Scandinavian Working Papers in Economics

Working Paper Series in Economics and Institutions of Innovation,
Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies

No 390: Regional Economic Development, Social Capital and Governance: A Buchanian Approach

Charlie Karlsson () and Philippe Rouchy ()
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Charlie Karlsson: Jönköping International Business School (JIBS), Blekinge Institute of Technology & Centre of Excellence for Science and Innovation Studies (CESIS)
Philippe Rouchy: Blekinge Institute of Technology

Abstract: The purpose of this paper is to consider some of the challenges lying ahead of policy makers in the context of regional development. Regional economic development encompasses the economics and other resources that a region can mobilize for its own sustainable development and competitiveness. It is only recently that regions have developed tools and means for analysing the performance of their firms and organizations. Public and private governance bodies have recognized that ever-changing economic conditions bring renewed externalities, which are difficult to capture. Gaps in regional performances have been attributed to important, but often intangible factors such as social capital. Regional economics has taken on board those concerns by considering networks, trust and local procedures in their studies. Nevertheless, the issue remains that regional governance seems intractable in market terms alone. In this paper, we tackle the issue of governance in the context of regional development thanks to Buchanan’s approach of choices and costs. To provide such an assessment, we contribute by merging economics and sociology, where we shift the cost focus from the classic economic concern for equilibrium towards a concern for social utility.

Keywords: Regional Development; Social Capital; Governance; Networks; Public Choice; Property Rights; Cooperation; Trust

JEL-codes: A14; B25; D70; P48; R11; R58

38 pages, January 9, 2015

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