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Sector-specific factor subsidies and employment in a regional price-endogenous export-base model

Listed author(s):
  • E McVittie
  • J K Swales

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.

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Article provided by Pion Ltd, London in its journal Environment and Planning A.

Volume (Year): 31 (1999)
Issue (Month): 12 (December)
Pages: 2145-2168

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Handle: RePEc:pio:envira:v:31:y:1999:i:12:p:2145-2168
Contact details of provider: Web page: http://www.pion.co.uk

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