Ya Ping Yin

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.

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.

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.

Migration Equilibria in Regional Economies: A Multi-Period CGE Analysis of an Improvement in Local Amenities

In this paper we investigate the possible system-wide impacts on the local economy of an improvement in amenities. The amenity improvement could take a variety of forms, such as upgrading the environment or enhancing local public service provision, and might involve public sector action.1 However, we here take the change to be entirely exogenous, and concentrate solely on the lasting economic consequences of the amenity improvement (relative to other regions). We are therefore not concerned with any transitory stimulus that expenditures associated with amenity improvement may bring, nor do we attempt to assess ‘non-economic’ effects on the quality of life in the locality.

Input–Output Analysis, Labour Scarcity and Relative Price Endogeneity: Aggregate Demand Disturbances in a ‘Flex-price’ Leontief System

In this paper, we introduce scarcity into a conventional demand-driven input–output system to produce a ‘flex-price’ Leontief model. We retain the fixed technical coefficients but allow changes in relative prices to reflect variations in the real wage. Because the consumption coefficients increase with the real wage, the aggregate labour demand curve is found to be upward sloping. This produces conventional results, as long as the labour supply curve is perfectly elastic (horizontal). However, once we introduce labour scarcity, in the form of an upward sloping labour supply function, we derive the seemingly paradoxical result that the output and employment effects of a demand expansion are greater here than in conventional input–output. Through simulation, this result is found to be strongly dependent on the assumption of export exogeneity.

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.

The regional impact of foreign direct investment: structure and behaviour in an ownership disaggregated computable general equilibrium model

Despite government rhetoric in support of indigenous regional development, in practice the attraction of foreign-owned inward investment remains a key plank of regional policy. Just under half of all expenditure on UK Regional Selective Assistance (RSA) is awarded to foreign-owned firms (PA Cambridge Economic Consultants, 1993) and individual regional development agencies vie for the attraction of incoming plants, often offering an extensive package of incentives.2 In Gillespie et al (2001a) we assess the impact of RSA-assisted investment on the Scottish economy using a computable general equilibrium (CGE) approach. Our earlier analysis makes no distinction between the foreign- and UK-owned manufacturing sectors, yet the former accounted for 39% and 23% of Scottish Manufacturing gross output and employment, respectively, during 1996 (Scottish Office, 1999). There is, therefore, a substantial foreign-owned component of Scottish manufacturing, and this may have a significant impact on the behavior of the regional economy of Scotland. Accordingly, in this chapter we refine our earlier approach to focus directly on the employment effects of export-oriented Foreign Direct Investment (FDI).

Openness, Imperfect Competition and the NAIRU

Considers the treatment of openness and imperfect competition in the influential analysis of Layard, Nickell and Jackmans (LNJs) Unemployment: Macroeconomic Performance and the Labour Market. Clarifies and completes LNJs treatment of openness through the provision of explicit analytical solutions to their model under fixed and flexible exchange rate regimes. Also provides a (largely informal) analysis of the sensitivity of the LNJ models results to the particular forms of imperfect competition assumed. It is argued that openness is crucial to the models properties, whereas imperfect competition is not. However, imperfect competitive behaviour may, more generally, have a major impact if it is not confined to the “well-behaved form” allowed by LNJ.