Is Competition Between Regions Welfare Increasing?

It is generally assumed that competition increases welfare. The main idea behind this assumption is that competition in a market is the best incentive mechanism to produce efficient market outcomes. This is good for social welfare and therefore stimulating competition is welfare increasing. According to this view, a lot of emphasis has been laid on the conditions to enhance competition in certain areas of the economy.

Next to these developments in the markets of goods and services, one sees a similar development in emphasizing competition between regions and semi-public and other kind of institutions. One can generally say that as a result of general development in other sectors and more formally, globalization tends also to increase the intensity of competition.