1. Regional Disparity and Policies Flashcards
What are the regional disparities in Europe?
Eastern europe GDP/capita lowest, 6200-14000
Central Europe and Scandanavia the best, 30-80,000
Spain, France, Portugal middle - 13-30,000
What are the GDP/pc within countires?
France wide - 9000 - 60,000
Hungary 9000 - 30,000
Belgium 25-69000
Ireland 27-85,000
What are the European employment rates spread in EU
80% in most of west and central europe, further east 30-65%
What are the incmoe disparities in UK?
Highest in south - 35-75,000
Midlands around 10-25,000
North gets richer 25-35,000
Schotrland poorer - 10-25,000
What are the richest and poorest areas in Northern Europe?
Richest - London, Luxermbourg, Brussels
Interestingly, poorest:
- West wales
- Cornwall
- Durham
- Lincolnshire
- Northern Ireland
- Yorkshire
9 of the 10 are in the UK
Regions in the UK:
- London centric nation devastatingly unequal - inner london richest region, yet nine of 10 poorest regions also in the UK.
- UK is the only country in the G7 group of leading economies where inequality has increased this century
What is the standard neoclassical growth model?
Solow model; assumptions:
- One good and two factors (L and K)
- Ideas and technology affect productivity of factors
- Production function has constant returns, positive and diminishing marginal products
- Part of income saved, invested to generate capital
- Capital depreciates over time
- Population is growing
Predictions:
1. Capital/labour ratio and per capita income increases with saving rate and level of productivity, depreciates with depreciation rate and population growth
2. Given any initial capital level, economy converges to steady state
3. Suppose countries share same tech in long run, differ in terms of saving behaviour and fertilty, observed cross country income and productivity differences explained by differences in savings rates and population
What is the impotance of the savings/investment rate?
Income level of poor countrie scatch up/converge towards income levels of rich countries if they have similar savings rates for capital as a share of output - conditional convergence
- Economic integration implies capital flows from rich regions to poor regions
- Investment rates in human capital also crucial for technological progress
What is the new geography mechanism?
- Integration could worsen regions problems:
Mechanisms - New geography - location matters - cenral regions at advantage
This is the central and periperal theory
Using Belgium (central) and spain (peripheral)
- Assumes production costs lower in spain due to EofS and expensive to produce, also shipment costs
- Reducing shipment cost does not necessarily cause production to move to low cost location
From high to low -> production shifts to spain
From high to medium - > production shifts to belgium
High barriers to trade encourage local production, moderate barriers interacting with EofS may encourage concentration in high cost locations due to good market access instead of low cost locations
Implication: integration could worsen the position of periphery countries with medium shipping csots, but benefit the periphery if it went far enough - low shipping costs
What are the new economic geography models??
Agglomeration forces - concentration, regional imbalance
Dispersional - congestion, high rent, land prices, competition - leads to decentralisation
Agglomeration:
- Increasing returns to scale - greater efficiency as firms move from small to large scale operations
Positive externalities:
- Increasing accessibility helps local firms
- Foreign firms demonstrating up to date technology to locals
Agglomeration forces:
- Incentives to concentrate production close to largest market: scale economies realised, transport costs are lower
Lead to concentration and regional imbalances:
- Technological spillover
- Labour market pooling - improve connection between firms and workers to improve efficiency of hiring
- Demand linkages
- Supply linkages
What is the model of tech sourcing in silicon valley?
Construction of technology core created - 10 zip codes in San Francisco Bay
While unrestricted in design, primary tech sourcing zones all contained in th ecore - small zones, overlapping regions with directional transmission
What is the model of demand linkages?
- Industry moving to a big region
- Expenditure shifts - workers spend in big regions instead of small regions
- Market size effects - big market bigger, small smaller
- Production shift - due to trade costs, firms prefer to locate in big markets, meaning more industry moves to the big region
What is the model of supply linkages?
- Some industry moves to big region
- Production shifts - migrated firms cheaper in big region, dearer in small regions
- Costs shift - wide range of local goods make big region a cheaper place to produce
- Production shifts - firms move from small to big markets attracted by the lower costs
What are dispersion forces?
COngestion, higher rent and land prices and ocmpetition lead to decentralisation
Congestion and travel time:
- Discourages firms from living in central areas due to higher cost and inaccessibility
Model of London:
- Central london can barely move anywhere in 30 minutes, much more the next 30 minutes and then much more last 30 but crazy
- Housing cost model similar effect - more expensive in middle
Example of new economic geographical model
Initial equilition - two identical regions, same population
By chance, equilibrium changes due to migration, one larger than other
Incentives:
- Economies of scale, external economies - creates accelerator where more economies move, raises real wages further, more migration etc.
Counteracting forces: if all firms located in one large region, may be incentived to move to periphery to become monopolist
What is portage and path dependence?
Questioned whether the distribution of population was determined by nature or path dependence
Context of cities in NA forming due to water navigation - potage sites attract commerce and services - water power, manufacturing and industrialisation
Initial advantage:
- Examined sites in US
- Found original advantages long obselete, exists continuing importance of historical portage sites
Path dependence key, especially during settlement of NA - waterborne transport important
- Port was focal point of commerce - hard to stop due to natural obstacles but ports offered easy opportunity
- Later railways and other power sources took over
