Patrizio Lecca

The regional economic impact of more graduates in the labour market: a 'micro-to-macro' analysis for Scotland

This paper explores the system-wide impact of graduates on the regional economy. Graduates enjoy a significant wage premium, often interpreted as reflecting their greater productivity relative to nongraduates. If this is so there is a clear and direct supply-side impact of higher education institution (HEI) activities on regional economies. We use an HEI-disaggregated computable general equilibrium model of Scotland to estimate the impact of the growing proportion of graduates in the Scottish labour force that is implied by the current participation rate and demographic change, taking the graduate wage premium in Scotland as an indicator of productivity enhancement. While the detailed results vary with alternative assumptions about the extent to which wage premia reflect productivity, they do suggest that the long-term supply-side impacts of HEIs provide a significant boost to regional GDP. Furthermore, the results suggest that the supply-side impacts of HEIs are likely to be more important than the expenditure impacts that are the focus of most HEI impact studies.

How much does a single graduation cohort from further education colleges contribute to an open regional economy

ABSTRACT How much does a single graduation cohort from further education colleges contribute to an open regional economy? Spatial Economic Analysis. This paper combines elements of growth accounting and numerical general equilibrium analysis to produce an alternative micro-to-macro modelling approach. This is used to evaluate the macroeconomic impact on the Scottish economy of the human capital generated by a single graduation cohort from further education colleges. The macroeconomic impact is found to be significant and larger than growth accounting would suggest due to the associated endogenous investment, employment and competitiveness effects. From a policy perspective this identifies the importance of the conventional teaching role of education institutions and the key function played by further education colleges in this process.

The external benefits of higher education

ABSTRACT The external benefits of higher education. Regional Studies. The private-market benefits of education are widely studied at the micro-level, although the magnitude of their macroeconomic impact is disputed. However, there are additional benefits of education that are less well understood. In this paper the macroeconomic effects of external benefits of higher education are estimated using the ‘micro-to-macro’ simulation approach. Two types of externalities are explored: technology spillovers and productivity spillovers in the labour market. These links are illustrated and the results suggest they could be very large. However, this is qualified by the dearth of microeconomic evidence, for which the authors hope to encourage further work.

Econometric Estimation of Nested Production Functions and Testing in a Computable General Equilibrium Analysis of Economy-Wide Rebound Effects

Quantitative models, such as computable general equilibrium (CGE), that are increasingly used to inform policy processes rely on a number of assumptions concerning how good and services are produced. Previous research has shown that the elasticity of substitution between inputs and the structure in which these inputs interact can have large impacts on model output. However, the choice of elasticities and production structure is often made without the support of statistical evidence. This research aims to address these points by estimating nesting structure and the elasticities of substitution therein across a number of sectors in the UK then testing the implications of introducing these estimates to parameterise a CGE model that is then used to simulation the economy-wide impacts of increased efficiency in the productive use of energy.

Human Capital in Economic Development: From Labour Productivity to Macroeconomic Impact†

Micro-econometric evidence reveals high private returns to education, most prominently in low-income countries. However, it is disputed to what extent this translates into a macro-economic impact. This paper projects the increase in human capital from higher education in Malawi and uses a dynamic applied general equilibrium model to estimate the resulting macroeconomics impact. This is contingent upon endogenous adjustments, in particular how labour productivity affects competitiveness and if this in turn stimulates exports. Choice among commonly applied labour market assumptions and trade elasticities results in widely different outcomes. Appraisal of such policies should consider not only the impact on human capital stocks, but also adjustments outside the labour market.

The Impact of regional R&D subsidy in a computable general equilibrium model

This article presents a computable general equilibrium model for the region of Sardinia (Italy) with the purpose of investigating the macroeconomic impact of research and development (R&D) policies. The model incorporates induced technical change obtained through knowledge accumulation and external knowledge spillovers. It turns out that the cost of R&D policies may change according to wage setting in the region. Indeed, the likely size of the optimal subsidy that is required to reach a given target growth is lower when wages are bargained locally compared to the case where wages are bargained nationally. Furthermore, the capacity of such a policy to generate knowledge spillovers from international and interregional trade is quite modest. Indeed, the capacity of the regional system to internalize innovations embedded in imported goods is partially offset by an increase in internal efficiency that lowers the spillover intensity through a reduction in the share of imports.

Energy efficiency as an instrument of regional development policy? The impact of regional fiscal autonomy

ABSTRACT This paper analyses the system-wide impact of increased household energy efficiency in a regional context, using Scotland as an example. It shows that household energy efficiency improvements typically deliver a ‘double dividend’ of a regional economic stimulus and reduction in energy use. However, the trade-off between the two is sensitive to the degree of regional fiscal autonomy, and so is likely to vary across regions. The use of taxation to support the implementation of energy-efficiency improvement programmes negatively impacts competitiveness, unless workers are willing to accept lower after-tax wages to fund public spending on improving household energy efficiency.

Computable General Equilibrium Modelling in Regional Science

Computable General Equilibrium (CGE) modelling has a long and distinguished history in regional science. In the past decade or so, improvements in computation have led to more elaborate and detailed CGE models being developed and used in a range of different policy areas. Against a backdrop of these advances, this chapter seeks to identify and review a number of areas where we see the potential for significant developments in CGE modelling in the years ahead. Specifically, we first consider potential improvements in computation, model specification and methodology, before looking in more detail at three areas where these models are used, or could be used, with a view to identifying avenues where model improvements would be valuable. These three areas are: urban and spatial modelling, model integration with other systems and models, and regional fiscal issues. CGE modelling has a bright future in regional science, but to remain at the forefront of economic research in regional science it must continue to adapt and evolve as, historically it has done, and we hope that the directions identified in this chapter are helpful to the future direction of this field.

Increased Energy Efficiency in Scottish Households: Trading-Off Economic Benefits and Energy Rebound Effects?

Energy rebound effect from increased energy efficiency has been generally considered as an undesired consequence of increasing energy efficiency policies that needs to be accounted when assessing the ability of such policies to decrease the demand for energy. However, recent studies have associated the energy rebound effect to a wider range of economic benefits coming from the higher energy efficiency. In computable general equilibrium (CGE) setting Lecca et al. 2014 show that a more efficient use of energy could lead to a reallocation of household’s expenditure towards non-energy sectors, which could stimulate the economy through a shift in the aggregate demand. However this would crowd out export due to an increased pressure on domestic consumption price. Here we use a regional (CGE) model for the Scottish economy to analyse the economic response of household - and of the wider economy - to an increase in household energy efficiency. We follow the approach of Lecca et al. 2014 but we focus on the regional case of Scotland. This allows us to understand some of the implications of moving from a national to a regional CGE modelling framework in the analysis of the impacts household energy efficiency improvements in the whole economy. The macroeconomic impacts of improving household energy efficiency are analysed using a CGE model for Scotland called AMOS-ENVI. This is a dynamic CGE model with forward-looking investment and consumption decisions, designed to analyse environmental and energy disturbances in a regional setting. The model accounts for 20 different productive sectors, including 4 supply chain energy industries, and includes information about fScottish households, the Scottish Government and imports and exports to the rest of the UK (RUK) and to the rest of the World (ROW). Wages are determined within the region in an imperfectly competition setting, using a wage curve where the real wage is negatively related to unemployment rate. The labour force is initially assumed fixed. We than release this assumption to allow for free workers interregional migration across UK, occurring in response to the difference between national and regional real wage and unemployment rates. We consider an energy efficiency improvement as being any technological change which allows households to consume the same bundle goods as before but using less physical energy in doing this. The rebound effect is measured as being the ratio between potential energy savings (PES) and actual energy savings (AES). The PES correspond to the pure engineering effect, for example improving efficiency by 10% and saving 10% of energy. The AES are calculated as the proportionate change in a specific energy use, for which efficiency has improved, as the result of the full general equilibrium adjustments. Results from simulations show that increasing household energy efficiency stimulates the Scottish economy through an increase and change in patterns in the domestic aggregate demand. In the long-run central case scenario the regional GDP increases by 0.11%, unemployment rate drops by 0.45% and households consumption increases by 0.4%. The consumption of energy decreases both in household and in production, although the calculated general equilibrium rebound effect is 50%, so that only 50% of the potential energy savings are achieved. By introducing free migrations of workers, we find that in an open region characterised by an integrated labour market, interregional migration of workers may give additional momentum to the economic expansion from the increased household energy efficiency. In fact the net in-migration relieves pressure on the real wage and the cpi, which return to their baseline values in the long-run restoring the lost competitiveness observed in the national case (Lecca et al., 2014). By considering different simulation scenarios we show that there is a friction between the economic expansion from increased household energy efficiency and the rebound effects. Moreover, we show that the economic stimulus from increased energy efficiency in household would be different depending on the precise specification of the impact itself.

Total Factor Productivity Surpluses and Purchasing Power Transfers: An Application to the Italian Economy

In this paper, we disagree on the opportunity to use the double deflation method to produce an equilibrating system of account at a constant price. In fact, by relaxing such a condition, by means of the single deflation method, we obtain a measure of purchasing power transfer that can be decomposed in productivity and market distortion. Results are presented for the evolution of the Italian economy for the periods 1995–2002.