Trade-off Efficiency-Equity as an Explanation of the Mitigated Success of the European Regional Development Policies

The objective of this paper is to demonstrate that the European regional development funds do not allow simultaneous achievement of goals of efficiency and equity when they are dedicated to financing transportation infrastructures. The paper first gives some insights on the origin of regional policies. Then we focus on the degree to which Ireland, Spain and Portugal (but not Greece), the main beneficiaries of regional funds, have been able to move to the European average (in terms of per capita income) since their membership in the EU, which also corresponds to the time when regional assistance was initiated in these countries. Empirical evidence also reveals that income disparities are increasing among regions within each of these countries and this raises the question as to whether the impact of regional funds is or is not rather favorable to this particular convergence pattern, given that one of the primary objectives of regional funding has been to ensure greater cohesion over the whole European territory. The answer comes mainly from the type of infrastructure regional funds finance. Since a significant part of regional funds is devoted to transportation issues, their impact on regional development has to be seen in the light of characteristics of the transport sector and the specific requirements in transport of each individual sector. The paper concludes that transportation infrastructures promote the country's aggregate growth but cannot be seen as an efficient instrument to reduce interregional disparities in Europe.