Christophe Ernaelsteen (p)

Raquel Ortega-Argiles

Macroeconomic models are one of the tools commonly used by economists to forecast and analyse economic policies. Based on the tradition of Keynesian paradigm, many of them focus on demand side to estimate impacts of policies on the economy through stimulations of final demand (household and public consumption, investment, exports…). Other models incorporate supply-side mechanisms in order to assess effects of policies that target long-term economic growth by improving the development potential of the economy. In the recent literature, two additional features were particularly taking into account in those models, namely the integration of the dynamics in general stochastic equilibrium model (DGSE model) and the incorporation of geographic and spatial regional effects. For example, the HERMIN model (Bradley and al., 1995), the QUEST III model (Ratto and al., 2009), the RHOMOLO model (Brandsma and al., 2015) and the GMR-Europe model (Varga and al., 2018) were developed to study simulating policy scenario in Europe and analysing impacts on the regions of the EU Member States.
The aim of our contribution is to present a preliminary version of a supply-side macro-regional DGSE model for Belgium. The model will integrate sectorial dimension of the Belgium economy and macro-regional input-output dynamics at the level of NUTS2. Particular attention will be given to the most recent regionalization methods. In Belgium, different level of public authorities are in charge of R&D, innovation and human capital development policies. Especially, regional governments finance R&D, federal government subsidize space research and community governments are in charge of education (human capital development). The model will also integrate this particularly features of the Belgium institutions.

Javier Barbero (p), Jorge Díaz-Lanchas, Patrizio Lecca, Giovanni Mandras

Raquel Ortega-Argiles

see extended abstract

Mark Thissen, Frank van Oort, Philip McCann (p), Raquel Ortega-Argilles

Raquel Ortega-Argiles

We analyse the impact of Brexit on the UK and EU regional economies by determining its consequences for the competitiveness of firms. In order to examine the initial impact before substitution of intermediate inputs takes place, our analysis employs a uniquely-detailed and comprehensive dataset which allows us to distinguish between the Brexit-related direct cost/price effects due to a tariff on export markets, the indirect global value-chain cost effects, and the spatial competition effects underpinning regional competitiveness across both the UK and the EU. In order to examine the effects of Brexit on UK and EU on the costs of firms we split the impact into an economic analysis part which examines the sensitivity (in terms of cost elasticities) of regional sectors to tariff barriers, and then a political economy part regarding the different potential Brexit scenarios which may arise relating to both tariff and non-tariff barriers. In this paper we apply the principle of revealed competition between regions (Thissen et al. 2013, Van Oort & Thissen 2017) to the effect of policies (i.e. Brexit) on costs of different industries allowing for both the product competition and the spatial-competition overlaps in a regional industry’s sales markets in European regions and the rest of the world taking value chains into account.

Our analysis demonstrates the adverse competitiveness shocks on the UK are only slightly greater for the largest trade partners in the EU such as the Netherlands, but much greater than for the rest of the EU, and that it is the economically weaker non-core regions of the UK which suffer the most. Moreover, ongoing negotiations on a Brexit treaty may improve the adverse shocks for the economically strong regions, but it will not help the economically weaker regions. We show that even amongst the non-core UK regions, those regions which are relatively stronger face less adverse competiveness shocks than those which are relatively weaker. It is even the case that the stronger regions may have positive competitiveness shocks at the expensive of the economically weaker regions. In other words, Brexit will not only make the core-periphery inequalities across the UK greater, but those core-periphery inequalities which exist within both non-core and core UK regions are also likely to increase. In mainland Europe we see a comparable pattern with a strengthening of the core-periphery structure in several countries due to Brexit and a higher adverse impact on the economic weaker regions.

Andre Carrascal-incera (p), Diana Guiterrez-Posada, Stephan Weiler

Raquel Ortega-Argiles

UK is a country where more than 60% of the population live in regions with a density of 350 inhabitants per square kilometre or over. In the last 15 years (from 2001 to 2017) this urbanization process has continued, showing higher population growth rates for larger and denser agglomerations. Furthermore, in the last 5 years the speed of this process has increased considerably. In the period 2002-2012 the UK’s urban population grew at an annual pace 1.32 times higher than the rural one, accelerating to a pace 2.20 times faster from 2012 through 2017.
There is a set of advantages for why people choose to move to larger cities already studied in the related literature such as higher expected wages, better searching and matching processes linked to a larger labour market, further access to amenities, among others. However, instead of evaluating the causes of urbanization, this paper assesses the main economic consequences of this demographic trend. In particular, we focus on the fact that urban and rural populations clearly differ in their lifestyles and, consequently, in their consumption patterns. According to the Living Costs and Food Survey data of 2017, while urban populations spend significantly more on Housing, Fuel and Power as well as in Clothing and Footwear; rural households spend more on Transport. At the same time, urban regions depend on the primary products and energy produced in rural areas, while cities are mainly specialized in the provision of services. We can further control for differences in levels and sources of income, given divergences in rural and urban regions in terms of wage/salary, and asset-based income flows.
As a first approximation to this issue, we extend the SEIM-UK multiregional model, including different types of households and workers in a Miyazawa fashion, to account for the main employment, output, and value-added effects that urbanization process has on the different 37 UK regional economies.