RATIONAL UNDERDEVELOPMENT

Ignacio Ortuño Ortín and Klaus Desmet
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Ignacio Ortuño Ortín: Universidad de Alicante

Working Papers. Serie AD from Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie)

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.

Keywords: inter-regional transfers; regional policy; uneven development. (search for similar items in EconPapers)
JEL-codes: H7 R58 (search for similar items in EconPapers)
Pages: 30 pages
Date: 2006-06
New Economics Papers: this item is included in nep-geo and nep-pbe
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Citations: View citations in EconPapers (2)

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http://www.ivie.es/downloads/docs/wpasad/wpasad-2006-12.pdf Fisrt version / Primera version, 2006 (application/pdf)

Related works:
Journal Article: Rational Underdevelopment* (2007)
Working Paper: Rational Underdevelopment (2001)
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Persistent link: https://EconPapers.repec.org/RePEc:ivi:wpasad:2006-12

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