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Personal Redistribution and the Regional Allocation of Public Investment

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  • Caminal, Ramon

Abstract

Should the geographic allocation of public investment aim at reducing regional inequalities or should it exclusively be concerned with the maximization of aggregate output? In this Paper I study the potential role of public investment in reducing personal welfare inequality, in combination with distortionary taxation. The case for public investment as a significant redistribution device seems weak. If the tax code is constrained to be uniform across regions then it is optimal to distort the allocation of public investment in favour of the poor regions, but only to a limited extent. The reason is that poor individuals are relatively more sensitive to public transfers, which are maximized by allocating public investment efficiently. If the tax code can vary across regions then the result is ambiguous and it might even be the case that the optimal policy involves an allocation of public investment distorted in favour of the rich regions.

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  • Caminal, Ramon, 2000. "Personal Redistribution and the Regional Allocation of Public Investment," CEPR Discussion Papers 2627, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:2627
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    Cited by:

    1. Caminal, Ramon, 2004. "Personal redistribution and the regional allocation of public investment," Regional Science and Urban Economics, Elsevier, vol. 34(1), pages 55-69, January.
    2. Halkos, George & Tzeremes, Nickolaos, 2011. "Population density and regional welfare efficiency," MPRA Paper 30097, University Library of Munich, Germany.
    3. Kiryluk-Dryjska, Ewa & Beba, Patrycja, 2018. "Region-specific budgeting of rural development funds—An application study," Land Use Policy, Elsevier, vol. 77(C), pages 126-134.
    4. Angel de la Fuente, "undated". "Infraestructuras y política regional," Studies on the Spanish Economy 122, FEDEA.
    5. Chetan Ghate & Gerhard Glomm & Jialu Liu Streeter, 2016. "Sectoral Infrastructure Investments in an Unbalanced Growing Economy: The Case of Potential Growth in India," Asian Development Review, MIT Press, vol. 33(2), pages 144-166, September.
    6. Akiyoshi Furukawa, 2012. "Regional allocation of public investment with transfer policy and agglomeration," Economics Bulletin, AccessEcon, vol. 32(3), pages 1865-1872.
    7. Herranz-Loncan, Alfonso, 2007. "Infrastructure investment and Spanish economic growth, 1850-1935," Explorations in Economic History, Elsevier, vol. 44(3), pages 452-468, July.
    8. Chetan Ghate & Gerhard Glomm & Jialu Liu, 2012. "Sectoral infrastructure investment in an unbalanced growing economy: The Case of India," Discussion Papers 12-07, Indian Statistical Institute, Delhi.
    9. Faguet, Jean-Paul & Shami, Mahvish, 2008. "Fiscal policy and spatial inequality in Latin America and beyond," LSE Research Online Documents on Economics 27162, London School of Economics and Political Science, LSE Library.
    10. de la Fuente, Angel, 2004. "Second-best redistribution through public investment: a characterization, an empirical test and an application to the case of Spain," Regional Science and Urban Economics, Elsevier, vol. 34(5), pages 489-503, September.
    11. Kiryluk-Dryjska, Ewa, 2008. "Zastosowanie Modelu Optymalizacyjnego Do Alokacji Środków Strukturalnych," Village and Agriculture (Wieś i Rolnictwo), Polish Academy of Sciences (IRWiR PAN), Institute of Rural and Agricultural Development, vol. 4(141).
    12. de la Fuente, Angel, 2002. "Is the Allocation of Public Capital Across the Spanish Regions too Redistributive?," CEPR Discussion Papers 3138, C.E.P.R. Discussion Papers.
    13. Wegener, Stefan & Kiryluk, E., 2008. "Regional aspects of decision-making support for rural development in Poland," 2008 International Congress, August 26-29, 2008, Ghent, Belgium 43845, European Association of Agricultural Economists.
    14. Tugores, Juan, 2008. "Regional integration and public policy. Evaluation of the European experience and possible implications for Latin American integration," Estudios y Perspectivas – Sede Subregional de la CEPAL en México 4879, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).

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    More about this item

    Keywords

    Public investment; Regional policy; Redistribution;
    All these keywords.

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods

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