A Tale of Two Divides: Regional Growth and Resilience in Italy and the UK Ben Gardiner, Raffaele Lagravinese, Ron Martin, Pete Tyler This work forms part of a larger project; How Regions React to Recession: Resilience, Hysteresis and Long Run Impacts (ESRC Grant ES/1035811/1).
1. Motivation for the study Study the nature of the North-South regional divide in the United Kingdom and Italy; Understanding the dynamics of long-run growth trends (mostly productivity but also some empl); Considering growth differentials across regions in each country created by current financial crisis and past recessions (GVA and empl); Examine the role played by industrial structure;
North-South Evolutions; Italy and UK compared and contrasted Gonzalez (2010); Is the North-South distinction a relevant policy geography. UK compared and contrasted; In Italy; Barca(2001); New Trends and the Policy Shift in the Italian Mezzogiorno; Malanima (2012); long-term decline; Bryne, Fazio and Piacentino; general lack of TFP convergence. Contrary to conventional wisdom, each region seems to follow its own growth path but importance of convergence; Ascari and Di Cosmo (2004); determinants of TFP in Italian regions and differences between North and South; Dunford and Greco (2007); impact of restructuring (privatisation) on steel companies and regional implications; In United Kingdom; Martin and Tyler (1991), Martin (2008), Martin, 2010, Gardiner et al (2013);
2. Long-run patterns 270 250 Output Level (1971=100) 230 210 190 170 150 Italy UK 130 110 90 Early-80s recessionary shock Early 90s recessionary shock Late 00s recessionary shock 1970 1975 1980 1985 1990 1995 2000 2005 2010
2. Long-run patterns 135 130 Employment Level (1971=100) 125 120 115 110 105 Italy UK 100 95 90 Early-80s recessionary shock Early 90s recessionary shock Late 00s recessionary shock 1970 1975 1980 1985 1990 1995 2000 2005 2010
230 2. Long-run patterns Productivity Level (1971=100) 210 190 170 150 Italy UK 130 110 Early-80s recessionary shock Early 90s recessionary shock Euro launch Late 00s recessionary shock 90 1970 1975 1980 1985 1990 1995 2000 2005 2010
Stereotypical North-South Divides (Italy) 135 North-South Divides - Italy Employment Level (1970=100) 130 125 120 115 110 105 100 North South 95 1970 1975 1980 1985 1990 1995 2000 2005 2010
Stereotypical North-South Divides (UK) 140 North-South Divides - UK Employment Level (1970=100) 130 120 110 100 North South 90 1971 1976 1981 1986 1991 1996 2001 2006 2011
Stereotypical North-South Divides (Italy) Productivity Level (1970=100) 100 120 140 160 180 200 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 year north south
Stereotypical North-South Divides (UK) 190 180 Productivity Level (1971=100) 170 160 150 140 130 120 North South 110 100 1971 1976 1981 1986 1991 1996 2001 2006 2011
Relative Productivity 115 110 105 Relative Productivity (Country = 100) 100 95 90 85 UK North-South Productivity Gap Italy North-South Productivity Gap Italy - North Italy - South UK - North UK - South 80 75 1970 1975 1980 1985 1990 1995 2000 2005 2010
Cumulative Deviations in Italy NUTS1 NUTS2
Cumulative Deviations in UK Above 1pp -1pp to 1pp -7pp to -1pp -9pp to -7pp below -9pp Above 9pp 2pp to 9pp -0.9pp to 1pp -3pp to -0.9pp -6pp to -3pp -9pp to -6pp -12pp to -9pp -14pp to -12pp below -14pp NUTS1 NUTS2
Productivity and Employment Growth Evolutions in UK and Italy Evolution of cumulative productivity and employment growth deviations Highlighting some extremes and segmenting (NUTS2) regions into the four possible quadrants Also noting regions that have shown ability to turn around / shift between quadrants
Cumulative Productivity and Employment by 2011 (Italy) 25 Cumulative Productivity Growth 1980-2011 (relative to national) 20 North 15 South 10 5 0-30 -20-10 0 10 20 30-5 -10-15 -20-25 Cumulative Employment Growth 1980-2011 (relative to national)
Cumulative Productivity and Employment by 2011 (UK)
Productivity vs Employment Evolutions (Italy) Cumulative Productivity Difference (relative to national) Cumulative Productivity Difference (relative to national) itf2 - Molise 25.0 20.0 15.0 10.0 5.0 0.0-20.0-15.0-10.0-5.0 0.0 Cumulative Employment Difference (relative to national) itg1 - Sicilia 7.0 6.0 5.0 4.0 3.0 2.0 1.0 0.0-12.0-10.0-8.0-6.0-4.0-2.0-1.0 0.0 2.0-2.0-3.0 Cumulative Employment Difference (relative to national) Cumulative Productivity Difference (relative to national) 2.0 1.0 0.0-1.0 0.0 5.0 10.0 15.0 20.0 25.0-2.0-3.0-4.0-5.0-6.0-7.0-8.0-9.0 Cumulative Productivity Difference (relative to national) ite3 - Marche 0.0-10.0-5.0-2.0 0.0 5.0 ite4 - Lazio 12.0 10.0 8.0 6.0 4.0 2.0-4.0-6.0 Cumulative Employment Difference (relative to national) Cumulative Employment Difference (relative to national)
Productivity vs Employment Evolutions (UK) Cumulative Productivity Difference (relative to national) Cumulative Productivity Difference (relative to national) ukg3 - West Midlands 14.0 12.0 10.0 8.0 6.0 4.0 2.0 0.0-30.0-25.0-20.0-15.0-10.0-5.0 0.0-2.0 Cumulative Employment Difference (relative to national) ukd5 - Merseyside 0.0-40.0-30.0-20.0-10.0 0.0-10.0-15.0-20.0 Cumulative Employment Difference (relative to national) 5.0-5.0 Cumulative Productivity Difference (relative to national) Cumulative Productivity Difference (relative to national) ukj1 - Berkshire, Bucks and Oxfordshire 10.0 8.0 6.0 4.0 2.0 0.0-2.0 0.0 10.0 20.0 30.0-4.0-6.0-8.0 Cumulative Employment Difference (relative to national) 0.0-1.0 0.0 5.0 10.0 15.0 20.0 25.0-2.0-3.0-4.0-5.0-6.0-7.0-8.0-9.0 ukh1 - East Anglia Cumulative Employment Difference (relative to national)
Summary of Regional Evolutions Northern Regions Southern Regions Country Quadrant 1 (high prod vs high empl) Quadrant 2 (low prod vs high empl) Quadrant 3 (low prod vs low empl) Quadrant 4 (high prod vs low empl) Italy itc4 itd1+2, itd3, itd5, ite1, ite2, ite4, itc1, itc2, itg1 itc3, itd4, ite3, itf1, itf2, itf3, itf4, itf5, ift6, itg2 UK ukd2, uki1, ukj1, ukj2, ukj3 ukm5, ukm6 uke2, ukf2, ukf3, ukg1, ukg2, ukh1, ukh2, ukh3, ukj4 ukk1, ukk2, ukk3, ukk4, ukl2, ukn ukc1, ukc2, ukd1, ukd3, ukd4, ukd5, uke1, uke3, uke4, ukf1, ukl1, ukm3, ukg3, uki2, ukm2, Turnaround regions? itd5, ite1, ite3, uki1, ukj1, ukj2, ukj3
3. The Role of Industrial Structure Using dynamic shift Share to investigate the role of industrial structure and regional characteristics on long-term national growth differential More formally: = = + + Each of these three components can be expressed as follows: ) ) Where: g = the growth of the variable X over the pre-defined time period (between t+n and t); g n = the national (percentage) growth of variable X during this period, g in = the national (percentage) growth by industry i of variable X during this period; and g ij = the regional (percentage) growth by industry i of variable X during this period.
Contribution of Industry-Mix, and Region-Specific Factors, to Long- Run Relative Output Performance (Italy, 1980-2011) 30 20 Contribution to Cumulative Differential Growth (pp) 10 0-10 -20-30 itc3 (Liguria) itc1 (Piemonte) itc2 (Valle d'aosta/vallée d'aoste) itf5 (Basilicata) ite2 (Umbria) itf2 (Molise) itg1 (Sicilia) itf4 (Puglia) itf6 (Calabria) ite1 (Toscana) itd4 (Friuli-Venezia Giulia) itd5 (Emilia-Romagna) itf3 (Campania) itg2 (Sardegna) itc4 (Lombardia) itf1 (Abruzzo) ite3 (Marche) ite4 (Lazio) itd1 (Provincia Autonoma Bolzano-Bozen) itd2 (Provincia Autonoma Trento) itd3 (Veneto) Region Industry
Contribution of Industry-Mix, and Region-Specific Factors, to Long- Run Relative Employment Performance (Italy, 1980-2011) 30 20 10 Contribution to Cumulative Differential Growth (pp) 0-10 -20-30 -40 itc3 (Liguria) itf4 (Puglia) itf2 (Molise) itf5 (Basilicata) itf3 (Campania) itd4 (Friuli-Venezia Giulia) itc1 (Piemonte) itf6 (Calabria) ite1 (Toscana) itf1 (Abruzzo) itc2 (Valle d'aosta/vallée d'aoste) itg1 (Sicilia) itd5 (Emilia-Romagna) ite3 (Marche) itc4 (Lombardia) itg2 (Sardegna) ite2 (Umbria) itd1 (Provincia Autonoma Bolzano-Bozen) itd2 (Provincia Autonoma Trento) itd3 (Veneto) ite4 (Lazio) Region Industry
Contribution of Industry-Mix, and Region-Specific Factors, to Long- Run Relative Productivity Performance (Italy, 1980-2011) 15 10 5 Contribution to Cumulative Differential Growth (pp) 0-5 -10-15 -20-25 ite4 (Lazio) ite2 (Umbria) itc2 (Valle d'aosta/vallée d'aoste) itc1 (Piemonte) itg2 (Sardegna) itg1 (Sicilia) itd5 (Emilia-Romagna) itc4 (Lombardia) itd1 (Provincia Autonoma Bolzano-Bozen) itd2 (Provincia Autonoma Trento) ite1 (Toscana) itf6 (Calabria) itd3 (Veneto) itc3 (Liguria) itf1 (Abruzzo) ite3 (Marche) itf5 (Basilicata) itd4 (Friuli-Venezia Giulia) itf2 (Molise) itf4 (Puglia) itf3 (Campania) Region Industry
Contribution of Industry-Mix, and Region-Specific Factors, to Long- Run Relative Output Performance (UK, 1980-2011) 60 Contribution to Cumulative Growth Differential (pp) 40 20 0-20 -40-60 ukd5 (Merseyside) ukc1 (Tees Valley and Durham) uke3 (South Yorkshire) ukl1 (West Wales and The Valleys) ukc2 (Northumberland, Tyne and Wear) uke1 (East Yorkshire and Northern Lincolnshire) ukg3 (West Midlands) ukm3 (South Western Scotland) ukd1 (Cumbria) ukd3 (Greater Manchester) uke4 (West Yorkshire) ukd4 (Lancashire) ukf1 (Derbyshire and Nottinghamshire) ukg2 (Shropshire and Staffordshire) ukh2 (Bedfordshire, Hertfordshire) uke2 (North Yorkshire) ukn (Northern Ireland) ukm6 (Highlands and Islands) ukm2 (Eastern Scotland) uki2 (Outer London) ukh3 (Essex) ukj4 (Kent) ukl2 (East Wales) ukd2 (Cheshire) ukf3 (Lincolnshire) ukk4 (Devon) ukf2 (Leicestershire, Rutland and Northants) ukk1 (Gloucestershire, Wiltshire and Bristol/Bath area) ukk2 (Dorset and Somerset) ukj3 (Hampshire and Isle of Wight) ukg1 (Herefordshire, Worcestershire and Warks) ukj2 (Surrey, East and West Sussex) ukh1 (East Anglia) ukk3 (Cornwall and Isles of Scilly) uki1 (Inner London) ukm5 (North Eastern Scotland) ukj1 (Berkshire, Bucks and Oxfordshire) Region Industry
Contribution of Industry-Mix, and Region-Specific Factors, to Long- Run Relative Employment Performance (UK, 1980-2012) 50 40 Contribution to Cumulative Growth Differential (pp) 30 20 10 0-10 -20-30 -40 ukd5 (Merseyside) ukg3 (West Midlands) ukm3 (South Western Scotland) ukc1 (Tees Valley and Durham) ukd3 (Greater Manchester) ukc2 (Northumberland, Tyne and Wear) ukm6 (Highlands and Islands) uke3 (South Yorkshire) ukd4 (Lancashire) ukl1 (West Wales and The Valleys) uki2 (Outer London) uke1 (East Yorkshire and Northern Lincolnshire) ukd1 (Cumbria) ukm2 (Eastern Scotland) uke4 (West Yorkshire) ukf1 (Derbyshire and Nottinghamshire) ukh2 (Bedfordshire, Hertfordshire) uki1 (Inner London) ukd2 (Cheshire) ukj4 (Kent) ukg2 (Shropshire and Staffordshire) ukj3 (Hampshire and Isle of Wight) ukf2 (Leicestershire, Rutland and Northants) ukl2 (East Wales) ukk1 (Gloucestershire, Wiltshire and Bristol/Bath area) ukm5 (North Eastern Scotland) ukj2 (Surrey, East and West Sussex) uke2 (North Yorkshire) ukn (Northern Ireland) ukf3 (Lincolnshire) ukg1 (Herefordshire, Worcestershire and Warks) ukk4 (Devon) ukh3 (Essex) ukk2 (Dorset and Somerset) ukh1 (East Anglia) ukj1 (Berkshire, Bucks and Oxfordshire) ukk3 (Cornwall and Isles of Scilly) Region Industry
Contribution of Industry-Mix, and Region-Specific Factors, to Long- Run Relative Productivity Performance (UK, 1980-2011) 50 40 Contribution to Cumulative Growth Differential (pp) 30 20 10 0-10 -20-30 ukn (Northern Ireland) uke2 (North Yorkshire) ukd5 (Merseyside) ukh3 (Essex) uke3 (South Yorkshire) ukk3 (Cornwall and Isles of Scilly) ukl1 (West Wales and The Valleys) uke1 (East Yorkshire and Northern Lincolnshire) ukg2 (Shropshire and Staffordshire) ukk4 (Devon) ukk2 (Dorset and Somerset) ukf3 (Lincolnshire) ukc1 (Tees Valley and Durham) uke4 (West Yorkshire) ukd1 (Cumbria) ukc2 (Northumberland, Tyne and Wear) ukl2 (East Wales) ukh2 (Bedfordshire, Hertfordshire) ukf1 (Derbyshire and Nottinghamshire) ukh1 (East Anglia) ukk1 (Gloucestershire, Wiltshire and Bristol/Bath area) ukd4 (Lancashire) ukj4 (Kent) ukd3 (Greater Manchester) ukg1 (Herefordshire, Worcestershire and Warks) ukm3 (South Western Scotland) ukd2 (Cheshire) ukf2 (Leicestershire, Rutland and Northants) ukj2 (Surrey, East and West Sussex) ukm2 (Eastern Scotland) ukj3 (Hampshire and Isle of Wight) ukj1 (Berkshire, Bucks and Oxfordshire) uki2 (Outer London) ukm6 (Highlands and Islands) ukg3 (West Midlands) ukm5 (North Eastern Scotland) uki1 (Inner London) Region Industry
4. Assessing Impact of Regions to Recessionary Shocks (for GVA and Empl) Our interpretation is that resilience as a concept captures both resistance to the shock and recovery from it Resistance and recovery indices both calculated the same = [( Xr/Xr) - ( X/X) E ] / X/X E where E = national during recession (-ve growth) or recovery (+ve growth) period zero => no difference to expected (national) effect positive => more resistant / stronger recovery than expected negative => less resistant / lower recovery than expected
Resistance vs Recovery Indices - Italy Output Employment 0.3 1.0 0.2 0.8 0.6 Average Recovery Index 0.1 0.0-3.0-2.0-1.0 0.0 1.0 2.0 3.0 4.0-0.1 North South Average Recovery Index 0.4 0.2 0.0-2.0-1.5-1.0-0.5 0.0 0.5 1.0 1.5 2.0-0.2 North South -0.2-0.4-0.3-0.6-0.4 Average Resistance Index -0.8 Average Resistance Index
Resistance vs Long-Run Growth (Italy) Output Employment 3.0 1.2 1.0 Long-run Growth (%pa, 1970-2011) 2.5 2.0 1.5 North South Long-run Growth (%pa, 1970-2011) 0.8 0.6 0.4 0.2 North South 1.0-3.0-2.0-1.0 0.0 1.0 2.0 3.0 4.0 Average Resistance Index 0.0-2.0-1.0 0.0 1.0 2.0-0.2 Average Resistance Index
Resistance vs Recovery Indices - UK Output Employment 1.5 3.0 2.0 1.0 1.0 Average Recovery Index 0.5 0.0-3.0-2.0-1.0 0.0 1.0 2.0 3.0 4.0 5.0 6.0 North South Average Recovery Index 0.0-1.5-1.0-0.5 0.0 0.5 1.0 1.5 2.0-1.0-2.0-3.0 North South -0.5-4.0-5.0-1.0 Average Resistance Index -6.0 Average Resistance Index
Resistance vs Long-Run Growth (UK) Output Employment 4.0 2.0 3.5 1.5 Long-run Growth (%pa, 1980-2011) 3.0 2.5 2.0 1.5 North South Long-run Growth (%pa, 1980-2011) 1.0 0.5 0.0-1.5-1.0-0.5 0.0 0.5 1.0 1.5 2.0 North South -0.5 1.0-3.0-2.0-1.0 0.0 1.0 2.0 3.0 4.0 5.0 6.0 Average Resistance Index -1.0 Average Resistance Index
5. Summary and Conclusions Spatial divides in Italy and the UK wider in the UK (for employment) clear north-south divergence, but more detail -> more variation Recession and resilience resistance to slowdown and recession is positively associated with ability to recover (moreso for employment) more resilient regions tend to enjoy stronger long-run growth clear north-south spatial patterns emerge Role of economic structure vs competitive effects structure has a role to play but less obvious link to performance regional-specific factors are mostly dominant