lecture 5 - david - regional disparities

Question 1

how can we explain the lack of cross country convergence with the Solow Model?

Answer 1

EU12 have not reached the steady state yet
differences in the fundamentals
productivity differences

Question 2

what are the dispersion forces?

Answer 2

land prices
congestion
local competitition

Question 3

what are the agglomeration forces?

Answer 3

demand linked
cost linked

Question 4

how do the demand linked aggloration forces occur?

Answer 4

suppose that south market as a share of total market suddenly increases. as there are shipping costs, firms relocate in the south. share of firms in the south rises. jobs and therefore workers move south. south market gets even bigger

Question 5

how do the supply linked agglomeration forces work?

Answer 5

suppose that the cost of producing in the south is suddenly lower. firms relocate in the south. share of firms in the south rises. more intermediate goods are available at a lower cost. the cost of producing in the south falls further.

Question 6

what is the relationship between the share of the firms in the south and the strength of the agglomeration forces?

Answer 6

there is a positive relationship between the strength of the agglomeration forces and the share of the firms in the south

Question 7

what is the relationship beyween the dispersion forces and the share of the firms in the south?

Answer 7

there is a positive relationship between the strength of the dispersion forces and share of the firms in the south

Question 8

what is the non interventionist view for regional policy?

Answer 8

regional policy penalises prosperous and productive regions
disparities are a market outcome and must be tolerated

Question 9

what is the interventionist view about regional policy?

Answer 9

disparities as a result of market failure. they can be better dealt with at a European level. as economic integration favours the core, something should be done for lagging regions

Question 10

what are the three programmes the EU has put in place for regional policy?

Answer 10

1. Two-thirds to less-developed regions (less than 75% of EU27).
2. 13% to transition regions ( between 75% and 90% of EU average).
3. 20% to more developed regions (above 90%).

Question 11

what are the benefits for the size of the country?

Answer 11

economies of scale in the provision of public goods
market size effect

Question 12

what are the costs for the size of the country?

Answer 12

heterogeneity of preferences