Regional policy in a globalized economy
Introduction Economic policy intervention in general and regional economic policy intervention in particular can be justiﬁed by two sets of arguments: an efﬁciency argument and an equity argument (Richardson 1978; Fürst et al. 1976; Armstrong and Taylor 1993). The efﬁciency argument is usually rooted in the notion of market failure and the need for policy to correct for it. In the case of substantial externalities, transaction costs or other major barriers to free trade and free resource allocation, it is the aim of policy to remove these barriers to allow market forces to allocate resources more efﬁciently. Rooted in the belief that market forces (when they can operate uninhibitedly) lead to an efﬁcient allocation of resources, such a policy is expected to lead to higher efﬁciency of resource allocation and, consequently, higher welfare, since formerly underutilized resources are now used in an optimal way.