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SEVERAL DIMENSIONS OF NEED MAY INFLUENCE AMOUNT OF FEDERAL FUNDS GOING TO THE STATE. THEREFORE ECONOMIC CHARACTERISTICS OF STATES SHOULD BE HELD CONSTANT WHEN COMPARING FUND ALLOCATION. EVIDENCE FOR 1978, SAYS THE AUTHOR, INDICATES THAT SNOWBELT STATES RECEIVED LESS FEDERAL FUNDS THAN SUNBELT STATES, EVEN ADJUSTING FOR DIFFERENT ECONOMIC CHARACTERISTICS.

In order to evaluate the allocational effectiveness of regional policy when harmonizing regional economic conditions firms? preferences play a pivot role. If harmonization hinders risk diversification of the firm, then instead of regional diversification of capital agglomeration of capital occurs. Hence, regional policy will not achieve its objective to equal the spatial allocation of capital.

In order to evaluate the allocational effectiveness of regional policy when harmonizing regional economic conditions firms' preferences play a pivot role. If harmonization hinders risk diversification of the firm, then instead of regional diversification of capital agglomeration of capital occurs. Hence, regional policy will not achieve its objective to equal the spatial allocation of capital.

Economic disparities among the regions of the European Union are more pronounced than among countries. Structural Funds have played a crucial compensatory role, promoting the economic development and real convergence of lagging regions. The amount of resources destined to regional policy and the conflicts arising from its funding and distribution create the need for an adequate theoretical foundation or model to help politicians solve the distribution problem. In this paper we propose an empirical procedure to carry out and evaluate different distributions of funds for the periods 1989 – 93 and 1994 – 99. We begin with the estimation of an augmented production function to permit the calculation of the expected GDP per capita. We then propose a nonlinear programming method to simulate alternative distributions of Structural Funds among Objective 1 regions, based upon two different approaches: equal development, and equal opportunities. For these two approaches we calculate different possibilities, ranging from highly efficient to highly equitable, with the result that we are able to show the 'frontier' of optimal distributions. Finally, we evaluate these results and compare them with the real distribution.

Regional allocation of public investment has been considered of a great interest over the years. Regional policy uses investments as a basic developmental tool and it seeks for an effective allocation among the regions. In addition, national economic policy distributes investments aiming at both economic development of less developed regions and maximization of national product. Therefore, an effective allocation by the central government is of a great significance. In addition, national economic policy distributes investments aiming at both economic development of less developed regions and maximization of national product. In this paper, existent methodological approaches, distributing public investment in regions, will be critical reviewed. These models are found in the international bibliography. The features of these methodologies are described in a general context. The flaws and the possibilities of their application for real problem's solution are analyzed. Finally, it is discussed whether there can be an application of either of the examined models on the case of Greece.

We develop a theory and simulation analysis to calculate optimal transfers from the central government to state governments in Mexico. Our results are: First, our models show that the best predictor of intergovernmental transfers in Mexico is population density. Second, we provide estimates of optimal intergovernmental transfers to states in Mexico. Our analysis suggests using the inequality of income distribution in the social welfare function as an instrument of public policy and our estimates help to understand the advantages and disadvantages of the current transfer system. The main limitation of our work is that it does not consider political factors in the calculation of transfers. Our analysis is the first to develop estimates of intergovernmental transfers using Paretian parametric functions of regional income distribution and interregional preferences for local public spending. Our work proposes an alternative allocation of intergovernmental transfers that could improve the welfare associated with local public spending in Mexico. ; (Pesos Sociales y Asignación Regional de Transferencias Intergubernamentales)Desarrollamos una teoría y un análisis de simulación para calcular las transferencias óptimas de recursos del gobierno central a los gobiernos estatales en México. Nuestros resultados son: Primero, nuestros modelos muestran que el mejor predictor de las transferencias intergubernamentales en México es la densidad poblacional. Segundo, proporcionamos estimaciones sobre las transferencias intergubernamentales óptimas a los estados en México. Nuestro análisis sugiere utilizar la inequidad de la distribución del ingreso en la función de bienestar social como instrumento de política pública y nuestras estimaciones ayudan a entender las ventajas y desventajas del sistema actual de transferencias. La principal limitación de nuestro trabajo es que no considera factores políticos en el cálculo de las transferencias. Nuestro análisis es el primero en desarrollar estimaciones de las transferencias intergubernamentales al utilizar funciones paramétricas Paretianas de la distribución regional del ingreso y las preferencias inter-regionales por el gasto público local. Nuestro trabajo propone una asignación alternativa de transferencias intergubernamentales que podría mejorar el bienestar asociado con el gasto público local en México.

"A common problem of regional policy is the distribution of funds to regional units. To follow the specific purpose of this budgeting process in a rational way this is often done in a formula allocation on the basis of official statistics. In the paper this is shown with the example of funds for active labour market policy. In Germany, measures of active labour market policy - e.g. training measures, integration subsidies and job creation schemes - are paid from a common budget. For the allocation of these budgetary funds (amounting to Euro 0,194 billion in 2004) to the regions of the Federal Republic of Germany, a formula was developed which was to be based essentially on a labour market indicator. The criteria for the development of a formula allocation were: most accurate fit to the legal guidelines of the Social Code, transparency of the procedure, openness for necessary policy decisions, scientific correctness in implementation, efficiency of the whole process. Here the procedure used in constructing the distribution process is explained and the distribution result is set out. Both were finally passed by the Supervisory Board of the Federal Employment Agency in Germany." (author's abstract)