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Tackling the UK’s regional economic inequality: binding constraints and avenues for policy intervention

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  • Anna Stansbury
  • Dan Turner
  • Ed Balls
Abstract
We analyse binding constraints to productivity growth in the UK’s regions outside London and the greater South East. These analyses challenge a number of common arguments about the UK’s regional economic inequality problem. We find little evidence consistent with the hypotheses (i) that low shares of university graduates remain the primary constraint on growth for the UK’s regions; (ii) that there is a generalised issue with access to finance for firms outside the South East; or (iii) that low or falling regional migration rates are to blame for the persistence of the UK’s regional economic inequalities. Instead, we find evidence consistent with (i) a specific relative shortage of STEM degrees; (ii) binding transport infrastructure constraints within major non-London conurbations; (iii) a failure of public innovation policy to support clusters beyond the South East, in particular through the regional distribution of public support for Research and Development (R&D); and (iv) missed opportunities for higher internal mobility due to London’s overheating housing market. We also find some suggestive evidence consistent with constraints on access to early-stage equity financing for high-growth-potential SMEs in certain regions.

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  • Anna Stansbury & Dan Turner & Ed Balls, 2023. "Tackling the UK’s regional economic inequality: binding constraints and avenues for policy intervention," Contemporary Social Science, Taylor & Francis Journals, vol. 18(3-4), pages 318-356, August.
    • Handle: RePEc:taf:rsocxx:v:18:y:2023:i:3-4:p:318-356
    DOI: 10.1080/21582041.2023.2250745
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    2. Niesr, 2023. "National Institute UK Economic Outlook Autumn 2023," National Institute UK Economic Outlook, National Institute of Economic and Social Research, issue 12, pages 5-40.
    3. Pabst, Adrian, 2023. "Foreward," National Institute UK Economic Outlook, National Institute of Economic and Social Research, issue 12, pages 3-4.
    4. Bauluz, Luis & Bukowski, Pawel & Fransham, Mark & Lee, Annie & López Forero, Margarita & Novokmet, Filip & Breau, Sébastien & Lee, Neil & Malgouyres, Clement & Schularick, Moritz & Verdugo, Gregory, 2023. "Spatial wage inequality in North America and Western Europe: changes between and within local labour markets 1975-2019," LSE Research Online Documents on Economics 119922, London School of Economics and Political Science, LSE Library.
    5. Paula Bejarano Carbo & Hailey Low & Ben Caswell & Stephen Millard & Monica George Michail & Max Mosley, 2024. "UK Economic Outlook: The Macroeconomic Outlook for the United Kingdom," National Institute UK Economic Outlook, National Institute of Economic and Social Research, issue 14, pages 7-47.
    6. Adam Yousef, 2023. "Box B: Productivity Paradox: Challenges and Opportunities," National Institute UK Economic Outlook, National Institute of Economic and Social Research, issue 12, pages 66-73.
    7. Bhattacharjee, Arnab & Pabst, Adrian & Robyn Smith & Szendrei, Tibor, 2024. "Outlook for UK Households, the Devolved Nations and the English Regions," National Institute UK Economic Outlook, National Institute of Economic and Social Research, issue 14, pages 48-75.
    8. Ana Carolina Garriga, 2023. "Box A: Public Confidence in the Bank of England," National Institute UK Economic Outlook, National Institute of Economic and Social Research, issue 12, pages 16-22.
    9. Niesr, 2023. "Forecast tables," National Institute UK Economic Outlook, National Institute of Economic and Social Research, issue 12, pages 77-85.

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    JEL classification:

    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)
    • R58 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Regional Development Planning and Policy

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