The Macroeconomic Perspective of Urban and Regional Development Policies : Enhancing the Productivity of Secondary Cities

Abstract

Confronted with increasing concentration of population and economic activity in a few large cities, polcymakers in many developing countries have sought to implement spatial policies to decentralize the population and employment from the large urban centers. Most decentralization policy instruments used in developing countries have aimed at influencing the location and relocation of manufacturing firms. In Korea as in other developing countries, spatial policies have taken various forms: strict zoning regulations, outright prohibitions of manufacturing activities by laws, and various financial incentive schemes to relocate industries to outlying areas. The Korean government has used both carrot and stick to disperse industry. The 1977 Industrial Location Act, for example, prevented new factories from locating in Seoul and empowered the government to issue relocation orders to existing establishments. Tax breaks, loan guarantees, relocation grants, and other incentives were offered to industries that moved. Large public investments were made in infrastructure in new industrial towns.