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North and South: A Regional Model of the UK

Patrick Minford, Yue Gai Orcid Logo, David Meenagh

Open Economies Review, Volume: 33, Issue: 3, Pages: 565 - 616

Swansea University Author: Yue Gai Orcid Logo

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DOI (Published version): 10.1007/s11079-021-09633-7

Abstract

We set up a two-region model to study the policy challenge of bringing the North’s income up to the level of the South in the UK. The model focuses on labour costs as the driver of output gains through the international competitiveness channel; and on tax/regulative costs to entrepreneurs as the dri...

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Published in: Open Economies Review
ISSN: 0923-7992 1573-708X
Published: Springer Science and Business Media LLC 2022
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URI: https://cronfa.swan.ac.uk/Record/cronfa58878
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first_indexed 2021-12-02T16:30:16Z
last_indexed 2023-01-11T14:39:46Z
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spelling 2022-07-25T16:53:20.0110997 v2 58878 2021-12-02 North and South: A Regional Model of the UK be1cd143e9a28ad97ef1a231272a37f2 0000-0003-4521-3176 Yue Gai Yue Gai true false 2021-12-02 ECON We set up a two-region model to study the policy challenge of bringing the North’s income up to the level of the South in the UK. The model focuses on labour costs as the driver of output gains through the international competitiveness channel; and on tax/regulative costs to entrepreneurs as the driver of productivity growth. The empirical results show that the regional model behaviour fits the regional UK data behaviour over the period of 1986Q1 and 2019Q4, using the demanding Indirect Inference method. We also carry out a Monte Carlo power test, which shows the empirical results we obtain are trustworthy and can provide us a reliable guide for policy reform. The results suggest that in response to tax cuts and labour market reforms GDP in the North increases almost twice as much as GDP in the South. Given that a broad programme of tax cuts and regulatory reform would more than pay for itself in the long run, it must be considered as a highly attractive political agenda. Journal Article Open Economies Review 33 3 565 616 Springer Science and Business Media LLC 0923-7992 1573-708X Regional study; DSGE model; Policy implication; Indirect Inference 1 7 2022 2022-07-01 10.1007/s11079-021-09633-7 COLLEGE NANME Economics COLLEGE CODE ECON Swansea University SU Library paid the OA fee (TA Institutional Deal) Not applicable. 2022-07-25T16:53:20.0110997 2021-12-02T16:24:15.4946630 Faculty of Humanities and Social Sciences School of Management Patrick Minford 1 Yue Gai 0000-0003-4521-3176 2 David Meenagh 3 58878__21975__10881a9fd40d46109d01a690b4504687.pdf 58878.pdf 2021-12-31T13:20:09.8802308 Output 10737689 application/pdf Version of Record true © The Author(s) 2021. This article is licensed under a Creative Commons Attribution 4.0 International License true eng http://creativecommons.org/licenses/by/4.0/
title North and South: A Regional Model of the UK
spellingShingle North and South: A Regional Model of the UK
Yue Gai
title_short North and South: A Regional Model of the UK
title_full North and South: A Regional Model of the UK
title_fullStr North and South: A Regional Model of the UK
title_full_unstemmed North and South: A Regional Model of the UK
title_sort North and South: A Regional Model of the UK
author_id_str_mv be1cd143e9a28ad97ef1a231272a37f2
author_id_fullname_str_mv be1cd143e9a28ad97ef1a231272a37f2_***_Yue Gai
author Yue Gai
author2 Patrick Minford
Yue Gai
David Meenagh
format Journal article
container_title Open Economies Review
container_volume 33
container_issue 3
container_start_page 565
publishDate 2022
institution Swansea University
issn 0923-7992
1573-708X
doi_str_mv 10.1007/s11079-021-09633-7
publisher Springer Science and Business Media LLC
college_str Faculty of Humanities and Social Sciences
hierarchytype
hierarchy_top_id facultyofhumanitiesandsocialsciences
hierarchy_top_title Faculty of Humanities and Social Sciences
hierarchy_parent_id facultyofhumanitiesandsocialsciences
hierarchy_parent_title Faculty of Humanities and Social Sciences
department_str School of Management{{{_:::_}}}Faculty of Humanities and Social Sciences{{{_:::_}}}School of Management
document_store_str 1
active_str 0
description We set up a two-region model to study the policy challenge of bringing the North’s income up to the level of the South in the UK. The model focuses on labour costs as the driver of output gains through the international competitiveness channel; and on tax/regulative costs to entrepreneurs as the driver of productivity growth. The empirical results show that the regional model behaviour fits the regional UK data behaviour over the period of 1986Q1 and 2019Q4, using the demanding Indirect Inference method. We also carry out a Monte Carlo power test, which shows the empirical results we obtain are trustworthy and can provide us a reliable guide for policy reform. The results suggest that in response to tax cuts and labour market reforms GDP in the North increases almost twice as much as GDP in the South. Given that a broad programme of tax cuts and regulatory reform would more than pay for itself in the long run, it must be considered as a highly attractive political agenda.
published_date 2022-07-01T04:15:45Z
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score 11.017797

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