Abstract
Within a country, there are major differences between regions in terms of economic activity and socio-economic, cultural and environmental conditions. These interact to a considerable extent with people’s preferences as to where they want to settle and the resulting (dis)agglomeration effects. Although people’s decisions and migration movements may result in a spatial balance of individual benefits, political interference and regional transfers from economically stronger to economically weaker regions may be necessary in order to increase overall economic efficiency and ensure political distribution targets. However, as regional transfers are associated with economic costs, these must be carefully weighed against the potential welfare gains.