Trade-off between aggregate efficiency and interregional equity: The case of Japan

Abstract

Just as the level of t.conomic development differs among countries, it differs among regions within a country. Although the degree of income disparity among regions within a country is generally less than among countries, it is not infrequent to find countries which have a per capita income disparity of five to one between the higt~est and J',.-. est income regions, Almost regardless of the degree of disparity, hov,,ever, the disparity of regional income levels is a serious political concern for a number of governments. Although a geographically-defined region does not deserve policy considerations of the government as much as the population group itself within the region, the difficulty of moving a large group of population often necessitates investment by the government into the region in addition to programs directed to the population in the region. The mobility of people is restricted not only by transportation costs but also by cultural and sociological distances associated with migra.+ion. Another possible method of narrowing interregional income disparity is a direct transfer of income or purchasing power:r, a method favored by many economists, The extent to which this method can be applied is, however, usually restricted on an ethical ground tltat every-