The Welfare Economics of Priority Area Policies

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Abstract
The priority area approach to problems such as urban deprivation has recently been criticized because of its alleged ineffectiveness and because the majority of the deprived live outside the priority areas. This paper argues that these criticisms do not constitute an adequate appraisal of the area approach, as they ignore some other and equally important considerations, in particular the economic aspects of the approach. One is the possibility of achieving resource cost saving through area action (thus making it possible to help more deprived people from a given level of resources). Another is the possibility of achieving a higher rate of take-up of special assistance. The paper discusses those attributes of utility functions and production functions that are relevant to the appraisal of area policies, and provides a framework that would allow a complete evaluation of the economic aspects of an area policy.

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