The role of universities in regional development Endogenous human capital and growth in a two-region model

This paper proposes a dynamic two-region model with human capital accumulation. This economic system is assumed to produce two commodities – one in each region. The only university in the economy which carries out higher education (=teaching) is located in region 1. The model describes the dynamic interdependence between human capital accumulation, regional division of labour, the spatial price structure under perfect economic competition, and the government intervention in higher education. Thus the analysis examines how differences in human capital improvements and environmental conditions between the two regions affect the economic geography. Received: October 1998/Accepted: April 2000     

The effects of scientific regional opportunities in science-technology flows: Evidence from scientific literature in firms patent data

Relevant scientific literature has demonstrated that in spaces of smaller scale than the national, the availability of scientific knowledge is also relevant for generating spillover effects that benefit the industrial sector. The proliferation of such literature consistently stressing the importance of physical proximity for the two-way flow of knowledge and for the development and fostering of innovation, together with the high degree of self-government of the Spanish regions (which have the competence to develop their own R&D policies), all suggest that the relationships between the scientific community and the industrial sector may be closer and more productive in the regions where the scientific potential is more relevant, in comparison with other regions. The basic objective of this article is to test for the possible differential effects of a favourable scientific environment on science-technology relationships, and more specifically, to determine if the considerable regional resources directed towards scientific research in local universities are being translated into economic results for industry, by way of better utilisation of scientific knowledge to enable companies to generate more and better innovations in processes and products. The methodology that we employ relates the scientific citations in patent documents - as a basic indicator of these science-technology flows- with various indicators of resources and results of academic research that reflect the scientific research environment. With caution, and recognising the limitations inherent in the NPC (non patent citation) methodology, different econometric specifications permit the conclusion to be drawn that companies of those regions with a more favourable scientific environment make greater use of scientific knowledge. Received: September 2003/Accepted: October 2004 The authors are members of Eco-21 Research Project. Centra Foundation (Junta de Andalucía). We are grateful for the useful comments on an earlier draft of this paper that were provided by three anonymous referees. This research has been granted by the Ministry of Science and Technology (SEC 2001–3030).     

The insufficiency of Pigouvian taxes in a spatial general equilibrium model

The paper considers, in a spatial general equilibrium setting, the pollution externality problem caused by a competitive industry. It is shown that the pollution control instrument supporting the optimum is a two-part Pigouvian tax–emission rights scheme in which the polluter pays only for the emissions which exceed its initial emission rights. The optimal level of the emission rights depends on the nature of pollution. In the global pollution case they are zero, whereas in the local pollution case they are equal to the firm's emissions at the optimum. In general, the optimal initial emission rights are between these values, but they may also be negative. In the latter case the firm pays for a greater amount of emissions than it emits. The emission tax proceeds, if there are any, must be distributed to the victims (households) as compensation. Received: December 1998/Accepted: May 2000     

Explaining regional economic performance: An historical application of a dynamic multi-regional CGE model

A multi-regional dynamic computable general equilibrium model of the Australian economy (federal-f) is used to identify the causes of the divergent growth performance of two Australian regional economies (Tasmania and the rest of Australia) over the period 1992–1993 to 1998–1999. These causes are traced to a large number of structural and policy changes in the two economies. Ultimately, no simple or mono-causal explanation for the divergent growth experience is found – the relatively slow growth of the Tasmanian economy is the net effect of a large number of countervailing influences. Nevertheless, from among these many influences, it is possible to distinguish those that had a sizeable impact from those that had a negligible impact. Received: 29 February 2000 / Accepted: 31 July 2000     

Social accounting and regional economic planning: an integrated model for policy analysis and optimisation

This paper combines a Social Accounting Matrix (SAM) with a Linear Programming (LP) model for impact analysis and the allocation of resources among alternative sectors. The model is applied to the Golestan Province of Iran. A SAM is used to analyse the impact of economic policy on Gross Regional Product (GRP), job creation for different educational groups among the labour force, mean personal income and income inequality. The mean GRP of the region is formulated as an objective function, with job creation, income inequality, and supply and demand limitations of sectors formulated as constraints of the model. By combining an LP model with a SAM it is possible to determine the activity level of sectors to meet the maximum level of GRP for a region with respect to related goals and constraints. The linking of a SAM with an LP model allows the positive points of each model to be combined in a new model with greater capabilities. The results of implementation of the model can be used for resource allocation and policy-making purposes.     

Testing for fiscal competition among French municipalities: Granger causality evidence in a dynamic panel data model

The purpose of this article is to produce further empirical insights into fiscal competition among local governments within an original framework. Relying on Granger's methodology, we address the question of possible causality at municipal level, between local budget variables (public expenditure and taxes) and residential location patterns. Tests are performed on a sample of 27 French municipalities belonging to the same suburban area for the 1987–1996 period. We identify two different strategies. Some localities compete in the tax rate variable while others act on public expenditure. If we consider public investment spending and taxes results strongly reject the adaptive hypothesis and clearly support the idea of fiscal competition. If we retain operating expenditure results indicate that both behaviors are accepted. Received: 31 August 2000 / Accepted: 11 May 2002 RID="*" ID="*" I would like to thank Jean-Sébastien Pentecote for his Wingauss assistance as well as three anonymous referees for their helpful comments.     

Impacts of regional development strategies on growth and equity of Korea: A multiregional CGE model

This paper is concerned with the assessment of major regional development strategies such as the three Coastal area development strategies (East Coast Development, South Coast Development, and West Coast Development) and the Seoul-Pusan development corridor strategy in terms of efficiency and equity. Multiregional Computable General Equilibrium for Korea is developed to capture the economic impact of regional investment expenditures, estimating the time-series influences of regional development alternatives on economic growth, inflation, welfare, income distribution, and interregional economic inequality for ten periods. In a sense that the main point of concern in the national development planning of Korea is with the question of improvement of national competitiveness with more equitable interregional income distribution, it is necessary to promote the West Coast region rather than the Seoul-Pusan development corridor. The West Coast regional development can lead to substantial gain in GDP and reduction in regional income disparity. In a multinational economic perspective, this regional development is expected to contribute to the economic cooperation of Northeast Asia and to enhancing the joint comparative advantages between China and Korea. However, it might worsen the income inequality in the long run. Received: September 1999/Accepted: September 2001     

The effects of trade openness on regional inequality in Mexico

This paper attempts to shed light on the debate about the effect of trade openness on regional inequality, by exploring the specific mechanisms through which this relationship might operate. It does so by testing the hypothesis, based on endogenous growth theory, that a region’s ability to capture the benefits of trade openness depends on key regional characteristics—its critical endowments—and therefore the degree to which trade will reduce regional inequality in a given country is mediated by the geographic distribution of its endowments. I test the hypothesis in Mexico, using statistical analysis of an original sub-national dataset that runs from 1940 to the present. The results indicate that opening up to trade benefits more those regions with lower levels of education, thereby tending to reduce regional inequality. However, opening up to trade also benefits more those regions with higher levels of income and infrastructure, thereby tending to increase regional inequality. This latter effect is greater than the former, so that the overall effect of trade openness is to increase regional inequality.     

Fiscal decentralization and regional income disparities: evidence from the Colombian experience

Using the Colombian experience, this paper introduces new empirical evidence about the relationship between fiscal decentralization and regional income disparities. The study has made some advances in the empirical analysis of this relationship. First, a panel data approach is introduced to catch the dynamics of adjustment involved in a fiscal decentralization policy. Secondly, the analysis is based on a country experience rather than a cross-country analysis, so the effects of fiscal decentralization are estimated more objectively than previous research that exhibits cultural, historical, and institutional variation. Finally, other limitations observed in previous work, such as the absence of spatial dependence and sensitivity of the conclusions to the measures of fiscal decentralization used, are addressed in this paper.

Incorporating agglomeration economies in transport cost-benefit analysis: The case of the proposed light-rail transit in the Tel-Aviv metropolitan area

Abstract.  The economic evaluation of transport projects relies primarily on the impact of the project on road users. Economic benefits are calculated from a reduction in the aggregate value of time saved by the users, as well as from savings on vehicle-operation and maintenance costs, reducion in traffic accidents, and more recently the negative environmental impacts that ensued. Most often the analysis assumes fixed demand. Major mass-transit systems, like the new Light Rail Transit (LRT) currently proposed for the Tel-Aviv Metropolitan Area (TAMA) in Israel, are expected to generate substantial new (induced) traffic. This development will most likely enhance the agglomeration forces at work in major urban concentrations. Agglomeration economies could lead to an upward shift in the production function of the metropolitan area, thus generating substantial additional benefits for the transport project. This article presents the methodology used to estimate the benefits derived from agglomeration economies induced by the aforementioned proposed new LRT in the TAMA. An estimate is made of the increase in the number of employees in the CBD owing to the proposed LRT and their potential contribution to the total annual production of the CBD. Agglomeration economies could add a significant amount of additional benefit to the transport project. In our case study the extent of these benefits increased the benefit-cost ratio from 1.15 to 1.40.     

The national and regional effects of fiscal decentralisation in China

Fiscal decentralisation has been an important part of the restructuring of China’s economy over the past three decades. Yet, there has been only limited analysis of the way in which decentralisation in China might affect variables such as welfare, output and income at the aggregate level and none at the regional level. This paper makes a start at filling this gap by analysing the aggregate and regional effects of various policies which aim to change the balance between fiscal activities of the national and regional governments. For this, we use a small theoretical model designed to capture some of the features of the Chinese economy, and we solve it numerically using a parameterisation based on Chinese data. We analyse the effects of four different shocks; all of them involve a transfer of resources to the regional governments financed by a cut in central government expenditure, but they differ in the way in which regional governments use the additional funds: (1) they adjust expenditure on the consumption good, (2) they adjust infrastructure expenditure, (3) they maximise the size of their own budget, and (4) they maximise the welfare of the representative citizen. We find that the aggregate economic effects of decentralisation depend on the precise nature of the policy and that aggregate benefits may often mask a deterioration in the inter-regional distribution of those benefits.     

US state and local fiscal policies and non‐metropolitan area economic performance: A spatial equilibrium analysis*

Faced with declining economic bases, many non‐metropolitan areas find themselves balancing the need to be cost‐competitive in terms of lower taxes against the need for provision of valued government services. Using a spatial equilibrium framework, this study econometrically examines the nexus between US state and local fiscal policies and non‐metropolitan county growth in earnings and housing rents during the 1990s. The results suggest that state and local fiscal characteristics significantly influenced firm and household location. Some characteristics could be clearly identified as having dominant firm profit effects, while numerous others were identified as having household amenity effects.     

The employment impact of demographic change: A regional analysis

The central concern of this article is with measurement of the economic impact of demographic change at a regional level. To facilitate this, a method is developed which involves the linking together of two hitherto separate analytical techniques: labour market accounts and extended input-output models. The application of the method is demonstrated by reference to three UK regions – West Midlands, Merseyside, and East Anglia – with contrasting demographic and economic histories over the time intervals 1971–1981 and 1981–1991. The employment impact of consumption derived from demographic change is measured in relation to individual elements of the labour market account and comparisons are made with the effects of economic change over the same time periods. Received: 27 February 1997 / Accepted: 5 March 1998     

Statistical and mathematical sources of regional science theory: Map pattern analysis as an example

Krugman states that “Regional science is not a unified subject. It is best described as a collection of tools.” Unfortunately such a perspective fails to fully acknowledge theoretical dimensions of the accompanying refocusing on geographic expressions of economic linkages, such as those highlighted in spatial externalities specifications. Such promulgated aspects of the spatial economic landscape relate to map pattern, and certainly the spatial statistics and spatial econometrics theory that accompanies it, as well as the underlying substantive theory garnered from a variety of sources. The principal implication is other than “loose- jointed, do-the-best-you-can theorizing”. Received: 22 November 1997 / Accepted: 10 March 1998     

Spatial disparities in the European Union: an analysis of regional polarization

This paper examines the degree of polarization in the European Union regional per capita income distribution between 1977 and 1999 from several complementary perspectives. Specifically, we have combined a non-parametric analysis with the information provided by various polarization measures proposed by the literature on personal income distribution. The results reveal that the European regions tend to cluster into different per capita income classes during the study period. Nevertheless, the level of intra-distribution mobility is relatively low, especially in regions at the upper and lower ends of the distribution. In any event, regional polarization has decreased over time, as a consequence of various factors sometimes working in opposite directions. Additionally, the empirical evidence provided reveals that the geographical location of the various regions and the differences in their productivity levels, play a major role in explaining the polarization patterns observed in the European Union.     

A model of urban growth with endogenous suburban production centers

This paper presents a theoretical model of the spatial growth of an urban area. Its primary contribution is that suburban production centers arise as small, independent landowners respond to market forces. Other models impose subcenters exogenously and require action by large developers or government agencies. The model predicts almost no undeveloped land is present in struggling cities, but urban sprawl is the hallmark of a growing metropolitan area. There is also anticipatory sprawl: even while all industrial development is concentrated in the central city, a leapfrog zone may sprout between two residential zones in the suburbs. Received: July 2000/Accepted: December 2000     

Public land leasing and the changing roles of local government in urban china

Since late 1980s China's urban land use began to change from administrative allocation to public land leasing. Based on the assumptions of fiscal decentralization and growth of private economy, this paper provides another perspective on public land leasing in addition to the well-known efficiency of market allocation of land resource. My focus is on the endogenous evolution of local public finance due to rent capitalization. Especially, I model a two-sector urban economy and a multi-task local government that allocates its effort to maximize fiscal revenue. The findings indicate that complete wage capitalization under administrative allocation of land contributes to the pressure on local governments to look for alternative revenue source. Public land leasing helps to include private firms into local public finance and re-orient local governments' interest from SOEs to public goods provision. A simple test on the institutional change shows the efficiency of public land leasing relative to the old system. I thank Rena Sivitanidou and Yongheng Deng for their helpful comments on an early version of the paper.     

The regional distribution of Spanish unemployment: A spatial analysis

In this article we propose a set of tools for analysing the regional distribution of unemployment. As we are interested in the characteristics of the distribution as a whole, results from a traditional regression analysis are complemented with those obtained by estimating its external shape before and after being conditioned to factors underlying regional unemployment. In addition, we specifically consider the spatial characteristics of the distribution, and the empirical model we develop to determine explanatory factors includes spatial effects. This framework is applied to the study of the provincial distribution of unemployment rates in Spain. Results point to increasing spatial dependence in the distribution of regional unemployment rates, and a change in the factors causing regional differentials over the last decade.     

The economic effects of local authority mergers: empirical evidence for German city regions

Cooperation of neighbouring local authorities in the provision of regional public goods can be efficiency enhancing due to economies of scale, a better realisation of fiscal equivalence or dynamic efficiency gains. While the need for such cooperation between local authorities is undisputed, there are different positions concerning the form the cooperation should take. Some argue that local authority mergers are the most efficient and democratic strategy. Others argue that functional cooperation is more appropriate and that mergers reduce the welfare enhancing effects of competition between local authorities. Based on the conditions in Germany that can be interpreted as a natural experiment it is shown in a cross-section analysis that local authority mergers in monocentric city regions have indeed significant economic effects. All else equal the financial situation of city regions where the core and the hinterland are separate administrative districts is worse than in single district regions. Radical mergers of core cities and suburban towns in the 60s and 70s led to higher economic growth in the period 1980–1998.     

Modeling regional endogenous growth: an application to the non-metropolitan regions of Australia

An exploratory modeling approach to investigate spatial variation in the levels of regional endogenous employment growth and decline over the decade 1991–2001 is developed and applied to an analysis of the non–metropolitan regions (Local Government Areas) in each of the five mainland States of Australia. For the dependent variable, the summation of the regional shift component for change in total employment in major industry sectors¹ over the decade 1991–2001, standardized by the size of the labor force at the beginning of the period, is used as a proxy measure of regional endogenous growth. A general OLS model incorporating a set of 27 independent variables (measuring aspects of industry structure, unemployment, occupational structure, population size and growth, human capital, income distribution, and proximity to the coast and the state metropolitan region) is run, followed by a backward iterative statistical procedure to reduce the complexity of the general model by eliminating statistically insignificant variables to arrive at a specific model for each State. ¹ 17 of the first digit industry sector classifications under ANZSIC93 were used.