Abstract
Despite government rhetoric concerning indigenous development, the attraction of foreign direct investment (FDI) remains a central plank of UK regional policy. The majority of studies of the regional impact of FDI concentrate on demand-side effects and use standard Keynesian or input–output multiplier methods.2 However the benefits from FDI are no longer thought to be limited solely to a stimulus to employment from additional demand. Indeed the focus of much recent work, especially at the level of the national economy, has been on supply-side issues, particularly the identification of ‘efficiency spillover’ effects from FDI to the indigenous sector. This issue is considered directly in several of the papers in this volume, with previous research being summarised in the paper by Blomstrom et al. In Gillespie et al. (1998) we argue that the identification of the regional system-wide demand-side effects ofassisted investment should incorporate capacity constraints and labour market displacement. This is not possible with the standard multiplier models. The argument for supply-side modelling holds a fortiori for the identification of the system-wide impacts of efficiency spillovers that operate primarily through changes in relative prices.
This is a preview of subscription content, log in via an institution to check access.
Access this chapter
Tax calculation will be finalised at checkout
Purchases are for personal use only
Preview
Unable to display preview. Download preview PDF.
References
Alexander, J.M. and Whyte, T.R. (1995), ‘Output, income and employment multipliers for Scotland’, Scottish Economic Bulletin, 50, Winter 1994/95.
Armington, P. (1969),‘A theory of demand for products distinguished by place of production’, IMF Staff Papers, 16, pp. 157–78.
Barkley, D.L. and McNamara, K.T. (1993), ‘Local input linkages: a comparison of foreign-owned and domestic manufacturers in Georgia and South Carolina’, Regional Studies, 28, pp. 725–37.
Barrell, R. and Pain, N. (1997), ‘Foreign direct investment, technological change, and economic growth within Europe’, Economic Journal, 107, pp. 1770–86.
Blanchflower, D.G. and Oswald, A.J. (1994), The Wage Curve, Cambridge, Mass., MIT Press.
Blomstrom, M. (1991), Foreign Investment and Spillovers, London,Routledge.
Blomstrom, M. and Kokko, A. (1998), ‘Multinational corporations and spillovers’, Journal of Economic Surveys, 122, pp. 247–78.
Bradley, J., Fitzgerald, J. and Kearney, I. (1993), ‘Modelling supply in an open economy using a restricted cost function’, Economic Modelling, 10, pp. 11–21.
Bradley, J., Whelan, K. and Wright, J. (1995), ‘Hermin Ireland’, Economic Modellings 12, pp. 249–74.
Cantwell, J.A. (1987), ‘Technological advantage as a determinant of the international activity of firms’, University of Reading discussion paper, Series B, no. 105.
Coe, D.T. and Helpman, E. (1995), ‘International R&D spillovers’, European Economic Review, 39, pp. 859–87.
Davies, S.W., and Lyons, B.R. (1991), ‘Characterising relative performance: the productivity advantages of foreign owned firms in the UK’, Oxford Economic Papers, 43, pp. 584–95.
Dervis, K., De Melo, J. and Robinson, S. (1982), General Equilibrium Models for Development Policy, Cambridge, Cambridge University Press.
Enderwick, P. (1985), Multinational Business and Labour, London, Croom-Helm.
Francois, J.F. and Reinert, K.A. (1997), ‘Introduction’, in Francois, J.F. and Reinert, K.A. (eds), Applied Methods for Trade Policy Analysis: A Handbook, Cambridge, Cambridge University Press.
Gibson, H. (1990), ‘Export competitiveness and UK sales of Scottish manufactures’, paper delivered to the Scottish Economists’ Conference, The Burn.
Gillespie, G. (1998), ‘Foreign-owned multipliers: evidence from a Scottish input–output model’, Strathclyde Papers in Economics 98/1, Department of Economics, University of Strathclyde, Glasgow.
Gillespie, G., McGregor, P.G., Swales J.K. and Yin, Y.P. (1998), ‘The displacement and multiplier effects of regional selective assistance: a computable general equilibrium analysis’, Strathclyde Papers In Economics 98/3, Department of Economics, University of Strathclyde, Glasgow.
(2000), ‘The regional employment impact of foreign direct investment: an ownership-disaggregated computable general equilibrium analysis’, Strathclyde Papers In Economics 2000/1, Department of Economics, University of Strathclyde, Glasgow.
Greenwood, M.J., Hunt, G., Rickman, D.S., and Treyz, G.I. (1991), ‘Migration, regional equilibrium, and the estimation of compensating differentials’, American Economic Review, 81, pp. 1382–90.
Haddad, M. and Harrison, A. (1993), ‘Are there positive spillovers from direct foreign investment? Evidence from panel data for Morocco’, Journal of Development Economics, 42, pp. 51–74.
Harrigan, F. and McGregor, P.G. (1988), ‘Price and quantity interaction in regional economic models: the importance of openness and closures’, in Harrigan, F. and McGregor, P.G. (eds), Recent Advances in Regional Economic Modelling, London, Pion.
Harrigan, F., McGregor, P.G., Dourmashkin, N., Perman, R., Swales, J.K. and Yin, Y.P. (1991), ‘AMOS: a macro–micro model of Scotland’, Economic Modelling, 10, pp. 424–79.
Harris, J.R. and Todaro, M.P. (1970), ‘Migration, unemployment and development: a two sector analysis’, American Economic Review, 60, pp. 126–42.
Harris, R.I.D. (1989), The Growth and Structure of the UK Regional Economy 1963–85, Aldershot, Avebury.
Higgs, P.J., Paramenter, B.R. and Rimmer, R.J. (1988), ‘A hybrid topdown, bottom-up regional computable general equilibrium model’, International Regional Science Review, 11, pp. 317–28.
Hill, S. and Roberts, A. (1995), ‘Inward investment, local linkages and regional development’, paper presented at the Regional Science Association, British and Irish Section, Annual Conference, 13–15 September 1995, Cardiff Business School.
HM Treasury (1995), A Framework for the Evaluation of Regeneration Projects and Programmes, London, HMSO.
Hubert, F. and Pain, N. (1999a), ‘Inward investment and technical progress in the United Kingdom’, paper presented at European Association for Research in Industrial Economics Annual Conference, Turin, September.
(1999b), ‘Foreign direct investment, spillovers and technical progress in the UK’, paper presented at the Money, Macro and Finance Research Group Annual Conference, Oxford, September.
Jones, R. and Whalley, J. (1988), ‘Regional effects of taxes in Canada, an applied general equilibrium approach’, Journal of Public Economics, 37, pp. 1–28.
Kay, N.M. (1991), ‘Multinational enterprise as strategic choice: some transaction cost perspectives’, in Pitelis C. and Sugden R. (eds,), The Nature of the Transnational Firm, London, Routledge.
Kimbell, LJ. and Harrison, G.W. (1984), ‘General equilibrium analy sis of regional fiscal incidence’, in Scarf, H.E. and Shoven, J.B. (eds), Applied General Equilibrium Analysis, Cambridge, Cambridge University Press.
Kraybill, D.S. and Lugani, S. (1992), ‘Multiregional computable general equilibrium models: an introduction and survey’, mimeo, Department of Agricultural and Applied Economics, University of Georgia, Athens, GA.
Layard, R., Nickell, S. and Jackman, R. (1991), Unemployment: Macroeconomic Performance and the Labour Market, Oxford, Oxford University Press.
McGregor, P.G., Swales, J.K. and Yin, Y.P. (1996), ‘A long-run interpretationof regional input–output analyses’, Journal of Regional Science, 36, pp. 479–501.
Minford, P., Stoney, P., Riley, J. and Webb, B. (1994), ‘An econometric model of Merseyside: validation and policy simulations’, Regional Studies, 28, pp. 563–75.
Morgan, W., Mutti, J. and Partridge, M. (1989), ‘A regional general equilibrium model of the United States: tax effects of factor movement and regional production’, Review of Economics and Statistics, 71, pp. 626–35.
PA Cambridge Economic Consultants Limited (1993), Regional Selective Assistance 1985–88, London, HMSO.
(1995), Assessment of the Wider Effects of Foreign Direct Investment in Manufacturing in the UK, London, HMSO.
Partridge, M.D. and Rickman, D.S. (1998), ‘Regional computable general equilibrium modeling: a survey and critical appraisal’, International Regional Science Review, 21, pp. 205–48.
Peck, F. (1990), ‘Nissan in the North East: the multiplier effects’, Geography, 75, pp. 354–7.
Phelps, N.A. (1993), ‘Branch plants and the evolving spatial division of labour: a study of material linkage change in the northern region of England’, Regional Studies, 27, pp. 87–101.
Scottish Office Industry Department (1994), Scottish Input–output Tables for 1989, Edinburgh, HMSO.
Shoven, J.B. and Whalley, J. (1984), ‘Applying general equilibrium models of taxation and trade: an introduction and survey’, Journal of Economic Literature, 22, pp. 1007–51.
(1992), Applying General Equilibrium, Cambridge, Cambridge University Press.
Treyz, G.I., Rickman, D.S. and Greenwood, M.J. (1993),‘ The dynamics of US internal migration’, Review of Economic and Statistics, 75, pp. 209–14.
Turok, I. (1993), ‘Forward investment and local linkages: how deeply embedded is Silicon Glen’, Regional Studies, 27, pp. 401–17.
Editor information
Editors and Affiliations
Copyright information
© 2001 National Institute of Economic and Social Research
About this chapter
Cite this chapter
Gillespie, G., McGregor, P.G., Swales, J.K., Yin, Y.P. (2001). A regional computable general equilibrium analysis of the demand and ‘efficiency spillover’ effects of foreign direct investment. In: Pain, N. (eds) Inward Investment Technological Change and Growth. Palgrave Macmillan, London. https://doi.org/10.1057/9780230598447_7
Download citation
DOI: https://doi.org/10.1057/9780230598447_7
Publisher Name: Palgrave Macmillan, London
Print ISBN: 978-1-349-42518-1
Online ISBN: 978-0-230-59844-7
eBook Packages: Palgrave Economics & Finance CollectionEconomics and Finance (R0)