ESPON 3.4.2

Territorial Impacts of EU Economic Policies and Location of Economic Activities

ESPON 3.4.2: The Research Hypothesis

– knowledge and innovation based economy

– slow-growth cycle with low rates of growth of productivity and demand

– economic activity is becoming more linked to specific environments

– necessary context to enterprises looking for externalities

– fiscal and ideological restrictions

– public policy oriented towards indirect intervention through the creation of externalities

– rising importance of the existing resources of regions

– remetropolitisation and reconcentration of economic activities,

– mainly into those areas already endowed with the necessary framework conditions

Fundamentals 1: Profits of enterprises are at fairly high levels

Fundamentals 2: Proportion of salaries in value added is decreasing

Fundamentals 3: Investment of enterprises is decreasing:

Fundamentals 4: Different schools on regional growth

cultural diversity and tolerance and favourable cultural amenities and infrastructure

Cultural theory

well-developed and regionally embedded set of informal and informal institutions

Institutionalist theory

adaptive capabilities of a regional economy to respond to shifts and changes in markets

Evolutionary theory

clusters of specialised export-orientated industries, and associated supporting supplier and institutional networks

Cluster theories

innovation, technological advance and entrepreneurialism

Neo-Schumpeterian theory

accumulation and attraction of educated and skilled human capital

Endogenous (or ‘new’) growth theory

productivity of a region’s tradable baseExport-base theories

Main Source of Regional Growth and Productivity

Theory

What about the « New Economy » ?

– Example: USA

– no rise in technological residual of productivity growth through new information technologies => no increase in global factor productivity

– reorganisation of work processes increased productivity, not machines

– strong demand for (expensive) investments in the new technologies boosted growth

– elements of spatial distribution:– proximity matters: increased complexity of rapidly evolving technologies

force actors to regroup and stay in contact

– knowledge is often tacit and personal, making “transmission” costs rise with distance

– knowledge creation is cumulative in nature and thus there is a feedback effect which strengthens those regions where knowledge and innovation is already present

– new economy also needs physical infrastructure investments (hot spots, fibre optic connections, etc) which are only profitable in dense metropolitan areas

Hypotheses on regional effects of current policies– price stability as absolute priority reduces the adjustment

opportunities available in the past => immediate competition, even for lagging regions with low productivity

– globalisation and deregulation policies create competition for jobs, thus exerting pressure on direct and indirect wages and on working conditions

– lagging regions specialise in those economic sectors where wage level important competition factor

– very limited redistribution of productivity gains towards salaries => regressive specialisation

– increased difficulty for lagging regions to catch up

– but: empirical evidence concerning convergence is very ambiguous

Regional policiesOrientation change of regional policies

dynamic competitiveness

work division

initiative units

Evolution of regional policies

        crisis of the Welfare State       inefficiency of investment stimulation policies        Concern for a more autonomous regional development

Origins :        crisis of traditional sectors

Concept of inter-regional equity Concept of inter-regional efficiency

Regional policy instruments Regional policy instruments* public aid * local firm competitiveness* infrastructures * local actors motivation* Consumption support * training, education, R&D

RESOURCES MOBILITY RESOURCES MOBILITY

regions are management andfunctions are separable

* Keynes * Schumpeterdemand economy supply economystatic competitiveness

* fordist * toyotisthomogeneous products differentiated products

Characteristics Characteristics

flexibility and polyvalence* functionalist * territorial

technocratic management

* rising phase of a long cycle : exploitation of new technologic opportunities 

* declining phase of a long cycle : change of technological direction

* high growth * low growth* climax of the Welfare State * crisis of the Welfare State* industrial economy * knowledge economy

Economic context Economic context

Top-down approach Bottom-up approachExogenous development Endogenous development

National regional policy Decentralized regional policy

From the 60's … until today

Our project

– Extensive review, analysis and synthesis of the literature

– Concentration on basic economic data, but in long-term series (whenever possible)

– Sectoral structure

– Evolution of profits, wages, investments

– Basic information on production factors: human and physical capital

– Localisation factors through entry-exit and enquiries

– Assessment of regional impacts of policies very challenging

– Macro

– Regional

Some provocations

– Main questions for this workshop:– Which are the main factors for knowledge society and economic

growth?– How can we translate those factors for territorial analysis (both in

terms of territorial thinking and measuring)?– Which recommendations can be given to future projects

approaching these questions?

– ESPON can not solve a decades-long discussion with one-year under-financed projects

– Discussion has to focus on fundamentals to understand regional development

– Every answer heavily depends on the scale

– Maybe ESPON should concentrate on the effort of translating and synthesising wide range of existing research into policy-relevant information