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

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


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


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

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