An input-output based alternative to 'ecological footprints' for tracking pollution generation in a small open economy

The usefulness, rigour and consistency of Input-Output (IO) as an accounting framework is well known. However, there is concern over the appropriateness of the standard IO attribution approach, particularly when applied to environmental issues (Bicknell et al. 1998). It is often argued that the source and responsibility for pollution should be located in human private or public consumption. An example is the "ecological footprint" approach of Wackernagel and Rees (1996). However, in the standard IO procedure, the pollution attributed to consumption, particularly private consumption, can be small or even zero. Here we attempt to retain the consumption-orientation of the "ecological footprint" method within an IO framework by implementing a neo-classical linear attribution system (NCLAS) which endogenises trade flows. We argue that this approach has practical and conceptual advantages over the "ecological footprint". The NCLAS method is then applied to the small, open economy of Jersey

The macroeconomic consequences of Scottish fiscal autonomy: inverted haavelemo effects in a general equilibrium analysis of the tartan tax

In 1997 the Scottish people voted both for the creation of a legislative Parliament and to endow the Parliament with tax-varying powers. The establishment of the Scottish Parliament in 2000 heralded the most radical innovation in the regional fiscal system in modern U.K. history. This development has been the subject of considerable controversy, however, especially in respect of the decision to afford the Parliament the power to alter the basic rate of income tax by up to 3p in either direction. The fact that Scotland, at least according to official data, receives a substantial net fiscal transfer from the rest of the UK, and has traditionally had higher public expenditure per capita than England, leads most commentators to believe that the power to change the standard rate will, in practice, be restricted to the power to increase it (Blow et al, 1996; McGregor et al 1997). Accordingly, while the Parliament allows the use of the power to generate a balancedbudget contraction in expenditure, we focus here on the impact of a balanced-budget fiscal expansion. While Labour, SNP and the Liberal Democrats in Scotland all supported the introduction of a Parliament with tax-raising powers, the Conservatives labelled this scheme the “tartan tax” and claim that its use would be detrimental to Scotland, leading to a reduction in Scottish employment and to net out-migration. This political controversy, together with the national Labour Party’s desire to shed its reputation as a Party of high taxation, in part accounted for the Scottish Labour Party’s commitment not to exercise the tax-varying power during the lifetime of the first Scottish Parliament, despite the fact that others have meanwhile been vigorously arguing the case for full fiscal autonomy. In this paper we focus primarily on the consequences for the Scottish economy if the Parliament chooses to exercise the degree of fiscal autonomy that it already possesses. However, the factors that govern the likely macroeconomic impact of a balanced budget change also prove critical to the analysis of any region-specific tax or expenditure change, whether generated as a consequence of, for example, rigorous adherence to the Barnett formula (that, at least in principle, governs the allocation of government expenditure to the devolved authorities in the UK, et al 2003, 2007) or movement towards greater fiscal autonomy. Accordingly, we also identify the implications of our analysis for the wider debate on regional fiscal issues in general and greater fiscal autonomy in particular

"Policy Scepticism" and the Impact of Welsh Higher Education Institutions (HEIs) on their Host Region : Accounting for Regional Budget Constraints

This paper replicates the analysis of Scottish HEIs in Hermannsson et al (2010b) for the case of Wales in order to provide a self-contained analysis that is readily accessible by those whose primary concern is with the regional impacts of Welsh HEIs. A "policy scepticism" has emerged that challenges the results of conventional regional HEI impact analyses. This denial of the importance of the expenditure impacts of HEIs appears to be based on a belief in either a binding regional resource constraint or a regional public sector budget constraint. In this paper we provide a systematic critique of this policy scepticism. However, while rejecting the extreme form of policy scepticism, we argue that it is crucial to recognise the importance of the publicsector expenditure constraints that are binding under devolution. We show how conventional impact analyses can be augmented to accommodate regional public sector budget constraints. While our results suggest that conventional impact studies overestimate the expenditure impacts of HEIs, they also demonstrate that the policy scepticism that treats these expenditure effects as irrelevant neglects some key aspects of HEIs, in particular their export intensity

Construction of a multi-sectoral inter-regional IO and SAM database for the UK

The purpose of this paper is to explain the construction of the input-output (IO) and social accounting matrix (SAM) databases for the inter-regional computable general equilibrium (CGE) model of the UK developed as part of the project 'An Analysis of National and Devolved Economic Policies' undertaken as part of the ESRC Devolution and Constitutional Change research programme. We identify four main regions of the UK: Scotland, Wales, Northern Ireland and England. However, in Section 2, we begin by constructing a set of two-region accounts where we focus on Scotland, Wales or Northern Ireland with the other aggregate 'region' labelled 'rest of the UK' or RUK. Then, in Section 3, we extend to a three-region framework where we identify Scotland, Wales and RUK. Finally, in Section 4, we extend further to construct the full 4-region IO and SAM

The regional distribution of public expendictures in the UK : an exposition and critique of the Barnett formula

The Barnett formula is the official basis upon which increments to public funds are allocated to the devolved regions of the UK for those parts of the budget that are administered locally. There is considerable controversy surrounding the implications of its strict application for the relevant regions. The existing literature focuses primarily on the equity of the spatial changes to government per capita expenditure that would accompany such a change. In contrast, in this paper we attempt to quantify the system-wide economic consequences-the real, relative resource squeeze that accompanies the financial relative squeeze-on one devolved region, Scotland. The analysis uses a multisectoral regional computable general equilibrium modelling approach. We highlight the importance of population endogeneity, particularly since the population proportions used in the formula are now regularly updated

The environmental "trade balance" between Scotland and the rest of the UK : an inter-regional input-output and SAM analysis

We use an inter-regional input-output (IO) and social accounting matrix (SAM) pollution attribution framework to serve as a platform for sub-national environmental attribution and trade balance analysis. While the existence of significant data problems mean that the quantitative results of this study should be regarded as provisional, the inter-regional economy-environment IO and SAM framework for Scotland and the rest of the UK (RUK) allows an illustrative analysis of some very important issues. There are two key findings. The first is that there are large environmental spillovers between the regions of the UK. This has implications in terms of the devolution of responsibility for achieving targets for reductions in emissions levels and the need for policy co-ordination between the UK national and devolved governments. The second finding is that whilst Scotland runs an economic trade deficit with RUK, the environmental trade balance relationship for the main greenhouse gas, CO2, runs in the opposite direction. In other words, the findings of this study suggest the existence of a CO2 trade surplus between Scotland and the rest of the UK. This suggests that Scotland is bearing a net loss in terms of pollutants as a result of inter-union trade. However, if Scotland can carry out key activities, such as electricity generation, using less polluting technology, it is better for the UK as a whole if this type of relationship exists. Thus, the environmental trade balance is an important part of the devolution settlement

Who pollutes in Scotland? A prelude to an analysis of sustainability policies in a devolved context

The notion of sustainable development has begun to figure prominently in the regional, as well as the national, policy concerns of many industrialized countries. Indicators have typically been used to monitor changes in economic, environmental and social variables to show whether economic development is on a sustainable path. This paper focuses on pollution in Scotland and analyses the sustainability policies in a devolved political context

Inverted Haavelmo Effects in a General Equilibrium Analysis of the Impact of Implementing the Scottish Variable Rate of Income Tax.

The Scottish Parliament has the authority to make a balanced-budget expansion or contraction in public expenditure, funded by corresponding local changes in the basic rate of income tax of up to 3p in the pound. This fiscal adjustment is known as the Scottish Variable Rate of income tax, though it has never, as yet, been used. In this paper we attempt to identify the impact on aggregate economic activity in Scotland of implementing these devolved fiscal powers. This is achieved through theoretical analysis and simulation using a Computable General Equilibrium (CGE) model for Scotland. This analysis generalises the conventional Keynesian model so that negative balanced-budget multipliers values are possible, reflecting a regional “inverted Haavelmo effect”. Key parameters determining the aggregate economic impact are the extent to which the Scottish Government create local amenities valuable to the Scottish population and the extent to which this is incorporated into local wage bargaining.Fiscal federalism, devolution, regional wage bargaining and migration, Scotland, regional computable general equilibrium analysis.