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

Michelle Gilmartin, Peter McGregor, Kim Swales

Research output: Working paperDiscussion paper

Abstract

In a UK context, research into regional policy impacts has focused largely on the effects of a policy on the target region, with any consequences for other regions being largely ignored. This study aims to address this issue by providing a comprehensive evaluation of regional policy, focusing on both the regional and national implications of a policy shock. The paper examines the system-wide effects on the Scottish and rest of UK (RUK) economies of an increase in labour efficiency in the Scottish traded sectors. 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
Supply side
Wage determination
Policy impact
Comprehensive evaluation
Regional labour markets
Spillover effects
Computable general equilibrium
Labour efficiency

Keywords

  • regional CGE modelling
  • migration
  • regional development policy

Cite this

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title = "The National Impact of Regional Policy: Supply-Side Policy Simulation with Labour Market Constraints in a Two-Region Computable General Equilibrium Model",
abstract = "In a UK context, research into regional policy impacts has focused largely on the effects of a policy on the target region, with any consequences for other regions being largely ignored. This study aims to address this issue by providing a comprehensive evaluation of regional policy, focusing on both the regional and national implications of a policy shock. The paper examines the system-wide effects on the Scottish and rest of UK (RUK) economies of an increase in labour efficiency in the Scottish traded sectors. 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 : Supply-Side Policy Simulation with Labour Market Constraints in a Two-Region Computable General Equilibrium Model. / Gilmartin, Michelle; McGregor, Peter; Swales, Kim.

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

Research output: Working paperDiscussion paper

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