Table of Contents

Preface to the third edition ix

Part I Regional economics 1

1 Regional income and employment determination 5

1.1 Impact analysis: indirect and induced effects 7

1.2 The Keynesian income–expenditure approach 8

1.3 Applications of regional multiplier analysis 15

1.4 Weaknesses of regional multiplier analysis 20

1.5 A multi-region model of income determination 21

1.6 Further developments in the economic modelling of regions 27

1.7 Regional econometric models 30

1.8 Conclusion 33

Further reading 34

2 The input–output approach to modelling the regional economy 35

2.1 The input–output method 37

2.2 Regional applications of input–output analysis 49

2.3 Some limitations of the input–output approach 56

2.4 New developments in regional modelling 58

2.5 Conclusion 62

Further reading 63

3 Regional growth disparities: neoclassical perspectives 64

3.1 Regional growth disparities: some facts 66

3.2 The neoclassical growth model 66

3.3 Identifying the components of economic growth in practice 72

3.4 Endogenous technological progress: the engine of growth 76

3.5 Technology transfer between regions: catching up with the technology leaders 79

3.6 The convergence of regional per capita incomes in practice 81

3.7 Extending the neoclassical growth model 85

3.8 Conclusion 88

Further reading 89

4 Export demand models, agglomeration and cumulative growth processes 90

4.1 The demand for a region’s output: the export-base approach 91

4.2 Regional exports and cumulative causation: a model of regional growth 94

4.3 A constraint on regional growth: the balance of payments 101

4.4 Some alternative explanations of cumulative growth 104

4.5 Trade costs, industrial clusters and regional growth 107

4.6 Evidence of the economic benefits of industrial agglomeration 109

4.7 The spatial concentration of the financial sector in core regions 111

4.8 Empirical studies of cumulative growth processes 113

4.9 Conclusion 117

Further reading 118

5 Interregional trade 119

5.1 The basis of regional trade specialization 122

5.2 More modern theories of regional trade 131

5.3 Conclusion 138

Further reading 139

6 Interregional migration 140

6.1 The classical theory of labour migration 141

6.2 Interregional migration in Great Britain, 1961–96 143

6.3 The determinants of migration: relaxing the assumptions of the classical model 147

6.4 Alternatives to the classical theory of migration 153

6.5 Migration during periods of recession 158

6.6 The effects of migration: Is migration equilibrating? 162

6.7 Conclusion 164

Further reading 165

7 Regional unemployment disparities 166

7.1 Regional unemployment disparities: Why do they persist? 168

7.2 The causes of unemployment: the conventional approach 175

7.3 Estimating the relative importance of the various types of unemployment 179

7.4 Empirical studies of regional disparities in unemployment 184

7.5 Socio-demographic causes of unemployment: evidence from the UK 192

7.6 Hidden unemployment 195

7.7 Conclusion 200

Further reading 201

Part II Regional policy 203

8 The case for regional policy: British experience 205

8.1 The case for reducing regional economic disparities 206

8.2 Policy action: alternative approaches 209

8.3 The historical development of regional policy in Britain 214

8.4 Regional policy: economic efficiency or social inclusion? 225

8.5 Conclusion 230

Further reading 231

9 Regional policy instruments 232

9.1 Micro-policy instruments and regional policy 234

9.2 Controls on businesses: location controls or pro-business measures? 239

9.3 Capital subsidies versus labour subsidies 241

9.4 Community economic development initiatives 254

9.5 Conclusion 261

Further reading 262

10 Indigenous development: small and medium enterprises and technological progress 263

10.1 Regional policy and the SME sector 264

10.2 Regional policy and new technology 286

10.3 Industrial districts, innovative milieux and ‘learning regions’ 292

10.4 Conclusion 300

Further reading 302

11 Regional policy and the European Union 303

11.1 Regional problems in the European Union 304

11.2 Regional policy in the European Union 319

11.3 Existing EU regional policy 324

11.4 Conclusion 334

Further reading 335

12 Regional policy and devolution 336

12.1 The changing system of regional governance 337

12.2 The regional implications of centralized control 341

12.3 Partial devolution: allocating fiscal policy powers to regional authorities 352

12.4 The complete devolution of fiscal, monetary and trade policy powers 359

12.5 Conclusion 360

Further reading 361

13 The evaluation of regional policy 362

13.1 The evaluation process 364

13.2 Aggregate studies of the effect of regional policy on employment trends in the assisted areas 368

13.3 Estimating the effect of regional policy on inward investment into the assisted areas 370

13.4 Regional policy and foreign inward investment 374

13.5 Surveys of assisted firms 383

13.6 Ex ante evaluation of regional incentives using the cost–benefit approach 388

13.7 Using large-scale regional models to estimate policy impacts 393

13.8 Evaluation of regional development programmes: the EU’s Structural Funds 396

13.9 Conclusion 400

Further reading 401
References and bibliography 402
Index 429

About the Author

Harvey Armstrong is Professor of Economic Geography at Sheffield University. He has previously worked at Loughborough University and Lancaster University and has held a visiting appointment at the University of British Columbia. He has published extensively in the areas of regional policy, European regional disparities, local economic development policy and the economic performance of world micro-states and dependent territories.

Jim Taylor is Professor of Economics at the Lancaster University and has held visiting appointments at the Universities of Pennsylvania, British Columbia and Melbourne. His research includes work on the evaluation of regional policy and on various aspects of education economics. He has published many papers and several books on regional policy and has been the editor of Regional Studies, the journal of the Regional Studies Association.

Reviews

"The authors' careful scholarship, intellectual rigour and clear analysis of mainstream theory means that this new edition of Regional Economics and Policy will continue as a standard work for students. The book provides an excellent synthesis of theoretical and empirical work on regional economic concepts and theories, leading to clear and important lessons for policy. It successfully brings updated literature and new material to bear on the key issues in the field." Ronald McQuaid, Napier University "This is an excellent textbook on regional economic theory and policy. This edition has been comprehensively revised to take account of the recent revival of interest in regional issues and the consequent burgeoning literature in the field. The book presents recent developments in the context of earlier work and both are discussed in a succinct and masterly fashion. This book will continue to remain the definitive overview of the subject and will be widely consulted by all those interested in the regional aspects of economic activity." John McCombie, University of Cambridge