J. Kim Swales

Multi-sectoral Cluster Modelling: The Evaluation of Scottish Enterprise Cluster Policy

This article describes the ex post cluster evaluation framework being developed by Scottish Enterprise. It focuses primarily on the macro level evaluation and, in particular, on the use of multi-sectoral modelling techniques to identify the effects of cluster policy on key indicators such as gross domestic product (GDP), unemployment and competitiveness. The Scottish Input-Output (I-O) table is a key element in this approach. The strengths and weaknesses of I-O data, both as a basis for this analysis and as a means of identifying important intra-cluster linkages are explored. Further, the article describes methods for visual representation of the linkages identified using such a method.

The Neoclassical Economic Base Multiplier

In this paper we derive an analytical expression for the regional neoclassical economic base marginal employment multiplier. The model that we adopt is a variant of the 1-2-3 general equilibrium model used in trade analysis. Its specific neoclassical characteristics are that laborsupply is a positive function of the real consumption wage and that factor and product demands are price sensitive. We calculate the employment multipliers associated with both a demand and supply stimulus to the basic sector. We demonstrate that it is possible for the marginal economic base multiplier to take any positive or negative value. However, the value of the marginalmultiplier is likely to approximate the value of the conventional average multiplier the closer production and utility functions are to Cobb-Douglas specifications and the more elastic is the labor supply function.

Spillover and Feedback Effects in General Equilibrium Interregional Models of the National Economy: A Requiem for Interregional Input-Output?

Input-output is the most widely employed general equilibrium model for the analysis of demand disturbances to the regional economy. However, whilst input-output systems are relatively easy to implement, they have severe limitations. These include fixed production and consumption coefficients and a neglect of supply-side constraints. Therefore, although input-output is a convenient technique to use, the key question is whether it is appropriate for modeling a regional market economy. McGregor et al (1996a) argue that the outcomes predicted in a large range of conventional economic models for “small” regions converge on input-output results in the long run. Essentially, where a small region’s factor markets are ultimately fully integrated into their national counterparts, there is no regional scarcity of resources at the existing ruling prices. The addition of cost functions which are linear and homogeneous in input prices and output, together with cost minimization and any form of mark-up pricing, generates the demand-invariant prices which motivate fixed production and consumption coefficients.

Incorporating sustainability indicators into a computable general equilibrium model of the scottish economy

Abstract In recent years, the notion of sustainable development has begun to figure prominently in the regional, as well as the national, policy concerns of many industrialized countries. Indicators have typically been used to monitor changes in economic, environmental and social variables to show whether economic development is on a sustainable path. In this paper we endogenize individual and composite environmental indicators within an appropriately specified computable general equilibrium modelling framework for Scotland. In principle, at least, this represents a very powerful modelling tool that can inform the policy making process by identifying the impact of any exogenous policy change on the key endogenous environmental and economic indicators. It can also identify the effects of any binding environmental targets on economic activity.

‘Policy scepticism’ and the impact of Scottish higher education institutions (HEIs) on their host region: accounting for regional budget constraints under devolution

Hermannsson K., Lisenkova K., McGregor P. G. and Swales J. K. ‘Policy scepticism’ and the impact of Scottish higher education institutions (HEIs) on their host region: accounting for regional budget constraints under devolution, Regional Studies. A ‘policy scepticism’ has emerged that challenges the results of conventional regional higher education institution (HEI) impact analyses. This paper provides a systematic critique of such scepticism. While rejecting its extreme form, the limiting effect of the binding public-sector expenditure constraints under devolution is noted and it is shown how conventional impact analyses can be augmented to accommodate these constraints. While the results suggest that conventional impact studies overestimate the expenditure impacts of HEIs, they also demonstrate that the policy scepticism that treats these expenditure effects as irrelevant neglects some key aspects of HEIs, in particular their export intensity.

Augmenting the Input–Output Framework for ‘Common Pool’ Resources: Operationalising the Full Leontief Environmental Model

Abstract In its initial formulation, the full Leontief (1970) environmental model augments the conventional Input–Output (IO) table by introducing pollution generation and separately identified pollution elimination sectors. Essentially it extends IO analysis to incorporate the use of a ‘common pool’ resource. Subsequent literature has either been analytical in nature or has concentrated on pollution generation but not cleaning activity. In this paper we generate an empirical full Leontief environmental IO system, based on augmenting the existing Scottish IO tables through endogenising waste generation and waste disposal activity. Due to weaknesses in data, our empirical results need to be treated with some caution. However, the construction of the extended IO system and the interpretation of the output and price multiplier results raise a number of interesting practical and conceptual issues. The analysis undertaken here can be extended to other ‘common pool’ resources such as the use of highways and irrigation systems.

Commercial agencies and surrogate motherhood: a transaction cost approach.

In this paper we investigate the legal arrangements involved in UK surrogate motherhood from a transaction-cost perspective. We outline the specific forms the transaction costs take and critically comment on the way in which the UK institutional and organisational arrangements at present adversely influence transaction costs. We then focus specifically on the potential role of surrogacy agencies and look at UK and US evidence on commercial and voluntary agencies. Policy implications follow.

The Expenditure Impacts of Individual Higher Education Institutions and Their Students on the Scottish Economy under a Regional Government Budget Constraint: Homogeneity or Heterogeneity?

Comparing each of the higher education institutions (HEIs) as a separate sector in the Scottish input—output table suggests that their expenditure patterns are homogenous and that any apparent heterogeneity in their conventional demand impacts depends primarily on scale. However, a disaggregation of their income by source reveals a disparity in their degree of dependence upon funding from the devolved Scottish Government. Acknowledging the binding budget constraint of the Scottish Government, and deriving balanced-expenditure multipliers, reveals large differences in the net-expenditure impact of HEIs upon the Scottish economy, with the source of variation being the origin of income. Applying a novel treatment of student expenditure impacts through identifying the amount of exogenous spending per student further increases the heterogeneity of the overall expenditure effects. These issues have particular importance for many governments facing increasing pressure to reduce their overall budgets.

The impact of the Barnett formula on the Scottish economy: endogenous population and variable formula proportions

The Barnett formula is the official basis upon which increments to public funds are allocated to the devolved regions of the UK for those parts of the budget that are administered locally. There is considerable controversy surrounding the implications of its strict application for the relevant regions. The existing literature focuses primarily on the equity of the spatial changes to government per capita expenditure that would accompany such a change. In contrast, in this paper we attempt to quantify the system-wide economic consequences—the real, relative resource squeeze that accompanies the financial relative squeeze—on one devolved region, Scotland. The analysis uses a multisectoral regional computable general equilibrium modelling approach. We highlight the importance of population endogeneity, particularly since the population proportions used in the formula are now regularly updated.

A regional computable general equilibrium analysis of the demand and ‘efficiency spillover’ effects of foreign direct investment

Despite government rhetoric concerning indigenous development, the attraction of foreign direct investment (FDI) remains a central plank of UK regional policy. The majority of studies of the regional impact of FDI concentrate on demand-side effects and use standard Keynesian or input–output multiplier methods.2 However the benefits from FDI are no longer thought to be limited solely to a stimulus to employment from additional demand. Indeed the focus of much recent work, especially at the level of the national economy, has been on supply-side issues, particularly the identification of ‘efficiency spillover’ effects from FDI to the indigenous sector. This issue is considered directly in several of the papers in this volume, with previous research being summarised in the paper by Blomstrom et al. In Gillespie et al. (1998) we argue that the identification of the regional system-wide demand-side effects ofassisted investment should incorporate capacity constraints and labour market displacement. This is not possible with the standard multiplier models. The argument for supply-side modelling holds a fortiori for the identification of the system-wide impacts of efficiency spillovers that operate primarily through changes in relative prices.