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Rational Underdevelopment

Author

Listed:
  • Ignacio Ortuño Ortín

    (Universidad de Alicante)

  • Klaus Desmet

    (Universidad Carlos III de Madrid)

Abstract

We propose a two-region two-sector model of uneven development,where technological change benefits either the lagging or the leading region. Inthis framework inter-regional transfers may lead to persistentunderdevelopment; by raising wages, transfers reduce the chance of thebackward region adopting a new technology and taking o.. Due to uncertaintyabout which region benefits from technological change, the backward regionmay rationally choose to remain underdeveloped, while the advanced regioncontinues to pay transfers. The model provides a rationale for cases, such asItaly’s Mezzogiorno, where the same rich region subsidizes the same poorregion on a continuous basis.

Suggested Citation

  • Ignacio Ortuño Ortín & Klaus Desmet, 2006. "Rational Underdevelopment," Working Papers. Serie AD 2006-12, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
    • Handle: RePEc:ivi:wpasad:2006-12
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    References listed on IDEAS

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    Cited by:

    1. Gilad Aharonovitz, 2011. "Knowledge-based spatial differences in economic activity, job related migration and housing related migration," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 46(1), pages 159-188, February.
    2. Amitrajeet A. Batabyal & Peter Nijkamp, 2019. "The magnification of a lagging region’s initial economic disadvantages on the balanced growth path," Asia-Pacific Journal of Regional Science, Springer, vol. 3(3), pages 719-730, October.
    3. Marcus Gumpert, 2020. "Underdevelopment through Productivity Improvement Measures in an Advanced Region," European Research Studies Journal, European Research Studies Journal, vol. 0(4), pages 865-872.
    4. Amitrajeet A. BATABYAL, 2018. "Note On Local Public Good Induced Spillovers Between A Leading And A Lagging Region," Regional Science Inquiry, Hellenic Association of Regional Scientists, vol. 0(2), pages 11-16, July.
    5. Batabyal, Amitrajeet & Nijkamp, Peter, 2014. "Some properties of the technology gap between leading and lagging regions," MPRA Paper 71596, University Library of Munich, Germany.
    6. Batabyal, Amitrajeet & Yoo, Seung Jick, 2019. "Heterogeneity and the Provision of a Public Good in Leading and Lagging Regions," MPRA Paper 96812, University Library of Munich, Germany, revised 15 Sep 2019.
    7. Klaus Desmet & Ignacio Ortuño Ortín, 2007. "Rational Underdevelopment," Scandinavian Journal of Economics, Wiley Blackwell, vol. 109(1), pages 1-24, March.
    8. Christos Ap. LADIAS & Filipos RUXHO & Fernando Jos? Calado e Silva Nunes TEIXEIRA & Susana Soares Pinheiro Vieira PESCADA, 2023. "The Regional Economic Indicators And Economic Development Of Kosovo," Regional Science Inquiry, Hellenic Association of Regional Scientists, vol. 0(1), pages 73-83, June.
    9. Marcus Gumpert, 2019. "Multidimensional Core-peripheral Model," European Research Studies Journal, European Research Studies Journal, vol. 0(1), pages 192-208.
    10. Marcus Gumpert, 2019. "Multidimensional Core-peripheral Model," International Journal of Economics & Business Administration (IJEBA), International Journal of Economics & Business Administration (IJEBA), vol. 0(1), pages 192-208.
    11. Ramon Tremosa-i-Balcells & Joan Costa-i-Font, "undated". "The "relative competitiveness" patterns of Spanish regions after the European Monetary Union (1999-2002)," Studies on the Spanish Economy 169, FEDEA.
    12. Amit Batabyal & Peter Nijkamp, 2014. "Technology, Learning, and Long Run Economic Growth in Leading and Lagging Regions," ERSA conference papers ersa14p893, European Regional Science Association.

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    More about this item

    Keywords

    inter-regional transfers; regional policy; uneven development.;
    All these keywords.

    JEL classification:

    • R58 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Regional Development Planning and Policy
    • H7 - Public Economics - - State and Local Government; Intergovernmental Relations

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