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The Impact of the Barnett Formula on the Scottish Economy: Endogenous Population and Variable Formula Proportions

Author

Listed:
  • Linda Ferguson
  • David Learmonth
  • Peter G McGregor

    (Department of Economics, University of Strathclyde, Glasgow G4 0GE, Scotland)

  • J Kim Swales

    (Fraser of Allander Institute, Department of Economics, University of Strathclyde, Glasgow G4 0GE, Scotland)

  • Karen Turner

    (Department of Economics, University of Strathclyde, Glasgow G4 0GE, Scotland)

Abstract

The Barnett formula is the official basis upon which increments to public funds are allocated to the devolved regions of the UK for those parts of the budget that are administered locally. There is considerable controversy surrounding the implications of its strict application for the relevant regions. The existing literature focuses primarily on the equity of the spatial changes to government per capita expenditure that would accompany such a change. In contrast, in this paper we attempt to quantify the system-wide economic consequences—the real, relative resource squeeze that accompanies the financial relative squeeze—on one devolved region, Scotland. The analysis uses a multisectoral regional computable general equilibrium modelling approach. We highlight the importance of population endogeneity, particularly since the population proportions used in the formula are now regularly updated.

Suggested Citation

  • Linda Ferguson & David Learmonth & Peter G McGregor & J Kim Swales & Karen Turner, 2007. "The Impact of the Barnett Formula on the Scottish Economy: Endogenous Population and Variable Formula Proportions," Environment and Planning A, , vol. 39(12), pages 3008-3027, December.
    • Handle: RePEc:sae:envira:v:39:y:2007:i:12:p:3008-3027
    DOI: 10.1068/a38254
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    References listed on IDEAS

    as
    1. Layard, Richard & Nickell, Stephen & Jackman, Richard, 2005. "Unemployment: Macroeconomic Performance and the Labour Market," OUP Catalogue, Oxford University Press, number 9780199279173.
    2. Peter Mcgregor & Kim Swales, 2005. "Economics of devolution/decentralization in the UK: Some questions and answers," Regional Studies, Taylor & Francis Journals, vol. 39(4), pages 477-494.
    3. Katerina Lisenkova & Peter Mcgregor & Nikos Pappas & Kim Swales & Karen Turner & Robert Wright, 2006. "Macroeconomic Impact of Ageing Population in Scotland. A Computable General Equilibrium Analysis," ERSA conference papers ersa06p432, European Regional Science Association.
    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Kristinn Hermannsson & Katerina Lisenkova & Peter G. McGregor & J. Kim Swales, 2014. "'Policy Scepticism' and the Impact of Scottish Higher Education Institutions (HEIs) on their Host Region: Accounting for Regional Budget Constraints under Devolution," Regional Studies, Taylor & Francis Journals, vol. 48(2), pages 400-417, February.
    2. Kristinn Hermannsson & Katerina Lisenkova & Peter G McGregor & J Kim Swales, 2011. "Regional Impact Analyses and the Appropriate Treatment of Regional Budget Constraints under Devolution: An Application to the Impact of Scottish HEIs," ERSA conference papers ersa10p1595, European Regional Science Association.
    3. Hermannsson, Kristinn & Lisenkova, Katerina & McGregor, Peter G. & Swales, J. Kim, 2010. "Policy Scepticism and the Impact of Northern Irish Higher Education Institutions (HEIs) on their Host Region: Accounting for Regional Budget Constraints," SIRE Discussion Papers 2010-78, Scottish Institute for Research in Economics (SIRE).
    4. Soo Jung Ha & Geoffrey Hewings & Karen Turner, 2008. "Econometric estimation of Armington import elasticities for regional CGE models of the Chicago and Illinois economies," Working Papers 0810, University of Strathclyde Business School, Department of Economics.
    5. Hermannsson, Kristinn & Lisenkova, Katerina & McGregor, Peter G. & Swales, J. Kim, 2010. "Policy Scepticism and the Impact of London-based Higher Education Institutions (HEIs) on the economy of England: Accounting for Alternative Uses of Public Expenditure," SIRE Discussion Papers 2010-97, Scottish Institute for Research in Economics (SIRE).
    6. Ha, Soo Jung & Hewings, Geoffrey & McGregor, Peter G & Swales, J Kim & Turner, Karen, 2010. "Econometric estimation of Armington import elasticities and their system-wide impact in a regional CGE model of the Illinois economy," Stirling Economics Discussion Papers 2010-19, University of Stirling, Division of Economics.
    7. Lin, Hsing-Chun & Lee, Huey-Lin & Chen, Po-Chi & Hsu, Sheng-Ming & Lin, Kuo-Jung & Lee, Duu-Hwa & Chang, Ching-Cheng & Hsu, Shih-Shun, 2013. "The Potential Crisis of Population Ageing and Low Fertility: GEMTEE Dynamic Computable General Equilibrium used in Population Forecasts and Analysis," Conference papers 332413, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    8. Giesecke, James A. & Madden, John R., 2013. "Regional Computable General Equilibrium Modeling," Handbook of Computable General Equilibrium Modeling, in: Peter B. Dixon & Dale Jorgenson (ed.), Handbook of Computable General Equilibrium Modeling, edition 1, volume 1, chapter 0, pages 379-475, Elsevier.
    9. Lisenkova, Katerina & McGregor, Peter G. & Swales, J. Kim, 2010. "Policy Scepticism and the Impact of Welsh Higher Education Institutions (HEIs) on their Host Region: Accounting for Regional Budget Constraints," SIRE Discussion Papers 2010-72, Scottish Institute for Research in Economics (SIRE).

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