LSE centre for economic performance: urban renewal and regional growth: muddled objectives and mixed progress

A new series of Election Analyses is now available from the LSE’s Centre for Economic Performance (CEP). The series will discuss the research evidence on some of the key policy battlegrounds of the 2010 General Election, including macroeconomic policy, immigration, health, education, crime, poverty and inequality, labour market policy, regional policy, energy and the environment, financial regulation and bankers’ bonuses, and foreign aid. Since 1997, the Labour government has spent considerable sums trying to narrow the gap between poor areas – neighbourhoods, cities and regions – and the rest. The latest CEP Election Analysis from the Centre for Economic Performance (CEP) considers the evidence on the effects of some of these policy initiatives, with a focus on the role of ‘area-based initiatives’, which try to improve outcomes in particular areas. According to author Professor Henry Overman, the evidence suggests that progress against objectives has been mixed. This is unsurprising: the economic processes that drive differences across cities and regions of the UK are poorly understood and what evidence we do have has played little part in the formulation of policy. As a result, there is confusion about what urban and regional policy could and should try to achieve – and the parties’ positions tend to be based on belief rather than evidence

NHS competition: bad science or bad blogging?

Following yesterday’s post criticising the LSE research that is underpinning the drive towards competition and choice in the NHS, Henry Overman provides a defence of the research findings and questions the extent to which public understanding of the evidence has been enhanced by this exchange

The impact of government grants: employment up, productivity down

Henry Overman reviews new research on the effects of government grants on employment and productivity in the private sector

London’s employment mix and the bank bailouts have helped it avoid the worst of the recession, but things do not look so rosy for the capital’s poor.

When the recession hit many predicted that London would fare the worst. Henry Overman argues that while incomes and employment have contracted in London in the last two years, the capital’s high proportion of professional and service occupations as well as government interventions (including the bank bailouts) have shielded it from the worst of the recession thus far, and has even led to some above average rises in spending.

Can we learn anything from economic geography proper?.

This paper considers the ways geographers (proper) and (geographical) economists approach the study of economic geography. It argues that there are two areas where the approach of the latter is more robust than the former. First, formal models identify which assumptions are crucial in obtaining a particular result and enforce internal consistency when moving from micro to macro behaviour. Second, empirical work tends to be more rigorous. There is much greater emphasis on identifying and testing refutable predictions from theory and on dealing with issues of observational equivalence. But any approach can be improved and so the paper also identifies ways in which geographical economists could learn from the direction taken by economic geographers proper.

Neighbourhood effects in small neighbourhoods.

This paper uses data on a sample of Australian teenagers to test for neighbourhood effects on school dropout rates. The data allows us to test for neighbourhood effects at two different spatial scales. We find that educational composition of the larger neighbourhood can influence the dropout rate. We argue that this is most likely to reflect the structure of local labour market demand. We also find that low socio-economic status of the immediate neighbourhood has an adverse impact on dropout rate. This suggests that government policy may need to consider the socio-economic composition of quite small geographical areas if it considers interfering in the market to create greater income mixing within neighbourhoods.

Mostly pointless spatial econometrics?

We argue that identification problems bedevil most applied spatial research. Spatial econometrics solves these problems by deriving estimators assuming that functional forms are known and by using model comparison techniques to let the data choose between competing specifications. We argue that in most situations of interest this, at best, achieves only very weak identification. Worse, in most cases, such an approach will simply be uninformative about the economic processes at work rendering much applied spatial econometric research ‘pointless’, unless the main aim is simply description of the data. We advocate an alternative approach based on the ‘experimental paradigm’ which puts issues of identification and causality at centre stage

Testing for Localisation Using Micro-Geographic Data

To study the detailed location patterns of industries, and particularly the tendency for industries to cluster relative to overallmanufacturing, we develop distance-based tests of localisation. In contrast to previous studies, our approach allows us to assess the statistical significance of departures from randomness. In addition, we treat space as continuous instead of using an arbitrary collection of geographical units. This avoids problems relating to scale and borders. We apply these tests to an exhaustive UK data set. For four-digit industries, we find that (i) only 51% of them are localised at a 5% confidence level, (ii) localisation takes place mostly at small scales below 50 kilometres, (iii) the degree of localisation is very skewed, and (iv) industries follow broad sectoral patterns with respect to localisation. Depending on the industry, smaller establishments can be the main drivers of both localisation and dispersion. Three-digit sectors show similar patterns of localisation at small scales as well as a tendency to localise at medium scales.localisation, clusters, K-density, spatial statistics

Falling house prices and the case for more housing

Writing in yesterday's Guardian, Larry Elliot suggests that the result in Bradford West was a symptom of the North-South divide. I don't intend to comment on that particular hypothesis but I was struck by his broader point: 'Britain is not alone in having depressed regions, but nowhere else is the problem so big and the desire to fix it so small'

Riots: what next?

With the violence (at least temporarily) under control attention is now turning to the longer run questions raised by this week's rioting. Today I wanted to focus on one aspect of this: to what extent the riots reflect a failure of urban policy and what, if anything, could be done better