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The Export Base Model with a Supply-Side Stimulus to the Export Sector

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  • Ha, Soo Jung
  • J. Kim, Swales

Abstract

In the export-base model, the level of a region’s economic activity is underpinned by the performance of its export sector (Daly, 1940; Dixon and Thirlwall, 1975; Kaldor, 1970; North, 1955). This theory is now almost universally represented as a primitive version of the familiar Input-Output (IO) or Keynesian demand-driven approach, where regional output is linked to regional exports through a rather mechanistic multiplier process (Romanoff, 1974). Further, in a standard IO inter-regional framework, the expansion of output in one region always generates positive impacts on other regions. That is to say, there is always a positive spread, and no negative backwash, effect. However, these models typically embody no supply-side constraints. What is more, the stimulus to the export sector is often thought to come through supply-side improvements (North, 1955; McCombie, 1992). Whilst accepting that the development of a healthy export base is generally central to promoting the growth of the regional economy, the relationship is likely to be much more complex than is usually thought. Also whilst an increase in regional exports typically increases economic activity in the target region, the effect on other regions is less straightforward (Myrdal, 1957). In this paper we begin by using a single-region IO analysis of the operation of a stylised export base model. The impact of a conventional increase in export demand is compared to a situation in which increased competitiveness underpins the improved export performance. This analysis is then extended through the use of an interregional (Scotland–Rest of the UK) Computable General Equilibrium (CGE) model. In simulation, different exogenous demand and supply side disturbances are calibrated so as to generate the same long-run expansion in Scottish manufacturing exports. The subsequent specific evolutions of regional GDP and employment in both Scotland and the rest of the UK (RUK) are then tracked.

Suggested Citation

  • Ha, Soo Jung & J. Kim, Swales, 2010. "The Export Base Model with a Supply-Side Stimulus to the Export Sector," SIRE Discussion Papers 2010-27, Scottish Institute for Research in Economics (SIRE).
  • Handle: RePEc:edn:sirdps:159
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    References listed on IDEAS

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    1. Harrigan, Frank & McGregor, Peter G. & Dourmashkin, Neil & Perman, Roger & Swales, Kim & Yin, Ya Ping, 1991. "AMOS : A macro-micro model of Scotland," Economic Modelling, Elsevier, vol. 8(4), pages 424-479, October.
    2. Layard, Richard & Nickell, Stephen & Jackman, Richard, 2005. "Unemployment: Macroeconomic Performance and the Labour Market," OUP Catalogue, Oxford University Press, number 9780199279173.
    3. Gillespie, Gary & McGregor, Peter G. & Swales, J. Kim & Yin, Yan Ping, 1999. "A Computable General Equilibrium Approach to the Ex Post Evaluation of Regional Development Agency Policies," ERSA conference papers ersa99pa260, European Regional Science Association.
    4. 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.
    5. Karlsson, Charlie & Johansson, Börje, 2006. "Regional Development and Knowledge," Working Paper Series in Economics and Institutions of Innovation 76, Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies.
    6. Mark Partridge & Dan Rickman, 2010. "Computable General Equilibrium (CGE) Modelling for Regional Economic Development Analysis," Regional Studies, Taylor & Francis Journals, vol. 44(10), pages 1311-1328.
    7. Dixon, R & Thirlwall, A P, 1975. "A Model of Regional Growth-Rate Differences on Kaldorian Lines," Oxford Economic Papers, Oxford University Press, vol. 27(2), pages 201-214, July.
    8. Kaldor, Nicholas, 1970. "The Case for Regional Policies," Scottish Journal of Political Economy, Scottish Economic Society, vol. 17(3), pages 337-348, November.
    9. Alex Christie & J. Kim Swales, 2010. "The Barnett Allocation Mechanism: Formula Plus Influence?," Regional Studies, Taylor & Francis Journals, vol. 44(6), pages 761-775.
    10. Harris, John R & Todaro, Michael P, 1970. "Migration, Unemployment & Development: A Two-Sector Analysis," American Economic Review, American Economic Association, vol. 60(1), pages 126-142, March.
    11. Mark D. Partridge & Dan S. Rickman, 1998. "Regional Computable General Equilibrium Modeling: A Survey and Critical Appraisal," International Regional Science Review, , vol. 21(3), pages 205-248, December.
    12. Douglass C. North, 1955. "Location Theory and Regional Economic Growth," Journal of Political Economy, University of Chicago Press, vol. 63, pages 243-243.
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    More about this item

    Keywords

    Export base; efficiency improvement; regional growth;

    JEL classification:

    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes
    • R13 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General Equilibrium and Welfare Economic Analysis of Regional Economies
    • R58 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Regional Development Planning and Policy

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