ABSTRACT
This chapter examines the rationale and impact of government policy in regional development. It shows that the analysis requires specific and formal recognition of the federal form of government in Canada as a major determining factor in the rise and fall of regions. One of the key features of a federal as opposed to a unitary form of government is heterogeneous preferences among the consumer-citizens and the geographic concentration of groups with similar preferences forming local communities, provinces or states. Different combinations of grass-roots coalitions will identify the various political parties. The result of this process is that the so-called public interest sought, or the social utility function adopted by governments, is no more than a weighted and moving average of the special interests of the grand coalition. Government trading may involve cooperation rather than conflict and trade-off, in those instances where there is complementarity between regional and national development.
