A location quotient approach to producing regional production multipliers for the Irish economy

Abstract

AbstractRegional issues in Ireland, although a relatively small and geographically homogenous country, attract considerable attention, much of which centres on the size of Dublin and the South East and its perceived dominant share of the national economy. Using location quotients (LQs) analysis and linking the production multipliers to their two digit NACE codes, this paper presents the first exploration of possible regional industrial specialization in related sectors in Ireland at the NUTS 2 level. Linking the production multipliers with NACE codes by region allows one to explore whether potential region specialization is associated with Jacobian externalities in Ireland. Using a relatively novel LQ approach, and a cut‐off value of 1.25 or above as an indicator of industrial specialization and clustering, this paper found that in the Border, Midlands West (BMW) region and the South East region, 29 and 32 sectors respectively had LQ greater than the cut‐off value of 1.25. In terms of Jacobian externalities, this paper found businesses in related sectors; particularly finance and insurance and transport and telecommunications are more likely to cluster in the BMW region. From a policy perspective this would indicate that there may be a role for the Regional Assemblies, particularly the Assembly for the BMW region to help develop and co‐ordinate regional industrial policy in Ireland. From a regional science perspective, this paper adds empirical evidence to the literature on Jacobian and related variety in regional economies.