23
Is Scotland a Region? Grant Allan and Kim Swales Urban and Regional Economics Seminar Group Open University of Wales 25 th - 26 th September 2013

Is Scotland a Region?

  • Upload
    thora

  • View
    27

  • Download
    0

Embed Size (px)

DESCRIPTION

Is Scotland a Region?. Grant Allan and Kim Swales Urban and Regional Economics Seminar Group Open University of Wales 25 th - 26 th September 2013. Outline. What is a region? Regional modelling Is Scotland a region? Sub-regional heterogeneity Impact of independence/greater devolution. - PowerPoint PPT Presentation

Citation preview

Page 1: Is Scotland a Region?

Is Scotland a Region?

Grant Allan and Kim Swales

Urban and Regional Economics Seminar GroupOpen University of Wales25th - 26th September 2013

Page 2: Is Scotland a Region?

Outline

• What is a region?

• Regional modelling

• Is Scotland a region?

• Sub-regional heterogeneity

• Impact of independence/greater

devolution

Page 3: Is Scotland a Region?

What is a region?

• Difficult question to answer in abstract.

• At least two ways to consider a region:• A homogeneous space (Gwilym Price)• A structured space (John Parr)

• Scotland is an administrative (devolved) region. Is it correct to treat it as an economic region?

• Recent Treasury Report “Macroeconomic and Fiscal Performance of Scotland” shows the performance of Scotland is comparable to the UK in recent past:

(gdp/worker), growth.

Page 4: Is Scotland a Region?

A region for policy modelling

• Considered the way the region has been defined in use.

• Outline the assumptions that we (FAI) make in regional modelling

• Ask why we have applied the model to Scotland

• Consider whether Scotland is an appropriate economy to be modelled in this way, given the heterogeneity within Scotland.

• Raise some issues on inter-regional models

Page 5: Is Scotland a Region?

Modelling Assumptions• Sectors have classical/neo-classical production technology

• Constant returns to scale technology• Competitive product markets

• Trade driven by imperfect competition (Armington assumptions)

• Open factor markets• Unified national financial market (exogenous r/i)• Unified (but imperfectly competitive) labour market• Inter-regional migration (flow equilibrium)• Typically no other fixed (region specific) input

• Industrial disaggregation (Industrial structure and linkages matter)

• Welfare transfers financed exogenously.• Impose no individual macroeconomic constraints

Page 6: Is Scotland a Region?

Classical long-run characteristics• For demand shock, you get an extended IO model of the

Batey-Madden type. (Industrial structure and linkages matter, endogenous population)

• For a supply (efficiency) shock you get the IO price-dual (Ghoshian) model.

• Structurally, the region has a large traded sector, so that the impact on export demand (and import substitution) are typically important for both demand and supply shocks.

• In the long-run it operates as a classic export-base type model

Page 7: Is Scotland a Region?

General characteristics• In the short run fixed labour force and specific capital

stocks limit full adjustment (reflected in prices).

• In many ways like a NEG model in the sense that imperfect competition in the market for traded goods is very important but with no increasing returns (long run expansion limited by export markets).

Page 8: Is Scotland a Region?

Why apply the model to Scotland?

• Data• Calibration: IO tables, National Account data• Parameter values

• Policy• Regional policy• Scottish specific policy (Scottish Office/Scottish

Enterprise)• Over time these arguments strengthened

• Devolution and Independence debate• Improved data sources

Page 9: Is Scotland a Region?

The system of regions in the UK

• Shouldn’t Scotland be modelled as part of a UK national system?• Almost certainly (Mark Partridge)

• What should a UK regional disaggregation look like?• Individual devolved regions?• Disaggregation of England?

Page 10: Is Scotland a Region?

How far do the assumptions hold?

• Essentially the model assumes homogeneity within the region

• Key economic characteristics should be similar:

• Labour market conditions

• Production function

• Or in some constant structure

Page 11: Is Scotland a Region?

Intra-Scottish labour market variation Employment rate (16-64), % Unemployment rate (16-64), %

NUTS3 levels 2004 2012 2004 2012Orkney Islands 83.4 81.3 1.6 5.3Shetland Islands 85.0 79.7 1.5 !Caithness & Sutherland and Ross & Cromarty 80.8 78.5 3.6 4.6Abderdeen City and Aberdeenshire 76.1 78.4 5.3 4.8Inverness & Nairn and Moray, Badenoch & Strathspey 78.0 76.0 4 4.6South Lanarkshire 73.0 75.1 4.5 5.3East Lothian and Midlothian 75.8 74.9 4.1 5.2Lochaber, Skye & Lochalsh, Arran & Cumbrae and Argyll and Bute 79.1 74.2 2.8 6.1West Lothian 76.9 74.0 3.8 5.5Falkirk 74.3 72.9 4.6 7.7Edinburgh, City of 74.0 72.8 5.2 5.8Scottish Borders 77.5 72.5 2.9 6.2Perth & Kinross and Stirling 75.1 71.8 4.1 8.1Eilean Siar (Western Isles) 77.8 71.3 5.1 8.1Inverclyde, East Renfrewshire and Renfrewshire 72.4 70.4 5.2 9.3East Dunbartonshire, West Dunbartonshire and Helensburgh & Lomond 73.8 70.0 4.7 8.3South Ayshire 71.8 69.9 6.7 10.9North Lanarkshire 69.1 69.5 6.4 12.8Clackmannshire and Fife 74.5 69.1 5.2 9.8Angus and Dundee City 69.4 69.0 7.2 8.3Dumfries and Galloway 75.6 67.2 3.9 10.1East Ayrshire and North Ayrshire Mainland 66.6 64.1 8.1 12.7Glasgow City 62.9 59.7 7.9 12

Page 12: Is Scotland a Region?

Employment rates

55

60

65

70

75

80

85

90

Aber

deen

City

Aber

deen

shire

Angu

s

Argy

ll an

d Bu

te

Clac

kman

nans

hire

Dum

fries

and

Gal

low

ay

Dund

ee C

ity

East

Ayr

shire

East

Dun

bart

onsh

ire

East

Loth

ian

East

Ren

frew

shire

Edin

burg

h, C

ity o

f

Eile

an S

iar

Falk

irk Fife

Glas

gow

City

High

land

Inve

rcly

de

Mid

loth

ian

Mor

ay

Nort

h Ay

rshi

re

Nort

h La

nark

shire

Ork

ney

Islan

ds

Pert

h an

d Ki

nros

s

Renf

rew

shire

Scotti

sh B

orde

rs

Shet

land

Isla

nds

Sout

h Ay

rshi

re

Sout

h La

nark

shire

Stirli

ng

Wes

t Dun

bart

onsh

ire

Wes

t Lot

hian

Empl

oym

ent r

ate,

16-

64, %

Local Authority area (1-32)

2004

2012

Page 13: Is Scotland a Region?

Unified labour market

• Difficult to argue that this is a unified labour market with such big variation in unemployment and employment rates.

• But perhaps there is an underlying urban/rural structure (high employment rates in the rural (particularly highland)) regions. Low employment rate and high unemployment rate in urban regions.

• Doesn’t appear to be the case

Page 14: Is Scotland a Region?

GVA per head

020406080

100120140160180

Angu

s and

Dun

dee

City

Clac

kman

nans

hire

and

Fife

East

Loth

ian

and

Mid

loth

ian

Scotti

sh B

orde

rs

Edin

burg

h, C

ity o

f

Falki

rk

Pert

h &

Kinr

oss a

nd S

tirlin

g

Wes

t Lot

hian

East

Dun

barto

nshi

re, W

est…

Dum

fries

& G

allo

way

East

Ayr

shire

and

Nor

th A

yrsh

ire…

Glas

gow

City

Inve

rclyd

e, E

ast R

enfr

ewsh

ire a

nd…

Nort

h La

nark

shire

Sout

h Ay

rshi

re

Sout

h La

nark

shire

Aber

deen

City

and

Abe

rdee

nshi

re

Caith

ness

& S

uthe

rland

and

Ros

s &…

Inve

rnes

s & N

airn

and

Mor

ay,…

Loch

aber

, Sky

e &

Loch

alsh

, Arr

an &

Eile

an S

iar (

Wes

tern

Isle

s)

Orkn

ey Is

land

s

Shet

land

Isla

nds

Eastern Scotland South Western Scotland NE Highlands and islands

GVA

per h

ead,

199

7 an

d 20

10, S

cotla

nd =

100

NUTS 3 regions

1997

2011

Page 15: Is Scotland a Region?

GVA per employee

020406080

100120140160180

Angu

s and

Dun

dee

City

Clac

kman

nans

hire

and

Fife

East

Loth

ian

and

Mid

loth

ian

Scotti

sh B

orde

rs

Edin

burg

h, C

ity o

f

Falki

rk

Pert

h &

Kinr

oss a

nd S

tirlin

g

Wes

t Lot

hian

East

Dun

barto

nshi

re, W

est…

Dum

fries

& G

allo

way

East

Ayr

shire

and

Nor

th A

yrsh

ire…

Glas

gow

City

Inve

rclyd

e, E

ast R

enfr

ewsh

ire a

nd…

Nort

h La

nark

shire

Sout

h Ay

rshi

re

Sout

h La

nark

shire

Aber

deen

City

and

Abe

rdee

nshi

re

Caith

ness

& S

uthe

rland

and

Ros

s &…

Inve

rnes

s & N

airn

and

Mor

ay,…

Loch

aber

, Sky

e &

Loch

alsh

, Arr

an &

Eile

an S

iar (

Wes

tern

Isle

s)

Orkn

ey Is

land

s

Shet

land

Isla

nds

Eastern Scotland South Western Scotland NE Highlands and islands

GVA

per e

mpl

oyee

in 2

010,

Scot

land

= 10

0

NUTS 3 regions

Page 16: Is Scotland a Region?

Gross Domestic Household Income

020406080

100120140160180

Angu

s and

Dun

dee

City

Clac

kman

nans

hire

and

Fife

East

Loth

ian

and

Mid

loth

ian

Scotti

sh B

orde

rs

Edin

burg

h, C

ity o

f

Falki

rk

Pert

h &

Kinr

oss a

nd S

tirlin

g

Wes

t Lot

hian

East

Dun

barto

nshi

re, W

est…

Dum

fries

& G

allo

way

East

Ayr

shire

and

Nor

th A

yrsh

ire…

Glas

gow

City

Inve

rclyd

e, E

ast R

enfr

ewsh

ire a

nd…

Nort

h La

nark

shire

Sout

h Ay

rshi

re

Sout

h La

nark

shire

Aber

deen

City

and

Abe

rdee

nshi

re

Caith

ness

& S

uthe

rland

and

Ros

s &…

Inve

rnes

s & N

airn

and

Mor

ay,…

Loch

aber

, Sky

e &

Loch

alsh

, Arr

an &

Eile

an S

iar (

Wes

tern

Isle

s)

Orkn

ey Is

land

s

Shet

land

Isla

nds

Eastern Scotland South Western Scotland NE Highlands and Islands

GDHI

per

hea

d, 1

997

and

2010

, Sco

tland

= 10

0

NUTS 3 regions

1997

2010

Page 17: Is Scotland a Region?

GVA growth(cumulative growth, 1997 to 2010 minus Scottish GVA growth)

Page 18: Is Scotland a Region?

Shift share full calculations

National share Industry mix Regional shift

𝐺𝑉𝐴𝑖𝑗𝑡+𝑛10𝑖=1 − 𝐺𝑉𝐴𝑖𝑗𝑡

10𝑖=1 = ∆ 𝐺𝑉𝐴𝑖𝑗𝑡+𝑛10

𝑖=1 = ൭ 𝐺𝑉𝐴𝑖𝑗𝑡10𝑖=1 ∗𝑔𝑛൱+ቌ 𝐺𝑉𝐴𝑖𝑗𝑡

10𝑖=1 ∗ሺ𝑔𝑖𝑛 −𝑔𝑛ሻቍ+ቌ 𝐺𝑉𝐴𝑖𝑗𝑡

10𝑖=1 ∗൫𝑔𝑖𝑗 −𝑔𝑖𝑛൯ቍ

Absolute GVA change,

1997-2010, (£m)

National share (£m)

Industry mix (£m)

Regional shift (£m)

Eastern

Scotland

Angus and Dundee City 435.7 977.2 -83.1 -458.5Clackmannanshire and Fife 656.7 1203.5 -238.6 -308.1East Lothian and Midlothian 425.4 446.1 -77.7 57.0Scottish Borders 209.6 306.0 -58.4 -38.0Edinburgh, City of 4362.4 2834.9 1201.8 325.7Falkirk 600.5 505.4 -130.8 225.9Perth & Kinross and Stirling 837.0 813.3 48.8 -25.1West Lothian 611.7 695.6 -137.4 53.4

South Wester

n Scotla

nd

East Dunbartonshire, West Dunbartonshire and Helensburgh & Lomond 381.4 604.1 -10.6 -212.1Dumfries & Galloway 328.9 463.1 -96.6 -37.6East Ayrshire and North Ayrshire mainland 164.4 727.8 -194.8 -368.6Glasgow City 3636.3 3422.7 892.7 -679.1Inverclyde, East Renfrewshire and Renfrewshire 54.2 1316.2 -185.7 -1076.3North Lanarkshire 1369.6 869.2 -144.8 645.2South Ayrshire 268.7 435.8 -48.4 -118.6South Lanarkshire 655.7 993.3 -202.6 -135.1

NE Aberdeen City and Aberdeenshire 3402.0 2515.2 -312.4 1199.2

Highlands and

Islands

Caithness & Sutherland and Ross & Cromarty 340.6 247.3 -27.0 120.3Inverness & Nairn and Moray, Badenoch & Strathspey 1087.7 494.3 -113.2 706.6Lochaber, Skye & Lochalsh, Arran & Cumbrae and Argyll & Bute 251.5 320.5 -49.2 -19.9Eilean Siar (Western Isles) 42.4 86.3 -9.2 -34.7Orkney Islands 55.4 68.3 -22.4 9.4Shetland Islands 120.2 94.5 -24.1 49.8

Page 19: Is Scotland a Region?

Cumulative Regional shift by region

-1500

-1000

-500

0

500

1000

1500

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Cum

ulati

ve R

egio

nal S

hift

ele

men

t of G

VA gr

owth

, £m

Aberdeen City and Aberdeenshire

Inverness & Nairn and Moray, B adenoch & Strathspey

North Lanarkshire

Falkirk

Cai thness & Sutherland and Ross & Cromarty

Edi nburgh, City of

Shetland Islands

Per th & Kinross and Stirling

East Lothian and Midlothian

West Lothian

Orkney Islands

Lochaber, Skye & Lochalsh, Arran & Cumbrae and Argyll & Bute

Dumfries & Galloway

Scotti sh Borders

Eilean Siar (Western Isles)

South Ayrshire

South Lanarkshire

East Dunbartonshire, West Dunbartonshire and Helensburgh & Lomond

Clackmannanshi re and Fife

East Ayrshire and North Ayrshire mainland

Angus and Dundee City

Glasgow City

Inverclyde, East Renfrewshire and Renfrewshire

Page 20: Is Scotland a Region?

GDP figures

Much less easy to tell a rural/urban story.

Glasgow has low productivity and negative differential growth in the shift share analysis although favourable structure. Dundee has both low industry mix and regional shift.

Edinburgh and Aberdeen are major sources of growth

Page 21: Is Scotland a Region?

Growth Sectors in space

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

Aber

deen

City

Aber

deen

shire

Angu

sAr

gyll a

nd B

ute

Clac

kman

nans

hire

Dum

fries

and

Gal

low

ayDu

ndee

City

East

Ayr

shire

East

Dun

barto

nshi

reEa

st Lo

thia

nEa

st R

enfre

wsh

ireEd

inbu

rgh,

City

of

Eile

an S

iar

Falki

rkFi

feGl

asgo

w C

ityHi

ghla

ndIn

verc

lyde

Mid

loth

ian

Mor

ayNo

rth

Ayrs

hire

Nort

h La

nark

shire

Orkn

ey Is

land

sPe

rth

and

Kinr

oss

Renf

rew

shire

Scotti

sh B

orde

rsSh

etla

nd Is

land

sSo

uth

Ayrs

hire

Sout

h La

nark

shire

Stirli

ngW

est D

unba

rtons

hire

Wes

t Lot

hian

Shar

e of

tota

l Sco

ttish

em

ploy

men

t in

Grow

th Se

ctor

s, 20

11

Local Authority area (32)

Food and drink Energy including renewables Lifesciences

Sustainable tourism Financial and business services

Page 22: Is Scotland a Region?

Is Scotland a Region?

• Is It appropriate to treat Scotland as a unified region?• Does spatial structure affect performance.• Does the intra-regional location of a shock affect the

regional impact? • At present Scotland has two primary geographical sources

of GDP growth: Edinburgh and Aberdeen (with Inverness and North Lanark). Does Scotland face the same issue of polarised growth as the UK?

• Should there be more spatially unbalanced industrial policy in Scotland?

• Independently of the independence vote, will sub-regional concerns become much more prominant?

Page 23: Is Scotland a Region?

Scottish Government/ESRC-funded modelling• North Sea oil+gas is an important input:

• Likely that there will be an augmented set of (semi?) official IO accounts

• Should be formally modelled• Labour market:

• Greater skill disaggregation (unskilled more region specific)

• Is geographic disaggregation needed?• Income distribution

• Household disaggregation• Should there sub-regional disaggregation

• Scotland RUK NEG model