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Student
Title
Supervisor
Faculty
Educational Programme
Final Grade
Year of Graduation
Ekaterina Avdeeva
What Does the NEG Say About Regional Equalizing Subsidies?
8
2017
The problem of income inequalities is a big role for economic state development. For its solution the equalizing policy should be conducted. It is the special interest for the EU where three funds are accumulated for its conducting. The main instruments of it are subsidies which countries of the EU who has sufficient criteria get. But there is a problem of choice the priority approach: to equalize in the EU as a whole across countries or within them. There are two macro-regionswith higher level ofdevelopment (North and Western) which has relatively equal income dispersion whereas the South and the Eastern part has significant disparities and as a whole the EU.

We found that the Russian equalizing regional policy doesn’t play big role as in the EU because of obstacles and approach of the Ministry of regional development to its conducting. So we supposed that the equalizing regional policy couldn’t be efficient then because of many problems in evidence it doesn’t make sense to conduct it.

Therefore, in our work we analyze the efficiency of the equalizing regional policy. For this, we modify model of Pflueger and Suedekum “Integration, agglomeration and welfare” and test our hypothesis about the efficiency. We worked with the homothetic preferences and translog price index function taking into account variable markups.

We get interesting results: there are efficient ways of the equalizing regional policy which don’t always work for real economic situation. So the main conclusion of our work is that the subsidies couldn’t be efficient instrument for getting income convergence across regions.

Key words: equalizing policy, European regional policy, NEG, subsidies

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