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Sector-Specific Factor Subsidies and Employment in a Regional Price-Endogenous Export-Base Model

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  • E McVittie

    (Plymouth Business School, University of Plymouth, Drake Circus, Plymouth, Devon PL4 8AA, England)

  • J K Swales

    (Fraser of Allander Institute, Department of Economics, University of Strathclyde, Curran Building, 100 Cathedral Street, Glasgow G4 0LN, Scotland)

Abstract

In this paper we use a variant of the 1–2–3 trade-focused general-equilibrium model to calculate the employment effects of factor subsidies applied to the regional export base. Analytical expressions are derived for the change in basic employment and the export-base employment multiplier. These expressions are compared with the conventional hybrid approach where the impact on the recipient sectors is analysed by using a partial-equilibrium method and the effect on other sectors is calculated through some form of demand-driven multiplier. The conventional hybrid procedure fails to capture fully displacement in the regional labour market. If we use the general-equilibrium results as a benchmark, numerical simulation suggests that the hybrid approach substantially overestimates the employment effects of the subsidies. Similar problems are likely to apply to the evaluation of all supply-side policies targeted on the regional export base.

Suggested Citation

  • E McVittie & J K Swales, 1999. "Sector-Specific Factor Subsidies and Employment in a Regional Price-Endogenous Export-Base Model," Environment and Planning A, , vol. 31(12), pages 2145-2168, December.
    • Handle: RePEc:sae:envira:v:31:y:1999:i:12:p:2145-2168
    DOI: 10.1068/a312145
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    References listed on IDEAS

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    Cited by:

    1. Nooraddin Sharify, 2007. "A New Approach to Compare the Impact of Direct and Indirect Payments on Regional Macroeconomic Indices," Iranian Economic Review (IER), Faculty of Economics,University of Tehran.Tehran,Iran, vol. 12(1), pages 193-211, winter.
    2. Peter G. McGregor & Eric P. McVittie & J. Kim Swales & Ya Ping Yin, 2000. "The Neoclassical Economic Base Multiplier," Journal of Regional Science, Wiley Blackwell, vol. 40(1), pages 1-31, February.
    3. J. Kim Swales, 2005. "Resource‐Constrained Export‐Base Regional Multipliers: A Northian Approach," Journal of Regional Science, Wiley Blackwell, vol. 45(1), pages 223-250, February.
    4. Maureen Kilkenny & Mark D. Partridge, 2009. "Export Sectors and Rural Development," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 91(4), pages 910-929.

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