Regional development refers to the processes and strategies of creating more prosperous regions. It encompasses economic growth, job creation, and improvements in infrastructure as well as enhancing cultural, social and environmental conditions. Regional development policies are generally based on local characteristics and specific needs. They aim to balance economic development with preserving natural resources and reducing environmental impacts. They also encourage civic participation and regional entrepreneurship.
Regional strategies often focus on lagging areas of a country by promoting the growth of specialized industries or attracting investment. These efforts help reduce disparities between regions, encourage innovation and entrepreneurship, support sustainable development, and promote balanced urban-rural growth. They also address the growing need to adapt to climate change and other major global challenges.
However, these efforts are challenged by regional inequalities and the inability to overcome structural barriers to growth. Regional disparities can arise from differences in initial endowments and trade patterns (Krugman’s New Economic Geography), or from agglomeration effects driven by economies of scale and the production of goods intensive in local resources. Inequalities may also be caused by the growing role of noneconomic factors such as governance, culture, social capital and education in shaping regional development trajectories.
The field of regional development has developed a range of models and mechanisms to improve its effectiveness, including policy coordination and decentralization. Decentralization involves shifting power and resources from central governments to regional or local authorities. It can be effective in reducing administrative costs, increasing transparency and accountability, and encouraging broader participation by citizens. In addition, it can provide more flexibility in addressing regional problems and improving the quality of public services.