Regional Disparities

Abstract

The chapter discusses regional disparities in economic performance and living standards. It first sets out some key facts and provide a conceptual framework to help analyze whether such disparities are efficient, or instead reflect market and/or policy failures. It examines whether policy attempts to reduce regional disparities necessarily involve a trade-off between equity and efficiency. The chapter then investigates whether policymakers should focus on boosting the economic performance of lagging regions—or, conversely, accept the presence of regional disparities, and instead assist households in lagging regions through transfer payments, investments in education, health, and other basic services, and by facilitating out-migration.