The Gap between Free Market and Social Optimum in the Location Decision of Economic Activity

Abstract

This article presents a simplified model for comparison of the spatial distribution (core—periphery) of economic activity resulting from free market conditions, with the distribution that would lead to a social optimum. It further examines the public policy measures required to lead the economy towards the optimal distribution. Simulations are conducted to illustrate the mechanism of intervention of public policy and to test the feasibility of various measures. An important conclusion is that public investment in the creation of competitive ability in the periphery may provide the solution to market failure and therefore lead to the achievement of a social optimum greater than the free market optimum. Another preliminary conclusion is that public policy should consider a combination of measures (such as improving both regional infrastructure and the quality of the labour force), since focusing on a single measure may not be sufficient to achieve a social optimum.

The role of local embeddedness and non-local knowledge in entrepreneurial activity

“…For investigation purposes, 290 Swedish municipalities are merged into 90 local labor markets (LLMs) that are defined by statistics of commuting in the way that maximizes self-containment of commuting flows within a region (Statistics Sweden 2010). Non-core regions are defined as those beyond the metropolitan areas and their surroundings (Lagendijk and Lorentzen 2007;Malul and Bar-El 2009). In case of Sweden, the LLMs of three largest cities-Stockholm, Gothenburg, and Malmö-are considered as metropolitan regions, while the remaining 87 LLMs are classified as non-core regions.…”

Zavajajoče dojemanje in gospodarska učinkovitost regionalnega sistema

“…Pravzaprav se trženje regij in mest kot orodje politike pogosto uporablja za sprejemanje podobe regije (Paddison, 1993) in s tem za spodbujanje regionalnega gospodarstva s pritegnitvijo novih naložb (Kearns in Philo, 1993;Short idr., 1993). Najprej smo razvili poenostavljen model, ki kaže uravnoteženo prostorsko porazdelitev podjetij med središčem in obrobjem, nato pa smo ga razširili tako, da smo v analizo vključili dejavnik dojemanja (kar temelji na modelu, ki sta ga razvila Miki Malul in Raphael Bar-El; glej Malul in Bar-El, 2009a, 2009b. Opisu teoretičnega modela sledi empirična analiza dejavnikov dojemanja na podlagi opravljene ankete.…”

“…Naša analiza temelji na modelu, ki sta ga razvila Malul in Bar-El (2009a, 2009b, pri čemer bomo najprej opisali glavna načela delovanja tega modela, ki mu bomo nato dodali še učinek dojemanja. Zaradi poenostavitve predvidevamo, da sta v preučevanem gospodarstvu samo dve regiji.…”

“…»Konstanta« večinoma vsebuje dva dejavnika: kakovost delovne sile in kakovost infrastrukture, ki skupaj tvorita približno 70 % »konstante« (Malul in Bar-El, 2009a). Preostalih 30 % tvorijo poslovno okolje, vključno s splošnim poslovnim okoljem, dostop do kapitala in raven kriminala (izraelsko ministrstvo za industrijo, trgovino in delo, 2005).…”

The social value of municipal services

“…Examining 140 schools in Ohio, Haurin and Brasington (1996) showed that a 1% increase in the achievement of the ninth grade increased house prices by an average of 0.5%, with housing prices being a proxy for the level of satisfaction of the residents. Education also emerged as a significant factor for companies when choosing where to locate (George, 1882;Malul and Bar-El, 2009).…”