Gaki-Polyzos-Sdolias, 222-233 Public Invstmnts Allocation and Rgional Pospity atha Gaki Dpatmnt of Planning and Rgional Dvlopmnt Univsity of Thssaly, Gc magaki@uth.g Safim Polyzos Dpatmnt of Planning and Rgional Dvlopmnt Univsity of Thssaly, Gc spolyzos@uth.g Labos Sdolias Univsity of Thssaly, Gc TEI of Laisa, Gc Abstact Th govnmnt aiming at ducing inqualitis uss diffnt typs of public invstmnt, whil gional pospity is associatd with inqualitis. Thfo an affctiv allocation of a Public Invstmnt Pogam is of gat impotanc and has aousd th intst within th yas. Public spnding on invstmnt divs fom th Public Invstmnt Pogam (PIP) psntd in th annual Budgt of th Gk govnmnt. Thoughout th past yas th Gk govnmnt spnt lag amounts of mony on invstmnt pojcts in th Gk pfctus using political citia. Th qustion to b solvd is whth th is a mathmatical way of solving this gional allocation poblm. In this contxt, th pap invstigats th allocation of public invstmnt using th cosponding multipli found in litatu. On of th vaious applications of gional multiplis is in gional policy dpicting th gional inqualitis. Th gional multipli that is xamind is fist dscibd. Thn a study is pfomd using this multipli and data fom Gc and th sults a compad to th invstmnt allocation in Gc. Finally a snsitivity analysis is pfomd and th divd conclusions a citd. Kywods: Public invstmnt, gional allocation, gional pospity, gional multiplis. JEL classification: R11, R12, R58 Intoduction On of th citical factos contibuting to gional conomic dvlopmnt is public capital. Thfo th govnmnt s dcisions on public invstmnt gional allocation a of gat political concn among policymaks. Th main industis in Gc a touism, shipping, industial poducts, food and tobacco pocssing, chmicals, mtal poducts and mining. Th main poblms that th Gk conomy facs a th high at of unmploymnt, buaucacy, couption and tax vasion. Th global comptitivnss is low compad to th oth Euopan Union countis whas conomic gowth has bn diminishing sinc 2009. Th atio of loans to savings was ov 100% duing th fist months of 2010, showing an xisting tnd of ov-lnding. Th poblm of gional allocation of invstmnt among a numb of gions o among all gions in a county has bn of incasd intst to sachs in cnt yas. Th ky sach qustion is how to allocat a budgt among gions. IBES ORAL Laissa, 8-10 Jun 2013 222
Gaki-Polyzos-Sdolias, 222-233 This pap analyss a mthod, among a significant numb of diffnt ons, usd to solv th poblm of public invstmnt distibution. In contay to th on analysd h, oth mthods us singl- and multi-citia maximization poblms taking into considation a numb of constaints. In this pap th allocation dpnds on th calculation of th at of distibution and th vaiabls dfining it. Th data usd fo this application div fom th Hllnic Statistical Svic (EL. STAT.) and fom EPILOGI 2010. Bfo calculating th at of distibution, an invstigation is pfomd gading th Public Invstmnt Pogam in Gc fo th yas 2000-2010, psnting gaphs and maps that dpict th amount of public invstmnts in th fist dcad of th 21st cntuy in Gc. Thn a cas study is pfomd, calculating th amount of public invstmnt allocatd in ach Nuts III - gion (pfctu) using diffnt fiv vaiabls. Th sults a compad to th Public Invstmnt Pogam implmntd in 2010 and conclusions div whth th gions w favoud o not. Dscibing bifly th contxt of this aticl, th nxt sction fs to a shot viw of th cosponding litatu. In th following sction a sach is pfomd and th inqualitis of th PIP allocation a psntd in gaphs and maps. Thn th pfomd cas study and its sults a dscibd. Finally a snsitivity analysis is pfomd and th conclusions a listd. thods fo Public Invstmnt Allocation Ov tim, sval mthodologis w dvlopd and th cosponding modls w dfind in od to addss th poblm of gional allocation of invstmnt. A vaity of mthodologis gading this poblm can b found in litatu. Ths mthodologis dal ith with pivat o with public invstmnt. This pap s focus is on public invstmnt. A numb of sachs invstigat th allocation only of on typ of infastuctu but oths contibut to th solution of allocating a numb of infastuctus o th allocation of th total Public invstmnt pogam in som gions o in th whol county. Th usual allocatd facilitis found in litatu can b aipots, factois, schools, hospitals tc (Cunt t al., 2001). Th invstmnt allocation poblm has aousd th sachs intst sinc th dcad of 1950. In th aly 1960 th poblm invstigatd gads th allocation of th total public invstmnt budgt in two gions, which can b gnalizd fo th application on th total numb of th nation s gions (Rahman, 1963; Dofman, 1963; Intiligato, 1964). Ths modls poposd th us of on objctiv function (singl-objctiv optimization modls). Ov tim, it has incasingly bing alizd that th application of singl-objctiv optimization modls dos not ncssaily povid an adquat solution. Th volution of applid mathmatics contibutd to th intoduction of nw modls using mo than on objctiv functions to find th optimal solution. ulti-facto dcision situations could b handld by optimization tchniqus that did not function o xist bfo. ultiobjctiv pogamming, thfo, has volvd to b an impotant tool in modn dcision making and dsigning (Nijkamp and Ritvld, 1976). Tying to solv th poblm of invstmnt allocation sachs usd indxs of gional inqualitis. Th aim of this pap is to distibut a national pogam of public invstmnts taking into account th following two assumptions, IBES ORAL Laissa, 8-10 Jun 2013 223
Gaki-Polyzos-Sdolias, 222-233 Th public invstmnts constitut duction of gional inqualitis and thfo mans of gional dvlopmnt. Th distibution of th budgt fo th constuction of public woks usually in Gc us mainly political citia and is not basd on a conct mthodology. Using th following lation th distibution of a pogam of public invstmnts is possibl with th us of gional dispaitis indxs; this lation is a modification of anoth on found in litatu (Kavvadias, 1992). E n min [ fi ( di ) min ] P [ fi ( di ) P i 1 ] (1) Wh: E = th at of distibution of conomic objct of a pogam of public invstmnts fo th pfctu. min, = th small inquality indx and th inquality indx of pfctu spctivly. f = a "coctiv" facto, which dpicts th i intvntionist faculty of govnmnt fo chang of gnal policy dpnding on th political o conomic conditions (i=l,2,3,..n) with stuctual o intvntionist xpdincy. ( d ) = a vaiabl, that gulats th intnsity of gional policy of public invstmnts, whil xhibito oscillats btwn 0 and 1 (0< <1). In th cas wh =0 will b ( d ) 1, thfo it is liminatd. P = th population of pfctu. (d ) Th pics th two vaiabls and tak, dpict altnativ policis of allocating a public invstmnt budgt, chaactizing th diffnt intnsity in th policy ducing gional inqualitis. Accoding to litatu it is possibl to study fou diffnt policis, which a th (i) taining, (ii) popotional, (iii) powful and (iv) th combind gional policis (Kavvadias, 1992; Polyzos, 2004). Tabl 1: Valus of Typ of Policy ( d ) and i f i f fo th diffnt typ of policis Vaiabls ( d ) i Rtaining 0 1 >0 Popotional 0 1 0 Powful >0 >1 0 Combind 0< <1 >1 Public Invstmnt Allocation in Gc f Vaious valus Public spnding on invstmnt divs fom th Public Invstmnt Pogam (PIP) psntd in th annual Budgt of th Gk govnmnt. Th PIP covs invstmnt in infastuctu in th conomy s pimay IBES ORAL Laissa, 8-10 Jun 2013 224
Gaki-Polyzos-Sdolias, 222-233 and sconday sctos, as wll as paymnts fo infastuctu in oads, bidgs, pots, aipots and touist facilitis (.g., mains), uban infastuctu (pimaily wat and swag facilitis and public housing), social infastuctu (ducation and halth) as wll as administativ xpnss latd to th abov catgois of public invstmnt (Lambinidis t al., 2005). Public Spnding has fluctuations ov th last dcad. Som gions duing th fist yas of th dcad 2000-2010 accpt small budgts and duing th last yas of this dcad lag budgts, whas oth gions tak constantly lag amounts of subsidy. oov th a Nuts III gions that ndos thoughout th sach piod constantly small amounts of subsidis. Th pvious a gaphically dpictd in its figus 1 and 2. Following figu 3 dpicts th avag budgt allocatd in Gc duing 2000-2010. Figu 1: Top 7 Nuts III Rgions gading Public Invstmnt Pogam Distibution fo th yas 2000-2010 (Data: EPILOGI 2010) Figu 2: Bottom 5 Nuts III Rgions gading Public Invstmnt Pogam Distibution fo th yas 2000-2010 (Data: EPILOGI 2010) Looking at th two fist gaphs th inqualitis in th distibution of th public invstmnt pogam a obvious. Rgional pospity dpnd on th incom inqualitis and thfo on th public invstmnt not fficint allocation. Looking into this social poblm th qustion aiss; is th a mthod that will sult th solution IBES ORAL Laissa, 8-10 Jun 2013 225
Gaki-Polyzos-Sdolias, 222-233 to ths wlfa quality poblm? Dos this mthod has to b complx o it th a way to com to a solution faily asy? Th following map dscibs th inqualitis of th avag PIP p capita distibution fo th fist dcad of twnty fist cntuy in Gc. Following, a cas study is pfomd aiming to invstigat th solution to th poblm in qustion. Figu 3: Public Invstmnt Pogam avag distibution fo th yas 2000-2010(souc: own pocssing, Data: EPILOGI 2010) Cas Study A cas study has bn caid out and is psntd blow in od to vify th applicability of at of distibution in Gc. Th study was pfomd fo all 51 Nuts III gions in Gc. Th lvant paamts a: P = Population in ach gion (Gk Population Cnsus hld in 2001) WI = Wlfa Indx fo 2005 PD = Poductiv Dynamism fo th yas 2001-2006 ILE = Invstmnt Incntivs Law - Lag ntpiss (Law 3908/2011) IE = Invstmnt Incntivs Law - dium-siz ntpiss (Law 3908/2011) ISE = Invstmnt Incntivs Law - Small and mico ntpiss (Law 3908/2011) PIP = Public Invstmnt Pogam in 2010. = 0 ( d ) 1 f i = 0 Th policy takn into considation is th popotional. oov fiv diffnt vaiabls a usd to calculat this at of distibution. Fo xampl incopoating th vaiabl of Wlfa Indx in quation (1) it can b wittn: E n WI,min WI,min [ fi ( di ) ] P [ fi ( di ) ] P (2) WI, i 1 WI, IBES ORAL Laissa, 8-10 Jun 2013 226
Gaki-Polyzos-Sdolias, 222-233 This pocdu is pfomd fo ach on of 5 vaiabls ( WI, PD, ILE, IE, ISE ) dscibd abov. Th data a usd fo this sach a fom EL.STAT (Th Hllnic Statistical Svic), Polyzos (2011) and fom EPILOGI (2010). Rsults Th sults of calculating th at of distibution givn fom quation (1) a psntd in th following tabl. Fo som gions th sults do not diff a lot but fo som oth thy do. In th last column th allocation of th Public Invstmnt Pogam in 2010 is psntd. In this way it is vitabl to compa th thotical allocation (columns 1 to 5) with th implmntd on in 2010(column 6). It can b obsvd that ach gion has a diffnt action to th chang of th vaiabl usd to calculat th cosponding at of distibution. If on compas th sults to th applid allocation thn it is obvious that th vaiabl usd is of gat impotanc to th outcom. It is also obsvabl that som gions w favoud gading th applid distibution of th funds in 2010 but oths w not, considing th accomplishmnt of balancd dvlopmnt. Figu 4: Public Invstmnt Rgional Rat of Distibution (fo all 51 Nuts III Gk gions) Th sults fom Tabl 2 a gaphically dpictd in figu 4. As it obsvd th gions of Fthiotida, ssinia, Ss and Iaklion w favoud fom PIP 2010, whas Thssaloniki and Attica w not. This sult is pobably du to th us of th p capita vaiabl. Th pviously a dpictd in figu 6 (a) and (b), wh it can b asily sn which gions w favoud (ight sid of th ba chat) and which w not (lft sid of th ba chat)fo ach calculation of th at of distibution (considing th WI Wlfa Indx and th PD Poductiv Dynamism vaiabls).taking out of th chat th gion of Attica and calculating th actually allocatd funds using th at of distibution and th total availabl funds in PIP2010, th diffncs btwn th usd vaiabls a obvious. IBES ORAL Laissa, 8-10 Jun 2013 227
Gaki-Polyzos-Sdolias, 222-233 Figu 5: Public Invstmnt Allocation (fo th 50 Nuts III Gk gions) (a) (b) Figu 6: Favoud and unfavoud gions fom th allocation of PIP 2010 compad to th allocation sults fom th calculation of th at of distibution (a) using WI Wlfa Indx and (b) using th PD- Poductiv Dynamism. IBES ORAL Laissa, 8-10 Jun 2013 228
Wlfa Indx (WI) Poductiv Dynamism (PD) Lag ntpiss (ILE) dium-siz ntpiss (IE) Small & mico ntpiss (ISE) PIP 2010 Gaki-Polyzos-Sdolias, 222-233 Tabl 2: Public Invstmnt Rgional Rat of Distibution E(%) * Rgion (Nuts III) [1] [2] [3] [4] [5] [6] 1 Aitoloakanania 2,63 2,32 1,72 1,63 1,78 2,57 2 Boiwtia 1,17 1,08 1,39 1,39 1,39 0,90 3 Evoia 1,91 1,96 2,05 2,28 1,95 1,70 4 Evitania 0,43 0,28 0,28 0,30 0,28 0,53 5 Fthiotida 1,71 1,52 1,70 1,89 1,62 9,79 6 Fokida 0,54 0,51 0,43 0,45 0,42 0,36 7 Agolida 0,95 0,93 0,88 0,84 0,91 0,36 8 Akadia 2,75 2,95 2,61 2,49 2,70 1,42 9 Achaia 2,95 3,12 2,47 2,35 2,56 3,92 10 Ilia 2,06 2,02 1,48 1,41 1,53 0,89 11 Kointhia 1,36 1,29 1,29 1,23 1,33 0,44 12 Lakonia 0,92 0,86 0,79 0,79 0,79 0,42 13 ssinia 1,80 1,61 1,40 1,40 1,40 6,50 14 Zakinthou 0,34 0,38 0,31 0,31 0,31 0,79 15 Kkias 0,97 1,12 0,89 0,89 0,89 0,93 16 Kffalinias 0,31 0,38 0,31 0,31 0,31 0,42 17 Lfkadas 0,18 0,20 0,18 0,18 0,18 0,23 18 Atas 1,01 0,82 0,60 0,57 0,62 0,55 19 Thspotias 0,44 0,48 0,35 0,34 0,37 1,41 20 Ioanninon 1,57 1,58 1,30 1,24 1,35 1,98 21 Pavzis 0,59 0,59 0,45 0,43 0,47 0,47 22 Kaditsas 1,67 1,20 1,03 1,03 1,03 0,98 23 Laissis 2,71 2,57 2,33 2,22 2,40 1,10 24 agnisias 1,66 1,83 1,72 1,64 1,78 1,02 25 Tikalon 1,79 1,29 1,11 1,11 1,11 1,29 26 Gvnon 0,36 0,35 0,30 0,30 0,30 1,35 27 Damas 1,04 1,30 0,80 0,76 0,83 0,89 28 Imathias 1,41 1,67 1,14 1,14 1,14 0,76 29 Thssalonikis 8,72 9,18 8,80 8,40 9,10 5,83 30 Kavalas 1,29 1,44 1,11 1,06 1,15 1,05 31 Kastoias 0,48 0,55 0,43 0,43 0,43 0,55 32 Kilkis 0,96 0,87 0,71 0,71 0,71 1,22 33 Kozanis 1,43 1,52 1,30 1,24 1,34 1,14 34 Pllis 1,90 1,40 1,18 1,18 1,18 0,47 35 Piias 1,32 1,27 1,03 1,03 1,03 0,72 36 Son 2,21 2,06 1,61 1,61 1,61 4,85 37 Floinis 0,58 0,57 0,43 0,43 0,43 0,58 38 Chalkidikis 0,89 0,90 0,89 0,85 0,92 0,90 39 Evos 1,46 1,46 1,14 1,09 1,19 1,65 40 Xanthis 1,08 0,96 0,78 0,74 0,81 0,62 41 Rodopis 1,42 0,96 0,85 0,81 0,88 2,06 42 Dodkanissou 1,67 1,77 1,81 2,01 1,72 2,24 43 Kukladon 0,88 0,96 1,07 1,19 1,02 0,93 44 Lsvos 0,97 0,98 0,87 0,87 0,87 1,09 45 Samos 0,40 0,42 0,35 0,35 0,35 0,57 46 Chios 0,42 0,49 0,42 0,42 0,42 0,59 47 Iakliou 2,87 2,56 2,51 2,40 2,60 5,23 48 Lasithiou 0,66 0,62 0,63 0,61 0,66 0,85 49 Rthimou 0,80 0,75 0,68 0,65 0,70 0,79 50 Chania 1,28 1,25 1,25 1,19 1,29 1,70 51 Attica 29,08 30,84 39,83 39,83 39,83 20,40 *Popotional Rgional Policy (=0, fi=1) In gnal, th last th vaiabls ILE, IE and ISE sm to giv th sam sults, which sults diff fom th ons takn fom using th fist two vaiabls. Th gnal conclusion is that th vaiabl usd is significant fo th calculus of th invstigatd at of distibution. Th favoud gions and th unfavoud gions fom th distibution of th PIP 2010 can b sn in figus 7 and 8. Figu 7 shows th favoud gions, th ons that w fundd with gat subsidis wh as figu 8 shows th unfavoud gions, th ons that IBES ORAL Laissa, 8-10 Jun 2013 229
Gaki-Polyzos-Sdolias, 222-233 took fw subsidis fom th PIP 2010 than th thotical mthod indicats. (a) (b) Figu 7: Favoud gions fom PIP 2010 compad to Public Invstmnt Allocation diving using th Wlfa Indx, th Poductiv Dynamism, and th Invstmnt Incntivs Law fo Lag, dium Siz and Small ntpiss (Law 3908/2011) (a)0-20 and (b) 20-200 million. (a) (b) Figu 8: Unfavoud gions fom PIP 2010 compad to Public Invstmnt Allocation diving using th Wlfa Indx, th Poductiv Dynamism, and th Invstmnt Incntivs Law fo Lag, dium Siz and Small ntpiss (Law 3908/2011) (a)0-20 and (b) 20-200 million. Snsitivity Analysis Following a snsitivity analysis will b psntd aiming to discov th ffct of vaiabls and f i in th calculation of th xamind at of distibution. Using quation (1) th lvant paamts a IBES ORAL Laissa, 8-10 Jun 2013 230
Gaki-Polyzos-Sdolias, 222-233 stabl and only th vaiabls and f i chang. Th at of distibution is calculatd using th WI Wlfa Indx and it is fomd as follows. n WI,min WI,min E [ fi ( di ) ] P [ fi ( di ) ] P (3) WI, i 1 WI, Th valus of th vaiabls fo th cass xamind a psntd in Tabl 3. Tabl 3: Snsitivity analysis vaiabls Vaiabls f i Cas 1 0 1 Cas 2 0 2 Cas 3 0 10 Cas 4 0 100 Cas 5 0.2 0 Cas 6 0.5 0 Cas 7 0.8 0 Cas 8 1 0 Cas 9 1 1 Cas 10 1 100 Th sults a dpictd in th following figu and th spid gaph. It is obsvabl that th gional policy takn into considation is of gat significanc. Whn vaiabl changs, th sults of th mthod giv significant diffntiatd valus compad to whn =0. As it can b sn in figus 9 and 10, cass 5,6,7 and 8 giv significantly diffnt valus fo th at of distibution compad to cass 1,2,3 and 4 vn though th vaiabl f is changd. i Figu 9: Snsitivity analysis sults Th commnts pvious mntiond can b asily sn in th spid gaph psntd in figu 10. IBES ORAL Laissa, 8-10 Jun 2013 231
Gaki-Polyzos-Sdolias, 222-233 Figu 10: Snsitivity analysis sults Conclusions Th optimization poblm of allocation of public invstmnt is vy complicatd. A lag numb of citia must b takn into considation in od to ach a conclusion. A mthod usd in litatu is th calculation of th cosponding at of distibution. A cas study is pfomd using fiv diffnt vaiabls fo th calculation of th invstigatd at of distibution. Th sults a compad to th Gk Public Invstmnt Pogam allocation in 2010. A snsitivity analysis is finally pfomd aiming to dtmin th us of th paamts and f i, usd in th calculation of th at of distibution. Public invstmnt in Gc ov th last dcad sm to favou som gions but som oths not. Som gions accptd small budgts and duing th last yas of this dcad lag ons, whas oth gions tak constantly lag amounts of subsidy. Calculating th cosponding at of distibution it is obsvd that th gions of Fthiotida, ssinia, Ss and Iaklion w favoud fom PIP 2010 but Thssaloniki and Attica w not. This sult is pobably du to th us of th p capita vaiabl. Th last th vaiabls usd in th cas study ILE, IE and ISE (Th Invstmnt Incntivs Law fo Lag, dium siz and small ntpiss) sm to giv th sam sults, which sults diff fom th ons takn fom using th fist two vaiabls (Wlfa Indx fo 2005, Poductiv Dynamism fo th yas 2001-2006). This sach shows that som gions w favoud and oths w not fom th PIP 2010. In any cas, th us of th convnint vaiabl is significant fo th occuing sults. oov, th us of th gional policy and thfo th cosponding paamts a impotant fo th calculation of th at of distibution. A qustion fo futh sach is in which way th usd paamts affct th calculation of th cosponding gional at of distibution. IBES ORAL Laissa, 8-10 Jun 2013 232
Gaki-Polyzos-Sdolias, 222-233 Rfncs Cunt, J. Daskin,. &Schilling, D. (2001), Disct ntwok location modls. In: Dzn Z, Hamach H(ds) Facility Location Thoy: Applications and thods, Chap 3.Sping, Blin, 83-120 Domazlicky, B. (1978), Th Rgional Allocation of Invstmnt: A noclassical odl, Jounal of Rgional Analysis and Policy (until 1996 known as Rgional Scinc Pspctivs), 8(2) Dofman, R. (1963), Rgional Allocation of Invstmnt: Commnt, Th Quatly Jounal of Economics, 77(1), 162-165 EPILOGI, (2010), Th Gk Pfctus. Athns, (in Gk) Intiligato,.S. (1964), Rgional Allocation of Invstmnt: Commnt, Th Quatly Jounal of Economics, 78(4), 659-662 Kavvadias, P. (1992), Indicatos of Rgional Dvlopmnt in Gc, KEPE, Athns (in Gk) Lambinidis,. Psychais, Y. & Rovolis, A. (2005), Rgional allocation of public infastuctu invstmnt: Th cas of Gc, Rgional Studis, 39(9), 1231 1244 Nijkamp, P. & Ritvld, P. (1976), ulti-objctiv pogamming modls. Nw ways in gional dcision making, Rgional Scinc and Uban Economics 6, 253-274 Polyzos, S. (2004), Public Woks, Invstmnts and thi Rgional Economic Effcts, Opational Rsach, 4(3), 373-388 Polyzos, S. (2011), Rgional Dvlopmnt, Kitiki Editions, Athns. Rahman, d. A., (1963), Rgional Allocation of Invstmnt: An agggativ Study in th Thoy of Dvlopmnt Pogamming, Th Quatly Jounal of Economics, 77(1), 26-39 IBES ORAL Laissa, 8-10 Jun 2013 233