Regional allocation of public investment

Conclusion In the previous Sections, we have observed the following interesting properties of the optimum solution to this regional allocation problem.First, as indicated by assumptions (33) (34), and (35), public investment in one of the regions will be justified during some phase of the planning period, even if it is less productive than the private investment in the same region. The reason is that the central government can directly control the interregional flow of public fundsoutside the market mechanism and can concentrate its public investment on the region with greater growth potential.Second, as seen by equation (41), the value of (T–t^*), the length of the second phase of planning, is independent from the length of planning horizonT provided thatT>T–t^*. Then, the relative significance of the second phase will be less and less asT becomes larger and larger. This is one of the characteristics which have been observed in the dynamic programming problems with linear form. Therefore, ifT is very large, the public investment should be almost persistently concentrated to the second region, as far as there is no change in the values of relevant parameters.Third, the resultant optimum solution is very sensitive to the relative sizes of such parameters ass_i, _i, _i(i=1, 2), and . Then, if there is some slight change in them by means of social overhead investment, for instance, which was analyzed earlier in this paper, we may observe a drastic change of the optimum solution. Such being the case, it may be possible for us to utilize some combination of those two kinds of public investment policy in order to attain theoptimum optimorum in the set of feasible growth paths.The author is a postdoctoral fellow with the University of Pennsylvania. The present paper is a product of his research on the basic theory of regional growth which has been supported by a grant from the Ford Foundation. This support is gratefully acknowledged. He is indebted to Professors W. Isard, B. H. Stevens, and J. Kissin for their valuable comments on the earlier draft of this paper. Of course, the author alone is responsible for any remaining errors.