Interaction between Regional and Industrial Policies: Evidence from Four Countries

After World War II, policies to promote industrialization-both to substitute for manufactured imports and to encourage exports based on unskilled labor-often successfully complemented regional polices to better distribute economic activity. The recent shift toward high technology, however, has strongly favored major urban areas, undermining efforts at regional decentralization and stabilization. Furthermore, countries are increasingly abandoning top-down regional policy and passing on responsibility for development to provincial and local levels, setting off vigorous interregional competition for economic activity and often favoring a few, relatively well-endowed regions. Evidence from Brazil, Japan, the Republic of Korea, and the United States shows how the recent emphasis on high-tech exports and decentralized regional policy may reinforce polarization and slow progress toward eliminating regional growth and income differentials.