The National Impact of Regional Policy: Demand-Side Policy Simulation with Labour Market Constraints in a Two-Region Computable General Equilibrium Model

Michelle Gilmartin, David Learmonth, Peter McGregor, Kim Swales, Karen Turner

Research output: Working paperDiscussion paper

Abstract

K governments generally advocate regional policy as a means of reducing regional disparities and stimulating national growth. However, there is limited comprehension regarding the effects of regional policy on non-target economies. This paper examines the system-wide effects on the Scottish and rest of UK (RUK) economies of an increase in Scottish traded sector exports to the rest of the world. The research is carried out in an inter-regional Computable General Equilibrium framework of the Scottish and RUK economies, under alternative hypotheses regarding wage determination and inter-regional migratory behaviour. The findings suggest that regional policy can have significant national spillover effects, even when the target region is small relative to the RUK. Furthermore, the configuration of the labour market is important in determining the post-shock adjustment path of both economies. In particular, while Scottish economy results are sensitive to alternative versions of how regional labour markets function, RUK region effects prove to be even more so.
LanguageEnglish
Place of PublicationGlasgow
PublisherUniversity of Strathclyde
Pages1-56
Number of pages57
Volume2007
Publication statusPublished - Jul 2007

Fingerprint

Labour market
Regional policy
Policy simulation
Computable general equilibrium model
Wage determination
Regional labour markets
Spillover effects
Regional disparities
Government
Computable general equilibrium

Keywords

  • regional CGE modelling
  • migration
  • regional development policy

Cite this

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title = "The National Impact of Regional Policy: Demand-Side Policy Simulation with Labour Market Constraints in a Two-Region Computable General Equilibrium Model",
abstract = "K governments generally advocate regional policy as a means of reducing regional disparities and stimulating national growth. However, there is limited comprehension regarding the effects of regional policy on non-target economies. This paper examines the system-wide effects on the Scottish and rest of UK (RUK) economies of an increase in Scottish traded sector exports to the rest of the world. The research is carried out in an inter-regional Computable General Equilibrium framework of the Scottish and RUK economies, under alternative hypotheses regarding wage determination and inter-regional migratory behaviour. The findings suggest that regional policy can have significant national spillover effects, even when the target region is small relative to the RUK. Furthermore, the configuration of the labour market is important in determining the post-shock adjustment path of both economies. In particular, while Scottish economy results are sensitive to alternative versions of how regional labour markets function, RUK region effects prove to be even more so.",
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The National Impact of Regional Policy : Demand-Side Policy Simulation with Labour Market Constraints in a Two-Region Computable General Equilibrium Model. / Gilmartin, Michelle; Learmonth, David; McGregor, Peter; Swales, Kim; Turner, Karen.

04. ed. Glasgow : University of Strathclyde, 2007. p. 1-56.

Research output: Working paperDiscussion paper

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AB - K governments generally advocate regional policy as a means of reducing regional disparities and stimulating national growth. However, there is limited comprehension regarding the effects of regional policy on non-target economies. This paper examines the system-wide effects on the Scottish and rest of UK (RUK) economies of an increase in Scottish traded sector exports to the rest of the world. The research is carried out in an inter-regional Computable General Equilibrium framework of the Scottish and RUK economies, under alternative hypotheses regarding wage determination and inter-regional migratory behaviour. The findings suggest that regional policy can have significant national spillover effects, even when the target region is small relative to the RUK. Furthermore, the configuration of the labour market is important in determining the post-shock adjustment path of both economies. In particular, while Scottish economy results are sensitive to alternative versions of how regional labour markets function, RUK region effects prove to be even more so.

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