Regional development strategies in changing environments: An ecological approach

The aim of this paper is the analysis of regional industrial development policies. This objective is achieved through a class of dynamic models mutated from the population ecology Literature. The paper begins by studying the development of a local population of homogeneous firms when only one region is considered. In this way it is possible to endogenously determine the regional 'carrying capacity' (i.e. the maximum dimension of its industrial mass) in terms of the availability of resources (local inputs and infrastructures) and the firms' ability to exploit these resources. The analysis is then extended through the introduction of the regional public authority which is able to foster regional industrial development by focusing its interventions on two alternative targets: either the regional 'maximum rate of growth' (r-strategy) or the regional 'carrying capacity' (K-strategy). The paper concludes by studying the effects of both national and international macro-economic shocks on the regional economy. We find that not only the size but also the frequency of these shocks is relevant when assessing the optimality of different policies.