Ministry of Rural Development and Foods, Department of Agricultural Policy & Documentation, Division of Agricultural Statistics, e-mail: email@example.com
Department of Regional Economic Development, University of Central Greece
A model of optimal allocation of investment across regions is developed. It is shown that the optimality conditions may lead to increasing inequalities at the spatial level. Introducing an element of endogenous innovation dualistic situation emerges. An empirical analysis, using data for the NUTS-2 regions of the European Union seems to confirm this argument.