THE LONG-RUN ECONOMIC IMPACTS OF FEDERAL,STATE, AND LOCAL FISCAL POLICIES IN METROPOLITAN AREAS*

ABSTRACT. This paper uses new estimates of metropolitan factor demand and output supply functions to study how federal, state, and local fiscal policies affect metropolitan economies. We illustrate our work with findings for ten metropolitan areas in five states for changes in state corporate income taxes, local property taxes, the federal corporate income tax, an investment tax credit, interest rates, public capital stocks, output prices, and tax and regulatory policies affecting gross wages. It is clear from these simulations that a policy that is nominally the same everywhere will have repercussions that vary widely across regions and cities.     

Labour Market Dynamics in Resource Dependent Regions: an Examination of the Western Australian Goldfields

Labour shortages have become an increasingly significant barrier to economic development in regional Australia. Many firms and government agencies are operating below capacity as a result of their inability to fill jobs. In the mineral resources sector, this has been compounded by rapidly rising demand for commodities and the very remote locations of many mine sites. This paper explores the dynamics of labour shortages in the minerals sector of the Western Australian Goldfields. It demonstrates close linkages between commodity price, labour supply and demand, and resource output. Against the background of a state-wide ‘resources boom’, the paper also points to an increase in intra- and inter- regional competition for labour.     

The effects of public capital on private sector performance in Turkish regional manufacturing industries1

This article investigates the impact of public capital formation on private manufacturing sector performance in the seven geographical regions of Turkey and in aggregate. A vector autoregression (VAR) model has been employed to estimate long run accumulated elasticities of private sector variables with respect to public capital for the time period 1980–2000. The results show that public capital affects private output positively in aggregate and in all regions apart from the Black Sea and Mediterranean regions. The results also reveal that only in the Marmara region, the impact is positive both on input and output. The public capital crowds in private sector inputs in some regions.     

High‐speed railway to success? The effects of high‐speed rail connection on regional economic development in China

We find that high‐speed railway connection in China has led to a reduction in GDP per capita for connected peripheral prefectures. We use the least‐cost path‐spanning tree network to address the nonrandom route placement issue. We find that the reduction of GDP per capita is driven by significant contractions in capital input, industrial output, and skilled labor outflow. We present evidence to support a trade‐based channel in light of falling transportation costs between peripheral and metropolitan regions. Our finding highlights the importance of the cost of human transport.     

The Impact of Public Capital Stock on Regional Convergence in Turkey

The effect of public capital on regional output and private sector productivity has been the subject of considerable research in the field of regional development literature. However, there have been only a few studies that develop linkages between public capital and regional economic convergence. This study examines the dynamic effects of public capital and transportation capital stocks on output per capita in terms of regional convergence in Turkey at NUTS 2 level. A conditional convergence model based on per capita gross domestic product and per capita public capital and transportation capital stocks is estimated using the panel data set for the Turkish regions for the time period of 1980–2001. The results reveal that public capital has a positive and significant effect on output per capita and thus on regional convergence in some of the models in the Turkish regions,. However, the transportation component of public capital stock has a negative effect on regional convergence in all models employed in the study. This implies that transportation capital stock leads to larger regional disparities between the Turkish regions.     

THE EMPLOYMENT CREATION EFFECTS OF FACTOR SUBSIDIES: SOME ESTIMATES FOR NORTHERN IRELAND MANUFACTURING INDUSTRY, 1955-1983

In this paper, I use estimates of the parameters of an industry demand function and a CES production function for Northern Ireland manufacturing in order to measure the relative impact of factor subsidies on employment, capital, and output. A simulation model is able to differentiate the output and substitution effects of subsidies. The results indicate that since manufacturing industry in the province tends to operate with a labor-intensive technology and, since its price-elasticity of demand for output is very low, the employment creating effects of capital subsidies are strongly negative.     

The Location of Services in the Urban Hierarchy and the Regions of the United States

We use regression and factor analyses to explain intermetropolitan variation in the proportion of jobs in disaggregated service sectors in American metropolitan areas. Central place theory postulates of centrally located establishments serving a surrounding complementary region partially explain the positive relationship between metropolitan size and the proportion of jobs in an area in services. Regional variation in demand following several decades of substantial shifts in population and economic output is an additional influence. Intermetropolitan clustering of service sectors is also occurring. A factor analysis of employment proportions in twenty-two disaggregate service sectors identified five intersectoral service clusters. The factor analysis accounted for substantially more variance than the regression equations. We interpret this result as evidence of the emergence of service-based spatial industrial complexes. We argue that agglomeration of information-intensive intermediate services is driven by an attraction to labor markets endowed with pools of skilled professionals who can flexibly apply their talents in a variety of sectors. Unusual demographic characteristics of some metropolitan areas probably explain clusters of final demand services.     

PRODUCTIVITY AND THE DENSITY OF HUMAN CAPITAL*

ABSTRACT We estimate a model of urban productivity in which the agglomeration effect of density is enhanced by a metropolitan area's stock of human capital. Estimation accounts for potential biases due to the endogeneity of density and industrial composition effects. Using new information on output per worker for U.S. metropolitan areas along with a measure of density that accounts for the spatial distribution of population, we find that a doubling of density increases productivity by 2–4 percent. Consistent with theories of learning and knowledge spillovers in cities, we demonstrate that the elasticity of average labor productivity with respect to density increases with human capital. Metropolitan areas with a human capital stock one standard deviation below the mean realize no productivity gain, while doubling density in metropolitan areas with a human capital stock one standard deviation above the mean yields productivity benefits that are about twice the average. These patterns are particularly pronounced in industries where the exchange of information and sharing of ideas are important parts of the production process.     

AMENITIES VERSUS LABOR MARKET OPPORTUNITIES: CHOOSING THE OPTIMAL DISTANCE TO MOVE*

ABSTRACT. A recent debate in the regional economics literature has focused attention on the motivation behind an individual's decision to migrate. Human-capital migration models emphasize labor market disequilibria whereas alternative (hedonic) migration models stress households’altered demand for nontraded goods. In this paper, we test the relative importance of these two possible motivations for moving between metropolitan areas. We use an intercity hedonic model to decompose wages into equilibrium and disequilibrium components. We then compare the separate influences of amenities and the disequilibrium component of wages on the distance moved between two metropolitan areas. Our findings indicate that both economic factors and amenity differentials are significant factors in explaining regional migration.     

TOTAL FACTOR PRODUCTIVITY GROWTH IN MANUFACTURING FURTHER EVIDENCE FROM THE STATES*

In this paper, we first develop a measure of total factor productivity (TFP) growth and summarize a source-of-growth analysis for the manufacturing sector of 48 states. As have others, we find little association between TFP growth differentials and output growth differentials for census regions. At the staterather than the regional level, however, we find a positive association between TFP growth and output growth. We use cross-sectional data to estimate the determinants of the variation in TFP growth. Two results emerge that are important for regional policy and for understanding national productivity trends. First, state investments in education and in transportation infrastructure may affect TFP growth. Second, energy price increases in the early 1970s had no differential effects on productivity growth across states. We also explore the determinants of manufacturing output growth and find that TFP growth, demand growth, wage growth, wage levels, and state corporate income tax rates are significant.     

Social Capital and Post‐Conflict Reconstruction in Burundi: The Limits of Community‐based Reconstruction

Using an examination of three NGO interventions in post‐conflict Burundi, this article questions community‐based reconstruction as a mechanism to rebuild social capital after conflicts, particularly when direct livelihood support is provided. The authors demonstrate a general shortcoming of the methodology employed in community‐based development (CBD), namely its focus on ‘technical procedural design’, which results in what may be termed ‘supply‐driven demand‐driven’ reconstruction. The findings suggest the need for a political economy perspective on social capital, which acknowledges that the effects on social capital are determined by the type of economic resource CBD gives access to. Through the use of a resource typology, the case studies show that the CBD methodology and the potential effects on social capital differ when applied to public and non‐strategic versus private and strategic resources. This has particular consequences for post‐conflict situations. A generalized application of CBD methodology to post‐conflict reconstruction programmes fails to take adequate account of the nature of the interventions and the challenges posed by the particular post‐conflict setting. The article therefore questions the current popular ‘social engineering’ approach to post‐conflict reconstruction.     

Lights and Shadows of Urban Water Demand Management: The Case of the Metropolitan Region of Barcelona

The economic, social, and environmental limits of supplying water to metropolitan areas through conventional means (reservoirs, water transfers, etc.) have resulted in growing consideration of demand management actions as well as in the use of non-conventional sources of supply. In terms of demand management, economic instruments (pricing and taxes), domestic water-saving technologies, and educational campaigns to encourage water saving during periods of drought have received special attention. While demand management policies have an effect on conserving water and therefore should be welcome, they present problems and uncertainties as well. Using the example of the metropolitan region of Barcelona, in this article I argue that water demand management policies may be insufficient for reaching their ultimate goal of controlled water consumption when confronted with structural changes in urban development such as the expansion of low-density growth, the multiplication of the number of households, or gains in income, all of which lead to a potentially greater demand for water. This calls for more integration of water policies with land use and urban development policies.     

The Effect of Public Infrastructure on the Private Productive Sector of Spanish Regions

In this paper we analyze the effect of infrastructure on the cost and productivity performance of the private productive sector of Spanish regions over the period 1980–1993. We use a dual approach based on cost functions that allows us to recover the usual parameters estimated with production functions. In addition, we obtain rates of return and cost elasticities of production factors at the regional level. Our framework explicitly considers that some factors are quasi-fixed and their volume can differ from their optimal endowment levels. Our results indicate that the public sector has contributed significantly to enhance productivity and reduce costs in the private sector of almost every Spanish region. Nevertheless, there is still scope for the government to continue its investment efforts, given that there remains an appreciable gap between observed and optimal public capital, and we find that in the long run, public capital promotes private investment.     

PUBLIC CAPITAL, REGIONAL OUTPUT, AND DEVELOPMENT: SOME EMPIRICAL EVIDENCE

ABSTRACT The goal of our paper is to provide direct estimates of the association between public capital and regional output. This is made possible by the construction of a data series which measures public capital at the state level.
The relation between public capital and other productive factors is tested using a translog production function. Our results show that labor and public capital are complementary inputs, and that public capital exhibited diminishing returns. We also consider restrictions on the translog formulation. Linear homogeneity is rejected in all cases, and the Cobb-Douglas specification is rejected for the manufacturing and all sectors categories.     

Accounting for Temporal Demand Variations in Retail Location Models

This article develops and calibrates a spatial interaction model (SIM) incorporating additional temporal characteristics of consumer demand for the U.K. grocery market. SIMs have been routinely used by the retail sector for location modeling and revenue prediction and have a good record of success, especially in the supermarket/hypermarket sector. However, greater planning controls and a more competitive trading environment in recent years has forced retailers to look to new markets. This has meant a greater focus on the convenience market which creates new challenges for retail location models. In this article, we present a custom built SIM for the grocery market in West Yorkshire incorporating trading and consumer data provided by a major U.K. retailer. We show that this model works well for supermarkets and hypermarkets but poorly for convenience stores. We then build a series of new demand layers taking into account the spatial distributions of demand at the time of day that consumers are likely to use grocery stores. These new demand layers include workplace populations, university student populations and secondary school children. When these demand layers are added to the models, we see a very promising increase in the accuracy of the revenue forecasts.     

ECONOMIC IMPACTS OF SEOUL'S JOB DECENTRALIZATION: A METROPOLITAN INPUT–OUTPUT ANALYSIS

ABSTRACT.  This study analyzes the economic impacts of job decentralization with the aid of the Seoul metropolitan input–output model (SMIO) for the Seoul Metropolitan Area (SMA). Two main features can be highlighted: modeling perspective and simulation results. The SMIO is a pioneering work in the application of this type of metropolitan input–output analysis to the real world by taking into account the spatial and industrial relationships of multiplier effects simultaneously within a metropolitan economic system. The simulation results show that job decentralization results in a serious spatial and industrial restructuring of the metropolitan economy, and that the SMA gains significant economic benefits from job decentralization, no matter where the job expansion takes place within the metropolitan region. Interesting to find is that job decentralization generates positive induced effects for all scenarios through a virtuous circle of production, income formation, and consumption, given suburbanized population, which is one of the economic reasons why jobs follow people.     

ON THE INTERPRETATION OF FIXED INPUT COEFFICIENTS UNDER AGGREGATION*

ABSTRACT A fixed input coefficient is traditionally interpreted as the additional input from one sector that is required for an additional unit of output in another sector. It is shown that this ratio of increments is, in general, not fixed under aggregation. A tight upper and lower bound for its variation are derived. A necessary and sufficient condition for the ratio to be fixed is obtained. As a consequence, adopting the common assumption of fixed input coefficients implies that additional assumptions at any subaggregate level are required. Similar results are given for the Leontief inverse, whose typical element is usually interpreted as the additional output in one sector that is required for an additional unit of final demand in another sector.     

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.     

On wine,rent and regions: labour market change and housing market processes in non‐metropolitan South Australia

This article reports on research into the relationship between labour market change and the private rental market in non‐metropolitan South Australia for the period 1990–2000. Using Small Area Labour Market data, Census data and records from the Residential Tenancy Tribunal the study investigates the capacity of the private rental market to respond to labour market and population growth. The article finds that there is considerable ‘stickiness’ within the private rental market in regional South Australia and that there has been a limited supply response to changing levels of demand. This has contributed to housing and labour shortages in some regions and over supply in others. Each circumstance has generated considerable dilemmas for public policy. The reasons underlying the imperfect market response are considered and the implications for the future development of the regions are discussed.     

A Spatial Price Determination Model for Multi‐Market Heterogeneously Distributed Resources: An Application to Forestry Markets in Sweden

The spatial dimension is a key paradigm in price determination, as attested by recent studies in the literature that highlighted the differential in market behavior between spatial and non‐spatial pricing settings. In this paper, we develop a model of spatial pricing for multi‐market heterogeneously distributed resources, with an application to the Swedish forestry sector. The focus of the model is to estimate the impact of spatial interaction on the demand for resources in terms of resource allocation, competition, and pricing. In its core, the pricing mechanism relies on a supply–demand framework. Using disaggregated data at the gridcell level for forest feedstock supply and harvesting costs in Sweden, we construct regional supply curves for each gridcell assuming a maximum transportation distance to delimit the potential market. Demand nodes are exogenously determined and are adjusted using a distance‐decay model to assess demand pressure across locations. We apply the model empirically to assess the impact on forest feedstock prices of a 20 TWh increase in biofuel production.