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Trade and the effect of public investment on regional inequalities in heterogeneously integrated areas

Costa-i-Font, Joan and Rodriguez-Oreggia, Eduardo (2005) Trade and the effect of public investment on regional inequalities in heterogeneously integrated areas. The World Economy, 28 (6). pp. 873-892. ISSN 0378-5920

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Abstract

Regional integration, it is argued, challenges the distribution of economic activity among regions. However, the government role in shifting the patterns of regional inequalities is still under debate and has received small comprehensive empirical evidence. This paper examines the hypothesis of trade as channelling public investment and, thus, perpetuating regional inequalities. We argue that the interplay of public and private investment plays a key role in stimulating trade and economic activity. To avoid problems of cross-country heterogeneity and comparability this study examines data for two countries; Mexico and Spain, both followers of trade integration arrangements. Findings indicate that regional inequalities in Mexico are significantly explained by differences in export capacity serving to boost private investment whereas inequalities in Spain are appreciably driven by previous endowments and private capital formation.

Item Type: Article
Official URL: http://www3.interscience.wiley.com/journal/1179654...
Additional Information: © 2005 Blackwell Publishing Ltd
Library of Congress subject classification: H Social Sciences > H Social Sciences (General)
H Social Sciences > HB Economic Theory
Sets: Departments > European Institute
Research centres and groups > LSE Health
Collections > Economists Online
Rights: http://www.lse.ac.uk/library/usingTheLibrary/academicSupport/OA/depositYourResearch.aspx
Date Deposited: 16 Jul 2008 08:53
URL: http://eprints.lse.ac.uk/19410/

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