A new VoxEU Debate: “How should policy tackle spatial disparities?”

The backlash against the uneven impacts of globalisation, the rise of populism and the effects of the Covid-19 pandemic, which amplified economic and health inequalities, have shone a spotlight on ‘left-behind places’.

With spatial disparities in economic performance across regions, cities and neighbourhoods a renewed focus for policymakers, we are introducing a new VoxEU Debate which seeks contributions on three questions:

  • Should spatial disparities be a policy priority?
  • What causes spatial disparities and their persistence over time?
  • What do we know about policy that works and that doesn’t work?  

We welcome contributions on these questions from different national perspectives, and from both academics and policy-makers. The experience in Germany might be different from that in the US or UK, and we can learn a lot from different countries with varying institutional settings and policy approaches. Please email contributions to the moderators: Gilles Duranton, Henry Overman and Helen Simpson (via [email protected]).  

The debate page is linked to the RPN on Spatial Disparities and Policy and opens with two interviews from Henry Overman and Tony Venables discussing the causes of spatial disparities. Henry focusses on the key role of sorting and the resulting spatial concentration of high-earners, and Tony emphasises the role of tradeable, high-value sectors in creating agglomerations and in driving successful cities. Both emphasise the difficulty of using policy to try and kick-start movements of firms and workers to smaller cities and the scale of spending that might be necessary to make them more attractive. Henry also highlights the long-term nature of left-behind places and the interaction of spatial inequality with intergenerational inequality – many areas remain deprived across multiple generations. Long-term interventions, in early-years education for example, will be needed to try and break the cycle. And Tony discusses something which we hope this debate will shed light on - the importance of institutions and governance and the role of devolution in enabling cities to turn their fates around.  

This leads to our three questions:

Should spatial disparities be a policy priority?

In the face of an energy crisis and increases in the cost of living, should spatial disparities rank high on governments’ priority lists? Do these latest challenges make helping areas facing long-term deprivation even more pressing, or should ‘place’ not play a role in fiscal policy decisions? We welcome views on whether policy should target places or focus on people, and on what equity and efficiency trade-offs governments face when aiming to narrow gaps in economic performance across areas.

What causes spatial disparities and their persistence over time?

Gathering evidence from a wide range of countries on the factors underlying spatial disparities, and on their scale, is crucial to understanding how to tackle them. As is evidence that gaps have narrowed, or even reversed. Differences in earnings across places are largely driven by the location decisions of the highly-skilled and the firms that employ them: a self-reinforcing process leading some places to thrive while others fail. De-industrialisation also plays a role, and the spatial disparities that arise are typically stubbornly persistent. But what other factors also influence the degree to which a country exhibits long-term gaps in economic performance across places?

We welcome contributions and novel evidence from a broad range of settings to help establish common causes, and effects, of spatial inequalities across countries, but also to help pinpoint institutional or policy differences that mitigate against spatial disparities.

What do we know about policy that works, and about policy that doesn’t work? 

Many countries are grappling with the problem of spatial inequality, leading to wide-ranging policy interventions and a wealth of evidence on their effects. Are there success stories among this set of place-based policies? We welcome contributions on the types of government investment that deliver long-run gains to places, and to the people who live there.  In particular, what do we know about who benefits from place-based policies, and about what an effective set of policies looks like?

We also seek views from the policy community on all three questions as well as what policy options are being discussed in practice, and the evidence that would help make more informed decisions on whether and how to intervene.

Debate Moderators

Gilles Duranton

Professor and Dean's chair in real estate The Wharton School of the University of Pennsylvania

Henry Overman

Professor of Economic Geography London School Of Economics And Political Science

Fellow, International Trade and Regional Economics / RPN Steering Committee, Spatial Disparities and Policy

Helen Simpson

Professor of Economics University Of Bristol

Fellow, International Trade and Regional Economics / RPN Leader, Spatial Disparities and Policy