Productivity Change in Manufacturing Regions: A Multifactor/Shift-Share Approach

ABSTRACT The traditional shift-share model measures the combined effects of output growth and productivity change on employment. A region with above average employment growth either has a favorable industry mix or enjoys a competitive advantage over other regions. To separate the effects of output and productivity, the shift-share model is extended to decompose the effects of changes in output and productivity on employment. This paper modifies the Rigby-Anderson extension by separating the contribution of labor and capital to productivity growth in the analysis of regional economic performance, and investigates twenty (two-digit SIC) manufacturing sectors in twelve states (six snowbelt, six sunbelt states) to assess whether observed changes in employment were due to changes in output or to productivity.     

Manufacturing Output Indexes for a Metropolitan Area: A Look at New Economic Indicators

The purpose of this paper is to construct monthly manufacturing output indexes for a metropolitan area, employing a method used by the Federal Reserve Banks to construct regional manufacturing indexes. The Tulsa metropolitan area is the region considered. The index of total manufacturing output is included in a vector autoregression model of the Tulsa economy. The results indicate that the linkages between manufacturing activity and non-manufacturing employment differ from the linkages between employment in those sectors, and that since the early 1980s both sectors have become less sensitive to changes in the price of oil.     

Agglomeration Potential: The Spatial Scale of Industry Linkages in the Southern California Economy

ABSTRACT Targeting industry clusters for economic development has become popular despite the lack of empirical evidence about the spatial scales over which various clusters agglomerate. This paper identifies twenty manufacturing industry clusters from a principal components analysis of interindustry patterns of trade and measures the spatial employment concentration of each cluster's plants within a polycentric framework. Two to eight centers of employment concentration are detected within the Southern California region for each set of trade linkages. Our spatial half‐life measure reveals that half of a cluster's employment in associated establishments is located within a typical range of eight to twelve kilometers (about 5–7.5 miles) to the nearest employment center or subcenter for the particular cluster. Furthermore, employment in seventeen of the twenty clusters is found to be more spatially concentrated than manufacturing employment as a whole, suggesting that geographic proximity is important to interindustry linkages in the Southern California economy. More important, the spatial concentration across industry clusters varies considerably within the metropolitan area, implying that economic development practitioners should consider local context and adapt industry cluster theories to the specific advantages and disadvantages of their immediate locality.     

Productivity,International Trade and Reference Area Interactions in Shift‐Share Analysis: Some Operational Notes

ABSTRACT These notes discuss and illustrate two new extensions of shift‐share analysis: the productivity and output model and the international trade model. We also review a general limitation of these and other shift‐share‐type models with respect to the interaction between reference area and the region. A possible solution to this limitation is presented. The new extensions provide better insights about the regional economy but that benefit occurs at a cost. The cost is careful consideration and compensation where relatively large regions or sectors are central to the shift‐share assessment. The extensions are important in addressing earlier problems with the shift‐share approach. Our solution to shift‐share limitation on reference area interaction is vital if the method is to be extended to these multiple environments.     

The Impact of Output and Productivity Changes on Manufacturing Employment

Traditional univariate shift-share studies of employment provide an unreliable indicator of the relative performance of a region or an industry for they fail to separate the effects of output and productivity change on the demand for labor. An extended shift-share model is proposed that overcomes this weakness and permits identification of different processes of regional development. This model is used to investigate annual employment change in twenty (two-digit SIC) manufacturing industries in nine census regions of the U.S. between 1950 and 1986. The timing and depth of the exodus of manufacturing jobs from the snowbelt to the sunbelt is illustrated along with the business cycle performance of industries and regions. Productivity growth in the sunbelt is positively associated with rapid output expansion, whereas in the snowbelt it is associated with the loss of market share and economic rationalization.     

Integrating Firm Dynamics into the Shift‐Share Framework

ABSTRACT This article integrates firm birth and death data into a shift‐share analysis framework. The proposed methodology can be used when data availability does not allow for the direct association of employment changes to business demographics at the regional level. It may be also used as an exploratory step before any explanatory econometric work is undertaken as a means of identifying classes of potential control variables. Applying the method to Greek data suggests that firm‐size heterogeneity should not be ignored, that local conditions matter more than regional economic structure, and that the latter are asymmetrical across sectors when it comes to the effects of business demographics on regional employment or output growth.     

The elusive quest for balanced regional growth from Barlow to Brexit: Lessons from partitioning regional employment growth in Great Britain

The British Government’s economic strategy for post‐Brexit Britain of achieving balanced regional growth by “driving growth across the whole country” echoes the objectives set by the Barlow Report of 1940. The regional policies that followed the Barlow Report were heavily influenced by papers written for the Commission by G D A (later Sir Donald) MacDougall. The first of these papers was included as an appendix to the report itself and introduced the shift‐share methodology to the analysis of regional employment growth, and subsequently shown to be flawed. The second paper considered the urban hierarchy and growth but was never fully developed. Consequently post‐war regional policy focussed on the contribution of industrial structure to employment growth without fully taking into account the urban hierarchy or regional locations of that employment. This article replaces the flawed shift‐share methodology with multifactor partitioning (MFP) and applies it to regional employment growth for the period 1971‐2012, a span of special interest because it largely coincides with British membership of the European Union (EU). The deficiencies in the second paper are addressed by introducing allometry to measure the employment growth of each region relative to that of Great Britain and then regression analysis to relate the allometries to distance from London. The results of the two sets of analyses highlight the need for a multiple‐factor, comprehensive, and integrated approach to regional policy and provide a benchmark against which to gauge the success of Britain's post‐Brexit policy of driving future growth across the whole country.     

The Successful Transition to a Knowledge‐Based Development Path of a Less‐Developed Region

This paper presents the case of a less‐developed EU region—the Pomeranian region of Poland—that is, an example of the successful transformation from a command to market economy and the creation of a new knowledge‐based development path thanks to the upgrading of its innovation model. This successful transformation was based, in part, on the region's specific innovation policy and the activities of pro‐innovative institutions; however, other factors were also important such as the diversified structure of the region's economy. New knowledge‐based industries have developed in the region, while the potential of traditional industries that have gone through a restructuring, has been maintained. The factors that existed prior to the innovation model's transformation included such aspects as the high quality of human and social capital, a strong academic center, a high quality of life, and an open economy and society. Supply factors in the form of qualified personnel were crucial for the growth of employment in new industries and R&D that determined the improvement of the regional GDP per capita. Moreover, the transition to a knowledge‐based economy stimulated an increase in the concentration of population in the metropolitan area of Tri‐City.     

A Note on Localization and Specialization

ABSTRACT Analysts and policy makers frequently measure industrial localization and regional specialization. However, they rarely examine the nation's full array of industries or regions. So local indices, appropriate for specific industries or selected regions, are typically estimated. But in some instances global indices would be preferable in order to assess the wider features of the entire space‐economy. This article constructs global indices from the local indices already used in assessing localization and specialization. Global localization and global specialization are shown to be identical when all local indices use the dissimilarity logic. Two‐digit standard industry codes manufacturing data, taken from the U.S. during 1958–1995, are used to illustrate the results. The values of these global coefficients, like their local constituents, are shown to vary with geographic scale. The discussion addresses spatial distributions (evenness) but not geographic arrangements (clustering).     

Improving Local Manufacturing Employment Forecasts Using Cointegration Analysis

Procedures for tracking and forecasting economic conditions in regional economies have evolved significantly over the last 30 years. Much of this evolution has followed developments in macroeconomics, where techniques for tracking/forecasting key economic variables have tended to originate. This technique adoption and adaptation process continues today, as developments in the technique adoption and adaptation process continues today, as developments in the modeling of cointegrated macroeconomic time series have begun to appear in the regional modeling and forecasting literature. This paper presents an effort at modeling a segment of a regional economy using the cointegration testing procedures suggested by Johansen and Jusilius (1990) to develop a forecasting model for manufacturing employment in Milwaukee, WI. The paper demonstrates how Vector Error Correction (VEC) modeling can lead to gains in the accuracy of local manufacturing employment forecasts relative to more traditional VAR models in either levels or first-differenced form. In the process, it demonstrates procedures for developing a relatively simple VEC model that reveals something about the structure of the local manufacturing sector, including possible linkages to the national economy. This information can assist local policy makers in anticipating and adapting to business cycle-related fluctuations in this critical sector of the local economy.     

Creativity and Inequality: The Dual Path of China's Urban Economy?

Utilizing Chinese data for the years of 1998, 2000, 2005, and 2008, this research traces the growth of the creative economy and the enlarging income inequality in China's urban economy. While the creative sector now makes up close to 30 percent of China's urban private employment, industry‐based earnings disparity has also increased substantively. Provinces with larger creative economy also tend to have higher level of wage inequality among workers of the creative sector, the working sector, and the service sector. Several other factors, especially internal migration flow, size of manufacturing, and ownership structure in local economy, are found to be significantly linked to inequality as well.     

The Spatial Dimension of Trade‐ and FDI‐driven Productivity Growth in Chinese Provinces: A Global Cointegration Approach

This paper analyses the major determinants of long‐ and short‐run labour productivity evolution for Chinese provinces between 1978 and 2010. The role played by openness to trade and foreign direct investment (FDI) constitutes the main focus of this analysis. From a methodological perspective, our main contribution is the inclusion of spatial effects into a dynamic error correction modelling framework. The results show that, in addition to domestic factors such as investment intensity and infrastructure use, trade openness and inward FDI also exert a direct impact on labour productivity. Furthermore, the geographical environment has a strong indirect influence on productivity: The more a region is surrounded by high‐productive regions with good infrastructure and linkages to the world economy, the higher are its productivity level and growth rate. The magnitude of these impacts varies by spatial regime (coastal, interior provinces) and time period in focus. Especially in the recent past, trade and FDI activity appear to be increasingly important drivers of regional productivity evolution, both for coastal and interior regions. These findings have important policy implications: In order to fully exploit the benefits from such spillovers, coordinated industrial policies which foster regional complementarities and support the free movement of production factors across regional borders are crucial.     

Overview: Restructuring Chinese space in the new millennium

This collection is concerned with understanding the nature of China’s spatial development during the transition to a socialist market economy. It does so primarily by questioning the applicability of the ‘desakota’ model and extended metropolitan region (EMR) concept to the contemporary Chinese space economy. Yu Zhu’s contribution extends the ‘desakota’ model by applying it to rural areas without the attraction of large cities. Wing‐Shing Tang and Him Chung’s contribution discusses illegal land use and construction to highlight the rural‐urban transition’s negative and disintegrative aspects glossed over by the ‘desakota’ model, which stem from the extension of urban administration to former rural areas and the redistributive effects of land use reform. Andrew Marton sees the original ‘desakota’ model being rejuvenated by introducing the notion of rural agglomeration, a clearer recognition of local administrative structures and an appreciation that development issues now take place within a global‐local framework. George Lin explores the lingering effects of rural origins on Chinese identity and how this affects subsequent social and commercial groups within the Chinese diaspora. Peter Rimmer and Claude Comtois show how changes in China’s transport and telecommunications industry underlie, to a significant degree, the restructuring of China’s space economy and the country’s links to the rest of the world. Overall the contributions highlight that a new consensus will be required for any revised model of the Chinese space economy if this is to provide guidance for planners engaged in restructuring Chinese space in the new millennium.     

A New Shift‐Share Method

Shift‐share analysis is a decomposition technique widely used in regional studies to quantify an industry‐mix effect and a competitive effect on the growth of regional employment (or any other relevant variable) relative to the national average. This technique has always been subject to criticism for its lack of theoretical basis. This paper presents a critical assessment of the methods suggested by Dunn and Esteban‐Marquillas and proposes a new shift‐share method, which separates out the two effects unambiguously. By way of illustration, we provide an application to manufacturing employment in the Belgian provinces between 1995 and 2007.     

Industrial Structure and the Sources of Agglomeration Economies: Evidence from Manufacturing Plant Production

The impacts of agglomeration and local industrial structure are examined through an analysis of establishment‐level productivity. Using micro‐level data, measures of regional industrial specialization, economic diversity, and industrial competitive structure are incorporated together into a production function system estimated cross‐sectionally for three years and three manufacturing industries in the U.S. The findings demonstrate the importance of the influences of regional industrial competitive structure and diversity on performance.     

Regional Growth Dynamics in the Service Sector: The Determinants of Employment Change in UK Regions, 1971–2005

There is a need to better understand the dynamics relating to the evolving economic structure of regions, in particular factors concerning deindustrialisation and the growth of services. In order to unpick the dynamics relating to contemporary regional evolution, this paper examines regional employment in the UK's services sectors from 1971 to 2005. The analysis utilises the statistical technique of multi‐factor partitioning to examine the evolutionary dynamics of employment change in the UK service sector. Overall, differing growth trajectories in services employment across regions appear to be the result of the different underlying industrial structures observed within the regions themselves. The findings indicate that the industrial structure of a region has a significant influence on employment change in services, with related variety being of greater consequence than specialisation. This suggests that diversity, or urbanisation, effects have a greater influence than specialisation effects on “lighter” industries than “heavier” industries. Spatio‐temporal variations within the development of services are evident in the analysis, and there is evidence of convergence across the regions for all sub‐sectors examined. It concludes that in an increasingly services‐dominated economy, diversity and related variety have some weight in explaining regional development paths.     

近年来新疆第二产业内部结构的时空变化特征分析——基于分行业就业人口分布的实证研究

新疆地域广阔,受各地州市自然基础、资源禀赋、历史文化等条件差异的影响,第二产业内部各行业地区差异较大,就业人口分布也不均衡。本文利用2000-2011年新疆分行业就业人口统计数据、行政区划面积和行政区划图等资料,采用地统计学、时间序列分析方法,结合GIS、Geoda空间分析工具,对新疆第二产业内部的空间结构特征和时序变化特征进行了分析,结果表明：①新疆第二产业内部各行业具有独特的形态分布。2011年新疆第二产业内部采矿业,制造业,电力、热力、燃气及水生产和供应业,建筑业分别呈现出两个独立中心-外围结构、两个“C” 型结构、“一轴两翼”结构、和“一”字型结构;②2011年新疆第二产业内部存在空间集聚现象,行业和地域分布不同。阿克苏地区、喀什地区是采矿业、制造业显著聚集的区域,阿克苏地区是电力行业显著聚集的地区。③2000-2011年期间新疆第二产业内部不同行业之间比重有较大的差别,采矿业和电力行业对第二产业内部结构的变动起着重要的作用。     

Globalization and Regional Change in the U.S. Furniture Industry

ABSTRACT Furniture manufacturing has experienced rapid globalization in recent years. This is mainly the result of global production networks established by large manufacturers and retailers seeking to reduce costs in a highly competitive environment. The industry's globalization has been facilitated by technological innovations and the global reduction of trade and investment barriers. In the U.S., furniture‐producing regions are experiencing tumultuous change. Growing numbers of firms are outsourcing production to China, which is now responsible for about half of all U.S. furniture imports. Employment levels have plummeted. However, an analysis of spatial patterns of employment, output, and capital investment in U.S. furniture manufacturing shows that regional change is not uniform. Southern regions characterized by larger firms specializing in wooden case goods production have been especially vulnerable to job loss.     

Global Markets and the Role of Geographical Proximity in Mexico's Employment Growth

In the context of greater economic integration with global markets and structural economic reforms, this paper analyses regional and sectoral employment growth dynamics in Mexican states between 2004 and 2014. The methodology is based on spatial shift‐share analysis that explicitly considers interregional interactions in employment while assessing potential spillover effects arising from spatial interactions among states and industrial sectors. The results suggest a competitive effect from some industries—such as those related to science and specialized suppliers, intensive scale industries and dominated providers—which led to the formation of industrial corridors of neighboring states that connect the central region with the northeast region of the country. It was also found that proximity to states such as Nuevo Leon, Queretaro, Guanajuato, San Luis Potosi, and Puebla has positively influenced neighboring states in terms of employment growth rates. The results also support the argument of some sort of de‐concentration of economic activity in the capital, Mexico City, toward neighboring states.     

Spatial Clusters in EU Productivity Growth

In the last year, a central issue in regional economic growth debate has been represented by the empirical analysis of Verdoorn's law related to the long‐term dynamic relationship between the rate of growth in output and the productivity growth due to increasing returns. Several papers have tested Verdoorn's law on European countries as well as many other world economies. Recently, attempts have been made to provide foundations for a spatial version of the original law specification. The main contributions were dedicated to the inclusion of spatial dependence in the economic model. Surprisingly, in the literature on Verdoom's law the analysis of the spatial heterogeneity is not often considered. The aim of this paper is the regional analysis of the spatial dependence and heterogeneity in Verdoorn's law, identifying spatial regimes that can be interpreted as clusters of productivity growth in European regions at NUTS 2 level. To pursue this objective, an optimization algorithm for the identification of groups is used. This constitutes a modified version of Simulated Annealing.