Regional policy and the location of industry: an application of attraction theory

Abstract

An active regional policy is exercised both by the British Government and by most other industrial countries. A major part of this policy in the United Kingdom has been and still is the relocation of industries from the prosperous regions. It would therefore seem as though the theories of the location of economic activity would have some relevance to this problem. In reviewing the empirical work on location and industrial mobility, it is concluded, that they lack a rigorous theoretical and methodological base, such that little reliance can be placed on their results. These studies do however suggest certain factors that need further examination in explaining location. The theoretical work on location is found to be unable to generate many general results or suggest empirically testable models. These studies do however suggest certain analytical tools that are found useful to attraction theory. Attraction theory is examined and modified. The limitations and assumption underlying this theory are made explicit. It is concluded that this model may be a useful took in evaluating government policy on the relocation of industry; The results of the application to the United Kingdom data are presented. These results seem to explain why certain regions have had higher unemployment than the national average and also suggest certain policy prescriptions. In implementing the attraction model data from regional input- output tables are necessary. Therefore there is a discussion of various methods of constructing these tables. The results of the method considered most appropriate is given for purposes of comparison with the attraction results.