Joaquim Oliveira Martins (p)

One the fundamental questions of regional development is about spatial inequalities and what to do about it. There are basically two polar views about this issue. The first views agglomeration as a natural (an desirable) feature of development and, in order to ensure that the maximum of economic efficiency at the national level is attained, recommends compensatory policies for the lagging regions. The second considers regional inequalities as a source of inefficiencies and lost opportunities. These inefficiencies can be within the economic system, but, a recent literature strand (so-called the geography of discontent) has focused on the adverse political consequences of spatial inequality. Over the medium-run, the latter has negative effects on economic and social systems. The underlying hypothesis is that efficiency requires equity, and vice-versa. To address this complementarity, contrasting with the usual equity/efficiency trade-off, a place-based approach is advocated. Against this background, this presentation will focus on the interplay between agglomeration and convergence forces, which determine regional growth patterns. Depending on the relative intensity of these two forces, there may be periods of decreasing or increasing regional inequalities. The data suggest that we are living, especially after the 2008 crisis, a period of increased regional divergence in many OECD countries. This seem to be due both to a generalised weakening of productivity catching-up mechanisms and a stronger resilience of large urban areas to the effects of the recent crises. Accordingly, the presentation advocates that policies could focus on regional systems rather than mainly targeting poor or lagging regions. Examples of such an approach are policies promoting rural-urban linkages. Indeed, one should ensure both that large urban areas deliver agglomeration economies through appropriate urban policies, and other regions benefit from those improvements at the efficiency frontier through productivity catching-up. The latter is the task of place-based development policy. Finally, it will also be discussed on what basis a positive link between equity and efficiency could be envisaged.