The impact of exchange rate on regional development: The example of western Switzerland

A currency space would be constitute in a ideal way if the integrated economic regions would react similarly on external shocks. In fact, Switzerland, as an economic space, is far from being homogenous. Since the end of Bretton-Woods, Switzerland is confronted with a durably revaluation of its currency on the exchange markets. The export industries and the tourism seem to be challenged by the strong currency. However, the financial industry is likely to profit by the development of the exchange rates. The "working place" and the "financial place" of Switzerland compete more and more concerning the optimal economic conditions. This situation must be considered as fairly explosive for regional development in Switzerland. We face an uneven spatial allocation of export orientated industries and presumed beneficiaries. And, there is also an unequal availability of resources on the organisational, sectorial and regional level - in order to react on the long-term revaluation of the Swiss currency. This paper presents the first results of a research project led on the Swiss case. We discuss the influence of the evolution of the exchange rate on the development of regions in Switzerland. It consists first in identifying regional production systems (RPS) in the country. A RPS is defined as a productive specialised area including a number of small and/or large firms. Across these RPS' sectorial specifities and their development logic, we try to understand the RPS' evolution against a durably strong currency. We expect different possible evolutions, i.e. the relocation of activities, the contraction of specific activities, the development of new industrial activities, etc. Through the notion of territorial anchoring, we develop the idea that particular activities are rooted more durably to their territory and maintain a more qualitative relation with it, preventing relocation. The analysis allows to constitute a typology of RPS' in Switzerland, regarding their exposure to the longrun currency development and their territorial anchoring.

Integration of control relations in the problematic of competition between regions

The aim of this paper is to integrate control relations in the analysis of regional production systems (RPSs). Financial economy aspects are often neglected in the analysis of classical and also regional economists. However, many studies show that this financial dimension is far from neutral and that it has a considerable impact on the real economy.During the twenty last years, Swiss regions have grown according to different rhythms, compromising the convergence process of per capita incomes. The approach in terms of RPSs used by Crevoisier, Corpataux and Thierstein (2001) explains a considerable part of these different evolutions. For the authors, the Swiss economy is made up of eleven RPSs strongly specialised in activities like chemistry, textile, microtechnic, tourism, administration and finance. The RPSs specialised in traditional activities have had poor performances while the financial systems has grown rapidly. The result of these different trajectories is a clear dualisation of the Swiss economy (Corpataux and Crevoisier, 2001). The RPS approach is mainly focused on endogenous phenomenons and considers that competitiveness of regions can be explained by the history of interactions between the actors and the institutions of the RPSs. In this paper, we propose to complete this approach by measuring the level of decision-making autonomy. In respect with the theory of spatial division of labour, the idea is to take into account the existence of multilocation firms or of groups, implying a distribution of the firm functions, but also a concentration of the strategic decisional power. In addition to that, we integrate another crucial aspect for the Swiss case, that is the fiscal federalism. In the opinion of Maillat and Quiquerez (2003), the fiscal competition explains a great part of the evolution of disparities. The great differences between regions’ taxing rates clearly influences firm behaviour. Our main hypothesis is that the allocation of strategic establishments is not homogenous and that these headquarters are located in the RPS specialised in financial activities, reminiscent of what Sassen (1991) describes. But this situation is mitigated by the communities’ fiscal competition. To show that, we use data on participations and on property of establishments. The aim is to measure the intensity of cross-regional relations and also to evaluate the autonomy degree of each RPSs. Results show that there are significant disparities in terms of control. Some regions are highly dependent of other: an important share of their economy is controlled by firms located in other regions. Financial centres are at the top of this hierarchy. Beside this domination, few cantons succeed in using the fiscal tool. The spatial division of labour approach and these results about control relations in RPSs complete the analysis done considering the Swiss regions specialisations. More than that, it reinforces the idea of a dualisation of the Swiss economy. Indeed, authors like Zimmerman (1995) and Dupuy and Gilly (1995) agree to say that the embededdness (anchorage) of non autonomous firms is precarious compared to independent SMEs. Concentration of strategic jobs, with highest wages, is a factor of regional divergence. This factor is reinforced by the weak embededdness (anchorage) of the secondary units, poorly implicated in the regional economic circuit and at risk of being partially or completely relocated. Moreover, and that will be the hypothesis for our next research, we think that possessions and subsidiaries finance the headquarters, breaking out the local accumulation networks. This situation may distort the competition between regions. Bibliography CORPATAUX J. et CREVOISIER O., 2001, « Place financière ou économie de production ? Les mécanismes de la dualisation économique et spatiale de la Suisse (1975-2000) », Géographie, Economie, Société, vol. 3, n°1, pp. 3-30. CREVOISIER O., CORPATAUX J. et THIERSTEIN A., 2001, Intégration monétaire et régions : des gagnants et des perdants, Paris, L’Harmattan. Dupuy C. et Gilly J.-P., 1995, « Les stratégies territoriales des grands groupes », in Rallet A. et Torre A. (éd.), Economie industrielle et économie spatiale, Economica, Paris. Maillat D. et Quiquerez F., 2003, « L’évolution des disparités régionales en Suisse », Contribution au XXXIXème colloque de l’ASRDLF : concentration et ségrégation, dynamiques et inscriptions territoriales, Lyon, 1-3 septembre. Sassen S., 1991, The global City : New York, London, Tokyo, Princeton University Press, Princeton. Zimmermann J.B., 1995, « Dynamiques industrielles: le paradoxe du local », in Rallet A. et Torre A. (éd.), Economie industrielle et économie spatiale, Economica, Paris.

The Financialization of the Property Sector: the Case of the Swiss Pension Trusts (1994-2005)

About 15% of the fortune of the Swiss pension funds has been invested in real estate from 1994 to 2002. Pension trusts have two possibilities in their investment policy, either owning and being responsible for the buildings directly or buying shares in investment vehicules whose localization is mainly in Zurich. In the first case, pension trusts behave as contractors and investors at the same time, which requires staff and moreover knowledge of the real estate markets. Investments which are done at a regional scope and concern chiefly rental apartment buildings are evaluated inside the pension trusts. In the second case, pension trusts are only investors and investments are evaluated through market criterias such as yield, risk/ diversification and liquidity. Basically only the main urban regions of the country are considered for real estate investments that also concern chiefly rental apartment buildings in this case. The change of territorial scale doesn't seem to reduce the risk of real estate investments and the question of the expected yield can be of relevant.