Paper short abstract:

The paper explores the causes of regional development disparities. Theories based on oligopolistic competition developed for advanced capitalist countries are adapted to the case of developing countries. The policy and political implications of these disparities are sketched out.

Paper long abstract:

Virtually any country in the world has regional disparities in development. Stuart Holland and Françoix Perroux have presented compelling arguments that, at least in advanced capitalist countries, these stem primarily from oligopolistic competition. The first part of the paper elaborates on this process, primarily using the UK as an example, though references are made to other countries as well. In particular, I explain how the dominant position of a few large firms benefits those regions in which their operations are located, but prevents other regions from achieving a high level of development. Instead, it makes them dependent on transfers from the richer regions, usually through the central government budget.

In the second part of the paper, I try to adapt this analysis to less developed countries. A distinction has to be made between those developing countries that do have some domestic large advanced firms, and those that do not. While in the former group, the reason for regional disparities in development is at least partially the same as in advanced capitalist countries, in the latter, the disparities probably have more to do with the location of public employment and foreign investment.

A sketch is given of the policy and political implications of regional disparities and their causes. The political implications are particularly worth noting, as these disparities can potentially cause or contribute to various conflicts, and even separatism.