| Summary: | Economic activity tends to concentrate in space, generating very large spatial imbalances. As a result, there has been an on-going questioning on whether policies should address those spatial imbalances and if so which form should they take. In this context, the new economic geography literature has provided the foundations of modern location theory and has also motivated a debate about the rationale for spatially-targeted policies. In parallel of developments in the academic literature, the regional policy paradigm has also evolved. The paper describes the shift towards new types of place-based policies that has unfolded in OECD countries. These policies put much less emphasis on spatial imbalances and more on complementarities in policies designed to support growth, less on subsidies and more on investments, less on short-term solutions and more on long-term and sustainable ones. Our main conclusion, given that spatial dimensions are important for aggregate growth, the modern regional policy paradigm, if well designed, should be part of any growth-enhancing structural policy package.
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