RISK AND INCOME TRADEOFFS IN REGIONAL POLICY: A PORTFOLIO THEORETIC APPROACH*

ABSTRACT. Policy makers often try to raise a region's income by altering its industrial mix. However, such attempts to increase local income may have an adverse effect on the stability of the region's economy. In this paper, we develop single-, aggregate-, and multiregional portfolio models that can be used by policy makers to generate frontiers of risk/income-efficient industrial mixtures for a regional economy. These portfolio models are modified for application to the tourist industry in six regions of Spain. In practice, we find that the introduction of bounds on the magnitude of sector rebalancing has a major effect on the model solutions.     

Economic Governance and the Evolution of Industrial Districts Under Globalization: The Case of Two Mature European Industrial Districts

For many mature European industrial districts, the present decade has been one of trying (and often failing) to meet the difficult challenges posed by the rising tide of globalization. The future of these districts in the new global economy has become a key issue for regional and local development policy, and, in this respect, it has sparked a renewed interest in economic governance. Economic governance is important in that it underpins a region's long-term economic development path. This article is a contribution to the study of the economic governance of industrial districts and the related policy debate. The article does so by specifically exploring the economic governance issue by considering the experiences and challenges currently facing two mature European industrial districts in the global economy.     

On the Informational Basis of Regional Innovation Policy: From Growth to Capabilities

The shift from the linear to the innovation system-based approach has resulted in the emergence of differentiated regional innovation policy. However, certain common presumptions bind these location-specific policies together. The set of information that is used to design these policies and the set of information excluded are fairly similar. The theoretical sections of this paper provide a critical review on the informational basis of regional innovation policy by contrasting the interpretations of the welfare effects of technological change in the utilitarian tradition and in Sen's capability approach. The empirical sections analyse the correspondence of the innovation capacity and welfare (well-being) situation in a Hungarian micro-regional data set. We conclude that the conventional informational basis of innovation policy is too narrow from a welfare perspective. Not only should the differences in the innovation systems, but also the peculiarities of the region's welfare situation be considered during the design of innovation policy.     

Creation and Alignment of the Eco-innovation Strategy Model to Regional Innovation Strategy: A Case from Lahti (Päijät-Häme Region), Finland

This study focuses on the importance of eco-innovation in regional innovation strategy and policy development. It is conducted to get an in-depth understanding and learning about eco-innovation at the regional level and to draw some principles that are important in creating and aligning the eco-innovation strategy model to regional innovation strategy. The study highlights the new eco-innovation strategy model called SAMPO which was created and developed through a series of multi-stakeholder consultations which embodied the strengthening of the region's expertise—learning and knowledge-generating environment, design and innovation. These three areas of regional expertise are translated in the SAMPO model as three spearheads of innovation activities categorized as practice-based innovation, eco-design and sustainable innovation. Some principles are derived from the creation of the SAMPO model and put forward as strategic learning points in regional innovation strategy. The SAMPO model as positively acknowledged by the Päijät-Häme Regional Council, business clusters, research institutes and academic organizations may serve as a new framework that is useful in formulating and recreating eco-innovation policy in the region.     

ABSORPTIVE CAPACITY,KNOWLEDGE FLOWS,AND INNOVATION IN U.S. METROPOLITAN AREAS

High growth and progressive regions possess a culture that promotes innovation. Innovation depends on a region's ability to use its own existing knowledge and knowledge generated elsewhere. This paper demonstrates the importance of the ability to absorb external knowledge in explaining innovation productivity for 106 U.S. metropolitan areas. Using a spatial interaction model of patent citation flows with origin and destination dependence, the destination fixed‐effects coefficients provides a measure of a region's absorptive capacity. We identify local conditions that shape a region's absorptive capacity and demonstrate it has a positive and significant impact on innovation productivity.     

Rules of engagement: America's Asia-Pacific security policy under an Obama administration

The United States’ strategy in the Asia-Pacific stands at a historic juncture. How the new Obama administration conceives and implements its Asia-Pacific policy during its first term of office will have major and enduring ramifications for America's future. The new administration must have a clear vision of its country's national security interests in the Asia-Pacific as well as a better appreciation of the evolving dynamics of the region. To this end, it should continue to underwrite its bilateral security commitments, albeit through a less threat-centric lens, and be more cognisant of the region's multilateral overtures by further anchoring US participation in regional multilateral institutions. This shift from a position of bilateral primacy to one of engaged bilateral and multilateral partnership—a ‘convergent security’ approach—is the best strategy for Washington to advance its strategic interests in the Asia-Pacific.     

Borders,bridges and branding: The transformation of the Øresund region into an imagined space

This article explores the spatial-economic transformation of the Scandinavian Øresund Region over the last decades with a focus on the role of place marketing (branding) in this transition process. Although the Øresund Region, in which Copenhagen and Malmö cooperate, is often highlighted as a European model for cross-border cooperation, this paper argues for a more nuanced view. To be sure, the branding of the Øresund builds upon unique regional assets and is symbolized by visible objects (e.g. the Øresund-bridge and a regional logo). Still, however, the Øresund Region is an “imagined space”: the conurbation is branded as an exciting Euregional hub, whereas the region's inhabitants still cope with many day-to-day problems of cross-border integration. The article concludes that this mismatch between the Øresund's identity and image may hamper the region's future development.     

Knowledge Networks as a Regional Development Resource: A Network Analysis of the Interlinks between Scientific Institutions and Regional Firms in the Metropolitan region of Hanover,Germany

The debate on regional innovation potentials has concentrated in recent times upon the topic of regional knowledge networking. This article presents the findings of the first phase of a detailed network analysis of the cooperation relations between scientific institutions and firms in the “metropolitan region Hanover-Brunswick-Göttingen”. The research concentrated on the regional and supra-regional cooperation relations of approximately 500 science establishments of the region, including their interlinks with private sector firms. This analysis of a polycentric metropolitan region's knowledge networks in different fields of competence produced detailed information on the density of knowledge interlinking within the region, on the degree of connectivity between the region's scientific institutions and private sector firms, and on central network nodes within the regional innovation networks. The case study exemplifies the methodical approach of a regional network analysis and emphasizes the role of knowledge networks as a development resource which is of particular relevance to the region's innovation capacities.     

An analysis of technological potential and regional development processes in Rhône — Alpes

A region's technology potential can be developed in three ways: public finding; private investment (by business); and an intermediate area which ensures coherence between the public and private sectors, and which is mainly to be seen in interface structures between universities and business. After presenting these ways for Rhône‐Alpes, the paper introduces the regional policy to promote science and technology. According to French centralized political structure, the regional government acts as a lever. The region's innovation‐oriented policy, which should not be confused with a research‐oriented policy, has the impact of aiming all action at improving the technological environment of business, and at facilitating their economic development by integrating new technologies. Similarities between Rhône‐Alpes and Baden‐Würtemberg have led these two regions to cooperate increasingly in the fields of science and technology. The ‘four motor‐regions for Europe’ (with Lombardia and Catalonia) experiment in the field of new‐material investment cooperation could be useful if we think of the process aimed at strengthening integration in the European Community.     

Nationalizing Space: Cosmetic Federalism and the Politics of Development in Northeast India

Until recently Arunachal Pradesh on India's Northeast frontier was relatively insulated from the processes associated with development. State institutions were barely present during the colonial era. In 1962, however, India and China fought a border war in this area: this war, along with signs of unrest among indigenous peoples in the neighbourhood, exposed India's vulnerabilities in the region. Since then, nationalizing this frontier space by extending the institutions of the state all the way into the international border region has become the thrust of Indian policy. The region's governmental infrastructure was fundamentally redesigned to put in place what can only be described as a cosmetic federal regional order with a number of small states dependent on the central government's largess and subject to monitoring by India's Home Ministry. The new regional order has put Arunachal firmly on a developmentalist track, which has enabled India to meet its national security goals, but at a significant cost to the region.     

Resource Development and Aborigines: The Case of Roebourne 1960–1980

The pervasive and dynamic influence of economic restructuring on political and social relations is highlighted in many aspects of Australian daily life. The effect of economic restructuring on already marginalised and disempowered groups in society is often overlooked Development of iron ore mines and associated new towns, railways and ports transformed the regional economy of Western Australia's Pilbara region in the 1960s and 1970s. For Aborigines in Roebourne, this restructuring represented a new phase in their relations with ‘White Australia’. Interacting historical legacies, corporate strategies, government policies and economic processes further marginalised the region's Aboriginal population and linked the region to the global economy in ways which created significant barriers to the development of Aboriginal self-management strategies. This paper reviews this period with particular emphasis on the social impact of the iron ore ‘boom’ on local Aboriginal people. In the current climate of renewed economic and political crisis in Western Australia, this review provides a timely reminder that such processes occur in a broader context than is often recognised in regional planning processes.     

Material constraints to popular imaginaries: The extractive economy and resource nationalism in Bolivia

Widespread neoliberal-era privatizations in South America's extractive economies rekindled longstanding social movement demands for nationalist control of non-renewable resources and propelled the region's left political turn over the last decade. In Bolivia, where resource extraction has dominated exports since colonial times, social movements employing resource nationalist master frames overturned governments in 1952, 2003, and 2005. In 2005 indigenous leader Evo Morales was elected president promising to direct resource wealth to generate economic development, but the structural constraints created by an extractive economy have made these goals impossible to achieve over the short and medium term. This article suggests that the clash between resource nationalist imaginaries embedded in contentious social movements and the realities of long-term extractive dependent economies not only limits government policy options but also fuels continued social protest.     

LOCATIONAL FACTORS IN THE DECLINING INDUSTRIAL COMPETITIVE ADVANTAGE OF THE NEW YORK URBAN REGION*

This paper investigates the locational factors that contributed to the decline of the New York urban region's industries during 1972-1975. Based on the static concept of a specialization index, a dynamic comparative advantage index is constructed. A model is then formulated to test the hypothesis that regional competitive advantage (vis-à-vis the nation) is a function of relative disparities in the change of these locational factors. Regression results show that the region's competitive advantage is influenced positively by the differential rate of change in market size, by the differential profit rate before tax, and negatively by the differential rate of change in unit labor cost and in unit energy cost. The differential tax rate does not seem to affect the region's competitive advantage. Nevertheless, a progressive corporate income tax structure tends to neutralize the beneficial effects of the economies of agglomeration and the urban attraction of the region.     

Some Aspects of the Development and Location of Industry in the Central Asian Economic Region

Despite rapid industrialization since World War II, Central Asia is still far from exhausting its potential for industrial development based on abundant mineral resources, fuels and energy, and on the most favorable manpower supply of any of the Eastern regions of the USSR. The only limiting factor in economic development is water. In light of the region's resource situation, future development should focus on a diversified industrial expansion involving activities with limited water and metal needs (in the absence of a major regional iron and steel plant) or medium or high energy and labor requirements. This would include nonferrous metals, chemicals (except for those posing a water pollution problem) and expansion of the region's cotton-based production complex, ranging from irrigated cotton culture to finished fabrics.     

Invasion by invitation: the role of alliances in the Asia-Pacific

Alliances continue to occupy a prominent place in the Asia-Pacific's security architecture. For many regional states such as Australia and Japan, their respective alliances with the USA are the unchallenged foundations of their security. But when the rise of China is causing major change in the region, and when many countries are increasingly reliant on China economically, is the region's network of alliances any longer appropriate or useful? This article reviews alliances in theory and practice, and argues that, while alliances are unlikely to disappear, their utility is nothing like as clear-cut as many of their supporters would have one believe.     

FIRM ENTRY AND EXIT: CAUSALITY TESTS AND ECONOMIC-BASE LINKAGES*

ABSTRACT One of the foundations of applied regional economics down through the years has been economic base theory (EBT). EBT presumes that economic activity within the basic sector unidirectionally causes economic activity in nonbasic sectors. In recent years, however, increasing attention has been given to the possibility that traditionally nonbasic activities (e.g., services) may be quite important in determining a region's total economic activity. In this paper, we examine the nature and direction of causality of economic activity within a regional economy. Using novel data on entry and exit of firms, the empirical analysis provides new insights into the strengths and weaknesses of traditional economic base theory.     

The Political Economy of Environmental Policy Reform in Latin America

Many parts of the world are threatened with environmental damage and degradation, affecting both the natural resources and the economy of the area. This article analyses the factors affecting the likelihood of different environmental policy reforms in Latin America, with particular emphasis on: the strengths and weaknesses of different groups which promote such reforms; the degree to which the reforms are compatible with the region's current economic policies; and how the type of political regime affects these issues. It reaches the conclusion that, although there has been progress in recent years, the possibility of carrying out far-reaching reforms which could substantially reduce pollution and resource depletion has been limited by: 1) the difficulties involved in linking environmental issues with concerns for social justice; 2) economic policies which promote the exploitation of natural resources and labour and weaken the public sector; and 3) the great influence over regional governments of groups with vested interests in continuing environmentally destructive activities.     

New Perspectives for Modernization in Central America

ABSTRACT Ostensibly, the Central American Left has been defeated both politically, in the Nicaraguan elections, and economically, with the triumph of orthodox economic adjustment policy. In reality, the end of the Cold War promises to alter the economic and political climate in a way that will encourage the region's long-delayed modernization. Although the political arena remains turbulent, moderate forces are emerging which Washington will find easier to support. Equally promising is the region's favourable record of economic adjustment in the second half of the 1980s. A more favourable world climate for world trade in the 1990s would ease the region's foreign exchange constraint and enable a further round of industrialization to take place, while further eroding the economic basis of ‘oligarchic despotism’.     

Information Age Ireland: The Attraction,the Reality and Never Ending Geography

This paper is an attempt to probe deeper behind the well-documented success story of the Irish economy over the 1990s. Over the decade, the country experienced unparalleled levels of economic growth that saw unemployment levels plummet, inflation levels stabilize and inward investment rise at a substantial rate. Growth rates of gross national product (GNP) best surmise the Irish case, the tigerish performance brought the country from one with a per capita GNP two-thirds of the European Union (EU) average in 1987, to one which exceeded the average 10 years later. An exposition of Ireland's pursuit of a foreign direct investment (FDI) development model forms a major part of this work. Recognizing the importance of FDI in Ireland, and FDI in the software sector in particular, this paper shows how and why investors flocked into the country over the golden era of the 1990s. Exogenously, Ireland's place on the outskirts of one of the world's biggest markets made it an alluring option for outside investors. Endogenously, the rationale behind the pursuit of high-tech FDI policy, beyond employment creation was the expected spill-over effects of multinational companies (MNCs) on the local economy. Questions are asked about the nature of positive externalities both in terms of the growth of an indigenous sector alongside a foreign-owned one as well as the sustainability of this type of investment. Changes in the organizational structures of MNCs over the 1990s, through decentralization of activities and outsourcing are integral to the Irish success story. Organizational transformation resulting in networks of global production have helped Ireland, as a peripheral region, to reposition itself as an access point to the lucrative European market. The geographic alteration on the national level however, has not been recreated on the sub-national scale. Contrary to the writings of many technology determinists, Ireland's pursuit of an information economy has had a very real impact in terms of regional economic divergence within the country. The lack of coherent regional or spatial planning is to blame along with a telecommunications infrastructure that has exacerbated the regional woes of an economy with an explicit focus on high-technology industries.     

Do We Need a GCC Bank to Facilitate the Economic Turnaround of the GCC Region?

Amidst the ongoing crisis of plummeting oil prices, the GCC (Gulf Cooperation Council) terrain has become a haunt of economists and financial analysts to tackle the ongoing challenges in the region. GCC constituents are gearing themselves with a robust political will that they hope could result in a turnaround of their economy by adopting a policy of economic diversification in nonoil‐based sectors. With this background supported by extensive qualitative scan of literature pertaining to the reforms proposed by the six members of the GCC to drive the economy forward amidst ongoing economic crisis, this article seeks to underscore the prospect of a shared initiative by the GCC constituents in institutionalizing a GCC bank as a potent innovative solution which may serve to provide an edifice for pushing forth the region's economy in nonhydrocarbon segments contingent upon the individual needs of the GCC constituents. As an exploratory study, this paper sheds light on these issues besides discussing the fundamental functions of the GCC bank.