons of Regional Policy in general:

1. Fairness
Regional policy is seen as a way of ensuring that all parts of society can share
in the benefits of a modern, growing economy
2. Extra production
Regional policy is essential if peripheral region’s unutilized resources-
particularly unemployed labors are to be drawn into productive use.
3. Lower inflation/faster growth
The concentration of economic activity in core regions is overheating, which lead
to inflation. By spreading economic activity, regional policy allows the economy
to enjoy lower inflation and more sustained growth.
4. Fewer urban problems
Economic activity in EU is increasingly concentrated in big cities. The quality
of life-traffic congestion, pollution, and crime and overcrowding are serious
problems. Regional policy offers a way of easing the pressures on the big cities
by diverting part of the economic activities elsewhere.

Why in EU? Arguments:

1. Avoiding competitions
Between EU different regions for inward investment project
2. Vested interest
The more integrated the EU, the bigger would be the spill-over effect of one
member states on another. (spill-over effect: confidence of stabilized)
3. Financial targeting
Poor member states are not able to support their own poorer regions
4. Coordination
????? don’t understand
5. Effects of integration

Effects of EU integration on regional disparities

Divergence forces:
1. Agglomeration economies (Geographical terms)
Occur when firms from many different industries locate close to one another. (eg:
transport facilities, financial facilities). These “external economies of scale”
effects tend to strongly favor the core regions of the EU.
2. Dominant market position (open competition → weaker company couldn’t survive)
 Large multinational firms are already concentrated and dominated in the core
regions of the EU, opening up peripheral regions to competition from them could
have serious effects for the smaller and less powerful firms more frequently found
in peripheral regions.
3. Selective migration (well educated workers move from remote to center area)
As integration proceeds, peripheral regions suffer migrant loss from the free
movement of labour. Young skilled, and economically active labour migrate from
peripheral to core regions.
4. Loss macro-policy (loss of monetary policy)
Euro zone member state lost the power to use monetary policy to stimulate a weak
local economy. Peripheral member state face a future of very limited macro-policy
powers. This will restrict their ability to protect their local economies such as
by way of currency devaluation.

* Disparities
economic development of the least advantaged regions In short, Europeans do not
all have the same advantages in the face of the challenge of globalisation

* Solidarity
European solidarity: purpose to strengthen its economic and social cohesion and
specifically to reduce the gaps among levels of development in the various
regions. Eg: infrastructure, information society, R&D