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

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  • E McVittie
  • J K Swales

Abstract

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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  • E McVittie & J K Swales, 1999. "Sector-specific factor subsidies and employment in a regional price-endogenous export-base model," Environment and Planning A, Pion Ltd, London, vol. 31(12), pages 2145-2168, December.
  • Handle: RePEc:pio:envira:v:31:y:1999:i:12:p:2145-2168
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    Cited by:

    1. J. Kim Swales, 2005. "Resource-Constrained Export-Base Regional Multipliers: A Northian Approach," Journal of Regional Science, Wiley Blackwell, vol. 45(1), pages 223-250.
    2. Maureen Kilkenny & Mark D. Partridge, 2009. "Export Sectors and Rural Development," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 91(4), pages 910-929.
    3. Peter G. McGregor & Eric P. McVittie & J. Kim Swales & Ya Ping Yin, 2000. "The Neoclassical Economic Base Multiplier," Journal of Regional Science, Wiley Blackwell, vol. 40(1), pages 1-31.

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