The relative efficiency of automatic and discretionary regional aid

Research output: Contribution to journalArticle

Abstract

For the last two decades, the primary instruments for UK regional policy have been discretionary subsidies. Such aid is targeted at "additional" projects - projects that would not have been implemented without the subsidy - and the subsidy should be the minimum necessary for the project to proceed. Discretionary subsidies are thought to be more efficient than automatic subsidies, where many of the aided projects are non-additional and all projects receive the same subsidy rate. The present paper builds on Swales (1995) and Wren (2007a) to compare three subsidy schemes: an automatic scheme and two types of discretionary scheme, one with accurate appraisal and the other with appraisal error. These schemes are assessed on their expected welfare impacts. The particular focus is the reduction in welfare gain imposed by the interaction of appraisal error and the requirements for accountability. This is substantial and difficult to detect with conventional evaluation techniques.
LanguageEnglish
Pages434-451
Number of pages18
JournalEnvironment and Planning A
Volume42
Issue number2
DOIs
Publication statusPublished - 2010

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subsidy
aid
efficiency
welfare
welfare impact
regional policy
accountability
project
responsibility
interaction
evaluation
appraisal

Keywords

  • regional aid
  • economics
  • regional policy
  • discretionary subsidies

Cite this

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The relative efficiency of automatic and discretionary regional aid. / Swales, J. Kim.

In: Environment and Planning A, Vol. 42, No. 2, 2010, p. 434-451.

Research output: Contribution to journalArticle

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