Rising spatial disparities and development: why do they matter?

The UNU-WIDER project on "Spatial Disparities in Human Development" published six volumes (a collection of 40 papers) on the topic of spatial dimensions of inequality. This policy briefing aims to to draw out some of the main findings of these volumes for policy purposes by asking the following three questions:

• How large are spatial disparities, and what has been happening to them?
• What explains the levels and trends in spatial inequality?
• What are the appropriate policy responses to spatial inequality?

The briefing finds that:

• while there is tremendous country heterogeneity, the overall conclusion from these studies is that spatial inequality is high and, in many countries, rising
• overall, the studies in this project emphasise "second nature geography" (the interactions between economic agents, and in particular increasing returns that can be created by dense agglomerations and interactions) in explaining the level and trend of spatial disparities
• spatial disparities have risen over the last two decades.

The theory, evidence, and causal analysis presented in this project suggests a two-pronged approach to addressing the problem of rising spatial inequalities while still reaping the gains from agglomeration and international openness. The first component of the strategy is to remove barriers to the de-concentration of economic activity. The second component is to facilitate, or at least not impede, the migration of individuals and households to areas of high and rising well-being. The authors argue that this two-sided approach stands the best chance of gaining the most from the efficiencies of agglomeration and openness, without running into the potential destabilisation of rising spatial inequality.

The briefing concludes that the case for policy interventions to ensure a more spatially equitable allocation of infrastructure and public services, and for policies to ensure freer migration, has been made powerfully in the papers in this project. But it states that the broad outline still needs to be developed in a detailed and country specific manner, the benefits of infrastructure allocation need to be weighed against the costs, and the congestion costs of migration will have to be set against its equity benefits. In order for this to happen, a deeper and more detailed understanding of the determinants of spatial inequality, and how exactly policy interventions in infrastructure and other areas will impinge on it, is needed.