Central places and development : an economic appraisal of the portuguese regional decentralisation

Abstract

The purpose of this paper is to appraise the Regionalisation of Portugal from the economic point of view. With a population of about 10 million people, Portugal only has Central Government and Local Government administrative levels and now seeks to introduce an intermediate regional level. The creation of administrative regions is included in the Constitution and has been regulated by a law approved by the Assembleia da Republica (Law 56/91 of 13th August). But, the regions have not been established yet and there is no wide consensus on the matter. Regionalisation is mainly a political problem which involves the balance of the distribution of power (and financial resources) between the capital and the regional urban centres. Here it is treated instead as an economic problem: how to efficiently allocate a set of administrative functions in space to maximize scale economies and minimize transport and communication costs? Economic efficiency is dealt with here, e. g., the location of administrative functions which minimize the sum of production and transport costs. Pontes (1987) argues that in spatial economy, efficiency and maximisation of social welfare (measured by the aggregate surplus of consumers and productive units) are only in harmony in the specific case where demand for the administrative function is inelastic in relation to transport and communication cost.