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Regional Policy Different regions achieve a variety of economic success Poor regions are characterised by:- Low GDP per head, high unemployment, and net outward migration. They are dominated by a few traditional industries Have poor transport infrastructure Low education attainment Low productivity Difficulty in attracting investment Prosperous regions may also suffer from their success – Congestion Pollution Labour shortages It makes sense then to use the economic resources available within the EU in a better more efficient way and regional policy attempts to address the disparities in economic success and use resources more efficiently Theory Market theory suggests that regional problems would solve themselves e.g. firms would move to areas of labour excess where wages would be cheaper and more available. Labour would move to prosperous areas where wages are higher and more jobs available Practice Best workers move out of poor areas making those areas less attractive to firms and therefore to inward investment. Successful regions draw greater investment as firms wish to share in that success. Therefore Govts try to intervene to correct regional disparities resulting from market failures. Governments are restricted however in what they can do because of the effects of the EU monetary policy particularly if a nation is part of the Euro Zone as this also has an effect on fiscal spending. Therefore EU regional policy is becoming increasingly important. Aims of EU Regional Policy - to remove regional differences to achieve greater equity, social cohesion, and efficiency The accession countries being poorer than the rest of Europe were given regional assistance before accession took place Aid will continue to bring their economies up to the EU average and to reduce regional imbalances afterwards The EU also uses regional policy to increase economic efficiency. Remember that if there are unemployed resources e.g. unemployed workers, schools or hospitals with spare capacity and there is a shortage of resources in other areas then an economy is not allocatively efficient. Pan EU policies are hard to implement of there are regional disparities – policies suitable for one region may not be suitable for another. EU Regional Policy Objectives To assist those areas with less than 75% of the EU average GDP (plus assistance to the sub artic areas of Finland and Sweden which without assistance would not be economically viable) To help regions in industrial decline To support education, training and employment Regional Policy spending Spending is through - The Regional Development Fund - Social Fund - Cohesion Fund |