webinar1: ron martin - shocking aspects of regional development: the economic geographies of...

1

Shocking Aspects of Regional Development: The Economic

Geographies of Resilience

Professor Ron Martin Department of Geography University of Cambridge

Seminar Presented to Department of Geography Trinity College, Dublin

30 June 2015

2

•  Why the rise of ‘resilience thinking’ •  Regional economic development as a shock-prone

process •  What is meant by resilience – defining and

conceptualising the notion •  Regional resilience to recessions in the UK •  Regional reactions to the European crisis •  Some unresolved issues

Outline

Resilience – A Bourgeoning Area of Research and Policy Discourse

3

4

•  Increasing interest in notion of resilience across physical, natural, social and organisational sciences •  Succession of major natural and environmental

disasters has focused attention on how affected local communities recover from shocks and emergencies •  More general belief that we live in more risk-prone

world (economic change and instability, global economic crises, climate change, terrorism, etc) •  So to some extent, geographers are being swept up

in this development

Why the Rise of Resilience Thinking?

5

•  Change is one of capitalism’s constants •  What might appear as slow change at aggregate

level conceals a multitude of local ‘disruptions’ •  Ongoing ‘creative destruction’not a spatially

neutral process •  A firm closure can be a significant shock to a local

economy •  An industry-wide collapse can give rise to multi-

location shocks (eg closure of 150 coalmines across UK, 1983-2000) •  The regional and local impact of macro-shocks

(recessions, crises, major policy shifts, etc) – the recent crisis

Regional Development as a Shock-Prone Process

6

•  Resilience is concerned with how systems and entities react to and recover from such shocks •  Do shocks have merely transient or more

permanent effects (‘remanence’, ‘hysteresis’)? •  How is a region’s resilience influenced by its

developmental pathway? •  How do shocks influence a region’s developmental

pathway? •  What about ‘slow-burn’ processes? Are these ‘shocks’? •  Or do they become shocks when they reach a ‘tipping point’ or threshold?

Regional Development as a Shock-Prone Process

7

1.  An inappropriate metaphor 2.  No distinct ‘theory’ of resilience 3.  Privileges idea of ‘return to normal’, ignores ‘perverse’

resilience 4.  Too associated with idea of equilibrium 5.  Emphasises holistic (systems) ontology, and ignores micro-

level agency 6.  Notion is depoliticised 7.  Suggests local resilience determined endogenously 8.  Adds little to existing notions of sustainability or

competitiveness 9.  Notion easily captured by neoliberal ideology

Criticisms of Resilience Thinking

8

•  Resilience – from Latin Resilire - “to leap back or rebound”, “to recover form and position elastically”

•  Question is how we interpret, apply or adapt, such a definition in regional socio-economic contexts

•  Resilience of what to what? •  Ontological as well as epistemological issues –

different meaning as between physical and social worlds?

•  Both an analytical concept and a normative policy imperative (as a ‘desirable’ characteristic)

•  Entered policy discourse (‘resilience building’) without sufficient collective agreement as to its meaning and determinants?

What is Regional Economic Resilience?

9

•  Two typical definitions of ‘resilience’: • 1. Self-Restorative ‘Bounce

Back’ (‘Engineering Resilience’) • Concentrates on stability of system near an

‘equilibrium’ or steady state: vulnerability and resistance to disturbances (shocks) and speed of recovery to system’s ‘equilibrium’ or steady state • Bears some affinity to notion of ‘homeostasis’ -

self-correcting compensating adjustments to restore ex ante state or trajectory following a disturbance from that state or trajectory • Or some versions of ‘robustness’ in Evolutionary

Biology (resistance to environmental change)

Towards a Definition?

Stylised Possible Reactions of a Regional Economy to a Shock

10

!" #" $" %" &" '" (" )" *"!+"!!"!#"!$"!%"!&"!'"!("!)"!*"#+"#!"##"#$"#%"#&"#'"#("#)"#*"$+"$!"$#"$$"$%"$&"$'"$("$)"$*"%+"%!"

,-./01-23

4"05"674.7

4""

89-2"

:0;252<"=50;4>"?@4>""@3<"A/0;25"=50;4>""

:0;252<"=50;4>"?@4>"@3<""B2C7-.D03"0E"?52FA>0GH""=50;4>"B@42"

I073G2"I@GH"40"?52FA>0GH""=50;4>"?@4>"@3<"=50;4>"B@42"

I073G2"J05;@5<"40"B@9C2<""=50;4>"?@4>"@3<"B2C7-.D03""0E"?52FA>0GH"=50;4>"B@42"

I073G2"J05;@5<"40"B@9C2<"=50;4>""?@4>"@3<"=50;4>"B@42"

!"

#"

$"

%"

&"

'"

("

)"A>0GH"

*"

+"

,-" ,."

11

• 2. Resilience as ‘Ability to Absorb Shocks’ (‘Ecological Resilience’)

• “Magnitude of shock that can be absorbed before system changes its structure… a measure of robustness and buffering capacity” (Berkes and Folke, 1998) • Focuses on behaviour of system when pushed ‘far

from equilibrium’ by a shock • Resilience defined by stability of structure and

functionality in the face of shocks • But what if system moved to new state or path

that is more favourable than original? This surely is equally (or more) an indication of resilience?


12

•  But third form can be defined: •  3. ‘Adaptive or Developmental Resilience’ •  Capacity for positive adaptation in anticipation of or

in response to shocks in order to maintain/restore functionality and stability • Similar to notion of ‘developmental resilience’ in

Psychopathology, ‘plasticity’ in Evolutionary Biology; ‘self-organised adaptation’ and ‘adaptive robustness’ in Complexity Theory • Two versions • System adapts its structure and function in response to

or in anticipation of changes in environment • System changes its environment


Key Issues in Regional Economic Resilience

13

Domain

Key Issue

Vulnerability to shocks

Why do regions differ in their vulnerability (propensity) to shocks?

Disturbance or shock

What is the nature of the shock? What aspect of a region’s economy is being disturbed? Reference state

or dynamic What is the ‘reference’ state or dynamic of the variable(s) of interest in the absence of a shock? Resistance to

shock

How far has the ‘reference’ state or dynamic been disturbed by the shock? Adaptability

What are the mechanisms by which the region’s firms, workers and institutions respond and adapt to shocks? Recovery Recovery to what, and how fast?

Determinants of resilience

What determines a region’s resilience?

A Possible Definition? The capacity of a regional or local economy to withstand or recover from market, competitive, technological and other shocks to its developmental growth path, if necessary by undergoing adaptive changes to its economic structures and its social and institutional arrangements, so as to maintain or restore its previous developmental path, or transit to a new sustainable path characterized by a more efficient, productive and equitable use of its physical, human and environmental resources (Martin and Sunley, 2015).

14

Regional Economic Resilience as Process

15

!

Depth of Reaction to

Shock

Extent and Nature of

Adjustment to Shock

Recession

Post-Shock Regional

Developmental Pathway

Vulnerability and Exposure

to Shocks

Scale, Nature and Duration

of Shock

RESISTANCE REORIENTATION RECOVERABILITY RISK

Regional Economic Structures, Resources, Capabilities

Competences Business Cultures, Confidences and Expectations

Local (and National) Institutions Nature and Extent of Supportive Policies and Measures

Pre-Shock Regional

Developmental Pathway

Some of the Determinants of Regional Economic Resilience

16

17

Measuring Regional Resilience Method

Focus Examples

Case study based

Mainly narrative based, may involve simple descriptive data and interviews with key actors, interrogation of policies

Munich (Evans and Karecha, 2013); Cambridge and Swansea (Simmie and Martin, 2010); Buffalo and Cleveland (Cowell, 2013)

Resilience indices

Singular or composite, comparative, measures of (relative) resistance and recovery, using key system variables of interest

UK regions (Martin, 2012; Martin and Sunley, 2015); US cities and counties (Augustine et al, 2012; Hans and Goetz, 2013)

Statistical time series models

Impulse response models; error correction models. These estimate how long it takes for impact of shock to dissipate (how much of the impact is subsequently eliminated per unit time period)

US regions (Blanchard and Katz, 1992); UK regions (Fingleton, Garretsen and Martin, 2012)

Causal structural models

Embedding resilience in regional economic models to generate counterfactual positions of where system would have been in the absence of shock

US metropolitan areas (Doran and Fingleton, 2013); EU regions (Fingleton, Garretsen and Martin, 2014)

!

Reaction to the Great Recession, Selected US States

18

!"#

!$#

%&#

%'#

%!#

(&"#

(&$#

"&&(#

"&&"#

"&&)#

"&&'#

"&&*#

"&&$#

"&&+#

"&&!#

"&&%#

"&(&#

"&((#

"&("#

"&()#

"&('#

,-./0#1230-4256

.#7"&&(8(&&9# !""#$%#&'

!"#

!$#

%&#

%'#

%!#

(&"#

(&$#

"&&(#

"&&"#

"&&)#

"&&'#

"&&*#

"&&$#

"&&+#

"&&!#

"&&%#

"&(&#

"&((#

"&("#

"&()#

"&('#,-

./0#1230-4256

.#7"&&(8(&&9#

!"#$%

!"#

!$#

%&#

%'#

%!#

(&"#

(&$#"&&(#

"&&"#

"&&)#

"&&'#

"&&*#

"&&$#

"&&+#

"&&!#

"&&%#

"&(&#

"&((#

"&("#

"&()#

"&('#,-

./0#1230-4256.#7"&&(8(&&9#

!"#$%&'($")

!"#

!$#

%&#

%'#

%!#

(&"#

(&$#

"&&(#

"&&"#

"&&)#

"&&'#

"&&*#

"&&$#

"&&+#

"&&!#

"&&%#

"&(&#

"&((#

"&("#

"&()#

"&('#

,-./0#1230-4256.#7"&&(8(&&9# !"#$%&'($

a a

a a

c

c

c

c

b

b

b b

19

•  Context – growing regional imbalance across the UK economy over past 40 years •  Role of recessionary shocks? •  Four main recessions, 1974-76, 1979-82, 1990-92 and

2008-10 •  How have UK regions resisted and recovered from

these? •  What has been the role of economic structure in

shaping regional resilience?

The Resilience of UK Regions to Recessionary Shocks

20

•  Simple Measures of Regional Resistance and Recoverability

•  Need to define the ‘expected’ (counterfactual) – •  Eg assume each region reacts the same as the

nation over contraction or recovery (say, t to t+k):

A Simple Measure of Resilience

€

Re sisr =(ΔEr

Contraction )− (ΔErContraction )expected

(ΔErContraction )expected

€

Recovr =(ΔEr

Recovery )− (ΔErRecovery )expected

(ΔErRecovery )expected

€

(ΔErt,t+k )expected = Σ igN

t,t+kEirt

A Simple Measure of Resilience

21

! Strong resistance but weak recoverability

MOST RESILIENT Strong resistance and strong recoverability

>0.0 Recoverability 0.0 <0.0

Weak resistance and weak recoverability

LEAST RESILIENT

Weak resistance but strong recoverability

<0.0 0.0 >0.0 Resistance

Last Four Recessionary Shocks to UK Economy (Employment)

22

!"#

!$#

!%#

!&#

!'#

!(#

!)#

"*#

"+#

"!#

+)'+#

+)'"#

+)'%#

+)''#

+)')#

+)(+#

+)("#

+)(%#

+)('#

+)()#

+))+#

+))"#

+))%#

+))'#

+)))#

!**+#

!**"#

!**%#

!**'#

!**)#

!*++#

!*+"#

,-./0#1230-4256.#789009-6:;#

<#<#

<#

<#

=# =#

=#

=#<#>#=5?5::9-6/@4#A-B6.C@6:#7<D-?E:;#=#>#=5?-F5@95:#

Recessions and Recoveries in the UK Regions

23

!"#

$"#

%"#

&'"#

&&"#

&("#

&)"#

&*"#

&""#

&+"#

&!"#&%!&#

&%!)#

&%!"#

&%!!#

&%!%#

&%$&#

&%$)#

&%$"#

&%$!#

&%$%#

&%%&#

&%%)#

&%%"#

&%%!#

&%%%#

(''&#

('')#

(''"#

(''!#

(''%#

('&&#

('&)#

,-./0#1230-4256

.#7&%!&8&''9#

:-;.<#=5>.#:-;.<#1/>.#1/>.#-?#16@0/6A#

1/>.#BCA0/6A>#DE#FG50/6A#

=/05>#H-GI>JK;2L5G>CA5#M-6A-6#:N-.0/6A#=5>.#BCA0/6A>#

D-G.<#=5>.#

D-G.<#1/>.##

Regional Resilience over Last Four Recessionary Shocks

24

!"#$%

!"#&%

!"#'%

!"#(%

"%

"#(%

"#'%

"#&%

"#$%

!)#*% !)% !"#*% "% "#*% )% )#*%

+,-./,01234356%

+,737518-,%

!"#"$$%&'()*+*,-./(!"#&0"12()*-.,*3(

9.:5;%<,75%

=175,08%

9.:5;%=175%

=%>3?418?7%

@%A0,418?%

B.8?.8%

<14,7%

@.05;%=175%

@.05;%<,75%

9-.5418?%

<%>3?418?7%

C.0D7!E:F2,0%

+G"#&$%

!"#$%

!"%

!&#$%

&%

&#$%

"%

"#$%

!'% !"% &% "% '%

()*+,)-./01023%

()4042.5*)%

!"#"$$%&'()**+,-*.(!"#&/"01()*-*,-2(

6+57+5%

8*+21.57%

9%:-)1.57%

;%<071.574%

9+-2=%;)42%

8+>2=%?.42%

8+>2=%;)42%

?.42)-5%

?%<071.574%;.1)4%

@+-A4!B>C/)-%

9%:-)1.57%

(D&#""%

!"#$%

!"%

!&#$%

&%

&#$%

"%

"#$%

!'% !(% !"% &% "% (% '%

)*+,-*./012134%

)*5153/6+*%

!"#"$$%&'()*+,-+./((!"#&0"12()*+.-+*(

7,68,6%

9,:3;%</53%</53*.6%

=/2*5%

>%?.*2/68%

<%@182/685%

9+,32/68%

>,.3;%</53%

A,.B5!C:D0*.%

9,:3;%=*53%

=%@182/685%>,.3;%=*53%

)E&#'(%

!"#$%

!"#&%

"%

"#&%

"#$%

"#'%

"#(%

!)% !"#*% "% "#*% )%

+,-./,01234356%

+,737518-,%

!"#"$$%&'()**+,*-.(!"#&/"01()**-,+2(

9.8:.8%;%<0,418:%

=14,7%

=%>3:418:7%

?.@5A%B175%

B175,08%

;.05A%=,75%C.0D7!E@F2,0%

;.05A%B175%

B%>3:418:7%?.@5A%=,75%

?-.5418:%

+G"#"$%

25

•  Specialisation versus diversity debate in regional studies (eg Duranton and Puga, 1999; Frenken and Van Oort, 2007; Kemeny and Storper, 2014) •  Some argue that specialisation is the motor of regional

growth (Storper, 2013) •  But others argue that diversified economy is more

resistant to shocks: different sectors have different elasticities of demand •  And hence diverse structures should make regions more

resilient (diversity ‘spreads risk’) (Davies and Tonts, 2010) •  Major structural changes in regional economies over past

40 years (deindustrialisation, tertiarisation, financialisation)

The Impact of Economic Structure on Regional Resilience

26

•  Shift-share decomposition of differential regional reaction to shocks (relative to national reactions) into industrial structure effect and regional competitiveness effect:

That is,

Differential change = Industry effect + ‘Competitiveness’

effect

Using Shift-Share to Assess Role of Industrial Structure

€

ΔErt,t+k = Σ i (gN

t,t+kEirt )+ Σ i (giN

t,t+k − gNt,t+k )Eir

t + Σ i (girt ,t+k − giN

t,t+k )Eirt

€

ΔErt,t+k − Σ i (gN

t,t+kEirt ) = Σ i (giN

t,t+k − gNt,t+k )Eir

t + Σ i (girt ,t+k − giN

t,t+k )Eirt

27

Contribution of Industrial Structure and Competitiveness Effects to Regional Resilience over

Successive Economic Cycles

!"#

!$%&#

!$#

!'%&#

'#

'%&#

$#

$%&#

"#

()*+)*#

,)-./#012.#

,)-./#342.#

342.#56+71*+2#

8)-92/6-4!:;<=4-#

>);./#3

42.#

>?).71*+#

,)-./4-*#@-471*+#

012.#56+71*+2#

012.4-*#

31742#

>);./#012.#

A)*.-6=;

B)*#.)#C6D4-4-4*

B17#0<E7)F<4*

.#A/

1*G4#HI

J4-1G4#I**

;17#K

L#

!"#"$$%&'()*+,-+./(!"#&0"12()*+.-+*(

M4G6)*##

@*+;2.-F##

!"#

!$%&#

!$#

!'%&#

'#

'%&#

$#

$%&#

"#

()*+,-*.#/*-01.2#

()*+,#314+#

56)+01.2#

7)*84,9*-!:;<=-*#

>10-4#

314+#?9201.24#

>-4+#?9201.24#

314+-*.#

()*+,#>-4+#

5);+,#>

-4+#

5);+,#314+#

@).2).#

A).+*9=;

B).#+)#C9D-*-.

B10#3<E0)F<-.

+##A,

1.G-#HI

J-*1G-#1..

;10#K

L#

!"#"$$%&'()**+,-*.(!"#&/"01()**+,-2(

M-G9).##

/.2;4+*F##

!"#

!$%&#

!$#

!'%&#

'#

'%&#

$#

$%&#

"#

()*+,#-./+#

()*+,#01/+#

23)+4.56#

7)56)5#

0.41/#

()*+,1*5#8*14.56#

9)*:/,;*1!<=>?1*#

01/+#@;64.56/#

-./+#@;64.56/#

-./+1*5#

2)=+,#-./+#

2)=+,#0

1/+#

A)5+*;?=

B)5#+)#C;D1*15

+.;4#->

E4)F>15

+#A,

.5G1#HI

J1*.G1#I55

=.4#K

L#

!"#"$$%&'()*+*,-./(!"#&0"12()*-.,*3(

M1G;)5##

856=/+*F##

!"#

!$%&#

!$#

!'%&#

'#

'%&#

$#

$%&#

"#

()*+#,-./01.*#

2345*6-4)!789:)4*-.)#

;34+6#()*+#

;34+6#<0*+#

=38+6#<0*+#

<0*+#,-./01.*#

=38+6#(

)*+#

(0/)*#

<0*+)41#

=>3+/01.#

?31.31#

;34+6)41#@4)/01.#

A31+4-:8

B31#+3#C-D)4)1

B0/#<9E/3F9)1

+##A061

G)#HI

J)40G)#I11

80/#K

L#

!"#"$$%&'()**+,*-.(!"#&/"01()**-,+2(

M)G-31#

@1.8*+4F#

28

•  Industrial structure has some influence •  Has been positive in London, South East, Eastern

regions •  Negative in most of northern and less prosperous

regions •  But typically outweighed by ‘competitive effects’ in

almost all regions •  London’s competitive effect shifts from strongly negative

to highly positive over time •  Regional industrial specialisation has declined (regional

structures have become more similar) over time, except London

The Impact of Economic Structure on Regional Resilience

Structural Convergence across UK Regions

29

!"

!#!$"

!#%"

!#%$"

!#&"

!#&$"

!#'"

!#'$"

!#("

!#($"

!#$"

%)*%"

%)*'"

%)*$"

%)**"

%)*)"

%)+%"

%)+'"

%)+$"

%)+*"

%)+)"

%))%"

%))'"

%))$"

%))*"

%)))"

&!!%"

&!!'"

&!!$"

&!!*"

&!!)"

&!%%"

&!%'"

,-./0120314

56"7,89:/8:912";

0330<190208=>"?6@

.A"

B56@56"

C598D.6"?9.216@"

E12.3"

C598D"F138"G59H3IJ:<K.930@."E.38"L0@216@3"

F138"L0@216@3",/58216@"F138"5M"F6N216@",5:8D"F138"C598D"E.38"

,5:8D"E.38"

30

•  Context – Has European Monetary Union rendered regions in Eurozone more or less vulnerable to shocks? •  Banking crisis of 2008-09 triggered most severe

recessionary shock since formation of EU •  Continuing crisis in certain Eurozone member

states (especially Greece!) •  Is Eurozone viable single currency area? •  Large body of theory on ‘optimum currency areas’ •  Key underlying premise (requirement) of OCA – ‘homogeneity’ across members of monetary union

Regional Impact of European Crisis

31

•  ‘Homogeneity’ is satisfied by three conditions: •  1. Symmetry – economies should be roughly similar

and synchronised (all member states – and regions – similarly affected by shocks) •  2. Flexibility – free movement of labour and capital (to

restore regional imbalances in the event of asymmetric shocks) •  3. Integration – common fiscal policy (automatic

stabilisers and transfers to reduce impact of asymmetric shocks) •  Generally agreed that when established in 1999, Euro

zone did not satisfy key requirements of optimum currency area (eg Bayoumi and Eichengreen,1993)


32

•  Primarily a political rather than economic project •  Membership based on monetary (budgetary) criteria

(Maastricht convergence) – concerned with debt, deficit and inflation thresholds •  Argued in any case that – • Monetary union would itself ‘endogenise’ the required

symmetry, flexibility and integration conditions (Rose, 2004, De Grauwe and Mongelli, 2005) •  And that states and regions were becoming ‘more

similar’and synchronised •  Some argued, however, (eg Paul Krugman) that

increased integration could lead to greater regional specialisation and hence asymmetry of shocks •  Made worse by absence of common fiscal policy


33

•  Employment and productivity trends back to 1980 suggest degree of symmetry (variance) has increased (declined) among Eurozone regions over time, especially since 1999, compared to Non-Eurozone regions •  However, northern-central regions of Eurozone

more stable than southern-peripheral regions, in both employment and productivity terms •  In this sense ‘two-Eurozones’ – one northern-

central; one southern-peripheral •  After 1999, productivity in southern-peripheral

Eurozone regions fell progressively behind more central-northern Eurozone regions


34

Eurozone regions differ less in employment growth rates (show greater synchronicity) than Non-Eurozone regions

!"

#"

$"

%"

&"

'!"

'#"

'$"

'%"

'&"

#!"

'(&'"

'(&#"

'(&)"

'(&$"

'(&*"

'(&%"

'(&+"

'(&&"

'(&("

'((!"

'(('"

'((#"

'(()"

'(($"

'((*"

'((%"

'((+"

'((&"

'((("

#!!!"

#!!'"

#!!#"

#!!)"

#!!$"

#!!*"

#!!%"

#!!+"

#!!&"

#!!("

#!'!"

#!''"

,-./-012"34"5

26/30-7"8.39:

1;</=>"

"?.3@=A"5-=2B"

CD"526/30B"

E30FCD"526/30B"

!"

#"

$"

%"

&"

'!"

'#"

'$"

'(&'"

'(&#"

'(&)"

'(&$"

'(&*"

'(&%"

'(&+"

'(&&"

'(&("

'((!"

'(('"

'((#"

'(()"

'(($"

'((*"

'((%"

'((+"

'((&"

'((("

#!!!"

#!!'"

#!!#"

#!!)"

#!!$"

#!!*"

#!!%"

#!!+"

#!!&"

#!!("

#!'!"

#!''"

,-./-012"34"5

26/30-7"809

73:;

20<"

"""=.3><?"5-<2@"

8A"526/30@"

B30C8A"526/30@"

35

And in similarly in productivity growth rates g

!"

#"

$!"

$#"

%!"

%#"

&!"

&#"

$'($"

$'(%"

$'(&"

$'()"

$'(#"

$'(*"

$'(+"

$'(("

$'('"

$''!"

$''$"

$''%"

$''&"

$'')"

$''#"

$''*"

$''+"

$''("

$'''"

%!!!"

%!!$"

%!!%"

%!!&"

%!!)"

%!!#"

%!!*"

%!!+"

%!!("

%!!'"

%!$!"

%!$$"

,-./-012"34"5

26/30-7"8.39:

1;</=>"

"?.3@=A"5-=2B" C3.=A2.0"DE"526/30B"

F3:=A2.0"DE"526/30B"

!"

#"

$!"

$#"

%!"

%#"

&!"

$'($"

$'(%"

$'(&"

$'()"

$'(#"

$'(*"

$'(+"

$'(("

$'('"

$''!"

$''$"

$''%"

$''&"

$'')"

$''#"

$''*"

$''+"

$''("

$'''"

%!!!"

%!!$"

%!!%"

%!!&"

%!!)"

%!!#"

%!!*"

%!!+"

%!!("

%!!'"

%!$!"

%!$$"

,-./-012"34"5

26/30-7"89:73;920

<""=.3><?"5-<2@"

"A3.<?2.0"8B"526/30@"

C3D<?2.0"8B"526/30@"

36

But major difference in Productivity Levels between Northern and Southern regions of Eurozone, and divergence after 1999

!"#

$%#

$"#

"%#

""#

&%#'()%#

'()'#

'()*#

'()!#

'()$#

'()"#

'()&#

'()+#

'())#

'()(#

'((%#

'(('#

'((*#

'((!#

'(($#

'(("#

'((&#

'((+#

'(()#

'(((#

*%%%#

*%%'#

*%%*#

*%%!#

*%%$#

*%%"#

*%%&#

*%%+#

*%%)#

*%%(#

*%'%#

*%''#

#,-./0

123456#47#8.-59:-7#;7/#<.059:

-7#

=0-.>.7:

#?:@4.7A#BC

DE#F:-#=GFH.6:/

#I.-J:-K#

*%%"#,-41:AL###

8.-59:-7#=M#?:@4.7A#

<.059:-7#=M#?:@4.7A#

37

•  Assessing regional resilience to the crisis •  How quickly and how far have EU regions recovered to

their pre-shock (employment) growth paths? •  Fingleton, Garretsen and Martin use dynamic vector

spatial panel model

Where E is 255x1 vector of regional employment W is 255x255 matrix of regional trade interdependencies Q is 225x1 vector or regional output (GVA) K is 255x1 vector regional capital stock Estimated over 1997 to 2007


€

ln Et = γ ln Et−1 +ρWEt +β0 +β1 lnQt +β2 lnKt +εt

38

•  Model used to generate ‘counterfactual’ regional employment paths over 2007-2011 (b-e) •  These then compared with actual paths (c-d) •  Also extent of‘recovery gap’ (e-d)


!"

#!"

$!"

%!"

&!"

'!"

(!"

#" $" %" &" '" (" )" *" +"#!"##"#$"#%"#&"#'"#("#)"#*"#+"$!"$#"$$"$%"$&"$'"$("$)"$*"$+"%!"%#"%$"%%"%&"%'"%("%)"%*"%+"&!"&#"&$"&%"&&"&'"&("

,-./01-23

4"

56-2"

7829:;0<=">80?4;""7@4;" A<4B@/"70C49:;0<="D2<0E281""

>80?4;"7@4;"

F0B3428G@<4B@/"70C49:;0<=""D2<0E281">80?4;"7@4;"

H@3=63I"F86C6C"J3KB<2K":;0<="""

!"

#"

$"%"

&"

$!!)" $!#$"

39

•  Model estimated over 1997-2007 using actual values, gives R2 =0.91 for employment levels, R2 =0.6 for growth rates

parameter 0.639 0.156 0.104 0.01 t-value (321.1) (42.7) (140.4) (108.0)

•  Then used to predict 2008-2011 (using recursive values of E and predicted values of K and Q from moving average estimates over 1993-2007) (see Fingleton, Garretsen and Martin, 2015)


€

ln Et = γ ln Et−1 +ρWEt +β0 +β1 lnQt +β2 lnKt +εt

Actual Employment Change in the Crisis, 2008-2011 Greatest declines in Southern and Peripheral regions

40

Predicted (Counterfactual) Employment Change 2008-2011

(More evenly spread across regions)

41

Difference between Actual and Predicted Employment Growth, 2008-2011

42

Difference between Actual and Predicted (Counterfactual) Employment Level as at 2011 ‘Differential recovery’ – worst in Peripheral and

Southern EZ regions

43

44

•  Prior to Crisis, peripheral Eurozone regions converged in synchronicity compared to non-Eurozone region (though began to fall behind in productivity)

•  But southern-peripheral regions of Eurozone proved less resilient to crisis than either central Eurozone regions or non-Eurozone regions

•  In this respect • Regions of Eurozone may not constitute an OCA • Convergence in good times, partly stimulated by EMU,

may be more apparent than real • Real convergence matters as well as monetary

convergence (Maastricht criteria) •  Impact of crisis has varied within as well as between

countries • Magnifico (1973) warned of this issue four decades ago!


45

•  Studies of OECD nations suggest countries which suffer deep or frequent shocks have lower long-run growth rates (Cerra et al, 2008, 2009) •  If this also applies to regions, shocks can

contribute to long–run regional divergence in economic growth paths •  Positive adaptation versions of resilience suggest

recoveries could mark shift to new, improved growth path •  But negative shifts also possible, leading to

inferior growth paths

Resilience and Long-Run Regional Development

Shock-Induced Permanent (Hysteretic) Shifts in Regional Growth Paths? Two UK Regions

46

!"#

$"#

%""#

%%"#

%&"#

%'"#

%("#

%)"#

%*"#

%+"#%$+%#

%$+(#

%$++#

%$!"#

%$!'#

%$!*#

%$!$#

%$$&#

%$$)#

%$$!#

&""%#

&""(#

&""+#

&"%"#

&"%'#

,-./01-234#5%$+%6%""7#

South East

North East *

*

* Significant shift in growth path

*

47

•  Need to embed notion of resilience in theory of

regional development •  Different theories imply different interpretations of

shocks and resilience •  Resilience not some fixed ‘attribute’, but produced by

development process •  Evolves over time – can rise and fall •  Also, insight needed into the multi-scalar nature of

resilience (the links between micro-behaviours and aggregate dynamics) •  And role of locally endogenous versus exogenous

factors in shaping regional resistance

Some Unresolved Issues

48

Theorising Regional Economic Resilience? Regional

Theory

Role of Shock/Implied Interpretation of Resilience?

New Economic Geography theory

‘Resilience’ as stability of an equilibrium spatial pattern of economic activity in the face of shocks. A shock above critical threshold induces shifts to new spatial equilibrium pattern.

Evolutionary-Schumpeterian theory

Shocks as ‘gales’ of creative destruction and ‘competitive selection’. ‘Resilience’ as regional economic ‘fitness’, and ‘positive re-orientation’ of a region’s industrial-technological system.

Marxist Theory Shocks as major over-accumulation or competitive crises that set in train the search by capital for radically new ‘technological and spatial fixes’. ‘Resilience’ of regions depends on balance between local in situ technological fix and flight of capital to more buoyant or cheaper locations.

Path dependence theories

Shocks ‘de-lock’ regional development paths. Is ‘resilience’ resistance to ‘de-locking’ or positive path dependent adaptation/ability to create new paths?

!

49

•  Increasing interest in ‘building resilience’ (reducing vulnerability, improving capacity to absorb shocks, increasing adaptability of local economies) •  But need more insight into causes and

consequences of resilience before jumping to policy conclusions •  Both national and local institutions, and regulatory

and governance arrangements, may play crucial role •  Comparative case studies important to gain policy

insight

Some Unresolved Issues

webinar1: ron martin - shocking aspects of regional development: the economic geographies of...

Economy & Finance