The Long-Run Consequences of Adverse Economic Shocks: UK Regional and Urban Inequalities

Regional productivity and prosperity underpins national productivity and prosperity. Many parts of the UK appear to be consistently weak on both dimensions and fail to capture many of the benefits of technological change and globalisation that other parts of the country capture. The result is something of an apparent partitioning or decoupling of different parts of the country. 

The extent to which this partitioning takes place also appears to be greater in the UK than in many of our competitor countries, but it is still unclear which aspects of these processes are specific to the UK or reflect international trends. Crucially, this partitioning also acts as a major drag on overall UK productivity, because productivity gains in some regions appear not to transmit to other regions, thereby limiting overall national performance. 

Objectives

This project aims to uncover different aspects of the UK’s interregional divides using a variety of different methodologies. We employ a range of theoretical and empirical approaches in order to capture different dimensions of the productivity and performance gaps evident across the UK and our project contains two main strands of research. 

Our research examines the long-run adjustments to adverse shocks, asking analytically, why is it the case that certain places are left behind? Many places in the UK have experienced severe negative employment shocks in the last 50 years, arising largely from changes in trade, technology, and working practices. This study will investigate the mechanisms through which places adjust to such shocks and reasons why, in many cases, adjustment processes appear to have failed such that negative impacts have been persistent. The analytical framework for this strand of work comes from new economic geography (NEG), and the insights it provides concern the possibilities of places being stuck in under-development traps (e.g. Fujita et al 1999) which give rise to persistent divergence. The key mechanism in these models is typically linkages or spillover effects between firms that cause economic activities to cluster, and to create ‘first-mover’ problems in establishing new activities in a place. Such models are often highly stylised, and the work undertaken here will extend these models in order to better describe the economic and social structure of UK regional inequalities. 

The analytical work will be complemented by extensive empirical work examining the impacts of different types of shocks on regions over long periods and the experience of UK regions will also be set in the context of international comparators from various other OECD countries, in order to examine the extent to which the UK experiences of regional convergence and divergence are particular or general. 

Research team

Project website

Project contact details:

Professor Philip McCann (University of Sheffield)

Email: p.mccann@sheffield.ac.uk

Professor Raquel Ortega-Argiles, City-REDI, University of Birmingham

Email: R.OrtegaArgiles@bham.ac.uk

Dr Andre Carrascal-Incera, CityREDI, University of Birmingham

Email: A.Carrascal-Incera@bham.ac.uk

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Funder/client: ESRC – Rebuilding Macroeconomics Network 
Timescale: June 2019-March 2020

CONTACT

Project lead: Philip McCann
Emailp.mccann@sheffield.ac.uk