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By William Dillinger

Neighborhood monetary improvement is an curiosity of policymakers through the Europe and crucial Asia (ECA) zone. On eo suits important goals is to lessen poverty in lagging areas via stimulating neighborhood fiscal progress. notwithstanding, difficulties exist with this method. First, it can leave out the objective. even though geographical concentrations of poverty exist, negative humans additionally reside in areas which are - on general - wealthy. moment, the sourves of the matter should be misdiagnosed. Poverty is not just regarding the place everyone is, yet to who everyone is. In ECA, poverty is linked to low degrees of schooling and those who are too younger or too previous to take part within the exertions strength. lower than those situations, efforts to carry better salary employment possibilities to bad areas could have little speedy gain for the folks who dwell there. 3rd, counting on neighborhood fiscal improvement to handle poverty in lagging areas ignores the aptitude function of migration. The emigration of work, instead of the immigration of capital, could be a better technique of lowering the poverty of people in lagging areas, notwithstanding this is often not likely to put off wallet of poverty fast. improvement possibilities may possibly exist in bad areas that markets have missed. Interventions has to be assessed conscientiously. the various conventional tools used to stimulate nearby financial development have combined song files. finished custom-tailored methods seem to be a promising substitute. besides the fact that, governments can be modest in utilizing local improvement as a device of poverty relief. rules geared toward stimulating progress in bad areas might be complemented by way of extra direct anti-poverty measures, together with specific transfers and investments in schooling, and efforts to take away limitations to emigration.

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Extra resources for Poverty and Regional Development in Eastern Europe and Central Asia

Sample text

CHAPTE R 4 The Case for Intervention T he market-based approach to regional development has its critics. They argue that labor and capital markets will not, on their own, produce a satisfactory geographical outcome; that even if policy-induced barriers to migration were removed, people in poor regions would not migrate (at least not in sufficient numbers). They also argue that private capital markets will not ferret out all high-return investments. Such critics see a more active role for the public sector in determining the location of economic activity.

In the Slovak Republic, 60 percent of all foreign investment is clustered in the Bratislava region. In Poland, 50 percent of the initial capital of enterprises with foreign participation is concentrated in the region encompassing Warsaw. Using regional data covering the 1993 to 1998 period, Cieslik15 found that regional unemployment rates are negatively correlated with 15. Cited in World Bank (2006). Poverty and Regional Development in Eastern Europe and Central Asia 25 foreign investment, that is, that foreign investors favor regions that are already booming.

This finding is borne out by the figures cited in the recent World Bank paper (2006) on labor mobility in the new member states of the EU. 14 Why don’t people—at least working age people—in economically depressed regions move? To begin with, they have good economic reasons not to do so: in many cases they would be no better off if they did. Harris and Todaro (1970) noted long ago that the propensity to migrate is determined not by wage differentials alone but by wage differentials adjusted by likelihood of obtaining work.

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