Regional Differences in Economics

Summary

Driver description
Interactions with the Economy Domain
Interactions within the Social Domain
Interactions with the Environment Domain
Interactions with the Technology Domain
Impacts on Mobility and Transport

Driver description

  • “Key factors influencing a global shift of economic power from the advanced economies to the emerging economies are, first of all, the rates of productivity and income growth in emerging economies, which are outpacing those in advanced economies. Other important drivers are similar to those underlying continued economic growth: population growth, continuing technological innovation and diffusion of technologies, favourable economic policies and integration at regional and global level (Maddison, 2001).” (Ref: CO_0274)
  • “Regional inequalities in income per head arise from many different sources – differences in labour force participation, differences in employment rates, differences in the composition of skills and occupations and differences in productivity.”(Ref: CO_0116)
  • “The second factor driving regional variation in the productivity index is the educational qualifications of the local workforce.” (Ref: CO_0116)
  • “(...) an inverted U-shaped curve in the relationship between the national per capita income level and the extent of regional inequalities (holds) independently of the time period and regional administrative units considered.” (Ref: CO_0217)
  • “World output will treble, as growth accelerates on the back of the emerging economies. On average, annual world growth is projected to be accelerate towards 3% compared with growth of just over 2% in the 2000s. Emerging-world growth will contribute twice as much as the developed world to global growth over this period.” (Ref: CO_2026)
  • “Emerging and developing economies account for about half of global output and two thirds of global growth in purchasing-power-parity (PPP) terms, much of which is accounted for by China and India.” (Ref: CO_0180)
Figure 1‑40 World Economic Outlook

Source: International Monetary Fund, 2011 (Ref: CO_0180)

  •  “Economic and social disparities among regions weaken the EU’s dynamism.” (Ref: CO_0197)
Figure 1‑41 Overview of national factors of competitiveness

Source: Study on the factors of regional competitiveness (Ref: CO_0117)

  • “(...) the global risk context in 2011 is defined by a 21st century paradox: as the world grows together, it is also growing apart. Globalization has generated sustained economic growth for a generation. It has shrunk and reshaped the world, making it far more interconnected and interdependent. But the benefits of globalization seem unevenly spread – a minority is seen to have harvested a disproportionate amount of the fruits. Although growth of the new champions is rebalancing economic power between countries, there is evidence that economic disparity within countries is growing. Issues of economic disparity and equity at both the national and the international levels are becoming increasingly important. Politically, there are signs of resurgent nationalism and populism as well as social fragmentation. There is also a growing divergence of opinion between countries on how to promote sustainable, inclusive growth. To meet these challenges, improved global governance is essential. But this is another 21st century paradox: the conditions that make improved global governance so crucial – divergent interests, conflicting incentives and differing norms and values – are also the ones that make its realization so difficult, complex and messy. As a result, we see failures such as the Doha Development Round of the World Trade Organization (WTO) and the lack of international agreement at the Copenhagen Conference on climate change. The G20 is seen as the most hopeful development in global governance but its efficiency in this regard has not been proven.” (Ref: CO_1035)

Interactions within the Economy Domain

GDP trends

  • “[Productivity]... is generally seen as the most important driver behind GDP per capita and subsequent explanation of differences between regions.” (Ref: CO_0117)
  • “(...) institutional quality is a determinant of regional differences in entrepreneurship and economic growth.” (Ref: CO_0115)
  • “(...) great heterogeneity in economic growth among rural regions and the distance from a populated centre could be a significant factor explaining these differences.” (Ref: CO_0216)

Employment

  • “Remote rural regions appear economically more fragile: lower employment rates (Canada and Mexico) and economic output (Europe).” (Ref: CO_0216)

Intensified competition for scarce resources use

  • “Owning essential natural resources may further improve emerging economies' competitiveness. Their growing demand for resources stimulates domestic exploration and exploitation, possibly increasing the countries' share in the total global stock.” (Ref: CO_0274)

Interactions with the Social Domain

Migration flows

  • “The global economic crisis has affected all regions of the world. (...) The depth and extent of the crisis varies across regions, with some regions better insulated from the global downturn than others. The differential impact of the crisis in the different regions means that the impact on migrant workers will vary between regions.” (Ref: CO_0158)
  • “(...) demographic differences, combined with growing economic disparities, are increasing the pressure for migration, which is expected to become a more important factor in demographic change over the next 50 years.” (Ref: CO_0274)

Income structure and distribution

  • “There is also a high level of inequality in Europe that primarily takes the form of major regional income differentials between countries, although inequality within most member states has increased in recent years. Recent regional catch-up, which had reduced between-country inequality and which the debt crisis has abruptly terminated, must be revived within the framework of a European growth strategy.” (Ref: CO_0235)

Car ownership

  • “In the age of rising middle classes in emerging economies, demand for the car may explode – as we are already seeing in markets such as China.” (Ref: CO_5018)
  • “There are significant disparities in the ownership of passenger cars within the regions of the different European countries (...). The ratio registered in the various regions is often linked to economical issues.” (Ref: CO_0173)
  • “Dargay, Gately and Sommer find that geographic factors affect vehicle ownership saturation levels, and that most of the OECD countries are now approaching saturation levels.” (Ref: CO_5047)
Figure 1‑42 Regional disparities (at NUTS2 level) in the number of passenger cars per inhabitant, 2007

Source: Eurostat 2010 (Ref: CO_0173)

Urbanisation

  • “Urbanisation and economic growth in developing regions are strongly correlated.” (Ref: CO_5042)
  • “The urban population of the more developed regions is projected to increase modestly, from 0.9 billion in 2007 to 1.1 billion in 2050 (Figure below).” (Ref: CO_1015)
  • “The world rural population is expected to reach a maximum of 3.5 billion in 2018 or 2019 and to decline slowly thereafter, to reach 2.8 billion in 2050. These global trends are driven mostly by the dynamics of rural population growth in the less developed regions, which house today 90 per cent of the world rural population. Whereas the rural population of the more developed regions has been declining steadily during the second half of the twentieth century and will continue to do so for the foreseeable future, the rural population of the less developed regions more than doubled since 1950 and will likely continue to grow until 2021 before a long-term decline sets in (Figure below).” (Ref: CO_1015)

Source: World Urbanization Prospects- The 2007 Revision (Ref: CO_1015)

  • “While in the more developed regions, the proportion urban was already nearly 53 per cent in 1950, in the less developed regions the 50 per cent level will likely be reached around 2019.” (Ref: CO_1015)
  • “More developed regions are expected to see their level of urbanization rise from 74 per cent to 86 per cent over the same period. In the less developed regions, the proportion urban will likely increase from 44 per cent in 2007 to 67 per cent in 2050.” (Ref: CO_1015)
  • “The Chinese Ministry of Construction anticipates that by 2020 an additional 180 million people will reside in China’s cities. Residential building floor area has already been dramatically increasing since 2000; according to projections about 13 billion m2 more residential floor space will be constructed in the next two decades, which is equivalent to the total floor area of all the existing residential buildings in the EU-15 countries.” (Ref: CO_5009)
  • “Over the coming decades, the level of urbanization is expected to increase in all major areas of the developing world, with Africa and Asia urbanizing more rapidly than the rest. Nevertheless, by mid-century, Africa and Asia are expected still to have lower levels of urbanization than the more developed regions or Latin America and the Caribbean.” (Ref: CO_1015)
  • “Indeed, tendency for jobs to increase faster in the suburbs and on the urban fringes than in the centres and inner districts of metropolitan areas is characteristic of all developed countries.” (Ref: CO_0034)
  • “(...) if developing countries follow the same path of urban sprawl in the coming decades as more developed countries, the scale of urban expansion could be much greater and the magnitude of its impacts on the environment and human society even more pronounced.” (Ref: CO_5009)

Education

  • “(...) inequalities should first rise then decline depending on the total amount of knowledge available in the economy which is directly linked to the level of economic development.” (Ref: CO_0217)
  • “The idea that concentrations of highly skilled human capital should be associated with faster rates of real GDP per capita growth (itself very closely related to productivity growth) is not new. It is represented (...) as the ratio of university students to total employees.” (Ref: CO_0223)

Interactions with the Environment domain

GHG mitigation

  • “In most cases in developing regions, paths for socio-economic and technological development imply increases in GHG emissions, not reductions in emissions, including both emissions from the cities themselves and emissions from systems that meet urban needs, such as electric power plants located elsewhere.” (Ref: CO_0147)
  • “For (local and national) governments in countries with minimal per capita GHG emissions, it is very difficult to justify to their electorates expenditures on climate change mitigation if they are already unable to provide their populations with basic infrastructure and services.” (Ref: CO_0147)
  • “Within OECD economies, CO2 emissions from transport have fallen by nearly 4% from 2007 to 2008 and all transport sub-sectors have seen emissions fall as a result of the crisis except for international aviation. Within non-OECD economies, transport-related CO2 emissions have continued to register strong growth from 2007- 2008 with the exception of the rail sector.” (Ref: CO_4016)
  • “Regionally, carbon sequestration schemes are more common in developing country cities, often associated with gaining CDM credits or development programmes. However, actions promoting urban tree-planting and restoration, preservation or conservation of carbon sinks may be taken in cities in developed countries for reasons of environmental protection or the preservation of urban green spaces without associating them specifically with climate change mitigation objectives.” (Ref: CO_0147)

Emissions trading schemes

  • “Emission trading of CO2 and particularly the use of flexible mechanisms may export co-benefits of greenhouse gas mitigation — lower air pollution — to other regions of Europe or the world. Therefore, if decisions to buy CO2 emission credits abroad are motivated only by minimising the costs of climate change policies, this could result in a less cost-efficient overall solution.” (Ref: CO_0147)

Pollution levels and emission standards

  • “Differences in economic structure have an important role in explaining the variance in emission-intensity between regions. Even if one corrects for differences in economic structure, differences in emission intensity remain. This leads (...) to believe that a difference in environmental efficiency of industries (...) also plays an important role.” (Ref: CO_0174)

Interactions with the Technology Domain

Technology development in general and innovation diffusion

  • “A basic reference point for the creation of transport innovation is the situation in the most economically advanced countries. For the developing nations, the large-scale replacement of traditional transport means (city rickshaws, pack or cart animals) with motor transport, commonly used in Europe, North America and Japan, does not mean innovation, but classical adaptation and modernisation. An innovative challenge is a vision of what new can be done which is different from the solutions currently considered to be most advanced in the world.” (Ref: CO_5065)
  • “However, more and more often emerging economies are starting to challenge developed economies in the core areas of their competitive advantage, namely high-technology developments. Competitive pressures will increase as many emerging economies step up their general research and innovation capacities.” (Ref: CO_0274)
  • “Increasingly, EU-27 multinationals are competing with technology based companies from emerging economies in high-end technology markets. Growth rates in patent filings in some Asian economies are beyond the level of several western OECD economies.” (Ref: CO_0274)
  • “There is a common need for greater knowledge sharing and RD&D collaboration among countries to accelerate technology advancement along the curve from demonstration to commercialisation. There is also a need to target some emerging and developing economies with specialised approaches to ensure capacity building and appropriate enabling environments.” (Ref: CO_0154)
  • “Agglomeration economies, concentrations of research and development (R&D) activity and highly skilled human capital, and systems of urban governance play a significant role in driving spatial economic growth differences, but no role when it comes to population growth.” (Ref: CO_0223)
  • “(...) four basic factors (...) affect the innovative performance of firms. (...) Three of them concern mechanisms through which knowledge and routines are transferred from one organisation to the other, resulting in knowledge diffusion, interacting learning and innovation. (...) The fourth factor concerns organisational capabilities of firms, meaning the capacity of firms to deal effectively with a lack of required resources, such as knowledge, skills and capital.” (Ref: CO_0172)
  • “A revolution (...) may have started in developing nations such as India and China (...). Products from these regions are dramatically cheaper than those of Western competitors. The whole system of how businesses operate is being rethought – from supply chain management to recruitment – and the emerging economies are turning into hotbeds of innovation.” (Ref: CO_0284)
  • “According to Eurostat in 2009 60% of the EU 27 population between 16 and 74 years regularly used the Internet. However, there are large differences between European countries ranging from 31% regular internet use in Romania to 86% in the Netherlands and Sweden.” (Ref: CO_2018)

Traffic management systems

  • “Traffic volume in developing countries is usually lower, and infrastructure less evolved when compared to developed countries. Consequently, congestion levels are not necessarily lower and resultant pollution, specifically in urban areas, is a significant concern. Developing countries are usually in a phase of infrastructure deployment. The cost of technology is limited when compared to the cost of civil engineering work. This situation presents an important opportunity for building state-of-the-art infrastructure and implementing all necessary equipment.” (Ref: CO_2018)

Renewable energy production

  • “The generation mix varies widely between countries in OECD Europe.” (Ref: CO_0153)
Figure 1‑44 Electricity generation mix, OECD Europe, 2007

Source: Energy Technology Perspectives 2010 (Ref: CO_0153)

  • “Global energy use in the household sector increased by 28% between 1990 and 2007 to 1941 Mtoe. As is the case in the other major end-use sectors, energy consumption in households since 1990 has grown more in non-OECD countries (34%) than in OECD countries (17%). Natural gas is the fuel used most in OECD countries, providing 265 Mtoe (38%) of household energy requirements in 2007. Electricity use has been rising rapidly in OECD countries, largely because of the increased penetration of many different appliances. Electricity consumption increased from 169 Mtoe in 1990 to 248 Mtoe in 2007. In non-OECD countries, renewables, particularly traditional biomass, remain the largest source of energy, with consumption of 706 Mtoe in 2007. Electricity use is by far the fastest growing energy commodity, its use increasing by 175% since 1990 to reach 11% of total energy consumption. In Russia, district heating remains important in the household sector with heat consumption of 53 Mtoe in 2007, or 47% of total household energy consumption.” (Ref: CO_0153)
Figure 1‑45 Household energy use by energy commodity

Source: Energy Technology Perspectives 2010 (Ref: CO_0153)

  • “In energy, renewables accounted for 61% of new electricity generating capacity in the EU in 2009. But Europe's lead is challenged. The 2010 Renewable Energy Attractiveness Index now cites US10 and China as the best investment opportunity for renewable energy. The US is aiming to double its renewable energy generation by 2012. In 2009, China topped the global league table for wind power installation. Chinese and Indian wind turbine manufacturers now appear in the top ten. China and Taiwan now produce most of the world's PV panels.” (Ref: CO_0201)

Impacts on Mobility and Transport

Transport modes amongst regions and income

  • “The wealthiest regions are most mobile and thus have the highest share of high-speed modes, but even in these regions travelers will spend most of their travel time in automobiles. In North America the HST share of mobility will rise fourfold to 71% by 2050, but only 17% of the average person's travel time budget (11 min) will be spent moving at high speeds; a little time goes a long way in aircraft. A five-fold increase in per-capita mobility will make more common what is extreme traveler behavior today, such as living in Bombay or Boston and commuting daily to Delhi or Washington. Because extreme mobility depends on access to high speed modes, pockets of low density living will persist where it is time-intensive to travel to nodes (airports and maglev train stations) in the high-speed transportation system ± as likely in the outskirts of London as the Sahara.” (Ref: CO_0001)

Transport infrastructure and regions development

  • “The belief that transport infrastructure projects have significant impacts on the development of regional economies has often been used to justify allocating resources to transport infrastructure investment. However, the clear meaning of these impacts or how they could be evaluated has yet to be established.” (Ref: CO_0113)

Transport and regions accessibility

  • “In many cases, the objective of transport infrastructure investment is to improve the accessibility of a given region by reducing travel time or increasing the potential to travel. Accessibility can be measured as the quantity of economic or social activities that can be reached using the transport system.” (Ref: CO_0113)
  • “Inter-regional accessibility is focused on competition between the regions in Europe. The attractiveness and growth potential of cities in the single European market depend on good communication. One reason for this is that increasing international competition entails a greater need for personal contacts in product development and marketing activity. Thus, transportation should not be an obstacle to contacts between major cities or regions. Good air communication is important for remote cities in Europe, while high-speed trains may play a more significant role in central areas.” (Ref: CO_0113)

New transport and mobility patterns

  • “The tendency to homogeneity (GDP per capita equity, regional GDP equity) is to prioritize many-to- many transport fluxes (intercity, and interregional), with increased mobility for everybody. The tendency to heterogeneity (a few are rich and many are poor; regional disparity) leads to the prioritization of a few nodes over all the others. Few people are able to travel, and there is the development of exclusive transport services, with more segregated networks. Gregariousness together with increased mobility fluxes may bring transport segregation according to travel purpose (tourist trains versus business trains, charter flights versus private jets), while individualism may increase car use.” (Ref: CO_5048)

Increasing demand for transport in non OECD countries

  • “While mobility growth in the OECD can be expected to be slow and gradual, and even negative in some countries, it could be very fast outside of the OECD.” (Ref: CO_4024)
Figure 1‑46 Distribution of passenger and surface freight mobility in 2000 and 2050: share of OECD and non-OECD countries

Source: Transport Outlook 2011. Meeting the Needs of 9 Billion People (Ref: CO_4024)

  • “It is clear that urbanisation will significantly increase the strain on transport systems, notably on the public transport systems in the large cities of the developing world, since most of the growth in population over the next few decades will be in urban areas in these countries” (Ref: CO_5042)
  • “In China, as in other emerging economies, higher living standards have greatly increased demand for transportation.” (Ref: CO_0284)

Increasing demand for air travel in non OECD countries

  • “Many countries may experience higher levels of per-capita air travel at lower levels of per-capita income than has historically been the case in OECD countries. By 2030 the combined domestic markets in China and India are projected to surpass the current US domestic market which, in 2010, was the largest in the world.” (Ref: CO_0160)

Increasing demand for more cheaper cars in BRICS

  • “New Asian automakers will increase the pressure on the highly saturated car markets in Germany and Europe. Many signs indicate that “lowest cost cars”, in particular, will meet with rising demand in industrial nations, too. To the same degree that western societies become socially polarised, a “mobility divide” opens: While some remain able to afford mobility in comfort, others only manage to finance a mobility minimum. The success of the Dacia Logan has already given an impression of the potential offered by “discount cars” such as the Indian Tata Nano. Its European market entry has been envisioned for 2012. The low-cost market already belongs to the most important growth markets globally – European automakers will be forced to enter it, too.” (Ref: CO_0005)
  • “This applies for the fact alone that the European and US-American car markets will continuously lose in importance compared to the emerging markets. The BRIC-nations Brazil, Russia, India, and China have eagerly been envisaged as an escape from the market saturation trap. Some of the major automakers have been active in these markets for twenty years – Volkswagen in China – or thirty years – Fiat in Brazil – already. The current significance of these markets becomes obvious when one considers that in 2008, the number of cars sold in the BRIC nations equalled those sold in the USA. Framework conditions and consumer needs, however, differ widely between the four nations, necessitating a regional adaptation of strategies – in China and Russia, for instance, consumers prefer large – by western understanding “showy” – cars, whereas modern compact cars are well received in Brazil, as the Economist notes. Chances are that in the medium term, China will boast the world’s largest car population. It goes without saying that reproducing western mobility lifestyles in the emerging markets will place great burdens on climate and environment. Against this background, the issue of sustainable mobility becomes much more pressing.” (Ref: CO_0005)