Regional Growth Dynamics Research Articles

The effect of industrial competition on employment

PurposeThis study investigates the existence of Marshall, Jacob and Porter’s type of externalities in Mexico. We measure the impact of industrial specialization, competition and diversity on employment growth for the period 2004 to 2008.Design/methodology/approachThe analysis is based on data from 41 highly dynamic industrial clusters originally obtained by applying Porter’s (1998) methodology. We use a cross-section specification estimated via instrumental variables and two-stage least square estimation (2SLS) to control for endogeneity.FindingsOn average, we find that industrial specialization exerts a negative impact on employment growth within states and within clusters, indicating that traded industries in Mexico carry very little innovation, operate in early stages of the life cycle, face high costs of employment reassignation or exhibit low adaptability. A negative impact of specialization on employment conforms with Jacobs (1969) type of externalities and confirms what other studies have found in France (Combes, 2000), Korea (Lee et al., 2005) and the USA (Delgado et al., 2014). The authors also find that competition generates more employment.Research limitations/implicationsIndustrial data at the sub-branch level were obtained from the Economic Census (EC) of the National Institute of Geography and Statistics (INEGI). The EC information for 2004 was still not fully compatible with the North America Industry Classification System (NAICS), with 262 of the 309 data at the fourth-digit level aligned to the USA. In addition, industrial information from the EC is recorded every four years, which prevents this study to use panel data techniques and it makes it impossible to use time series methods.Practical implicationsPolicymakers can clearly identify competition forces having a significant impact on employment growth. This can orient policymakers to implement measures to encourage the development of some of these clusters, as well as to identify some of the sources that drive specialization, competition and diversity.Originality/valueThis paper contributes to the debate on the existence of Marshallian (MAR), Jacobian and Porter externalities. This is the first study using the definition of traded clusters in Mexico, which allows the authors to identify how specialization, competition and diversity forces drive the dynamics of regional employment growth.

EDB Macroreview, October 2016 - Economic Recovery Trajectories in Eurasia

In recent years, positive expectations have not been met for the second half of the year regarding economic recovery in the EDB member countries. In both 2015 and 2014, unfavorable external factors, primarily the fall in oil prices, had a negative effect on the dynamics of economic growth in the region. Available data for Q3 2016 indicate a more favorable scenario. This is suggested by both macroeconomic data and leading indicators, as well as signals from international credit rating agencies. Trends in regional growth dynamics in the past several months point to the start of economic recovery. Indeed, judging by data for July-August 2016, there are grounds for positive GDP growth rates in the EDB countries in Q3 2016. To all appearances, one can also expect positive changes in inflation before the end of 2016. The inflation rate in Russia is expected to be lower than 6% in 2016. It will hit an all-time low in 2017-2018 and be close to the central bank’s target of 4%. We expect a fall in the aggregate inflation rate of the EDB countries from 12.8% in 2015 to 6.1% in 2016, and a further slowdown in the rise in consumer prices to 4.8% in 2017 and 4.2% in 2018. Apart from the low world prices on food and primary commodities, a significant contribution to the decline in inflationary pressure is delivered by the stabilization of the exchange rates of the EDB countries’ currencies throughout Q2-Q3 2016. This trend is partially due to a decline in the outflow of capital from EDB countries and makes it possible for the countries to replenish their foreign exchange reserves. An important factor for the economic recovery in a number of the EDB countries was the rise in exports, primarily to the Russian Federation. In some countries, the acceleration of the rise in exports may be attributable to the depreciation of the national currency. However, Kyrgyzstan showed an increase in exports to Russia despite the strengthening of the som against the ruble, which suggests that integration factors may have played a certain role. Despite the positive changes however, there are lingering risks of imbalances in a number of macroeconomic sectors, primarily in the budgetary sphere. There are still significant global risks related to: the slowdown in the growth of the Chinese economy; the fall in the prices of primary commodities; the deterioration of the situation in the banking sector of European countries; as well as an increase in the Fed rate.

The EU Cohesion Policy in context: Does a bottom-up approach work in all regions?

This paper looks at the European Union as a laboratory to study how ‘spatially targeted’ policies (i.e. the European Union Cohesion and Rural Development Policies) interact with sectoral ‘spatially blind’ policies (i.e. the Common Agricultural Policy), jointly shaping regional growth dynamics. The analysis of the drivers of regional growth shows that the European Union Cohesion Policy has a positive influence on economic growth in all regions. However, its impact is stronger in the most socio-economically advanced areas and is maximised when its expenditure is complemented by Rural Development and Common Agricultural Policy funds. The top-down funding of the Common Agricultural Policy seems to be able to concentrate some benefits in the most deprived areas of the Union. This suggests that bottom-up policies are not always the best approach to territorial cohesion. Top-down policies may – in some cases – be effective in order to channel resources to the most socio-economically deprived areas. Territorial cohesion requires the flexible integration and coordination of both bottom-up and top-down approaches.

Advantages of Using Microwave Satellite Soil Moisture over Gridded Precipitation Products and Land Surface Model Output in Assessing Regional Vegetation Water Availability and Growth Dynamics for a Lateral Inflow Receiving Landscape

To improve the understanding of water–vegetation relationships, direct comparative studies assessing the utility of satellite remotely sensed soil moisture, gridded precipitation products, and land surface model output are needed. A case study was investigated for a water-limited, lateral inflow receiving area in northeastern Australia during December 2008 to May 2009. In January 2009, monthly precipitation showed strong positive anomalies, which led to strong positive soil moisture anomalies. The precipitation anomalies disappeared within a month. In contrast, the soil moisture anomalies persisted for months. Positive anomalies of Normalized Difference Vegetation Index (NDVI) appeared in February, in response to water supply, and then persisted for several months. In addition to these temporal characteristics, the spatial patterns of NDVI anomalies were more similar to soil moisture patterns than to those of precipitation and land surface model output. The long memory of soil moisture mainly relates to the presence of clay-rich soils. Modeled soil moisture from four of five global land surface models failed to capture the memory length of soil moisture and all five models failed to present the influence of lateral inflow. This case study indicates that satellite-based soil moisture is a better predictor of vegetation water availability than precipitation in environments having a memory of several months and thus is able to persistently affect vegetation dynamics. These results illustrate the usefulness of satellite remotely sensed soil moisture in ecohydrology studies. This case study has the potential to be used as a benchmark for global land surface model evaluations. The advantages of using satellite remotely sensed soil moisture over gridded precipitation products are mainly expected in lateral-inflow and/or clay-rich regions worldwide.

Understanding regional growth dynamics in Japan: Panel co-integration approach utilizing the PANIC method

This study proposes a panel co-integration approach using the PANIC method for understanding the regional growth dynamics using non-stationary panel data, and applies it to Japanese prefectures. This approach enables us to analyze both long-run equilibrium growth path and short-run dynamics across the regions. Specifically, we find that there is one common source of growth to which prefectures attach different weights, that the per capita real income of follower-prefectures will catch up to that of leader-prefectures, and that temporal fluctuations of the catch-up process elicited by Barro type regression qualitatively corresponds to short-run dynamics across prefectures by the PANIC method.

FDI, human capital and income convergence—Evidence for European regions

This study examines income convergence in regional GDP per capita for a sample of 269 regions within the European Union (EU) between 2003 and 2010. We use an endogenous broad capital model based on foreign direct investment (FDI) induced agglomeration economies and human capital. By applying a Markov chain approach to a new dataset that exploits micro-aggregated sub-national FDI statistics, the analysis provides insights into regional income growth dynamics within the EU. Our results indicate a weak process of overall income convergence across EU regions. This does not apply to the dynamics within Central and East European countries (CEECs), where we find indications of a poverty trap. In contrast to FDI, regional human capital seems to be associated with higher income levels. However, we identify a positive interaction of FDI and human capital in their relation with income growth dynamics.

The Spatial Dimension of Trade- and FDI-Driven Productivity Growth in Chinese Provinces: A Global Cointegration Approach

Since the introduction of its “open door” policy in the late 1970s, China has been attracting a growing share of FDI inflows and its international trade integration has advanced considerably. In this study, we take a closer look at the regional growth impact of the Chinese internationalization activity on labor productivity over the period 1979-2006. Our empirical analysis thereby extends the existing empirical literature by considering the likely spatial effects associated with Trade- and FDI-led growth in a dynamic error correction modelling framework. Our results indicate that, in the long run relationship, regional labor productivity is indeed driven by direct and indirect spatial effects of FDI and trade activity next to further supply side factors such as the regional infrastructure equipment and human capital endowment. Similarly, in the short-run, changes in FDI activity and especially human capital variables are found to matter for the regional growth dynamics.

Innovación tecnológica como mecanismo para impulsar el crecimiento económico Evidencia regional para México

The aim of this paper is to analyze the role of technological innovation in the dynamics of regional economic growth in Mexico. For this purpose, a model which involves a function of innovation and a production function to set the level of interaction between the variables of innovation and economic growth is used. For the econometric analysis statistical information by state is used, for the 1994-2008 period. A model is estimated with panel data, with results that show a positive and differentiated effect between variables that incorporate some degree of technological innovation such as patents, R & D expense, among others, as well as Gross Domestic Product (GDP) growth.

Economic Growth and Regional Labor Market Development in German Regions: Okun's Law in a Spatial Context

The inverse relationship between economic growth and labor market developments in the form of changes in the unemployment rate is known in economic literature as Okun’s law. The objectives of this paper are to estimate a regionalized Okun coefficient and its associated (regional) unemployment thresholds. The suitability and limitations of Okun’s law as a rule of thumb for regional economic growth and labor market policy are also discussed. Motivated by “Germany’s Jobs Miracle” in face of the economic crisis of 2008 and 2009, the existence of an uncoupling effect between economic and unemployment growth is questioned and whether regional economic growth is a driving force for regional labor market development. A regional dataset for the years 2002 to 2009 is employed for this study. The spatial dimension is pursued in two ways: a non-parametric approach using functionally defined labor markets as study areas and the application of spatial econometric panel data models, in particular the Spatial Durbin Error Model. The rationale is that functionally defined regional study areas are the appropriate spatial reference level for the analysis. It is found that, without accounting for spatial dependence, regionalized Okun coefficients are likely to be overestimated. The empirical results confirm a positive impact of economic growth on labor market performance; however, the estimated effect of regional economic growth is far lower than would have been expected. The paper illustrates the limited transferability of Okun’s law as a rule of thumb for growth dynamics on a regional level as well as limitations of regional growth dynamics for regional labor market development.

The evolution of place-based policies and the resurgence of geography in the process of economic development

This note provides a short description of the recent resurgence of geography and space in the process of economic development, and it also describes a paradigm shift in regional (place-based) policies taking place in OECD countries. Finally the note summarizes recent trends in regional growth dynamics, their links to aggregateperformance andwhat thismeans for policy. The policy discussion summarizes key messages in our first OECD Regional Outlook to be released this year. Although this paper deals with the OECD area as a whole, its conclusions are clearly applicable to the conduct of regional policy in the EU, particularly in the current context of financial crisis which places a renewed premium on the design of effective and appropriately targeted policies for regional development. The views and opinions expressed here reflect solely those of the author.

Regional Growth Dynamics in Central and Eastern Europe

This paper examines the regional growth process of the countries of Central and Eastern Europe since the start of their transition to market economies. It relates this to three distinctive explanations of regional growth and examines empirically their relevance in explaining the patterns of disparity and polarisation that have emerged in these countries over the last two decades. The collapse of communism and the early transition shock that followed created in many respects an experiment-like situation with a set of ‘initial conditions’ conducive for analysing patterns of convergence and divergence in the processes of national economic development and cross-national catch-up growth. The path to EU accession intensified the speed of these processes at the national level thus making the corresponding regional evolutions more marked. Our empirical analysis unveils a complex pattern of non-linear regional growth dynamics with convergence tendencies largely swaddled by processes of cumulative causation. Despite the process of national catch-up growth, regional evolutions are on the whole divergent, with a pattern of convergence at the middle- and lower-ends of the distribution and a slower tendency for club formation at the higher end, and thus overall an increasing trend of polarisation.

Booming Bohemia? Evidence from the US High-Technology Industry

This paper assesses the effect of Richard Florida's creative class on economic growth and development at two levels of spatial aggregation. First, I examine the dynamics of economic growth across US metropolitan regions and investigate how they relate to regional specialization and the concentration of talent in the high-tech industry. In addition to evidence of significant high-tech clusters, I identify important complementarities with regard to the interaction between the three Ts of regional development (talent, technology and tolerance) and regional growth dynamics. Using firm-level data, the regional analysis is then complemented by exploring the location of new high-technology plant openings and their relationship with university research and development (R&D) and the creative class. Specifically, I test the hypothesis that both university R&D and the presence of “creativity” generate spillovers which are captured locally in the form of new high-tech establishments, after controlling for important location factors such as local cost, demand and agglomeration economies. While the marginal impacts of increased R&D funding on county probability for new firm formation is modest, the mix of creativity and diversity—as proxied by the Florida measure—appears to be a key driver in the locational choice of new high-tech firms. Separate estimates indicate that these findings hold up across the major high-tech industries in the USA.

The spatial hierarchy of technological change and economic development in Europe

This paper discusses the possibility of a spatial hierarchy of innovation and growth dynamics in Europe. A spatial hierarchy is understood as a geographical clustering of regions, where important differences exist in terms of innovation and growth dynamics between the clusters. The literature on regional growth and innovation is briefly scanned. After this, a database on European regional growth and innovation dynamics is presented. Spatial correlation analysis and spatial principal components analysis are used to explore the possibility of a spatial hierarchy in Europe. The results point to a hierarchy consisting of four groups: South Europe, East Europe, and two groups in West and North Europe. Growth and innovation performance in these clusters are discussed, and some policy conclusions are drawn.

Infrastructure and regional growth, growth dynamics and policy relevance for India

The role of infrastructure in economic growth has been the subject of considerable research in the fields of public policy, economics, and planning. In this paper, I examine the contribution of publicly supplied infrastructure to sub national regional growth in India. I first develop and numerically examine a regionally disaggregated model of economic growth to understand the dynamics of private capital and public infrastructure. For the empirical analysis, I use a pooled data set for Indian states to examine if publicly supplied infrastructure is a significant determinant of regional growth and whether there are spatial variations in the productivity effects of infrastructure. The main findings are that transport and communications infrastructure expenditures are significant determinants of regional growth, and the positive benefits accruing from these expenditures come not only from investments made by individual states, but there are positive externalities from network expenditures made by neighboring states. Finally, the out of sample simulated regional growth predictions show divergence in private capital formation between lagging and leading states.

The micro-level dynamics of regional productivity growth: The source of divergence in Finland

Despite a rapidly expanding theoretical and empirical literature emphasising the role of incessant intra-industry restructuring in productivity growth, few studies have gone beyond the framework of the representative firm in examining convergence or divergence in regional productivity. We use unique longitudinal plant-level data over a long period of time and apply a useful variant of productivity decomposition methods to study differences in productivity-enhancing restructuring within manufacturing industries among Finnish regions. Long-lasting differences in industry productivity growth between Southern and Eastern Finland can be attributed to the “creative destruction” components of productivity growth, mainly to the between and entry components.

Localization, Specialization and Diversification Indicators and Shift-Share Analysis: An Application to the Nut Iii of the North Region in the Period 1986-1998

In this paper, we apply some of the instruments of the regional economic analysis to the NUT III of the North Region in order to make a reflection about the dynamics of the productive structure of those territories in the period 1986-1998, using, fundamentally, the analysis of localization, specialization and diversification indicators, as well as the shift-share analysis. The analysis of the indicators shows a relative stability of the productive structure of those territories in that period. Using employment to analyze the dynamics of regional growth in a comparative perspective and taking the Continent as reference, the application of the shift-share model lead us to conclude that only the NUT of Grande Porto has negative values for the structural and regional effects, while the NUT of Douro, Alto Trais-os-Montes and Minho-Lima reveal positive values for those two components. The others NUT of the North Region have positive regional effects and negative structural effects.

Achieving Regional Growth Dynamics in African Agriculture

study focuses on public investments and policy reforms for leveraging growth spillovers at the African regional level. A conceptual framework that is built on the endogenous growth theory and the new economic geography is presented first to gain a better understanding of the underlying theory and empirical evidence on regional integration and growth spillovers. In order to demonstrate the potential benefits from greater cross-border technology spillovers in Africa, as well as from trade liberalization and investment in infrastructure, results from ex-ante simulations using partial and general equilibrium models are then presented and discussed. Results indicate that sizeable regional spillover benefits can be obtained by permitting greater crossborder transfer and adoption of improved technologies, sometimes as large as three to four times the gain in direct benefits obtained within the innovating countries. This is especially true for commodities like mutton, groundnuts and sorghum. Moreover, reducing trade barriers between African countries in agriculture and non-agriculture can significantly increase intra-regional agricultural trade and raise economic growth rates. The simulations also demonstrate that improving transportation infrastructure generates the most encouraging results, increasing agricultural income by as much as 10%. The findings in this study confirm that greater regional cooperation in agricultural research and development, harmonization of regulatory standards for technology adaptation, and harmonization and liberalization of trade systems within the region could play a crucial role in expanding opportunities for African farmers. Therefore, strengthening linkages among African countries through infrastructure, agricultural R&D, and expansion of intraregional trade can generate large spillovers and leverage regional growth. Authors' Abstract

Spatially explicit sustainability analysis of long-term fiber supply in Georgia, USA

We present here a proof of concept for a new study of the forest management practices in Georgia, USA. The study is based on a long-term wood supply analysis of the current forest resources. We pursue questions about the sustainable bases of existing practices and significance of hypothetical scenarios relating to various management practices and regulatory constraints. The study is based on research in areas of regional growth and yield dynamics, intensive silviculture, and forest practices code. At this introductory stage the analysis is based on basic inventory information provided by the USDA Forest Service Forest Inventory Analysis unit, approximate locations of about 10,000 permanent sample plots, limited GIS information, Landsat TM imagery, and simplified assumptions about the spatial distribution of different forest cover types. We present here the preliminary results and identify the directions and resources for future developments. The results of the simulations suggest that the current forest practices in Georgia are based on sound and sustainable principles with the existing harvesting far below the maximum sustainable level. The preliminary analysis, for the current land base held constant, suggests that at the current harvesting level of approximately 42 million m 3 a year, the volume of mature and over-mature stands available for harvesting in Georgia may initially decrease during the first several years from about 550 to 400 million m 3, but after that it would increase to nearly double and eventually level off, exceeding 550 million m 3. The total volume of Georgia forests is expected to increase in the first 50 years from its current level of about 950 to 1150 million m 3, and then it will gradually decrease to about 1 billion m 3 over the next one-and-a-half century.

The Growth of the Firm: The Legacy of Edith PenroseThe Growth of the Firm: The Legacy of Edith Penrose, edited by PitelisChristos. New York: Oxford University Press, 2002.

1. Introduction and Overview 2. Edith Elura Tilton Penrose: Life, contribution, and influence 3. Mrs Penrose and Neoclassical Theory 4. The Significance of Penrose's Theory for the Development of Economics 5. Edith Penrose and Economics 6. Hercules and Penrose 7. The Growth of New Ventures: Analysis after Penrose 8. A Theory of the (Growth of the) Transnational Firm: A Penrosean perspective 9. Edith Penrose, Economics, and Strategic Management 10. Edith T. Penrose and Ronald H. Coase on the Nature of the Firm and the Nature of Industry 11. Regional Growth Dynamics: A capabilities perspective 12. Mismatching by Design: Explaining the dynamics of innovative capabilities of the firm with a Penrosean mark 13. Innovation, Profits, and Growth: Penrose and Schumpeter 14. The US Corporate Enterprise and 'The Theory of the Growth of the Firm' 15. Management Competence, Firm Growth, and Economic Progress

Reviews: Models of Local Governance: Public Opinion and Political Theory in Britain, Housing: Who Decides?, Reinterpreting Revolution in Twentieth-Century Europe, Governing for the Environment: Global Problems, Ethics and Democracy, Dynamics of Regional Growth of Europe: Social and Political Factors, Energy and Environment in the Transition Economies: Between Cold War and Global Warming

Reviews: Models of Local Governance: Public Opinion and Political Theory in Britain, Housing: Who Decides?, Reinterpreting Revolution in Twentieth-Century Europe, Governing for the Environment: Global Problems, Ethics and Democracy, Dynamics of Regional Growth of Europe: Social and Political Factors, Energy and Environment in the Transition Economies: Between Cold War and Global Warming