Peter McGregor

Amos - a macro-micro model of Scotland

Abstract The paper gives a detailed description of AMOS, a macro-micro simulation framework parameterized on Scottish data. From a macroeconomic modelling perspective, AMOS has two relatively novel features: the supply side is specified in terms of the microeconomic behaviour of ‘representative transactors’ and there is a wide choice over the precise form of supply-side behaviour. An outline of model software, a full model listing and illustrative simulations are also provided.

Thirlwall and balance of payments constrained growth

This paper outlines the theory which Thirlwall uses to determine the growth of domestic income and argues that crucial elements of this theory appear to be very weak. The empirical evidence presented by Thirlwall to support his argument for balance of payments constrained growth is considered.

Thirlwall law and balance of payments constrained growth - further comment on the debate

This paper reviews the debate that has occurred in Applied Economics over Thirlwalls Law (McCombie, 1989; McGregor and Swales, 1985; 1986; Thirlwall, 1986). The empired evidence concering the validity of the Law is re-assessed using a variety of tests including that suggested by McCombie (1989) and the new data set provided by Bairam (1988). The Law is overwhelmingly rejected by the evidence, contrary to the conclusions of McCombie and Bairam. The rationale for the assumption of constant relative prices which is required to derive Thirlwalls Law is reconsidered. The original ‘law of one price’ rationale renders the approach incoherent. The more recent rationale of sticky oligopolistic price improves the internal consistency of the model but necessitates consideration of non-price competition. However, neither the theory underlying Thirlwalls Law, nor empirical tests of the Law, property account for this. In principle, the Law cannot be employed to distinguish between demanding constrained and supply-co...

Balance of payments constrained growth - a rejoinder to Professor Thirlwall

Professor Thirlwall has argued that the growth rate of a country is constrained by the requirement that the external current account must broadly balance. He maintains that a countrys growth can be analysed using a dynamic Harrod trade multiplier, and that a countrys long-run growth rate (y) will approximate to the ratio of the rate of growth of exports (X) to the income elasticity of demand for imports (A): In a recent article in this journal (McGregor and Swales, 1985), doubts were expressed about the theoretical and empirical grounds on which Thirlwall makes these claims. In his reply, Thirlwall argues that such doubts are unfounded. He clarifies his theory on a number of points. He argues that his theory was subjected to inappropriate empirical tests. And whilst accepting that Equation 1 can be derived from a strict neoclassical model, he invites the reader to choose between the plausibility of the neoclassical story, as against the Keynesian alternative.

Economics of devolution/decentralization in the UK: some questions and answers

McGregor P. G. and Swales K. (2005) Economics of devolution/decentralization in the UK: some questions and answers, Regional Studies 39 , 477–494. The paper explores the economic implications of the radical process of devolution, decentralization and delegation of decision‐making and policy delivery initiated by the post‐1997 UK Labour Government. It is argued that the economies of all the presently devolved regions ultimately suffer if the Barnett Formula is rigorously imposed. It is shown that the efficiency of devolving fiscal authority involves a balance of positive and negative elements (depending on wage bargaining and migration responses). It is then argued that delegation/devolution of regional economic development policies, while exploiting regional information advantages, neglects regional economic interdependence, so there are potential gains from greater cooperation/coordination.

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.

Impact of alternative electricity generation technologies on the Scottish economy: An illustrative input—output analysis

Abstract UK energy policy is at a critical juncture, with major changes in the electricity generation mix in prospect. In Scotland, significant reductions in electricity-generating capacity are expected as coal- and nuclear-powered stations close, and renewable technologies provide a growing share of total electricity. Despite these radical changes, there has as yet been no assessment of the likely implications for the Scottish economy. This paper explores the likely systemwide impact of these changes on aggregate and sectoral outputs and employment levels using an input-output analysis that separately identifies eight generating technologies. The results suggest the need for careful disaggregation of the electricity generation sector and emphasize the economic distinctiveness of individual generation technologies.

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.

Migration equilibria/disequilibria and the natural rate of unemployment in a regional context

Examines the theory of regional equilibria in the presence of endogenous migration, where net migration flows are determined by real consumption wage and unemployment‐rate differentials. Provides a theoretical analysis of market clearing and steady state concepts of equilibrium and examines the impact on local demand of government expenditure. Concludes that a natural rate input‐output model applies, but that the system takes a long time to return to the equilibrium.