Regional Policy Spillovers: The National Impact of Demand-Side Policy in an Interregional Model of the UK Economy

Citation

Gilmartin M, Learmonth D, McGregor PG, Swales JK & Turner K (2011) Regional Policy Spillovers: The National Impact of Demand-Side Policy in an Interregional Model of the UK Economy. SIRE Discussion Paper, SIRE-DP-2011-46. Scottish Institute for Research in Economics. http://repo.sire.ac.uk/bitstream/10943/291/1/SIRE_DP_2011_46.pdf

Abstract
UK regional policy has been advocated as a means of reducing regional disparities and stimulating national growth. However, there is limited understanding of the interregional and national effects of such a policy. This paper uses an interregional computable general equilibrium model to identify the national impact of a policy-induced regional demand shock under alternative labour market closures. Our simulation results suggest that regional policy operating solely on the demand side has significant national impacts. Furthermore, the effects on the non-target region are particularly sensitive to the treatment of the regional labour market.

Keywords
regional CGE modelling; migration; regional development policy; Regional economics ; Regional growth ; Labor economics

JEL codes

• C68: Computable General Equilibrium Models
• D58: Computable and Other Applied General Equilibrium Models
• R58: Regional Development Planning and Policy