Globalization, Regional Economic Policy and Research

While the case for increasing the degree of integration in the world economy is strong (e.g., Sen 1999; Irwin 2002; Bhagwati 2004), it is based on the notion of net benefits.1 Workers, industries and places absorb trade-related gains and losses differently and must adjust to greater or lesser degrees to the liberalizing international economic environment. Because of the high degree of industrial specialization and concentration in the space economy, some states and regions’ potential losses are greater than their gains, at least in the short- to medium-run. While the losses seem eminently visible—evidenced in bankruptcies, closed factories, and unemployment lines—the benefits are typically diffuse. It still the case that net gains are not a fait accompli, despite a high degree of confidence in the net positives of trade within mainstream economics (Samuelson 2004). Moreover, core-periphery and cumulative causation theories and findings suggest that there are circumstances in which opening regions to import competition can exacerbate regional income inequalities (Venables 1998; Fujita and Hu 2001; Meardon 2001; Hu 2002; Mansori 2003).2 The differential regional impacts of globalization are therefore important and need to be fully understood, along with the aggregate economic benefits. Also requiring careful thought is what local strategies, if any, are necessary to maximize the benefits of globalization for regional businesses and workers. In a globalizing world of scarce public sector resources, what is the appropriate subnational economic policy response?