1 the recent evolution of regional economic disparities: from boom to bust and beyond professor ron...

1

The Recent Evolution of Regional Economic Disparities:

From Boom to Bust and Beyond

Professor Ron Martin

Department of Geography University of Cambridge

Newcastle, December 2009

© Ron Martin

2

A Challenging Time for Thinking About Regional Economies

• Rapidly changing global economy

• The return of ‘boom and bust’

• Problem of reforming finance system

• Prospect of sustained period of substantial public spending cuts

• Prospect of change in UK government

• Future of RDAs?

• The challenge of climate change

• New developments and debates in regional economic theory

3


• The dramatic change in economic conditions - from boom to bust - over the past two years poses several questions: Claim is that the ‘longest boom’ on record has been

followed by ‘deepest recession’ of post-war period How did the regions fare in the ‘longest boom’? Did regional inequalities narrow? How have regions been hit by the current recession? Are they being affected differently than in previous

recessions?

4


• These questions have provoked debate over regional growth: Boom has encouraged claims about benefits of spatial

agglomeration of economic activity for regional growth: that there is a trade-off between regional equity and national economic growth

But are such claims valid, and do they ignore the diseconomies of such agglomeration?

How far is the pattern of long-run regional growth shaped by successive booms and recessions?

Do regions differ in their resilience to major recessions? And how far does a region’s resilience influence its long run

growth?

5

The Regional Anatomy of New Labour’s ‘Long Economic Boom’

• Decade 1997-2007 claimed by New Labour as longest period of ‘non-inflationary continuous expansion’ (‘NICE’) on record

Britain is today experiencing the longest period of sustained economic growth since records began in the year 1701 (Gordon Brown, Budget Statement, March 2005).

• In fact, boom began in 1993, pre-dating New Labour governments

6

• Growth of GDP under New Labour was higher than under Thatcher, but lower than the best of the post-war boom

Period Average Annual Real Growth Rate (Percent)

1949-1964 2.9

1964-1973 3.3

1973-1979 2.3

1979-1990 2.3

1990-1997 1.9

1997-2007 2.9

Source of data: National Statistics Online, http://www.statistics.gov.uk/statbase/


7


• Brown repeatedly claimed that New Labour’s economic policies - controlling inflation, maintaining macro-economic stability through ‘monetary and fiscal prudence’, and promoting productivity - had given economy strong growth fundamentals

• In fact, growth of UK economy over the ‘NICE’ period was product of several factors: General global expansion Low import prices (especially Indian and Chinese goods) Debt-financed consumer boom, financed by excess of

cheap and easy credit And unprecedented asset price inflation in the housing

market

8

• Three arguments were advanced to suggest economic growth would be more spatially even than in 1980s:

• 1. Deindustrialisation of the ‘North’ in 1980s had largely removed the source of that area’s problem (the ‘North-South divide’ was now ‘dead’):

“The traditional ‘north-south divide’ unemployment problem has all but disappeared in the 1990s. This may prove to be

a permanent development, since the manufacturing and production sectors, the main source of regional imbalance

in the past, no longer dominate shifts in the employment structure to the same extent. Future shocks will have a

more balanced regional incidence than has been the case in the past” (Jackman and Savouri, 1999).


9


• 2. Emergence of ‘New Economy’ would provide all regions and cities with major growth opportunities: Low barriers to entry in many such activities (ICT

available everywhere) The regeneration and reconfiguration of cities around

‘soft economy’ of knowledge-based, creative, cultural and service sectors

Most cities are major markets for such activities, which can also compete in global markets from almost any location

10

• 3. New Labour’s new regional policy model was aimed at raising regional and local growth By promoting and enhancing ‘indigenous potential’ of

regions, cities and localities Focusing especially on knowledge-based and creative

industries Devolving policy to sub-national levels to ensure

delivery responsive to local opportunities and challenges

All intended to improve productivity and competitiveness of regions and localities - and hence the national economy - in the global market place


11


• The aim of New Labour’s regional policy model has been to close the growth gaps between the regions:

“to make sustainable improvements in the economic performance of all English regions by 2008 and over the long term reduce the persistent gap in growth rates between the regions, demonstrating progress by 2006…” (DTI PSA Target 7; HM Treasury, Target 2.3; DCLG Target 2).

• How did the regions fare during the long boom?

• How much progress was made in ‘reducing the persistent gap in growth rates between the regions’?

12

Regional Cumulative Differential Growth in GDP per Head, 1980-2007

Source of data: Cambridge Econometrics and Eurostat (2007 estimated)


-20

-15

-10

-5

0

5

10

15

201

98

0

19

82

19

84

19

86

19

88

19

90

19

92

19

94

19

96

19

98

20

00

20

02

20

04

20

06

Cu

mu

lati

ve D

iffere

nti

al G

row

th (

from

UK

Avera

ge)

in G

DP p

er

Head

(2

00

0 P

rice

s)

London

South East

Northern IrelandSouth West

ScotlandEast Midlands EasternWest MidlandsYorks-HumbersideWales

North West

North EastNew Labour

Long Boom

Conservative

Thatcher Boom Rec'nRec'n

13

The Uneven Boom: Pulling Ahead and Falling Behind, 1997-2007


2

2.2

2.4

2.6

2.8

3

3.2

3.4

60 80 100 120 140 160

Relative GDP per Capita, 1997 (UK=100)

Avera

ge A

nn

ual G

row

th in

Real G

DP

per

Cap

ita (

Perc

en

t),

19

97

-20

07

LondonSouth East

N. Ireland

South West

Eastern

East Midlands

Scotland

West MidlandsWales

North West

North East

Yorks-Humber

PULLING AHEAD

FALLING BEHIND LOSING GROUND

CATCHING UP

UK Average2.77

14

The Growth in Regional Inequalities (Disparities in GDP per head), 1980-2006

0.4

0.45

0.5

0.55

0.6

0.65

0.7

0.75

0.81

98

0

19

82

19

84

19

86

19

88

19

90

19

92

19

94

19

96

19

98

20

00

20

02

20

04

20

06

Coeffi

cien

t of

Vari

ati

on

(Po

pu

lati

on

Weig

hte

d)

NU

TS

1 a

nd

NU

TS

2 R

eg

ion

s

3.45

3.46

3.47

3.48

3.49

3.5

3.51

3.52

3.53

3.54

3.55

Coeffi

cien

t of

Vari

ati

on

(Po

pu

lati

on

Weig

hte

d)

NU

TS

3 R

eg

ion

s

NUTS1 Regions

NUTS2 Regions

NUTS3 Regions

Source of data: Cambridge Econometrics and Eurostat

Long BoomThatcher Boom


15

• Between 1980 and 1997, London had gained a 22 percent cumulative growth advantage over the North East and North West; and the South East an 18 percent advantage

• By 2007 this had increased to 30 percent in the case of London, and 25 percent in the case of the South East

• In general, the long boom produced divergent differential growth trajectories across the regions

• Some suggestion that regional growth advantage of London and South East may have stabilised after 2003 (as it did at end of Thatcher boom)

• But no evidence, overall, that regional growth gaps were reduced during the long boom


16

• Nature of the boom helps explain its regional complexion

• Led particularly by rapid expansion in financial and business services

• Based mainly in London and South East, which already had comparative advantage in these sectors

• Whereas northern regions more dependent on public sector for their growth

• This difference also reflected in regional differences in productivity growth and wage growth


17

Finance and Banking in the Boom:Growth in GVA, 1993-2007

-50

0

50

100

150

200

Min

ing

&q

uar

ryin

g

Pub

lic a

dm

in.

&d

efen

ce

Man

ufa

ctu

rin

g

Edu

cati

on &

hea

lth

Con

ctru

ctio

n

Dis

trib

uti

on

Oth

er s

ervi

ces

Hot

els

& c

ateri

ng

Ret

ailin

g

Tra

nsp

ort

&co

mm

sun

icat

ion

s

Oth

er b

usi

nes

sse

rvic

es

Ban

kin

g &

finan

ce

Perc

en

tag

e G

row

th in

G

ross

Valu

e A

dd

ed

(2

00

3 P

rice

s)

18

London’s Dominance of the Financial Services Boom, 1993-2007

Source of data: Cambridge Econometrics

-5

0

5

10

15

20

25

30

35

40

Lon

don

Sou

th E

ast

Nort

h W

est

East

ern

Sco

tlan

d

Sou

th W

est

York

shir

e-H

um

bers

ide

West

Mid

lan

ds

East

Mid

lan

ds

Wale

s

Nort

hern

Ire

lan

d

Nort

h E

ast

Perc

en

t S

hare

of

Nati

on

al G

row

th in

G

ross

Valu

e A

dd

ed

in

Fin

an

cial an

d B

usi

ness

Serv

ices

(20

03

pri

ces)

19

Different Modes of Regional Growth?Economic expansion in high growth regions has been

much more private sector based, and vice versa in slower growing regions

Source of data: National Statistics Online,http://www.statistics.gov.uk/statbase/

0

20

40

60

80

100

120

Lond

on

Sout

h Ea

st

Sout

h W

est

N Irelan

d

Easter

n

East M

idland

s

Wes

t Midland

s

York

s-Hum

ber

North

Wes

t

Wales

Scot

land

North

Eas

t

Gro

wth

of

Regio

nal

GVA

, 1997-2

006

Curr

ent

Pric

es,

Perc

ent

0

10

20

30

40

50

60

70

Public

Sect

or S

har

e o

f G

row

th (

Perc

ent)Total Growth in Regional GVA

(Current prices)

Public Sector Share of TotalGrowth

20

Regional Divergence in Productivity, 1997-2006

(Relative to UK) London and South East pulled ahead; Eastern and South

West regions achieved some catch up; but all other regions fell behind

Source ofdata: ONS and CambridgeEconometrics

-20

-15

-10

-5

0

5

10

15

20

25

30

35

Noth

East

North

Wes

t

York

s-Hum

ber

East M

idland

s

Wes

t Mid

land

s

Easter

n

Lond

on

Sout

h Ea

st

Sout

h W

est

Wales

Scot

land

N Irelan

d

GVA

per

Work

er

Rela

tive

to U

K

(Perc

ent

Diff

ere

nti

al)

1997

2000

2003

2006

21

Gross Average Weekly Earnings by Region,

1998 and 2007


-20

-10

0

10

20

30

40

50

North

Eas

t

North

Wes

t

York

s-Hum

bers

ide

East

Mid

land

s

Wes

t Mid

land

s

East

ern

Lond

on

Sout

h Ea

st

Sout

h W

est

Wales

Scot

land

N Irel

and

Gro

ss A

vera

ge W

eekly

Earn

ing

s R

ela

tive t

o U

K

(Perc

en

t D

iffere

nti

al) 1998

2007

22


• Together with the infiltration of NEG ideas, the long boom exerted influence on Government thinking on regional disparities

• NEG focuses on increasing returns affects of regional/spatial agglomeration of economic activity

• Theory argues that national growth enhanced by regional concentration of economic activity

• That there may be an ‘equilibrium level of regional disparity consistent with maximising national growth’

• And that a ‘trade-off’ may thus exist between national growth and reducing regional disparities

23


“Theory and empirical evidence suggests that allowing regional concentration of economic activity will increase national growth. As long as

economies of scale, knowledge spillovers and a local pool of skilled labour result in productivity gains that outweigh congestion costs, the economy will benefit from agglomeration, in efficiency and growth terms at

least… policies that aim to spread growth amongst regions are running counter to the natural growth process and are difficult to justify on efficiency grounds, unless significant congestion costs exist” (HM Treasury, 2006)

• We find the Treasury claiming that:

24


“There is no realistic prospect that our [northern] regeneration towns can converge with London and the South East. There is, however, a very real prospect of encouraging significant numbers of people to move from those towns to London and the south East… The implications of economic geography for the south and particularly South East are clear. Britain will be unambiguously richer if we allow more people to live in London and its hinterland. In addition, Oxford and Cambridge should the prime cities to see significant… expansion” (Cities Unlimited, Policy Exchange, 2008).

• And a more extreme, but not unrelated, view expressed by the Tory think tank, Policy Exchange:

25


• Despite its formal complexity, NEG theory is highly simplified view of regional development

• Which limits its plausibility and applicability as a basis for regional policy

• ‘Trade-off’ is therefore open to debate conceptually - and empirically

• Further, one major effect of regionally imbalanced growth in UK has been periodic emergence of inflationary pressure in London/South East

• Precisely what happened over 1997-2007 which saw unprecedented house price bubble originate in these core regions

26

How London and South East Led the House Price Bubble

(Average Dwelling Price)

Source of data: www.hbosplc.com/economy/historicaldata

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

19

83

19

84

19

85

19

86

19

87

19

88

19

89

19

90

19

91

19

92

19

93

19

94

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

Avera

ge H

ouse

Pri

ce (

£),

Seaso

nally

Adju

sted

East Anglia

East Midlands

Greater London

South West

West Midlands

North West

North

Yorks-Humberside

South East

Northern Ireland

Scotland

Wales Bubble begins in London and South East

Bubble begins in North

27

How London and South East Led the Mortgage Boom

Source of data: Council of Mortgage Lenders

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

Valu

e o

f M

ortg

age A

dva

nce

s (£

mill

ion)

Northern

South East

Greater London

North West

Yorkshire and Humberside

East Midlands

East Anglia

South West

West Midlands

Wales

Scotland

Northern Ireland

28

From Boom to Bust: The Regional Anatomy of the Recession

• In output terms, current recession has been faster than either 1990-92 or 1979-83

• And deeper than 1990-92

• But may prove shorter-lived than both

• In employment terms, decline has been less than expected given drop in output

• Employment decline less pronounced than either of past two recessions

• Suggests that firms have hoarded labour more (and workers more prepared to take wage and hours cuts)

29


How does the current recession compare? - GDP (2005 prices)


88

90

92

94

96

98

100

102

1 2 3 4 5 6 7 8 9

10

11

12

13

14

15

16

17

18

Quarters from Beginning of Recession

Peak

Quar

ter

= 1

00

1979(2)-1981(4)1990(2)-1992(2)2008(1)-

30


How does the current recession compare? Employment


88

90

92

94

96

98

100

102

1 3 5 7 9

11

13

15

17

19

21

23

25

27

29

31

33

35

37

Quarters from Beginning of Recession

Peak Q

uart

er

=100

1979(4) -1983(1)1990(2)-1992(4)2008(1)-2009(2)

31


• Initially, talk was about the epicentre of the recession being in London as this was key node in financial crisis

• Predicted that London would lose at 70,000-100,000 financial jobs

• With negative multiplier effects on other jobs in London economy and surrounding areas in South East

• Also argued that the structural shifts of 1980s and 1990s removed much of the traditional vulnerability of northern regions to economic shocks

• And others have argued that the growing dependence of northern regions on public sector activity during the 1990s and 2000s should shield them from the worst of the recession

• Estimated that 66 percent of output in North East, and 70 percent in Wales, accounted for by State sector, compared to 36 percent in South East

32

A Manufacturing rather than Financial Services Recession

80

85

90

95

100

105

110

115

120

125

130

20

03

-3

20

04

-1

20

04

-3

20

05

-1

20

05

-3

20

06

-1

20

06

-3

20

07

-1

20

07

-3

20

08

-1

20

08

-3

20

09

-1

Gro

ss V

alue A

dded (

2003-3

=100)

Manufacturing

Financial and Business Services

All Services

Fall in GVA 2008(1) to 2009(1) = 2.0%

Fall in GVA 2008(1) to 2009(1) = 3.0%

Fall in GVA 2008(1) to 2009(1) = 13.7%


33

• What can we say about the regional impact of the recession thus far? Output decline has been more severe than

employment decline Full employment impact across regions probably not

yet felt But impact has been regionally uneven London has fared much better than predicted Midlands and North East hit harder than elsewhere These patterns have left regional unemployment

disparities largely unaltered, with rate in North East double that in South East


34

Regional Impact of the Recession

Sources of data: Experian (Output estimates) and ONS (Employment)

Output

2008(1)- 2009(2)

Percent Change

Employment

2008(1)- 2009(2)

Percent Change

London -4.8 -1.9

South East -4.9 -2.9

Eastern -4.8 1.3

South West -5.0 -2.5

West Midlands -8.2 -3.4

East Midlands -7.6 -4.4

Yorks-Humber -7.3 -3.5

North West -6.7 -2.3

North East -8.6 -3.6

Wales -6.9 -1.8

Scotland -4.7 -2.4

Ireland -5.3 NA

35

The Regional Impact of the Recession:Unemployment Rate, 2007-2009

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

Jan-

07

Mar

-07

May

-07

Jul-0

7

Sep-

07

Nov-0

7

Jan-

08

Mar

-08

May

-08

Jul-0

8

Sep-

08

Nov-0

8

Jan-

09

Mar

-09

May

-09

Jul-0

9

Sep-

09

Unem

plo

yment

Rat

e (

Cla

iman

t C

ount)

East

South East

London

South West

East Midlands

West Midlands

Yorks-Humberside

North West

North East

Wales

Scotland


36

• Some Questions How does the regional impact of this recession

compare to previous recessions? How quickly will the regions recover? Will some

regions (eg London, South East, Eastern) recover sooner than others (eg Midlands, North West, North East)?

Such questions raise the interesting issue of the economic ‘resilience’ of the regions


37

Comparing the Current Recession with Previous Downturns - Output (GVA, 2005 prices)

Source of data: Cambridge Econometrics and Experian *=Estimate

Percent Change

1979-82 1990-92 2008(1)- 2009(2)*

London -5.3 -2.1 -4.8

South East -1.4 -1.0 -4.9

Eastern -2.2 -1.2 -4.8

South West -1.0 -1.6 -5.0

West Midlands -9.6 -1.2 -8.2

East Midlands -2.6 -1.1 -7.6

Yorks-Humber -1.3 -1.0 -7.3

North West -5.6 -0.9 -6.7

North East -3.6 -1.1 -8.6

Wales -5.5 -1.0 -6.9

Scotland -1.1 -0.1 -4.7

N Ireland -3.2 -0.3 -5.3

38

Comparing the Current Recession with Previous Downturns - Employment


Percent Change

1979(4)-1983(1)

1990(2)-1992(4)

2008(1)- 2009(2)

London -6.6 -11.2 -1.9

South East -2.2 -8.6 -2.9

Eastern -1.3 -7.5 1.3

South West -1.4 -4.6 -2.5

West Midlands -8.1 -9.6 -3.4

East Midlands -4.8 -5.2 -4.4

Yorks-Humber -8.0 -6.2 -3.5

North West -11.1 -5.7 -2.3

North East -11.8 -5.2 -3.6

Wales -10.4 -2.6 -1.8

Scotland -8.3 -1.3 -2.4

N Ireland -4.0 -1.0 NA

39

• Regions have not reacted in consistent way (in terms of employment) to last three recessions

• Pattern of response has varied:• Early-1980s recession most pronounced in industrial regions of

North

• Early-1990s recession most pronounced in London, South East and West Midlands

• Current recession more mixed pattern, though London least affected, and North East and West Midlands more affected

• Does the severity of a region’s response to recession influence its recovery?

• Is a region’s reaction to recession influenced by its preceding growth phase?


40

• The notion of ‘resilience’ is relevant to such questions

• Resilience idea is attracting growing interest in regional studies (and indeed in other disciplines, where there is concern over how complex systems respond to shocks)

• Resilience - Latin resilire, “to leap back or rebound” - the ability of a system to ‘recover form and position elastically’ following a shock or disturbance of some kind:

“the ability of a region to recover successfully from shocks to its economy that either throw it off its

growth path or have the potential to throw it off its growth path” (Hill et al, 2008)

The Issue of Regional Resilience

41

• But idea of resilience is not unambiguous

• Should notion refer not just to ability of regional economy to recover from a shock, but also the degree of resistance to the shock in the first place?

• Further, does the concept refer to the ability of a regional economy to retain its structure and function despite the shock to it; or to the ability of a region economy to change its structure and function rapidly and successfully in response to a shock - that is regional economic adaptability?

• Also does the resilience of a regional economy change over time?


42

• Two definitions in evolutionary ecology (where concept of resilience originated)• 1. ‘Engineering resilience’: stability of a system near an

equilibrium or steady state, where resistance to disturbance and the speed of return to the pre-existing equilibrium are key

• 2. ‘Ecological resilience’: the magnitude of the shock of disturbance that can be absorbed before the system changes its structure and function and becomes shaped by a different set of processes - ie movement of system to new equilibrium (steady) state

• Both have counterparts in mainstream economics - (1) self-correcting return to unique equilibrium, and (2) hysteretic shift to new equilibrium (linked to idea of multiple equilibria)


43

Stylised Responses of a Regional Economy to a Major Shock

Source: Martin and Simmie (2009)

44

• Regions have had different, divergent long-run growth paths over past 40 years

• Consider long-run paths of employment growth in South East and North East: Between 1971 and 2007 South East increased its employment

by 50 percent Over same period employment in North East showed no overall

increase

• And the two regions have had quite different patterns of response to and recovery from successive recessions

• These patterns help explain the long-run divergence in employment between the two regions


45

Long Run Divergent Regional Growth, 1971(1)-2009(2)(GVA in 2005 prices, 1971(1)=100)

Source of data: Experian

50

100

150

200

250

300

350

1971

Q1

1973

Q1

1975

Q1

1977

Q1

1979

Q1

1981

Q1

1983

Q1

1985

Q1

1987

Q1

1989

Q1

1991

Q1

1993

Q1

1995

Q1

1997

Q1

1999

Q1

2001

Q1

2003

Q1

2005

Q1

2007

Q1

2009

Q1

GVA

1971(1

)=100

South EastNorth EastNorth WestEasternEast MidlandsWest MidlandsYorks-Humber

46

Long Run Divergent Employment Growth, 1971-2007(1971=100)


60

70

80

90

100

110

120

130

140

150

160

19

71

19

73

19

75

19

77

19

79

19

81

19

83

19

85

19

87

19

89

19

91

19

93

19

95

19

97

19

99

20

01

20

03

20

05

20

07

Em

plo

ym

en

t In

dex 1

97

1=

10

0

South East

North East

East Midlands

West Midlands

Eastern

Yorks-Humber

North West

47

Contrasting (and Evolving) Regional Economic Resilience? South East and North East


60

70

80

90

100

110

120

130

140

150

160

19

71

19

73

19

75

19

77

19

79

19

81

19

83

19

85

19

87

19

89

19

91

19

93

19

95

19

97

19

99

20

01

20

03

20

05

20

07

Em

plo

ym

ent

1971=

100

South East

North East

RecessionRecession

Shock Shock

Recovery Recovery

48

Manufacturing Employment Across Recessions and Recoveries: South East and North East

0

20

40

60

80

100

120

19

71

19

74

19

77

19

80

19

83

19

86

19

89

19

92

19

95

19

98

20

01

20

04

20

07

Em

plo

ym

ent

1971=

100 South East

North East

Recession Recession

49

Service Employment Across Recessions and Recoveries: South East and North East

50

75

100

125

150

175

2001971

1973

1975

1977

1979

1981

1983

1985

1987

1989

1991

1993

1995

1997

1999

2001

2003

2005

2007

Em

plo

yment

1971=

100

South EastNorth East

Recession Recession

50

• In both regions, jobs lost in manufacturing in recessions have not been regained in subsequent booms

• Key difference is that South East has more than compensated by strong growth in service activities in the booms

• Put another way, South East economy has adapted much more and faster

• Adaptation in response to shocks is central to resilience

• Suggest we need to give much more attention to how regional economies adapt over time

• Increasing interest in adaptive growth within evolutionary economics - though as yet no definitive model or theory


51

• What makes for a resilient (adaptive) regional economy? Hysteretic and path dependence effects Economic diversity Skill and educational levels of workforce Innovative capacity Business and industry creation capacity Quality of infrastructures Institutional arrangements Influence over national economic policy priorities and

spending


52

• Despite ‘long boom’, no convergence of regional growth rates or incomes

• Little progress towards New Labour’s regional policy aim to “reduce the persistent gap in growth rates between the regions…” (DTI PSA Target 7; HM Treasury, Target 2.3; DCLG Target 2)

• Even if growth rates could be equalised across regions, (ie growth rates of northern regions raised to those of South East and London), regional disparities in GDP per head would continue to widen

• Current recession looks as though it will further frustrate that aim

Conclusions

53

• Major differences in economic resilience across regions

• South East and London seem more able to recover from recessions - more adaptable economies

• Likelihood is that these regions will pull away faster than other regions from the current recession

• The task confronting regional policy remains as challenging as ever

• Need to question the increasing agglomeration of economic activity in London and South East

• And grip of London and South East over national policy

Conclusions

55

National Growth and Regional Disparity in NEG Theory

National Growth

SS

g*

g1

A1 A* Agglomeration r1

RR

r*

Regional Income Inequality

56

ReorganisationPhase of restructuring

Emergence of new sectorsAccumulation – low and variedConnectedness – lowResilience (adaptability) - increases

ConservationPhase of stability and

increasing rigidity

Inertia of established sectorsAccumulation – slows Connectedness – highResilience (adaptability) - declines

ExploitationPhase of growth and seizing

of opportunities

Rapid growth of new sectors Accumulation – fast and focusedConnectedness – low and risingResilience (adaptability) - high

ReleasePhase of contraction

Sectors declineAccumulation – disinvestmentConnectedness – declinesResilience (adaptability) - low

An ‘Adaptive Cycle’ Model of Regional Economic Resilience

Shock

57

Gross Average Household Income and Poverty Rate by Postcode District, 2006

Equivalised Average Household Income (£000s) before tax and including benefits

Percent Householdswith incomes less than 60% UK median

Source of data: CACI

58

“The traditional ‘north-south divide’ unemployment problem has all but disappeared in the 1990s. This may prove to be a permanent development, since the manufacturing and production sectors, the main source of regional imbalance in the past, no longer dominate shifts in the employment structure to the same extent. Future shocks will have a more balanced regional incidence than has been the case in the past” (Jackman and Savouri, 1999, p. 27).

“Newcastle and areas like that have a large public sector which will at least shield traditionally very depressed areas from the battering the South East is going to get” (Vince Cable, Liberal Democrat Treasury Spokesman, 2009)


1 the recent evolution of regional economic disparities: from boom to bust and beyond professor ron...

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