Innovation as a Challenge for Peripheral Regions: an Israeli Case

Abstract

Peripheral regions are now confronted with the worldwide prominence of innovation and high technology driving economic growth. It is crucial that they integrate the new trends for their economic sustainability and for the narrowing of social gaps. Research has focused on factors influencing the concentration of technology in metropolitan areas. Other analyses have highlighted the advantages for peripheral or rural regions if they integrate into this process. In our article, we aim to contribute to the discourse by suggesting a unique approach, testing it empirically with a peripheral region in Israel.
 Our approach contains the following elements: First, instead of considering innovation as knowledge creation or practical implementation (as generally considered), we prefer the indicator of a knowledge-based economy, as a better proxy for advanced economic growth. Second, we make a distinction between the changes in the economy of the periphery as indicated by prevailing types of occupations, and the changes in the economy of the resident’s workers as indicated by their actual occupations, working in or out of the region (as in the distinction between GDP and GNP).
 Using time series for the last two decades, we compare the southern region of Israel and its main central region, using a classification of occupation types into three levels.
 The results showed a positive response of the peripheral region to the technological trend challenge. They improved skills and reacted to public policy measures. The economic structure of the periphery improved, providing occupations at higher wage levels. However, such improvement did not sufficiently respond to the improvement in labor supply by resident workers, leading to an increase in dependence on employment of high-level workers from other regions. We also detected an increase of internal gaps within the periphery.