Author

Rashid Aziz

Date of Award

1980

Degree Type

Thesis

Degree Name

Doctor of Philosophy (PhD)

Department

Economics / Economic Policy

Supervisor

A.A. Kubursi

Abstract

Resource allocation across regions in an economy has been analysed by many authors, both from the efficiency and equity viewpoints. In general, these aspects are assumed to be conflicting - the attainment of higher growth rates and income levels in accordance with efficient resource allocation normally discrimminates against the relatively less well off sections of society. The literature concentrates largely on the allocation of resources across sectors, irrespective of geographic considerations, so that the decision to invest in a region seldom incorporates the area's absorptive capacity. The regional imbalance that results is shown just as clearly by the lack of high technology industry in some areas as it is by the (potential) congestion and overcrowding that characterises other regions. This study focuses on the relationship between the regional allocation of income generating activities and the total income generated for the nation.

The growth potential of any area is defined by the availability of all essential facilities - service and repair facilities, transport and energy supplies being only a part of the picture. Factor supplies and the supply of credit, alongwith the high degree of interaction between regions and sectors also complement the picture. The low income potential of the peripheral areas of any nation is the result of a lack of these ancilliary facilities. However, once these bottlenecks are removed, the outlying areas normally depict higher growth rates than the core regions.

In this study, a linear programming model is developed linking the commodity, factor and asset markets of a nation, both across sectors and across regions. Thus, the commodity market of any region is related to the commodity, asset and factor markets of all regions. National absorptive capacity is now defined in terms of the potentials of all areas of the nation. The application of this model to Canada results in a set of optimal regional patterns of economic activity. Growth in any area is now encouraged only if the regional economy is not operating close to some capacity limitation, and if a full complement of goods and services, factors and assets is available.

The results obtained justify these expectations because the model depicts a pattern of resource allocation that stresses areas where all facilities for growth are present. Thus, further investment in the traditional center - Quebec and Ontario - is restricted, some critical thresholds regarding absorptive capacity having been hit. However, the regions where a full compIement of services and asset supplies is not available - the Atlantic provinces - are not the alternatives. The relative ordering favours the modern manufacturing and service sectors in Alberta and British Columbia.

The model does suggest the existence of a tradeoff between national income and regional balance, since the imposition of regional balance constraints reduces the value of national consumption. However, even when regional equity constraints are imposed, the model suggests that more national income can be generated through reallocation of economic activity than was generated by the historical pattern of allocation.

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