Does Social Cooperation Affect Macroeconomic Performance? Research Project
The Long-Run Consequences of Adverse Economic Shocks: UK Regional and Urban Inequalities
Principal Investigator: Professor Philip McCann
Philip McCann holds the Chair in Urban and Regional Economics in Sheffield University Management School, and held the Tagliaferri Research Fellow in the Department of Land Economy at the University of Cambridge 2015-18. Philip has published in almost every area of economic geography, regional and urban economics. He has also previously been a Special Adviser to two different EU Commissioners for Regional and Urban Policy, and has also advised four OECD directorates, the European Investment Bank, and government bodies in various countries. He was an independent adviser on the Northern Powerhouse Independent Economic Review and before that on the IPPR Northern Futures Commission and the North East Independent Economic Review.
Co-Investigators: Andre Carrascal-Incera (University of Birmingham), Ben Gardiner (Cambridge Econometrics), Ron Martin (University of Cambridge), Philip McCann (University of Sheffield), Raquel Ortega-Argilés (University of Birmingham), Patricia Rice (University of Oxford), Tony Venables (University of Oxford)
Regional productivity and prosperity underpin national productivity and prosperity. Many parts of the UK appear to be consistently weak on both dimensions and fail to capture many of the benefits of technological change and globalisation that other parts of the country capture. The result is something of an apparent partitioning or decoupling of different parts of the country. The extent to which this partitioning takes place also appears to be greater in the UK than in many of our competitor countries, but it is still unclear which aspects of these processes are specific to the UK or reflect international trends. Crucially, this partitioning also acts as a major drag on overall UK productivity, because productivity gains in some regions appear not to transmit to other regions, thereby limiting overall national performance.
The project aims to uncover different aspects of the UK’s interregional divides using a variety of different methodologies. We employ a range of theoretical and empirical approaches in order to capture different dimensions of the productivity and performance gaps evident across the UK and our project contains two main strands of research.
The first strand of our research examines the long-run adjustment to adverse shocks, asking analytically, why is it the case that certain places are left behind? Many places in the UK have experienced severe negative employment shocks in the last 50 years, arising largely from changes in trade, technology, and mining activity. This study will investigate the mechanisms through which places adjust to such shocks and reasons why, in many cases, adjustment appears to have failed and negative impacts have been persistent. The analytical framework for this strand of work comes from new economic geography (NEG), and the insights it provides concern the possibilities of places be stuck in under-development traps (e.g. Fujita et al 1999) which give rise to persistent divergence. The key mechanism in these models is typically linkages or spillover effects between firms that cause economic activity to cluster, and create a ‘first-mover’ problem in establishing new activities in a place. Such models are often highly stylised, and the work undertaken here will extend these models in order to better describe the economic and social structure of UK regional inequalities.
The empirical dimensions of the project have two main stands.
The first strand of our empirical research will use spatially disaggregated data going back to the 1970s, from the UK census and other ONS sources, in order to measure the shocks experienced by UK regions in the 1970s and 1980s, and to trace the differential performance of affected places. We will seek to establish characteristics of the economic, geographical, social and institutional environment in these places that has led to variations in their ability to adjust. We will pay particular attention to regional inequalities in the educational system arising from the difficulty of recruiting and retaining staff in some areas of the country.
The second strand of our empirical research will compare the evolution of UK cities and regions over more than five decades with that of other industrialised economies using various different sources. Our aim is to identify the extent to which the UK evolutions are typical or untypical of other industrialised societies, in order to help identify from where and how the UK may learn lessons from other countries. We will be using OECD and Eurostat data on regions and cities covering a variety of economic and social indicators, along with other recently-published long-run European regional development data. In order to allow comparability this work will also involve recalibrating UK Local Authority District information back to the early 1970s in a manner which is consistent with today’s OECD datasets.