Flaws and myths in the case for Scottish fiscal autonomy

Paper argues that some of the claimed advantages of fiscal federalism "may not be as robust as asserted by its proponents". The incentive of retained tax revenues would be no greater under fiscal autonomy than under forms of fiscal federalism or decentralisation. It is an assumption that the return of higher tax revenues would provide an incentive to Scottish politicians to promote growth. "There is a lack of empirical evidence that the pursuit of higher revenues and expenditure is a paramount concern for sub central governments." The case for fiscal autonomy implies that local politicians are forward-looking and have low time discount rates, "not a characteristic normally associated with the practice of politics"

A distinctive energy policy for Scotland?

This paper explores the emergence of a distinctive energy policy for Scotland and raises the issue of the desirability of any differentiation from UK energy policy. This requires an examination of both UK and Scottish energy policies, although we adopt a rather broad-brush overview rather than a very detailed analysis

Attribution of pollution generation to local private and public demands in a small open economy: results from a SAM-based neo-classical linear attribution system for Scotland

For the construction of environmental accounts, Input Output (IO) systems have a number of clear advantages. First IO is an internally consistency, rigorous accounting framework. Second, the characteristics of IO systems are well known. Third, IO systems focus on the link between intermediate and final demands, and can attribute the indirect, intermediate use of commodities to elements of final demand. However, there are concerns over the degree of appropriateness of the standard IO attribution approaches (McGregor et al, 2001a). If standard Type I output-pollution multiplier, especially in the case of a very open economy such as Scotland, responsibility for much pollution can be attributed to external sources of demand. Furthermore, when Type II output-pollution multipliers are utilised, local private consumption virtually disappears as a pollution source. This seems to be at variance with the common environmental approach, which would wish to place domestic consumption at the centre of pollution attribution

The demographic challenge facing Scottish HEIs: a computable general equilibrium analysis

This paper measures the regional demand impacts on output and employment of Scottish Higher Education Institutions (HEIs) based on Input-Output tables for the year 2006. The HEI disaggregated table was developed from existing Input-Output tables using supplementary data from HESA and purchasing data for Scottish universities. We calculate direct, indirect and induced impacts. Most of the existing literature focuses on individual institutions by employing Keynesian Multiplier or Input-Output analysis. This paper adds to the literature by providing the first systematic study of all individual HEIs using a common framework of analysis. The results suggest that HEIs may have substantial regional economic impacts both in terms of output and employment. Furthermore analysis of the HEIs' income sources suggests they are more export intensive than is commonly acknowledged, which motivates a re-evaluation of the appropriate counterfactual in regional impact studies of HEIs. Keywords: HEIs, University Impact, Input-Output

Impact of HEIs on the Scottish economy: new evidence from an HEI-disaggregated input-output approach

This paper measures the regional demand impacts on output and employment of Scottish Higher Education Institutions (HEIs) based on Input-Output tables for the year 2006. The HEI disaggregated table was developed from existing Input-Output tables using supplementary data from HESA and purchasing data for Scottish universities. We calculate direct, indirect and induced impacts. Most of the existing literature focuses on individual institutions by employing Keynesian Multiplier or Input-Output analysis. This paper adds to the literature by providing the first systematic study of all individual HEIs using a common framework of analysis. The results suggest that HEIs may have substantial regional economic impacts both in terms of output and employment. Furthermore analysis of the HEIs' income sources suggests they are more export intensive than is commonly acknowledged, which motivates a re-evaluation of the appropriate counterfactual in regional impact studies of HEIs. Keywords: HEIs, University Impact, Input-Output

Three and Four Region Multi-sector Linear Modelling Using UK Data : Some Preliminary Results

Scotland and Wales have relatively up-to-date, independently generated, IO tables. These can be separated out from a UK national IO table to construct an inter-regional table. We therefore undertake the detailed analysis at this three-region (Scotland, Wales and the Rest of the UK (RUK)) level, where the Rest of the UK is England and Northern Ireland. However, we also construct a more rudimentary four-region (Scotland, Wales, England and Ireland) set of IO and SAM accounts by constructing a separate Northern Ireland accounts. The inter-regional IO and SAM models are produced for the year 1999. This was determined by the availability of consistent data. In Section II we describe the construction of a three-region Input-Output model for the United Kingdom, which includes the regions of Scotland, Wales and the Rest of the UK (RUK). In Section III we extend the three-region model to construct an inter-regional Social Accounting Matrix. Section IV reports some results using the three-region IO and SAM models. In Section V, we generate a four-region IO and SAM model for the UK, which disaggregates Northern Ireland from the Rest of the UK, and provide some results using the four-region IO and SAM models. Section VI offers our conclusions

Is devolution good for the Scottish economy? A framework for analysis

This briefing sets out a framework for addressing the question: Is devolution good for the Scottish economy? We are currently implementing the approach and shall report the results in due course. We begin with two observations. Economic issues were clearly not the sole, or even the primary, motivation for Scottish devolution. However, given the current priority given to the decentralised delivery of policies to improve productivity the effect is of considerable interest. Devolution being 'good for the Scottish economy' is not necessarily the same thing as being 'good for the Scottish people'. If, for example, Scotland wanted to become 'greener', this could imply a desire for slower growth than in the rest of the UK. We set out below the aggregate effects and the specific mechanisms through which devolution might be expected to impact on the economy

An extension and application of the Leontief pollution model for waste generation and disposal in Scotland

Solid waste generation, treatment and disposal are important policy concerns for the Scottish Parliament. As a result of the Environment Act 1995, a National Waste Strategy for Scotland was introduced with the general aim of reducing the amount of waste produced and dealing with what is produced in more sustainable ways. This implies the need for an empirical framework to inform policymakers regarding the relationship between economic activity and waste generation, treatment and disposal and the likely impacts of any policy actions or other disturbances on all types of sustainability indicators. In this paper we report on a study to develop an extended input-output (IO) system of the type originally proposed in the seminal paper by Leontief (1970). This involves extending the standard IOaccounts to take account of pollution or waste generation as an additional output accompanying production and consumption activities in the economy and of the activity required to clean up (or prevent) these unwanted outputs. The extension of IO tables to take account of pollution/waste generation is relatively widespread in the literature. It is usually achieved through the introduction of physical pollution/waste-output coefficients, and has been previously applied to Scotland for the case ofair pollution (see McNicoll & Blackmore, 1993, McGregor et al, 2001). Such an approach allows us to examine the impact of the economy on the environment, in terms of the amount of pollution/waste emitted as a result of economic activity. However, it does not allow us to track the feedback from the environment to the economy in terms of the resources used in environmental cleaning. If we areinterested in this aspect, we need to identify the input structure of any pollution abatement or waste disposal activities and identify columns in the IO tables representing cleaning activities

The national impact of regional policy : policy simulation with labour market constraints in a two-regional computable general equilibrium model

The first step in a comprehensive evaluation of regional policy is to identify its full spatial impact. This involves two tasks. The first is to determine the form and strength of inter-regional linkages. The second is to specify the national constraints within which the system of regional economies operates. In this paper we use simulation results from a two-region Computable General Equilibrium (CGE) model of Scotland and the rest of the UK (RUK) to investigate these issues. The inter-regional linkages incorporate trade and income flows, inter-regional capital mobility and migration. The constraint that we focus on is an overall national population constraint and its impact on regional wage determination. The paper is structured in the following way. Section 2 outlines the AMOSRUK modelling framework. Section 3 describes the alternative labour-market model configurations used in the simulations. Section 4 reports the results for the model simulation and Section 5 is a short conclusion

The Richard commission and the financing of devolved government : the economics of devolution in Wales: Briefing No. 8

If the Barnett formula is rigorously applied to determine the budget of the Welsh Assembly Government, this will ultimately adversely affect the economy of Wales by limiting the growth in aggregate demand. This effect is reinforced now that population weights determining rises in expenditure in Wales (and Scotland and Northern Ireland) are regularly up-dated. There is some controversy in Wales about whether some form of needs-assessment exercise would favour Wales relative to its current position. What is clear is that the outcome of a rigorous, long term application of the Barnett formula would be a share of UK public expenditures in Wales (and Scotland and Northern Ireland) that was almost certainly below the level that would be dictated by any conventional understanding of 'needs'. The impact of the tax-varying power favoured by the Richard Commission is ambiguous, with the direction of effects dependent on the reaction of the current labour force and potential migrants. If workers insist on full compensation for loss of income to tax through a rise in gross wages a tax rise would lead to an economic contraction. However, if workers value the additional public services financed by the tax rise as equal to their loss of disposable income, this effect can be avoided. Much in other words would depend on how the proceeds of the tax rise were spen