Production cost in the periphery: The case of Greece

The phenomenon of developmental polarization, that is uneven regional development, strongly affects the production cost in the periphery of a country. This, in turn, seriously affects a peripheral enterprise's competitive posture and ability to survive. The increased transportation cost, the lack of friendly industrial environment and sufficient infrastructure, the manpower problem and the need for a centrally located branch of the enterprise are included among the most unfavorable factors for the production cost in Greek peripheral production units. An assessment of the production cost in such a unit showed an 18% increase due to these factors. Measures to counteract regional unevenness include development incentives and creation of industrial estates. Nevertheless, such measures, unless they address the increased production cost problem in the long run, can only marginally improve the regional distribution of productive activities. The paper discusses the relation between production cost and location, analyzes the factors affecting the production cost in the periphery, describes the support given to peripheral enterprises in Greece and suggests policies which would relate this support to the operating cost of such enterprises.