| This study is an attempt to give some reflection on a few specific issues concerning the interactions between national policies and regional economies.; First, I examine whether geographical concentration of economic activities is efficient or not. I, with Kiminori Matsuyama, present a simple model of a two-region economy in which not only inefficient diversification but also inefficient concentration may occur depending on parameters. What is crucial is the coordination failure between the entry decision of service firms and the migration decision of individuals, generated by the incompleteness of markets. The argument does not rely on price distortions, congestion externalities, or myopia in migration decisions.; Next, I examine how such inefficiency can be corrected by regional policies. For that purpose, two classes of regional policies, pure redistribution policies with taxation and subsidizing and policies involving infrastructure investment, are considered. I show that those policies are effective against the inefficiency problems in most of cases.; Having shown that there is an effective policy involving infrastructure investment, I turn my attention to the study of an optimal investment policy. I study a national government's problem of how to allocate a given amount of infrastructure investment among regions. In particular, the optimality of a balanced growth policy is examined. It is shown that the balanced growth policy is less likely to be optimal when degree of returns to scale in technological improvement, substitutability in consumption, and adjustment speed of population distribution are higher.; Another arena where national policies and regional economies interact involves international trade policies. I study the impacts of international trade policies (tariff policies) of a home country on the economies of its sub-regions. Assuming that the tariff rate is given, I show that the imposition of the tariff may hurt consumers in a region of the home country. Furthermore, under a simple assumption on consumers' voting behaviors about the imposition of the tariff, it is shown that because of consumers' strategic interactions, the outcome with the tariff being imposed may fail to be realized even if it Pareto-dominates the outcome without the tariff being imposed. |
