The ripple effects of large-scale transport infrastructure investment

We analyze the general equilibrium effects of an asymmetric decrease in transport costs, combining a large-scale spatial dynamic general equilibrium model for 267 European NUTS-2 regions with a detailed transport model at the level of individual road segments. As a case study, we consider the impact of the road infrastructure investments in Central and Eastern Europe of the European Cohesion Policy. Our analysis suggests that the decrease in transportation costs benefits the targeted regions via substantial increases in gross domestic product (GDP) and welfare compared to the baseline, and a small increase in population. The geographic information embedded in the transport model leads to relatively large predicted benefits in peripheral countries such as Greece and Finland, which hardly receive funds, but whose trade links cross Central and Eastern Europe, generating profit from the investments there. The richer, Western European nontargeted regions also enjoy a higher GDP after the investment in the East, but these effects are smaller. Thus, the policy reduces interregional disparities. There are rippled patterns in the predicted policy spillovers. In nontargeted countries, regions trading more intensely with regions where the investment is taking place on average benefit more compared to other regions within the same country, but also compared to neighboring regions across an international border. We uncover that regions importing goods from Central and Eastern Europe enjoy the largest spillovers. These regions become more competitive and expand exports, to the detriment of other regions in the same country.     

Innovation policy at the local and national levels: The case of Emilia‐Romagna

The article describes the main Italian policy instruments for innovation and how these have been used by companies located in the Region of Emilia‐Romagna. It also describes the role played by structures set up at the local level in the enactment of innovation policies in Emilia‐Romagna. In the first part, the article analyzes the current organization and legislation of Italian innovation policy; and in the second part, it examines the reasons which have led to the recognition of the importance of the local level of innovation policy, looking more closely at innovation initiatives in the Region of Emilia‐Romagna. In the third part, it draws the conclusions. In particular the article underlines that Italian local governments, even without legislative and financial autonomy, can play an important role in modernizing the industrial system through initiatives which do not require vast sums of money but which identify and meet specific local needs.     

BALANCED BUDGET MULTIPLIERS FOR SMALL OPEN REGIONS WITHIN A FEDERAL SYSTEM: EVIDENCE FROM THE SCOTTISH VARIABLE RATE OF INCOME TAX

This paper explores the impact on aggregate economic activity in a small, open region of an income tax funded expansion in public consumption that has no direct supply‐side effects. The conventional balanced budget multiplier produces an unambiguously positive macroeconomic stimulus, but the incorporation of negative competitiveness elements, through the operation of the local labor market, renders this positive outcome less certain. Simulation using a single‐region Computable General Equilibrium (CGE) model for Scotland demonstrates that the creation of local amenity effects, and the extent to which these are incorporated into local wage bargaining, is central to the analysis.