What to do in a crisis? Vassilis Tselios Centre for Urban and Regional Development Studies University of Newcastle upon Tyne 8 th European Week of Regions and Cities Brussels 4-7 October 2010

Introduction Global economic crisis feature of globalised capital markets spatial dimension: spillover effects (i.e. trade linkages, financial market linkages) past experience: Mexican crisis of , Asian crises of Aim: to look at the factors determining a regions particular response to the crisis determinants of regional economic development equity vs efficiency an effective regional action

Structure of the presentation 1.Factors determining regional economic development 2.Regional economic policy 3.An effective regional action 4.Conclusion

1. Factors determining regional economic development: internal factors First nature of geography: refers to the inherent virtue of specific regions natural characteristics interaction between economic agents and nature i.e. climatic conditions have pervasive effects on agriculture Second nature of geography: emphasises the efficiency gains from proximity interaction between economic agents i.e. advantageous for firms to be where many other firms are Complementarities

1. Factors determining regional economic development: external factors Spatial dependence: interregional externalities interdependence between regions there are similarities between neighbours i.e. productivity growth in a particular region may depend on productivity growth in neighbouring regions National factors: national externalities i.e. allocation of public expenditures Supra-national factors: European and global externalities i.e. climate change; monetary policy

2. Regional economic policy Intervention in internal factors first nature of geography (i.e. innovation in energy production and use) second nature of geography (i.e. improvement in transport infrastructure) Intervention in external factors spatial dependence (i.e. regional economic policy of the neighbouring regions) national factors (i.e. decentralisation, welfare state) supra-national factors (i.e. European economic policy)

2. Regional economic policy Equity: fairness, good distribution of income Efficiency: goods are distributed to the people (regions) who can gain the most utility from them Equity question: Within-region inequality: Who are advantaged and who disadvantaged? Between-region inequality: Which regions are advantaged and which disadvantaged? Efficiency question: Within-region inequality: Does the market deliver the optimal degree of within-region inequality? Between-region inequality: Does the market deliver the optimal degree of unevenness? Is there a trade-off between equity and efficiency?

2. Regional economic policy In a period of economic crisis: If the aim is equity … Convergence: regions diverge in periods of boom and converge in period of economic crisis But, threats: low levels of economic development, unemployment, poverty in the long run If the aim is efficiency … Direct and indirect intervention Short-run vs long-run effects Regional and supra-regional effects

3. An effective regional action Indigenous regional action encouraging individuals to develop their business ideas higher participation in tertiary education Exogenous regional action attracting exogenous resources (i.e. FDI and global production networks) Globalising regional development? The more a region is articulated into Global Production Networks, the more likely it is able to reap the benefits of economies of scale and scope in these regions, but the less likely it is able to control its own fate (Coe et al 2004: 475)* * Coe, N., Hess, M., Yeung, H. W-C., Dicken, P. and Henderson, J. (2004) Globalizing regional development: a global production networks perspective, Transactions of the Institute of British Geographers, New Series, 29, 4, Transactions of the Institute of British Geographers

3. An effective regional action to maximize the regions economic potential both top-down and bottom-up approach decisions about the regions where intervention is needed should be taken through co-operation between different tiers of government local regional supra-regional national supra-national to seek alternative development paths the complex interdependencies between regions shapes regional development within regions

4. Conclusions Regions are shaped by internal and external factors Regionally specific institutions Variety of supra-regional institutions Complex circuitry and networks Geographical scale & location matter Equity and efficiency People- and place-base effects Crisis The spread of difficulties from one economy (national/regional/local) to others: contagion The contagion is not random, but it is associated with weaknesses in national/regional economic fundamentals before the crisis