What is Local, what is Regional Economic Development?

One of the questions which usually comes up in discussions on decentralized approaches to economic development concerns the difference between local economic development and regional economic development: Is it possible to define exactly what is what? Is it possible to draw a clear boundary? Is it possible to define specifically local and specifically regional economic development activities?

I would tend to argue that the answer to all these questions is 'Probably not'. To start with, it is difficult to define what exactly is local and what is regional (apart from the observation that the latter in this context is less than national). For instance, many European local economic development agencies cater for a territory which has a larger gross domestic product (though a smaller area) than, say, Bolivia. Moreover, the scope of the term "region" tends to be fuzzy, as it is often applied to anything from two municipalities to a number of provinces/states (and never mind transborder regions). Then there is the problem that localities and regions share the feature of being clearly distinct from national government in that they cannot influence key variables of economic development, such as interest rate, exchange rate or foreign trade regime.

Apart from these complications, there are a number of economic and political-administrative issues which influence the allocation of economic promotion tasks to local and regional actors. What they indicate is this: There is no straightforward distinction between local and regional economic development. There is no genuine "LED" and "RED". Instead, there is a wide overlap. A given type of promotional instrument may be used both at the local and the regional level. Whether a given instrument is preferable for implementation at the local or at the regional level depends on

• the size and level of differentiation of the country (what exactly is "local" and "regional" in Honduras or Nepal?),
• economic factors such as transaction and opportunity cost and economies of scale,
• the political-administrative structure of the country and the allocation of responsibilities.

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