Place-Based versus Place-Neutral Policies for Promoting Regionally Balanced Economic Growth: A Sri Lankan Case using CGE based Simulations

Abstract

Development thinking has evolved over the time, and the role of space in economic growth and regional equity in economic development has become increasingly emphasized. While some reports, such as World Bank (2009), suggest resolution of the spatial problem by redistributing a part of the income generated in urbanized and agglomerated areas, some other reports and authors such as Barca (2012) have highlighted the importance of place-based policies for this purpose. The post 2015 development agenda of the United Nations also highlights the issue of regional equity. According to the literature on the economics of conflict, regional disparities in economic development can be one of the root causes for many conflicts -- while these conflicts can in turn contribute to further widening of those disparities. Sri Lanka is not an exception in this regard. Although regionally balanced economic growth is accepted as contributing to a cure for both problems, thus far rigorous quantitative studies analysing appropriate policy measures for reducing regional disparities whilst maintaining steady economic growth at the national level are lacking. Selection and implementation of an appropriate analytical tool to carry out such an analysis is another gap in the literature.