Essays on the spatial economics of growth and poverty theory and policies for southeast Asia

This dissertation is a three-part examination of economic growth and poverty from a spatial economics perspective. The first essay offers a model of fiscal competition across regions, where cross-regional transaction costs pertaining to private and public goods play a crucial role. The model extends the “core periphery” analysis of spatial economics, developed by Krugman (1991) and Fujita et al. (1999), to the fiscal landscape. The analysis shows that the “dual” externalities generated from Nash fiscal competition and monopolistic competition across regions involve welfare implications that are not conceivable in their absence. The analysis shows that benefits from public policies intended to support periphery regions could leak to the non-poor population.; The second essay argues that the commonly observed non-randomness of distribution of welfare and poverty across geographical locations is due to the existence of a “spatial poverty trap” (Jalan and Ravallion 1998). Indonesian data strongly suggest that such a trap is generated by observable and non-observable spatial factors affecting the magnitudes of transaction costs across and within regions. The existence of the spatial poverty trap justifies, in theory, geography-based poverty targeting programs. A recent geographic targeting program in Indonesia suggests that the success of these programs is contingent on the extent to which such a program is designed and implemented so as to provide stakeholders with the right incentives to achieve the intended policy goals responsibly.; The third essay empirically examines the relationship between foreign direct investment (FDI) and technological progress in developing countries. Time-series analysis from four emerging Southeast Asian economies suggests that any productivity gain from FDI critically depends on the extent to which the host country can “indigenize” the imported “knowledge as a global public good” (Stiglitz 1999). Otherwise, the FDI could contribute to capital accumulation but negatively influence the “national technological capability” (Rodrigo 1994). The Malaysian case, in particular, suggests that public support for indigenous industries, most of which are small and medium enterprises, could facilitate the process of technology indigenization.