Place-based policies and geographical inequalities

Abstract

Abstract Place-based programmes have become an important form of government intervention with the potential to profoundly affect the location of economic activity, along with the wages, employment, and industry mix of communities and regions. The enormous social costs of concentrated poverty and unemployment suggest that forms of policy intervention that can reduce concentrated poverty and unemployment have enormous upsides. At the same time, place-based policies involve important trade-offs. The main source of the trade-offs stems from the fact that place-based policies seek to shift investments, jobs, and incomes from the most productive areas of a country towards the least productive areas. This can result in economically meaningful efficiency losses. Setting socially optimal place-based policies crucially depends on understanding the sources of geographical disparities and the trade-offs involved.