Concentrated versus diffused growth assets: agglomeration economies and regional cohesion

The interest toward the supposed trade-off between efficiency and equity has strongly come back to the fore within the European Union (EU) after the 2008 economic crisis. The worsening of spatial economic imbalances, in fact, opened again the debate whether the European institutions should focus their budget allocations on core areas or on peripheral areas of less developed countries, following concentrated or spatially distributed normative actions. This paper addresses the question by applying an original method to assess the relative importance of urban efficiency with respect to spatially distributed resource endowments in affecting regional inequality. An innovative two-step procedure is applied: that first estimates a regional production function and then makes use of its output through a simulation to assess efficiency versus spatially even distribution of resources on the improvement of regional cohesion. The results show that urban efficiency gains play a relatively minor role in affecting regional disparities if compared with a spatially even distribution of production factors.