1. REGIONAL ECONOMIC RESILIENCE IN IRELAND - THE ROLE OF INDUSTRIAL STRUCTURE AND INWARD INVESTMENT Dr. Chris van Egeraat Maynooth University, Department of Geography and NIRSA Chairman Regional Studies Association – Irish Branch NIRSA/ESPON Conference: Creating the Regions of Tomorrow Maynooth, 26 September 2014

2. REGIONAL ECONOMIC RESILIENCE IN IRELAND - THE ROLE OF INDUSTRIAL STRUCTURE AND INWARD INVESTMENT Proinnsias Breathnach*, Chris van Egeraat* Declan Curran** *Maynooth University, Department of Geography and NIRSA **Dublin City University Business School

3. Resilience General definition resilience The ability of a body or organism to recover from the application of a disruptive shock of some kind (=equilibrium concept of resilience) Additional Dimensions (Ron Martin) Hysteresis The process whereby external shocks induce structural changes. This means that the economy cannot resume its former configuration. Resistance The ability of a body to resist deformation when an external force is applied.

4. Impact of the Crisis in Ireland Real GDP – Down 9.4% 2007-2010 – Slight recovery in ‘11 and ’12 but slight fall in ‘13 Real GNP – Down 10.3% 2007-2010 – Continued to fall in 2011. Recovery in ‘12 and ‘13 Employment down 14.5% 2008-2012 Unemployment rate up threefold to 14.4% 2007- 2012, falling since to 11.8% March 2014 Construction employment down 64% 2007-2012 – Spinoff impacts on labour-intensive services Exports fall slightly 2008, 2009 but strong recovery 2010-2012

5. Data and Methodology Analysis of employment in state-assisted firms Mainly exporting or import-substituting Data extracted from Forfás database for 2001, 2006, 2011 Refers to where workers work rather than where they live “The regions and localities we study are rarely functionally meaningful economic entities, but instead are often demarcated—for data collection, administrative or political reasons—along somewhat arbitrary lines.” (Martin, 2012, 13-14) Analysis here based mainly on functional regions (Regional Fields) defined mainly from commuting data.

6. Figure 1 Regional Fields

7. Methodology Exercise 1: Descriptive statistics and indexes Exercise 2: Ray-Srinath shift-share model

8. Exercise 1 - Sectoral/Regional Categories Comparing employment change 2001-’06 and 2006-’11 Long-term decline Lost employment in both 2001-2006 & 2006-2011 Long-term growth Gained employment in both periods Recession-sensitive Gained employment 2001-2006 Lost employment 2006-2011

9. Aggregate employment change - client firms Strong fall in employment since 2006 Foreign-owned segment faring better than indigenous segment

10. Sectors in long-term decline (LTD)

11. Sectors experiencing long-term growth (LTG)

12. Employment in “recession-sensitive” sectors (RS) Growth halted by the recession

13. Growth Category and Employment Change 06-11 Link between employment performance and 2006 sectoral mix Regions with low rates of Long-term Decline (LTD) and high rates of Long term Growth (LTG) experience low rates of employment decline Cork Anomaly related to Apple and EMC (no longer electronics manufacturing)

14. Table 10 EMC Cork Functions

15. The BVEC Index BVEC Resistance index. R = 0.64 with Cork and 0.79 without Cork BVEC Resilience index R = 0.69 with Cork and 0.85 without Cork

16. Some indication of a link between foreign presence and employment performance Cork Dublin and Galway among four regions with highest proportion in foreign firms At the same time, Limerick has the second worst performance (Dell effect) Correlation coefficient excluding Limerick is 0.74 Foreign firm share of employment in state-assisted firms 2006

17. Growth performance of sectors dominated by foreign/Irish firms (70%+) Of the 5 foreign dominated sectors, 3 fall in the LTG category Of the 9 Irish dominated sectors, 5 fall in the LTD category, with three in RS and one in LTG Some evidence that foreign firms tend to be found in more robust sectors, but the relationship between the two is by no means clearcut.

18. Shift-Share Employment Analysis Assess regional employment growth, by decomposing growth in three components – National-growth component: points to growth that would have occurred in the region had grown by the national rate – Industry-mix component: – the effect of the existing industrial structure on regional growth – captures the growth that would have occurred if the growth displayed by the existing regional industries matched that exhibited by the same industries nationally – Regional component (the residue): attributes regional growth to the dynamism or competitiveness of of the region. = location (dis-)advantages of industries in a region

19. Ray-Srinath shift-share model Traditional approach ignores possibility of industry-region interaction effects and how this can affect both the industry-mix and the regional share components Ray-Srinath model addresses this Industry-mix component is unpacked into a ‘pure’ industry-mix component and an allocation effect component Regional component is unpacked into a ‘pure’ regional effect and a region-industry interaction effect – Pure regional effect: reflecting region-specific factors that influence all industries equally – Interaction effect: location advantages of a given region for each particular industry which apply over and above the pure regional effect

20. Shift-share 06-11 - All Firms

21. All regions except Dublin were negatively impacted by an unfavourable industry-mix component – (Dublin has a concentration of national high-growth sectors) For other regions the negative impact of industry-mix component was variable – Ranging from -11.5 in the Midlands to -3.0 in Tralee ‘Pure’ regional effect rate (reflecting region-specific factors that influence all industries equally – Particularly strong positive effect in Cork and Galway – Negative impact in Dublin, Tralee, Limerick and Sligo All regions except Limerick and Sligo are negatively impacted by the region-industry interaction effect (location advantages of a given region for each particular industry which applies above pure regional effect) Combined pure regional / region-industry interaction effect greatest for Limerick (-12.6) and positive for Cork, Galway and Waterford

22. Regional Fields 06-11 – By Ownership Irish firms Foreign firms

23. Shift-share 06-11 – By Ownership In 7 of the 10 regions, the industry-mix effect operates in the same direction for the foreign and Irish segments. Cork exhibits a negative industry-mix effect for foreign firms and a positive effect for Irish firms Tralee is the only region with strongly contrasting industry-mix effect rates for foreign and Irish segments Foreign and indigenous firms exhibit strikingly contrasting regional effect rates Strong positive pure regional effect for Cork, identified for all firms, entirely linked to the foreign segment Letterkenny similar results By contrast, positive pure regional effect rate for Waterford, identified in relation to all firms, is entirely linked to the indigenous segment Sligo, Dundalk and Tralee further examples of how pure regional effect rates can exert contrasting influences in the two segments Foreign sector can have a positive as well as a negative effect

24. Conclusions Regional economic resilience in Ireland was the product of a complex set of interacting factors, including regional sectoral structure, regional competitiveness and nationality mix Nationality mix has an important impact on regional performance, but this impact is no clearcut. Foreign sector can have a positive as well as a negative effect on regional performance RSA Irish Branch Conference on Regional Economic Resilience, 2013, Cork Related Publications: – Van Egeraat, C. Breathnach, P. and Curran, D. (2013), Enterprise and labour: hubs, gateways and inter-regional specialisation. Administration, 60(3), 2013, p. 91-115 – NIRSA Working Paper – E-version on request