Daniel Felsenstein

Support for rural tourism: Does it make a difference?

The promotion of small-scale tourism is intuitively perceived as a suitable form of economic development for rural areas. However, its impact is controversial and not always obvious. To examine these issues, this paper presents an empirical analysis of public support to small-scale tourism enterprises in rural areas in Israel. Using the tools of cost- effectiveness and cost-benefit analysis, public assistance for this type of activity is shown to be able to generate considerable returns. Methodological issues in this kind of analysis are also discussed and the policy implications arising with respect to the suitability of different forms of tourism activity in rural areas are presented. Keywords: rural tourism, public sup- port, small-scale enterprises, rural development. 7 2000 Elsevier Science Ltd. All rights reserved.

University-related science parks - 'seedbeds' or 'enclaves' of innovation?

Abstract This paper examines the role of science parks as ‘seedbeds’ of innovation. Making the distinction between the spatial and the behavioural conceptions of the seedbed metaphor, the paper surveys the evidence related to the limited interaction effects between science park firms on the one hand and their neighbouring park firms, local universities and off-park firms on the other. This suggests that science parks might be functioning as ‘enclaves’ of innovation rather than seedbeds. This hypothesis is empirically tested on the basis of a survey of over 160 high-technology firms in Israel located both on and off-park. Specifically, the following questions are addressed: (1) are seedbed effects important inputs to a firms innovation level? and (2) to what extent are these effects contingent on the physical proximity and clustering afforded by science park location? The results indicate that, first, seedbed effects, as indicated by level of interaction with a local university and the entrepreneurs educational background, are not necessarily related to the firms innovative level; second, science park location is shown to have only a weak and indirect relationship with innovation level. It is proposed that the role of the science park is thus innovation-entrenching rather than innovation-inducing. The attraction of science park location could therefore be due to perceived status and prestige conferred rather than benefits in terms of technology transfer and information flow.

Local Festivals and Tourism Promotion: The Role of Public Assistance and Visitor Expenditure

Local festivals are increasingly being used as instruments for promoting tourism and boosting the regional economy. This is often reflected in the level of public assistance made available to them. However, it is difficult to assess the extent of the contribution of the festival to local economic growth, and most studies do not examine this issue beyond standard multiplier impacts. This study looks at two local festivals that take place annually in northern Israel. On the basis of detailed data on public assistance and visitor expenditure patterns, it goes beyond the basic impact analysis framework. A method is presented that accounts for net local income increase induced by the festival. The results show modest but positive local growth, suggesting some justification for public assistance for local festivals as a tourism strategy. Policy implications related to increasing the volume of visitors and their spending are discussed.

Spatial Vector Autoregressions

Abstract A spatial vector autoregressive model (SpVAR) is defined as a VAR which includes spatial as well as temporal lags among a vector of stationary state variables. SpVARs may contain disturbances that are spatially as well as temporally correlated. Although the structural parameters are not fully identified in SpVARs, contemporaneous spatial lag coefficients may be identified by weakly exogenous state variables. Dynamic spatial panel data econometrics is used to estimate SpVARs. The incidental parameter problem is handled by bias correction rather than more popular alternatives such as generalised methods of moments (GMM). The interaction between temporal and spatial stationarity is discussed. The impulse responses for SpVARs are derived, which naturally depend upon the temporal and spatial dynamics of the model. We provide an empirical illustration using annual spatial panel data for Israel. The estimated SpVAR is used to calculate impulse responses between variables, over time, and across space. Finally, weakly exogenous instrumental variables are used to identify contemporaneous spatial lag coefficients.

The University in the Metropolitan Arena: Impacts and Public Policy Implications

This paper estimates some of the impacts associated with a metropolitan university. The impact of the university in the metropolitan arena is conceptualised as a series of backward (expenditure) and forward (knowledge-related) linkages. These relationships can be both positive and negative and can operate in both the short and long terms. Their correct identification requires that the counter-factual situation of the area without the university be adequately specified. On the basis of a case study of the impacts associated with Northwestern University on the Chicago metropolitan area, some of these issues are highlighted. The results emphasise the magnitude of the university expenditure links with the metropolitan economy and the importance of scale when comparing these with more localised negative impacts. The paper concludes with some public policy implications relating to the role of the university as a non-profit organisation competing with local businesses and as an export base sector in the metropolitan economy.

Spatial error correction and cointegration in nonstationary panel data: regional house prices in Israel

We “spatialize” residual-based panel cointegration tests for nonstationary spatial panel data in terms of a spatial error correction model (SpECM). Local panel cointegration arises when the data are cointegrated within spatial units but not between them. Spatial panel cointegration arises when the data are cointegrated through spatial lags between spatial units but not within them. Global panel cointegration arises when the data are cointegrated both within and between spatial units. Spatial error correction arises when error correction occurs within and between spatial units. We use nonstationary spatial panel data on the housing market in Israel to illustrate the methodology. We show that regional house prices in Israel are globally cointegrated in the long run and there is evidence of spatial error correction in the short run.

Simulating the Impacts of Gambling in a Tourist Location: Some Evidence from Israel

Gambling and tourism are often perceived as comple mentary activities. This article examines this relationship both conceptually and empirically. While land-based casino gambling is not a legalized activity at present in Israel, the economic impacts of introducing a casino at Israels premier vacation resort, Eilat, are simulated. This ex ante evaluation shows that much of the output, income, and employment gains generated by a casino are likely to be captured outside the region and that localized impacts are small. The dis placement of existing local economic activity is examined, and the case of increased tourism expenditures generated by the casino is simulated. The public policy implications of these findings point to the necessity of developing activities that complement tourism at the local level, not just at the na tional level. The gambling-tourism relationship simulated for Eilat shows that national and local interests are not al ways synonymous.

Measuring the technological intensity of the industrial sector: A methodological and empirical approach

Abstract This paper contends that most definitions of what comprises a “high technology” industry are based on only one defining characteristic. It is argued that an adequate definition needs to be based on a multi-dimensional view of technology and a methodological approach is suggested for classifying industrial sectors into “technological profiles” on the basis of the various aspects of technology that they embody. Based on this methodology, an empirical study based on sub-branches of Israeli industry (at the 3 digit SIC level) is presented. Using cluster analysis and analysis of variance it is shown that the technological profiles have similar industrial, and not just technological, characteristics. The policy implications of these findings point to the need for a definition of “high technology” that caters to the policy needs and objectives for which it is being defined.

Urban Economic Development and High Technology Industry

This paper examines the economic development prospects for urban areas arising from localised clusters of high technology activity. Economic development opportunities are expected to be expressed in the development of local linkage patterns: employment linkages, production and service linkages and linkages to local universities. On the basis of survey evidence of high technology firms from two urban areas in Israel, linkage patterns are found to be weakly developed locally but extensively developed nationally and internationally. This is explained as a result of the international character of Israeli high technology activity resulting in a limited effect on the development of the local urban economy. Policy implications for urban economic development point to the need for the formulation of a public policy executed and administered at the local level rather than the present system of central government targeting of urban economic development at select locations.

When is a Cost Really a Benefit? Local Welfare Effects and Employment Creation in the Evaluation of Economic Development Programs

This article claims that the local welfare effects of employment generation are often treated inadequately in the evaluation of economic development programs. Opportunity costs of labor are often either ignored or overstated, resulting in misleading indicators of welfare changes. Appropriately accounting for these costs requires recognizing employment creation as a benefit in terms of the chain reaction that it sets off in the local labor market. This article uses the concept of “job chains” and describes the different labor market circumstances in which they are likely to form. The local development of these chains, the impacts of in-migrants on their length, and the likelihood of their completion within the local area are all particularly important economic development issues with public policy implications. The article discusses the empirical estimation of these chains and their implications for evaluating the welfare impacts of alternative economic development projects.