Regional policy: what is the most efficient instrument?

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Whatever the reasons at work – differences in locational endowments and/or externalities – a unit of capital is expected to be diversely productive according to the region where it is installed. This article determines which and the extent to which a regional policy could be implemented in order to make up for a productivity handicap. The model allows for comparing the efficiency of a productivity-enhancing instrument (a publicly provided input) with that of instruments that affect capital cost (a lower corporate tax rate, an investment tax credit, or a capital subsidy). The approach is illustrated in the contemporaneous context of France.
Original languageEnglish
Number of pages17
JournalPapers in Regional Science
Publication statusPublished - 2009


  • regional policy
  • productivity handicap
  • corporate tax cut
  • capital grant
  • publicly provided input

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