INDUSTRIAL CENTERS AND REGIONAL GROWTH IN THE PRESENCE OF LOCAL INPUTS*

ABSTRACT. A large proportion of regional production takes place in nontraded goods and services. In addition, significant productivity increases can be observed in some segments of this sector. Starting from these two empirical observations we construct a model of growth in a two-region setting with factor mobility. The growth process is based on endogenous technological change in the nontraded input sector, whose output serves as an input in the production of one of the two final goods, the so-called industrial good. We consider two extreme cases, one with locally limited, the other with interregional knowledge spillovers. Conditions are established under which interior solutions with production of local inputs and steady-state growth in both regions result, and others under which we find a core-periphery pattern with growth concentrated in one region only. The stability of the equilibria is discussed by considering the transition processes. Finally, it is shown that catching-up as well as leapfrogging may occur, if new technologies become available.     

TRANSBOUNDARY INCOME AND EXPENDITURE FLOWS IN REGIONAL INPUT-OUTPUT MODELS*

ABSTRACT. Nearly all regional input-output models have been constructed without a proper accounting of inflows and outflows of personal income and personal consumption expenditures. Typically invoked is a no cross-payments assumption, analogous to the no cross-hauling assumption for commodities. We present a new accounting framework based on the classification of flows according to the location of income generation, receipt, and spending, and argue that only flows endogenous in all three respects should be part of a closed regional I-O model. We use the framework to compute the upward bias in multipliers in a typical regional I-O model. We also present several methods for estimating transboundary flows.     

PRODUCTION FUNCTIONS AND THE DISAGGREGATION OF LABOR INPUTS IN MANUFACTURING PLANTS*

ABSTRACT. This paper investigates the assumption of homogeneous labor inputs underlying the production functions in many regional models. The results indicate that nonproduction and production labor within manufacturing plants are not strongly separable, and the homogeneous labor assumption is not therefore appropriate. Hence, regional models need to take this into account in order to give reliable results. Differences between industries provide useful additional insights into their labor and capital relationships.     

A NOTE ON INCOME TAXES AND DEGREE ONE PRODUCTION HOMOGENEITY*

ABSTRACT In a recent JRS article [Martinich and Hurter (1985)] we examined the production and spatial impact on a firm operating in an uncertain environment due to the imposition of a flat rate income tax. The impacts were shown to depend on the properties of the firm's production and preference functions. In this paper we develop further results for the case where the firm has a degree one homogeneous production function. It is shown that an income tax is technologically and spatially neutral for any risk-averse firm, without regard to any other properties of the preference function. Thus, we not only extend our earlier results for the degree one homogenous production function case but we also correct an error related to this case in the earlier paper.     

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.     

DETERMINANTS OF KNOWLEDGE PRODUCTION AND THEIR EFFECTS ON REGIONAL ECONOMIC GROWTH

ABSTRACT We provide a Bayesian spatial Markov Chain Monte Carlo model composition (MC³) analysis of growth rates in European regional patenting activity. Based on theoretical models on innovation and growth, we identify a large set of candidate explanatory variables that characterize regional stocks of knowledge, including: human resources devoted to innovative activity, scientific and technical capabilities, public and private investments, government policies, as well as regional industry structure, and indicators of regional technology gaps that reflect distance from the technological frontier. Our analysis shows that accommodating spatial dependence and heterogeneity leads to different conclusions regarding factors important for technological transfer and knowledge spillovers.     

REGIONAL INCOME EVOLUTION IN SOUTH AFRICA AFTER APARTHEID*

ABSTRACT South Africa is one of the wealthiest countries on the African continent. The high national level (and growth) of GDP per capita, however, masks significant differences in economic performance across South Africa's regions. This paper uses (spatial) Markov chain techniques to describe the evolution of the entire cross‐section regional income distribution in terms of its intra‐distributional characteristics during the post‐Apartheid period. The results indicate a heavily diverging regional income distribution. Relatively poor regions are likely to remain poor or become even poorer and the richest regions will maintain their lead in terms of income levels. Explicitly taking account of space furthermore shows that these high‐income regions are acting as local growth poles, absorbing economic activity from their immediate surroundings. Location, trade, education, and the variable fortune of the gold mining industry seem to be important determinants of the observed evolution.