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PROFESSOR DANIELAPROFESSOR L. CONSTANTIN DANIELA L. CONSTANTIN ASSOCIATE PROFESSORASSOCIATE PANTELIS PROFESSOR SKLIAS PANTELIS SKLIAS Dr STILIANOS DrALEXIADIS STILIANOS ALEXIADIS Director of the ResearchDirector Centreof the Research for Macroeconomic Centre for Macroeconomic Faculty of SocialFaculty Sciences of Social Sciences RSI Journal RSI Journal and Regional Forecastingand Regional (PROMAR) Forecasting (PROMAR) University of Peloponnese,University ofGreece Peloponnese, Greece Bucharest UniversityBucharest of Economic University Studies, of Economic Romania Studies, Romania Dr MICHAEL ALDERSONDr MICHAEL ALDERSON ASSOCIATE PROFESSORASSOCIATE PROFESSOR Director Project DirectorDevelopment Project Development PROFESSOR LOISPROFESSOR LAMPRIANIDIS LOIS LAMPRIANIDIS EVANGELIA GEORGITSOYANNIEVANGELIA GEORGITSOYANNI University of SzentUniversity Istvan, Hungaryof Szent Istvan, Hungary Department of EconomicDepartment Sciences of Economic Sciences Department of HomeDepartment Economics of Home Ecology, Economics Ecology, University of Macedonia,University Greece of Macedonia, Greece Harokopion University,Harokopion Athens, University, Greece Athens, Greece Dr PEDRO RAMOSDr PEDRO RAMOS Facudade de Economia,UniversidadeFacudade de Economia,Universidade PROFESSOR NIKOLAOSPROFESSOR KYRIAZIS NIKOLAOS KYRIAZIS ASSOCIATE PROFESSORASSOCIATE PROFESSOR de Coimbra, Portugalde Coimbra, Portugal Department of EconomicDepartment Sciences of Economic Sciences GEORGIA KAPLANOGLOU GEORGIA KAPLANOGLOU University of Thessaly,University of Thessaly, Department of EconomicDepartment Sciences of Economic Sciences Dr NIKOLAOSDr HASANAGAS NIKOLAOS HASANAGAS Volos, Greece Volos, Greece National and KapodistrianNational and University Kapodistrian of Athens, University of Athens, Faculty of ForestryFaculty and Naturalof Forestry Environment and Natural Environment Greece Greece Aristotle UniversityAristotle of Thessaloniki, University ofGreece Thessaloniki, Greece PROFESSOR VIRONPROFESSOR KOTZAMANIS VIRON KOTZAMANIS Department of SociologyDepartment of Sociology ASSOCIATE PROFESSORASSOCIATE PROFESSOR Dr CHRISTOS LADIASDr CHRISTOS LADIAS University of Thessaly,University Greece of Thessaly, Greece KONSTANTINOSKONSTANTINOS TSAMADIAS TSAMADIAS Department of EconomicDepartment and of Regional Economic Development and Regional Development Department of HomeDepartment Economics of Home and EcologyEconomics and Ecology School of SciencesSchool of Economy of Sciences and of Public Economy and Public PROFESSOR FATMIRPROFESSOR MEMA FATMIR MEMA Harokopion University,Harokopion Greece University, Greece Administration, PanteionAdministration, University Panteion of Social University and of Social and Faculty of EconomicsFaculty of Economics Political SciencesPolitical ,Athens, Sciences Greece ,Athens, Greece University of Tirana,University Albania of Tirana, Albania ASSOCIATE PROFESSORASSOCIATE TRIFON PROFESSOR TRIFON KOSTOPOULOSKOSTOPOULOS PROFESSOR IOANNISPROFESSOR MOURMOURIS IOANNIS MOURMOURIS Dr. ANNE MARGARIANDr. ANNE 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ASSOSIATE PROFESSOR JAN SUCHACEK LECTURER NETA ARSENI POLO ASSOSIATE PROFESSOR JAN SUCHACEK LECTURER NETA ARSENI POLO PROFESSOR DIMITRIOSPROFESSOR MAVRIDIS DIMITRIOS MAVRIDIS Department of Regional and Environmental Department of Economics Department of Regional and Environmental Department of Economics Department of TechnologicalDepartment of Educational Technological Educational Economics University “Eqrem Cabej”, Albania Economics University “Eqrem Cabej”, Albania Institute of WesternInstitute Macedonia, of Western Greece Macedonia, Greece Technical University of Ostrava, Czech Republic Technical University of Ostrava, Czech Republic LECTURER ALEXANDROS MANDHLA LECTURER ALEXANDROS MANDHLA ASSOSIATE PROFESSORASSOSIATE PROFESSOR ASSOCIATE PROFESSOR MIHAIL XLETSOS RAS Department of Economics, University ASSOCIATE PROFESSOR MIHAIL XLETSOS RAS Department of Economics, University ALBERT QARRIALBERT QARRI Department of Economic Sciences Of Surrey, United Kingdom Department of Economic Sciences Of Surrey, United Kingdom Vlora University,Vlora Albania University, Albania University of Ioannina, Greece University of Ioannina, Greece ASSISTANT PROFESSOR ASSISTANT PROFESSOR ASSOCIATE PROFESSORASSOCIATE PROFESSOR ASSISTANT PROFESSOR ANASTASIA GEORGE P. MALINDRETOS ASSISTANT PROFESSOR ANASTASIA GEORGE P. MALINDRETOS GEORGE GANTZIAS GEORGE GANTZIAS STRATIGEA Harokopion University, Athens, Greece STRATIGEA Harokopion University, Athens, Greece Department of CulturalDepartment Technology of Cultural & Technology & Department of Geography and Regional Planning Department of Geography and Regional Planning Communication CommunicationUniversity of the University Aegean, Greece of the Aegean, Greece National Technical University of Athens, Greece RESEARCH FELLOW PARK JONG SOON National Technical University of Athens, Greece RESEARCH FELLOW PARK JONG SOON Development Institute of Local Government Development Institute of Local Government ASSISTANT PROFESSORASSISTANT PROFESSOR ASSOCIATE PROFESSOR ELIAS PLASKOVITIS of South Korea ASSOCIATE PROFESSOR ELIAS PLASKOVITIS of South Korea DIMITRIOS LALOUMISDIMITRIOS LALOUMIS Department of Economic and Regional Department of Economic and Regional Department of TechnologicalDepartment of Education Technological Education Development, Panteion University, Athens, Dr KATERINA KOKKINOU Development, Panteion University, Athens, Dr KATERINA KOKKINOU Institute of Athens,Institute Greece of Athens, Greece Greece Department of Economics Greece Department of Economics Glasgow University, G. Britain Glasgow University, G. Britain LECTURER APOSTOLOSLECTURER KIOXOS APOSTOLOS KIOXOS ASSOCIATE PROFESSOR ASSOCIATE PROFESSOR Department of InternationalDepartment andof International European Studies, and European Studies, HELEN THEODOROPOULOU HELEN THEODOROPOULOU University of Macedonia,University Greece of Macedonia, Greece Department of HomeDepartment Economics of Home Ecology, Economics Ecology, Harokopion University,Harokopion Athens, University, Greece Athens, Greece
4 4 LECTURERLECTURER VICKY KATSONI VICKY KATSONI Dr KONSTANTINOSDr KONSTANTINOS IKONOMOU IKONOMOU MembersMembers DepartmentDepartment of Hospitality of Hospitalityand Tourism and Management Tourism Management DepartmentDepartment of Regional of and Regional Economic and Economic Professor AnaProfessor Cristina Ana Limongi Cristina Franca, Limongi Associate Franca, Associate TechnologicalTechnological Educational, Educational, Development,Development, University ofUniversity Central Greeceof Central Greece Professor FranciscoProfessor Diniz, Francisco Assistant Diniz, Professor Assistant Eloí Professorna Eloína Athens, GreeceAthens, Greece Maria ÁvilaMaria Monteiro, Ávila Dr Monteiro, Michel DuquesnoyDr Michel Duquesnoy Dr KATERINADr KATERINA PARPAIRI PARPAIRI PROFESSORPROFESSOR RSI JournalRSI Journal ZeitschriftZeitschrift für die Regionale für die Regionale ANASTASIAANASTASIA ATHANASOULAREPPA ATHANASOULAREPPA DepartmentDepartment of Pedagogy, of HighPedagogy, School High of School of Dr KHACHATRYANDr KHACHATRYAN NUNE NUNE WissenschaftWissenschaft
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Book ReviewBook Editors Review Editors ASSISTANT PROFESSOR Géographies, Géopolitiques et ASSISTANT PROFESSOR Dr KaterinaDr Kokkinou, Katerina DrKokkinou, Stilianos Dr Alexiadis, Stilianos Alexiadis,Dr Dr Géographies, Géopolitiques et ELECTRA PITOSKA ELECTRA PITOSKA Elias Grammatikogiannis,Elias Grammatikogiannis, Dr Maria Mavragani, Dr Maria Mavragani, GéostratégiesGéostratégies Régionales Régionales Technological Institute of Florina, Greece Technological Institute of Florina, Greece Dimitrios Kouzas,Dimitrios Vilelmini Kouzas, Psarrianou, Vilelmini Psarrianou,Helga Helga
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Dr DRITA DrKRUIA DRITA KRUIA Editorial EditorialAssistant Assistant Faculty of EconomicsFaculty of Economics Professor CristianoProfessor Cechela Cristiano Cechela Shkodra University,Shkodra University,Albania Albania PublisherManagerPublisherManager Dr LAMPROSDr LAMPROS PYRGIOTIS PYRGIOTIS Dr ChristosDr Ladias Christos Ladias RSI JournalRSI Journal Regional Science Inquiry Journal, Vol. V, (2), 2013 5
Contents Page Editorial 7
Articles 1 Economic Analysis of the Impact of Carbon Tax on the Economy of Makassar 15 City, Indonesia, Yuzuru Miyata, Any Wahyuni and Hiroyuki Shibusawa
2 Location Conditions of EnergyIntensive Enterprises, Rüdiger Hamm 33
3 A Theoretical and Methodological Approach of «Fragile» Areas: The Cases of 45 Greek Regions Crossed by the Egnatia Road, Lamara Hadjou and Marie Noëlle Duquenne
4 The Relation Between Industrial And SocioEconomic Fundamentals In German 59 Districts, Anne Margarian
5 Propensity for entrepreneurship among college undergraduates: the case of a 75 public university in northeastern Portugal, Maria Isabel Barreiro Ribeiro, António José Gonçalves Fernandes, and Francisco José Lopes de Sousa Diniz
6 Estimating Brazilian FDI Motivations In Portugal By Structural Equations Model 87 (SEM), Cristiano Cechella
7 The System of Contributions for Health Insurance Scheme in Albania 99 Performance and Main Challenges, Enkelejda Avdi
8 The Crossroad of Housing Loans Financing Case of Albania, Iris Shahini and 111 Orfea Dhuci
9 A geopolitical analysis of the activation of the Shiite geopolitical factor within 125 the Syrian conflict geosystem, Ioannis Th. Mazis and Michalis Sarlis
10 Interpreting Overall Inequality in China: The Roles of Physical Capital, Human 145 Capital and Social Capital, Yuheng Li and Hans Westlund
11 The Services of General Interest in Romania: Insights Into Legal And 151 Institutional Issues At National And Territorial Level, DanielaLuminiţa Constantin, Alina Elena Iosif, Alina Georgiana Profiroiu and Raluca Mariana Grosu
12 Local Actors and Leadership in Rural Destinations: Exploring the Role of 163 Gastronomic Confraternities, Bernard De Myttenaere
Announcements, Conferences, News 177
Academic profiles 181
Book reviews 185
Author Instructions 189
The articles published in RSI Journal are in accordance with the approving dates by the anonymous reviewers.
6 Regional Science Inquiry Journal, Vol. V, (2), 2013
Regional Science Inquiry Journal, Vol. V, (2), 2013 7
RSI Journal, Volume V, Issue 2 – Editorial
Under the most recent decision on EU's 20142020 budget, Cohesion Policy will invest €325 billion in Europe's Member States, their regions and cities to deliver the EUwide goals of growth and jobs, as well as tackling climate change, energy dependence and social exclusion. Taking into account the national contribution of member states, and the leverage effect of financial instruments, the overall impact is likely to be more than €500 billion. The reform of Cohesion Policy will ensure maximum impact for these investments, adapted to the individual needs of regions and cities.
As described by Johannes Hahn, Member of the European Commission in charge of Regional Policy, in No 47 PANORAMA Journal of the European Commission, ‘the new reformed EU regional policy will equip Europe even better to tackle the current challenges to longterm growth: unemployment, a lack of competitiveness, and climate change. The investments in the coming financial period aim to bring about structural reform. They support key areas for economic development, which are SME support, research and innovation, the digital agenda and the low carbon economy, as set out in the Europe 2020 Growth Agenda. These actions will mobilise the full potential of Europe’s regions to rebuild their economies on competitive foundations….. The key to this strategy is smart specialisation whereby a region selects a limited number of economic priorities on the basis of its own strengths and competitive advantage in the global market. The smart specialisation route requires a clear idea of a region’s strengths and weaknesses. All funding and efforts should be concentrated on these to ensure the highest lasting impact and best use of limited resources’.
Within this framework and policy planning orientation, this issue examines different case studies, focusing on important and modern scientific related issues, such as Economic Analysis of the Impact of Carbon Tax on the Economy, Location Conditions of Energy Intensive Enterprises, The Cases of Greek Regions Crossed by the Egnatia Road’, The Relation Between Industrial And SocioEconomic Fundamentals Districts, Strategic Planning in Universities, Estimating FDI Motivations, The System of Contributions for Health Insurance Scheme, The Housing Loans Financing, geopolitical analysis of the activation of the Shiite geopolitical factor within the Syrian conflict geosystem, Interpreting Overall Inequality in China: The Roles of Physical Capital, Human Capital and Social Human, The Services of General Interest in Romania: Insights Into Legal And Institutional Issues At National And Territorial Level, and Local Actors and also Propensity for entrepreneurship among college undergraduates. In this current issue, we have tried to select a group of papers which offer a wide variety of subjects and treatments, trying to integrate and approach the issues described above.
The first paper, by Yuzuru Miyata, Any Wahyuni and Hiroyuki Shibusawa, titled: ‘Economic Analysis of the Impact of Carbon Tax on the Economy of Makassar City, Indonesia’ deals with Makassar, the capital of South Sulawesi and the largest metropolitan city in eastern Indonesia. This city is an established of economic development for eastern Indonesia, which is characterized by a high degree of industrial development. Therefore, the carbon dioxide(CO2) emissions generated in the city will increase. However, the government has attempted to maintain environmental quality to ensure a liveable and healthy city. Unfortunately, the government’s budget to support the economic development is limited, despite the increased level of economic activity in the city. As a result of these conditions, the government has elected to economize resource use by improving the efficiency of resource allocations. To this end, the government imposed a carbon tax in the city. The purpose of this study is to analyze the impacts on the economy in Makassar resulting from the introduction of carbon taxes to reduce energy consumption in all sectors of the economy that generate CO2 emissions. The imposition of a carbon tax is expected to reduce CO2 emissions and to improve the city’s economic potential. The study investigates the possibility of transferring
8 8 RegionalRegional Science Science Inquiry Inquiry Journal, Journal, Vol. V, Vol. (2), V, 201 (2),3 201 3 carboncarbon tax revenuetax revenue to transfer to transfer to household to household to gene to generate rate increased increased household household income. income. A A computablecomputable general general equilibrium equilibrium (CGE) (CGE) model model was was the theprimary primary analytical analytical methodology methodology employedemployed to measure to measure the impactthe impact of the of impositionthe imposition of a ofcarbon a carbon tax acrosstax across all sectorsall sectors of the of the economy.economy. The Themodel model examined examined the impactthe impact of the of carbothe carbon taxn basedtax based on the on 2006the 2006 inputoutput inputoutput (IO)(IO) table table for Makassarfor Makassar City Cityand andestimated estimated of a ofso ciala so cialaccounting accounting matrix matrix (SAM) (SAM) table table the the samesame year. year. In CGE In CGE models, models, general general equilibrium equilibrium is ac ishieved achieved via the via price the price mechanism. mechanism. The The modelmodel assumes assumes a static a static economy economy with with no timerelated no timerelated elements. elements. A total A total of twenty of twenty eight eight industrialindustrial sectors sectors and twoand twoproduction production factors, factors, labo rlabo andr capital,and capital, are used are used in this in study.this study.
The The second second paper, paper, by Rüdiger by Rüdiger Hamm, Hamm, titled: titled: ‘Location ‘Location Conditions Conditions of EnergyIntensive of EnergyIntensive Enterprises’Enterprises’, asserts, asserts that thatthere there is an is interdependent an interdependent relations relationship betweenhip between enterprises enterprises and andthe the regionregion in which in which they theyare located:are located: On theOn onethe onehand hand the conditionsthe conditions of this of thislocation location influence influence turnover,turnover, costs, costs, profits profits and andthus thusthe economicthe economic situ ationsituation of the of individualthe individual firm. firm. On theOn otherthe other handhand the economicthe economic situation situation of the of regionalthe regional firms firms is an is important an important determinant determinant of regional of regional economiceconomic success success and andthe welfarethe welfare of the of peoplethe people living livi inng that in thatregion. region. This This happens happens directly directly becausebecause the firmsthe firms stabilize stabilize regional regional income income and and emp loyment; employment; but butthere there are alsoare also indirect indirect effectseffects running running via incomevia income and inputoutputlinkageand inputoutputlinkages. Regionals. Regional economic economic success success and welfareand welfare in turnin turn determine determine the the regional regional tax tax receipts receipts and and the theregions’ regions’ possibilities possibilities for positivelyfor positively influencinginfluencing the locationthe location conditions. conditions. These These interdep interdependenciesendencies give givean explanation an explanation for thefor highthe high interestinterest firms, firms, politicians politicians and andresearchers researchers normall normally havey have in regional in regional location location conditions conditions and and theirtheir quality. quality. The Thebetter better a region’s a region’s information information about ab theseout these issues, issues, the betterthe better its possibilities its possibilities to to promotepromote its location its location advantages advantages and andthe morethe more effici efficientlyently it can it usecan itsuse scarce its scarce financial financial means means to reduceto reduce the locationalthe locational disadvantages. disadvantages. Regional Regional marketing marketing and andimprovements improvements of the of region’sthe region’s locationlocation conditions conditions aim aimat the at acquisitionthe acquisition of new of newfirms, firms, at additional at additional private private investment investment in the in the region,region, at the at creationthe creation and and stabilization stabilization of employ of employmentment and and the population’sthe population’s welfare. welfare. In In recentrecent years years the Niederrheinthe Niederrhein Institute Institute for Regional for Regional and and Structural Structural Research Research (NIERS) (NIERS) has has surveyedsurveyed firms firms to thoroughly to thoroughly analyze analyze the locationthe location conditions conditions of Middle of Middle Lower Lower Rhine Rhine Area Area – a – a GermanGerman region region located located in the in western the western part partof Northr of NorthrhineWestphalia.hineWestphalia. This This research research especially especially aimedaimed at judging at judging the location the location conditions’ conditions’ quality quality in Middle in Middle Lower Lower Rhine Rhine Area. Area. But But as the as the firmsfirms had tohad evaluate to evaluate not onlynot only the localthe local quality quality but alsobut alsothe generalthe general importance importance of the of locationthe location factorsfactors and andas firms’ as firms’ participation participation in these in these survey surveys hass beenhas been sufficiently sufficiently high high the resultsthe results also also give givethe opportunitythe opportunity to rank to rank the locationthe location factors factors by its b yrelevance its relevance and andto differentiate to differentiate this thiskind kind of analysisof analysis by industry. by industry. So, theSo, aim the aimof the of proposethe proposed paperd paper is twofold: is twofold: It firstly It firstly describes describes which which locationallocational factors factors are –are on – the on basisthe basis of the of abovethe above mentioned mentioned surveys surveys – most – most important important from from the firms’the firms’ point point of view. of view. To find To findout whetherout whether energ energyintensiveyintensive industries industries have have special special location location requirementsrequirements it secondly it secondly compares compares these these general general results res ults with with those those from from energyintensive energyintensive industries.industries.
The Thethird third paper, paper, by Lamara by Lamara Hadjou Hadjou and andMarie Marie Noëlle Noëlle Duquenne, Duquenne, titled: titled: ‘A Theoretical ‘A Theoretical and and MethodologicalMethodological Approach Approach of «Fragile» of «Fragile» Areas: Areas: The TheCas esCas ofes Greek of Greek Regions Regions Crossed Crossed by the by the EgnatiaEgnatia Road Road’, deals’, deals with with rural rural areas areas socalled socalled ‘fragile’ ‘fragile’ which which have have rarely rarely been been object object of of theoreticaltheoretical and andmethodological methodological approach, approach, aiming aiming at delimiting at delimiting the conceptthe concept of fragility of fragility and andat at specifyingspecifying his components. his components. As well As wellas there as there is no is t heoreticalno theoretical approach approach to define to define these these milieus, milieus, therethere is no is either no either general general agreement agreement on the on notionthe notion of fragile of fragile space. space. Numerous Numerous are theare authorsthe authors who who use use this this notion notion without without specifying specifying contents, contents, or defining or defining its outlines. its outlines. Arise Arise then then the the questionquestion to know, to know, what what is really is really meant meant by thisby thisconc concept. ept.This This is the is firstthe firsttask taskof this of thisarticle article whichwhich seeks seeks to trace to trace the historythe history of the of conceptthe concept and andits useits useby authors.by authors. If the If conceptthe concept of of fragilityfragility seems seems to have to have obvious obvious filiations filiations with with the theconcepts concepts of periphery, of periphery, marginal marginal and and underprivilegedunderprivileged space, space, we proposewe propose to show to show that thatthis thisconcept concept refers refers to a tomore a more complex complex reality reality and andin any in anycase, case, a fact. a fact. Assuming Assuming that thatthe fragilitthe fragility is y not is anot state a state but indeedbut indeed a process, a process, the the questionquestion is then, is then, in on in one on one hand, hand, to specifyit to specifyit through through its multiple its multiple constituents constituents and and on the on the otherother hand hand to translate to translate these these last oneslast ones on a on set a ofset appropriate of appropriate and andquantifiable quantifiable indicators. indicators. By By takingtaking as study as study area, area, the northernthe northern region region of Greece of Greece which which has recentlyhas recently benefited benefited from from a great a great highwayhighway infrastructure infrastructure (Via (EgnatiaVia Egnatia), we), proposewe propose using using the methodsthe methods of multicriteria of multicriteria analysis, analysis, to highlightto highlight the typesthe types and degreesand degrees of fragility of fragility of the of subregionalthe subregional areas areas of northern of northern Greece. Greece. The The use ofuse factor of factor analysis analysis methods methods and andclassification classification confer confer us the us possibilitythe possibility to make to make a typology a typology Regional Science Inquiry Journal, Vol. V, (2), 2013 9 of these areas well beyond traditional approaches of disadvantaged areas, marginal or peripheral.
The fourth paper, by Anne Margarian, titled: ‘The Relation Between Industrial And Socio Economic Fundamentals In German Districts’ is a study for the impartial observer of German regions, for whom differences in regional industry structures and prosperity are quite obvious. On the one side, there are regions characterised by different industries, firm structures and labour qualification profiles. On the other side, some of these regions are prosperous, dynamic and growing in terms of inhabitants, labor force and income while others obviously suffer from high unemployment, low tax base and an unsatisfactory income situation. The analysis presented in this paper relates the regional industry structure to the socioeconomic fundamentals that describe the regions' productivity, its income distribution and its population dynamics. The statistical model is based on the approach of moderated mediation. It is thereby able to show that the estimated relations are conditional on the degree of regions' centrality respectively remoteness. Moreover, the analysis distinguishes direct and indirect relations and therefore allows for an identification of the multiple dimensions of the potential effects of local industry structures in cultural, productivity and distributive terms.
The fifth paper, by Maria Isabel Barreiro Ribeiro, António José Gonçalves Fernandes, and Francisco José Lopes de Sousa Diniz, titled: ‘Propensity for entrepreneurship among college undergraduates: the case of a public university in northeastern Portugal’, examines the entrepreneurial ability of the students of a public university in Bragança (Portugal) to identify differentiation factors of their entrepreneurial potential. A quantitative, transversal, and observational analysis was conducted involving 598 student participants. Data gathering took place between November and December 2012 and used the Entrepreneurial Potential Indicator questionnaire. The respondents were mostly female (61.0%), between 18 and 21 years old (53.8%), corresponding to an average of 22.6 years of age (±4.59), studied under an ordinary regime (82.6%), were from the northern region (83.9%), lived in an urban centre (53.8%) and attended the first study cycle (92.8%) of two scientific areas, namely Education Sciences (28.4%) and Technology and Management (28.4%). Over half of the respondents showed entrepreneurial skills (72.4%). Of all the human capital factors considered, the attendance regime was the only one which had no influence on the entrepreneurial potential. In fact, all the others, namely the course’s scientific area and the study cycle have proven to be relevant for reinforcing or developing the students’ entrepreneurial skills. None of the sociodemographic factors that were taken into consideration had any influence on entrepreneurial potential differentiation. Binary logistic regression (logit model) revealed a cause and effect relationship between all the characteristics and the entrepreneurial tendency.
The sixth paper, by Cristiano Cechella, titled: ‘Estimating Brazilian FDI Motivations In Portugal By Structural Equations Model (SEM)’ examines, through a model based on structural equations (Structural Equations Model), the motivations of Brazilian companies to invest in this country compared with firms of other nationalities, which are represented by German companies, Italian, Spanish, American and Japanese. The structural equations allow to infer the safety test results and theoretical constructs. From a theoretical model (known as "structural") constructed from a measurement model (or measurement) is scanned a set of dependency relations, linking the constructs of the hypothesized model. The structural equation modeling is suggested by Hair Jr. et al. (2006) for three purposes: confirming models, evaluation of competing models and the development of new models. In this study, we opted for the development of models related to the first situation, namely the confirmation of a particular model from a theory of FDI. This article has the following structure: first, it will enter the Portuguese economy from the twentieth century. Soon after, it will analyze the internationalization of the Portuguese economy, particularly foreign investment in Portugal. Thirdly, it will put the analysis model, with its conclusions regarding the differences and similarities in the determinants of investments between Brazilian companies and other nationalities in the decision to settle in Portugal, for example, the influence of linguistic affinity and logistics, respectively.
10 Regional Science Inquiry Journal, Vol. V, (2), 2013 10 Regional Science Inquiry Journal, Vol. V, (2), 2013
The seventh paper, by Enkelejda Avdi, titled: ‘The System of Contributions for Health The Insurance seventh paper, Scheme by in EnkelejdaAlbania Performance Avdi, titled: and‘The Main System Challenges’, of Contributions focuses on for the Health system of Insurancecontributions Scheme forin Albania health insurance Performance scheme and inMain Albani Challenges’,a. The paper focuses will on argue the system the need of for contributionsimmediate for measures health insuranceregarding this scheme issue. in Based Albani ona. t Thehe primary paper willand secondary argue the data, need through for immediatean economic measures analysis regarding is studyingthis issue. the Based trend on of the contr primaryibutor’s and numbersecondary for data, five through years. Are an economicidentified analysisthe economic, is studying social and the political trend of facto contrrs,ibutor’s that affect number this process for five and years. whole Are health identifiedinsurance the economic,scheme (HIS). social In andAlbania, political partly facto schemers, that function, affect this an informalprocess and labor whole market, health lack of insuranceincentives scheme for (HIS).participation In Albania, in health partly scheme, scheme weakfunction, administration an informal capacity labor market, for contributions lack of incentivescollecting for participationand poor structure, in health regulatory scheme, andweak super administrationvisor and all capacity in all its for funding contributions challenges, collectingare the and main poor factors structure, that accompaniesregulatory and for super yearsvisor the andhealth all carein all system its funding and as challenges, the result the are thecontributions main factors system that accompanies for health insurance. for years Thethe health main economiccare system factor and as is the a little result economic the contributionsgrowth and system a problem for health with insurance.which Albania The hasmain already economic begun factor to face. is a As little a result economic Albania growthfaces and a a greater problem inequity with which in the Albania ability has to already receive begunhealth to care. face. In As order a result to Albania evasion of facescontributions a greater inequity expected in path, the immediate ability to measures receive health administrative, care. In managerial, order to evasion and financial of contributionsmonitoring expected are needed. path, Mechanisms immediate measures for revenue adm colleinistrative,ction should managerial, be strengthened. and financial Health monitoringcare reform are needed.has been Mechanisms and will remain for revenueone of the colle majctionor challenges should be of strengthened. politics in Albania. Health Full care implementationreform has been of and its willefficiency remain requires one of athe broad maj orpolitical challenges consensus. of politics in Albania. Full implementation of its efficiency requires a broad political consensus. The eighth paper, by Iris Shahini and Orfea Dhuci, titled: ‘The Crossroad of Housing Loans The Financingeighth paper, Caseby Iris of Shahini Albania’, and investigatesOrfea Dhuci, factors titled: affecting‘The Crossroad housing of financeHousing Loans supply in FinancingAlbania. CaseHousing of Albania’,Finance is investigates a major factor factors determin affectinging the housing quality finance and tenure sup ofply housing in Albania.consumption, Housing the Finance overall is financial a major portfolio factor determin of the publicing the and quality the stability and tenure and effectiveness of housing of consumption,the financial the systemoverall (Diamondfinancial portfolio and Lea of1992a). the public Struy andk and the Turner stability (1986) and effectivenessand Stephens of(2000 the financial& 2002) systemargued (Diamondthat housing and finance Lea 1992a). plays anStruy importk andant Turner role in (1986) shaping and each Stephens country’s (2000 wider & 2002)housing argued system that andhousing the housingfinance playssystem an takes import importaant rolent insocial shaping and eacheconomic country’s consequences. wider housingThen, system it follows and the that housing the development system takes of importa a viablent social housing and financeeconomic system consequences. is of utmost Then,importance it follows in thatthe developed the development economies. of aFor viable a typica housingl houseowner, finance the system house is is of a major utmost asset importancein his portfolio in the developed and for manyeconomies. household, For a thetypica purchal houseowner,se of a house the representshouse is a themajor largest asset (and in hisoften portfolio only) and life for long many investment household, and the a purcha store ofse weaof alth house (Goodman represents 1989; the Sheppardlargest (and 1999; oftenMalpezzi only) life 1999; long Bundick investment and and Sellon a store Jr 2007; of wea Dickersolth (Goodmann 2009). 1989; In societies Sheppard like 1999; Albania, Malpezziwhere 1999;social Bundickhousing is and not Sellonon the Jrpriority 2007; list Dickerso of government,n 2009). the In housing societies affordability like Albania, would wherehave social to behousing looked is at not from on thethe prioritypoint of list view of government,of individual’s the abilityhousing to affordabilityraise money wouldneeded to havemeet to be the looked cost or at price from of the their point housing of view needs. of indi Thevidual’s first source ability of tofunding raise moneyfor individual needed isto their meetincome. the cost This or price is often of their the cheapesthousing needs.source The because first sourcethere is of no funding payment for of individual extra cost is in their form of income.interest. This Theis often problem the cheapest that arises source in because case of t indivihere isduals no payment in the emerging of extra cost economies in form isof that interest.income The levels problem are generally that arises low. in The case low of indiviincomeduals mea inns thelow emergingdisposal income economies which is prohibits that incomethe individualslevels are generally to qualify low. for Thehousing low loans.income means low disposal income which prohibits the individuals to qualify for housing loans. The ninth paper, by Ioannis Th. Mazis and Michalis Sarlis, titled: ‘A geopolitical analysis of The theninth activation paper, by of Ioannisthe Shiite Th. geopolitical Mazis and factorMichalis within Sarlis, the titled:Syrian ‘A conflict geopolitical geosystem’ analysis, presents of the activationa systemic of analysis the Shiite of thegeopolitical IranSyriaLebanon factor within geopo the Syrianlitical subsystemconflict geosystem’ within the, presentsframe of the a systemicWider analysisMiddle Eastof the geocomplex IranSyriaLebanon and in light geopo oflitical the g eopoliticalsubsystem factorwithin of the the frame Shiite of Islamistthe Widermovement. Middle East We considergeocomplex that theand Shiite in light Islamist of the move geopoliticalment, which factor is ofrepresented the Shiite by Islamist Hezbollah movement.in Lebanon We consider and by proxythat the Shiite Shiite organizations Islamist move inment, Iraq which(Kataeb is representedHezbollah andby Hezbollah Asa'ib Ahl al in LebanonHaq), has and been by proxy transformed, Shiite organizations under Tehran’s in Ira managemeq (Kataebnt Hezbollah and direction, and intoAsa'ib an Ahl important al Haq),power has beenredistribution transformed, factor under in the Tehran’s region. Turkey’s manageme foreignnt and policy direction, is evaluated into an as important unsuccessful powerand redistribution dangerous for factor the insecurity the region. of the Turkey’s state of foreignIsrael andpolicy the isstability evaluated of asthe unsuccessful Middle Eastern and geopoliticaldangerous for system, the security particularly of the instate relation of Isra toel An andkara’s the stability support of the radical Middle Islamist Eastern groups geopoliticaloperating system, inside particularly Syria. Ankara’s in relation policy to is An alsokara’s considered support as of a radical trigger Islamist mechanism groups for the operatingacceleration inside of Syria. secessionist Ankara’s and policy stateformation is also con amsideredbitions, as such a trigger as in mechanismthe case of forthe gradual the accelerationautonomy of ofsecessionist an ethnically and Kurdish stateformation zone in amthebitions, northeastern such asSyrian in the territory. case of theIn addition, gradual the autonomyUS Russianof an ethnically initiative Kurdish for the zone destruction in the north of theeastern chemical Syrian arsenal territory. of theIn addition, Assad regime the is US evaluated Russian initiativeas beneficial for the for destruction the regional of stability. the chemical Equally, arsenal we of evaluate the Assad the regime US Iranian is evaluatednegotiation as beneficial process as for a strategically the regional agile stability. diplom Equally,atic maneuver we evaluate from Washington’s the US Iranian part. negotiation process as a strategically agile diplomatic maneuver from Washington’s part.
Regional Science Inquiry Journal, Vol. V, (2), 2013 11
The tenth paper, by Yuheng Li and Hans Westlund, titled: ‘Interpreting Overall Inequality in China: The Roles of Physical Capital, Human Capital and Social Capital, investigates the relationship between overall inequality in China and the contributions of physical capital, human capital and social capital. The investment in physical capital tends to enlarge overall inequality while human capital helps to reduce the inequality. Human capital appears to be more influential than physical capital in overall inequality reduction in the research period. Social capital (people’s social networks) however, does not seem to exert any impact on overall inequality in the postreform era. Possible policy implications of these results are that measures should be taken to pursue more even distributed investment of physical capital and to increase people’s education in order to reduce overall inequality in China.
The eleventh paper, by DanielaLuminiţa Constantin, Alina Elena Iosif, Alina Georgiana Profiroiu and Raluca Mariana Grosu, titled: ‘The Services of General Interest in Romania: Insights Into Legal And Institutional Issues At National And Territorial Level’, addresses the legal and institutional issues generated by the organising and the provision of services of general interest (SGI) in Romania, with a special emphasis on the territorial distribution of competences and the derived responsibilities. It takes into consideration the classification of competences associated to local authorities as a result of the decentralisation process, which are divided into exclusive, shared and delegated ones. A series of drawbacks, inconsistencies are revealed followed by reflections on the solutions adopted by the authorities in favour of economic liberalisation and sustainable development of the local communities. The cooperation between the public authorities and the business sector is particularly addressed in this respect. In methodological terms, several interviews were conducted both among the general informants, namely academic representatives, policy makers, etc. and the representatives of the services providers, such as practitioners or publicadministrators involved in delivering SGI. The former category of interview respondents has generated ideas of a national coverage area, while the latter type of interviewees has presented their perspective on certain localities in Romania, but with wide applicability to other similar areas. The interviewees’ opinions have been mainly focused on the state and the future challenges on SGI in Romania.
The twelfth paper by Bernard De Myttenaere, titled: ‘Local Actors And Leadership In Rural Destinations: Exploring The Role Of Gastronomic Confraternities’ focuses on the three rural destinations in Wallonia (Chimay, Orval and Rochefort), putting forward reflections on the role and influence of gastronomic confraternities, both as actors in local economic and tourist development and in terms of their leadership capacity. By means of this exploratory research, this paper is not seeking to analyse the effectiveness or economic performance generated by the activities of the gastronomic confraternities, but rather to show the opportunities they offer for local actors to form and gain access to such networks. After having identified the many reasons and advantages to local actors of joining a gastronomic confraternity, this paper tries to understand why some of them do not seem to be interested in local actors, whereas others draw attract members of the local economic, political and social elites.
With our thanks and gratitude to the issue authors and the members of the editorial board, for preparing this issue, we strongly wish that this issue will act as a staring point for further theoretical and empirical research on the issues raised, providing a pathway for further academic and scientific dialogue.
On behalf of the Editorial Board,
Dr. Dr. Aikaterini Kokkinou and Dr. Stylianos Alexiadis
12 Regional Science Inquiry Journal, Vol. V, (2), 2013
Regional Science Inquiry Journal, Vol. V, (2), 2013 13
Articles
14 Regional Science Inquiry Journal, Vol. V, (2), 2013
Miyata Y., Wahyuni A., Shibusawa H., Regional Science Inquiry Journal, Vol. V, (2), 2013, pp. 15 31 15
ECONOMIC ANALYSIS OF THE IMPACT OF CARBON TAX ON THE ECONOMY OF MAKASSAR CITY, INDONESIA
Yuzuru MIYATA Graduate School of Architecture and Civil Engineering, Toyohashi University of Technology, Japan [email protected]
Any WAHYUNI Graduate School of Environment and Life Science Engineering, Toyohashi University of Technology, Japan [email protected]
Hiroyuki SHIBUSAWA Graduate School of Architecture and Civil Engineering, Toyohashi University of Technology, Japan hiro[email protected]
Abstract Makassar is the capital of South Sulawesi and the largest metropolitan city in eastern Indonesia. This city is an established of economic development for eastern Indonesia, which is characterized by a high degree of industrial development. Therefore, the carbon dioxide (CO2) emissions generated in the city will increase. However, the government has attempted to maintain environmental quality to ensure a livable and healthy city. Unfortunately, the government’s budget to support the economic development is limited, despite the increased level of economic activity in the city. As a result of these conditions, the government has elected to economize resource use by improving the efficiency of resource allocations. To this end, the government imposed a carbon tax in the city. The purpose of this study is to analyze the impacts on the economy in Makassar resulting from the introduction of carbon taxes to reduce energy consumption in all sectors of the economy that generate CO2 emissions. The imposition of a carbon tax is expected to reduce CO2 emissions and to improve the city’s economic potential. The study investigates the possibility of transferring carbon tax revenue to transfer to household to generate increased household income. A computable general equilibrium (CGE) model was the primary analytical methodology employed to measure the impact of the imposition of a carbon tax across all sectors of the economy. The model examined the impact of the carbon tax based on the 2006 inputoutput (IO) table for Makassar City and estimated of a social accounting matrix (SAM) table the same year. In CGE models, general equilibrium is achieved via the price mechanism. The model assumes a static economy with no timerelated elements. A total of twenty eight industrial sectors and two production factors, labor and capital, are used in this study. The model economy contains a single representative household that sets its consumption to maximize its utility subject to its budget constraint. The utility function used is the constant elasticity of substitution (CES) type, where the household maximizes utility subject to a budget constraint. Every industry uses an intermediate input to produce one commodity for each sector without commodity byproduct. The firms are assumed to maximize their profits by managing inputs and outputs subject to their production technology. Firms are assumed to be perfectly competitive and to achieve equilibrium in 2006 through flexible price adjustments. The carbon tax policy is assessed in two simulations. In the first simulation, a carbon tax is imposed on all industries without household transfer, and in the second simulation, the tax revenue is transferred to households. The government transfers funds to household in amount equal to the carbon tax revenue. In theory, the implementation of a carbon tax will reduce CO2 emissions and increase government revenues. Furthermore, household welfare will also increase, output prices will increase, and the household will reduce its consumption.
16 16 MiyataMiyata Y., Wahyuni Y., Wahyuni A., Shibusawa A., Shibusawa H., Regional H., Regional Scien ceScien Inquiryce Inquiry Journal, Journal, Vol. V, Vol. (2), V, 2013, (2), 2013,pp. 15 pp. 31 15 31
The Theresults results of all of simulations all simulations of the of CGEthe CGE model model indicated indicated that thata carbon a carbon tax cantax reducecan reduce the the volumevolume of CO of2 COemissions2 emissions by 8 by %. 8 In%. general, In general, output output prices prices and andproduction production volumes volumes decline. decline. The The demand demand for capital for capital tendeds tendeds to be to fixed, be fixed, and and labor lab demandor demand declined declined after after tax revenues tax revenues werewere transferred transferred to the to representativethe representative household. household. Household Household consumption consumption declined declined following following the the imposition imposition of carbon of carbon taxes taxes but but increased increased in res inponse response to the to thetransfer transfer of carbon of carbon tax tax revenues.revenues. Therefore, Therefore, household household welfare welfare increased increased after af ter receiving receiving transfers transfers from from the the government.government. It is Itcrucial is crucial to effectively to effectively manage manage efforts efforts to redu to reduce COce 2 COemissions.2 emissions. The Thesuch such management management involvesinvolves not onlynot only productionside productionside efforts efforts concernin concerning environmentalfriendlyg environmentalfriendly technology; technology; but but preventionprevention of a ofdecline a decline in commodity in commodity consumption consumption preferences. preferences.
Keywords:Keywords: Carbon Carbon tax, CGEtax, CGE approach, approach, CO2 COemissions,2 emissions, economy economy analysis analysis JELJEL classification: classification: H21, H21, H32, H32, H71 H71
I I Introduction Introduction A carbonA carbon tax istax one is policyone policy instrument instrument that canthat becan a ppliedbe applied to address to address greenhouse greenhouse gas emissions.gas emissions. Indonesia’sIndonesia’s policy policy goals goals in this in respectthis respect can becan fou bend fou innd the in Ministry the Ministry of Finance of Finance Indonesia’s Indonesia’s Green Green PaperPaper on Climate on Climate Change Change Commitment Commitment of the of President the President of the of Republic the Republic of Indonesia, of Indonesia, presented presented at at a G20a G20 conference conference (2010). (2010). The The country’s country’s target target is t o is reduce to reduce CO 2 CO emissions2 emissions in 2020 in 2020 to the to the equivalentequivalent of 6 of% 6to % 24 to % 24 below % below 2005 2005 levels. levels. The Thetax willtax willbe introduced be introduced at a atrate a rateestimated estimated to to reducereduce emissions emissions to meet to meet longterm longterm goal. goal. The Thedegree degree of abatement of abatement achieved achieved is measured is measured based based on the on estimatedthe estimated emissions emissions level level in 2006, in 2006, whichwhich is considered is considered the businessasusual the businessasusual (BAU) (BAU) scenario. scenario. In principle, In principle, of abatement of abatement applies applies to all to all CO2 COemissions2 emissions generated generated a results a results of economic of economic activity activity in the in city. the city.The Theuse ofuse fossil of fossil fuel fuelaccounts accounts for 68.7for 68.7% of % total of totalemissions emissions in Indonesia in Indonesia (2010). (2010). UnderUnder the BAUthe BAU scenario, scenario, the COthe2 COemissions2 emissions generated generated by energy by energy sector sector in Makassar in Makassar City Careity are estimatedestimated at 2.57 at 2.57 million million tons tons for 2006. for 2006. To achieve To achieve the target the target in the in Green the Green Paper, Paper, it will it will be be necessarynecessary to reduce to reduce emissions emissions by 154,000 by 154,000 to 616,000 to 616,000 tons tonsrelative relative to the to BAU the BAU scenario. scenario. Under Under the the scenariosscenarios considered considered in this in study,this study, a carbon a carbon tax istax introduced is introduced at a rateat a ratethat thatis sufficient is sufficient to reduce to reduce CO2 COemissions2 emissions by 7 by% 7to % 8 to% 8relative % relative to 2006 to 2006 levels. levels. The Ttaxhe applies tax applies to all to commodities all commodities consume consume the city.the city.However, However, to avoid to avoid double double taxation, taxation, tax dotaxes do notes applynot apply to the to exportthe export or and or distributionand distribution sectors.sectors. The The study study provides provides a detailed a detailed evaluation evaluation of the of impthe acts imp acts of the of carbonthe carbon tax ontax production, on production, consumptionconsumption and and urban urban economic economic performance. performance. This This research research uses uses a computable a computable general general equilibriumequilibrium (CGE) (CGE) model, model, which which is a quantitativeis a quantitative method me thodto estimates to estimates the impact the impact of economic of economic and and policypolicy shocks, shocks, particularly particularly those those affecting affecting the enttheire ent economy.ire economy. The Themodel model realistically realistically reproduces reproduces the structurethe structure of the of overall the overall economy economy and thereforeand therefore the nature the nature of all of existing all existing economic economic transactions transactions amongamong diverse diverse economic economic agents agents (productive (productive sectors, sectors, household, household, the government, the government, and and external external sectors).sectors). The The results results of the of CGE the CGE model model are expected are expected to reveal to reveal that that the carbon the carbon tax will tax will have have significantsignificant impacts impacts throughout throughout the economy. the economy. The Thecarbon carbon tax willtax willinitially initially be set be atset rate at rateof Rp. of 10,000/tCORp. 10,000/tCO2, wich2, wich is equivalent is equivalent to US to $1/tUS $1/t CO2.CO The2. Themodel model employs employs the carbon the carbon tax rate tax appliedrate applied in India, in India, under under the assumption the assumption that Makassarthat Makassar city city exhibits exhibits an economic an economic structure structure that that is suffici is sufficientlyently similar similar to that to that of India. of India. The The results results presentedpresented below below estimate estimate the effects the effects on the on city’s the city’s economic economic activity. activity.
II II The TheModel Model
2.1 2.1 Framework Framework of the of Modelthe Model The Theresults results of the of simulationsthe simulations produced produced using using the CtheGE C comparativestaticGE comparativestatic model model were were reported reported as deviationsas deviations from from a baseline a baseline scenario scenario (BAU). (BAU). Rathe Rather thanr than presenting presenting changes changes over over time, time, the the modelmodel reports reports differences differences with with respect respect to the to basel the baseline scenarioine scenario at a at given a given point point in 2006. in 2006. Such Such resultsresults are generallyare generally considered considered to represent to represent econo economic micresponses responses over overa period a period of approximately of approximately two two years years (McDouugall, (McDouugall, 1993). 1993). The The model model is consiste is consistent withnt with price price levels levels and and real real economic economic activity.activity. The Theprice price is determined is determined exogenously exogenously and aandcts asacts the as numeraire the numeraire in the in model. the model. An exampleAn example of a ofcomparative a comparative static static model model is illustr is illustrated atedin Figure in Figure 1. The 1. Thefigure figure depicts depicts the the equilibriumequilibrium relationships relationships between between demand demand and and supply supply before before and and after after the imposition the imposition of a of a carboncarbon tax. tax. This This study study assumed assumed that that the thecity’s city’s indu industriesstries produced produced products products and and CO 2 CO2 emissionsemissions as a asbyproduct. a byproduct. In the In figure,the figure, x is xa cois mmodity,a commodity, p is pthe is pricethe price of the of commodity,the commodity, t t Miyata Y., Wahyuni A., Shibusawa H., Regional Science Inquiry Journal, Vol. V, (2), 2013, pp. 15 31 17 is the tax per unit of the commodity, and the commodity supply function will shift upward by t.
p S1
E1 S p1 E p0 t
p2 D
x2 x2 x1 x0 Figure 1: Equilibrium before and after the imposition of a carbon tax
This figure indicates that the price of the commodity before the imposition of the tax (x2) is p2 and that the price of the commodity after the imposition of the tax (x2) becomes p2 + t. Equilibrium is achieved when the demand function (D) and the supply function (S) intersect at point E (x0,p0). After the tax is introduced, equilibrium occurs at the point E1 (x1, p1), which is the intersection of the demand function (D) and the supply function (S1) after the tax has been imposed. The model simulations indicate that the tax will result in percentage changes in industrial output of 100*(X1X0)/X0 and demonstrate how the policy could affect industrial output and economic performance.
2.2 Setup of the Economy In the model, production requires the use of two production factors: one unit of labor and one unit of capital. In the model economy, there are twentyeight industry representative firms, that produce twentyeight commodities. There is a single representative household that consumes all commodities in the economy in a way that maximizes its utility. The household supplies the firms with two production factors in return for income. The supply and demand for these commodities and production factors are in perfectly competitive equilibrium in 2006.
Figure 2: Hierarchical structure of the model 2.3 Behavior of Economic Agents
18 18 MiyataMiyata Y., Wahyuni Y., Wahyuni A., Shibusawa A., Shibusawa H., Regional H., Regional Science Scien Inquiryce Inquiry Journal, Journal, Vol. V, Vol. (2), V, 2013, (2), 2013,pp. 15 pp. 31 15 31
2.3.12.3.1 Industries Industries The The industries industries use useintermediate intermediate inputs, inputs, labor labor and and capital capital to produce to produce goods. goods. Industries Industries combinecombine the intermediate, the intermediate, labor labor and capitaland capital inputs inputs using using the Leontief the Leontief production production function function and and applyapply the CobbDouglasthe CobbDouglas production production function function for thefor valueaddedthe valueadded inputs inputs (see (seeFigure Figure 3). The 3). The firm’sfirm’s cost costminimization minimization problem problem can becan written be written as follows: as follows:
28 28 + + + min∑minp x∑+pix1( ij+tp1( )(wLtpj)(+wLrKj ) rK j ) ( j = (1,....j =128,....) 28 (1)) (1) i=1 i iij=1 j j j with withrespect respect to xij to, L xj ijand, Lj Kandj Kj subject subject to to x x 1 1 x x1 j ij x x28 j 1 j ij 28 j (2) (2) X =Xminj =[min [ f ( Lf j, (KL j ),, K j ), ,..., ,..., ,..., ,..., ] ] j a a j j j a a a a a a 0 j 0 j 1 j 1 j 1 j 1 j 28 j 28 j − a a j1( − a 1( ) a j ) f ( L , K≡ ) ≡ A j L K j (3) (3) f j ( L jj , K jj ) j A1 j L 1j j K j j j wherewhere pi: pricepi: price of commodity of commodity i i xij: intermediatexij: intermediate input input of industry of industry i's product i's product in industry in industry j j tpj: nettpj :indirect net indirect tax rate tax imposedrate imposed on industry on industry j’s product j’s product (indirect (indirect tax ratesubsidy tax ratesubsidy rate) rate) w: wagew: wage rate rate r: capitalr: capital return return rate rate Lj: laborLj: labor input input in industry in industry j j Kj: capitalKj: capital input input in industry in industry j j Xj: outputXj: output in industry in industry j j a0j: valuea0j: value added added rate inrate industry in industry j j aij: inputaij: input coefficient coefficient Aij ,αAij:ij technological,αij: technological parameters parameters in industry in industry j j
FigureFigure 3: Hierarchical 3: Hierarchical structure structure of industries of industries
The Theconditional conditional demands demands for intermediate for intermediate goods, goods, labor lab andor capitaland capital in the in productionthe production process process are asare follows: as follows:
= (4) xij =xijaij Xajij X j(4)
α α − α j j a X 1( − α1( j )r j )r a0 j X 0j j j LD LD= = (5) (5) j j α wα w A A j j j j Miyata Y., Wahyuni A., Shibusawa H., Regional Science Inquiry Journal, Vol. V, (2), 2013, pp. 15 31 19
1( −a ) j a j w a0 j X j KD = (6) j − 1( a j )r A j where LDj: conditional demand for labor in industry j KDj: conditional capital demand in industry j The industries conform to the zero profit condition under perfect competition.
28 profit = p j X j − ∑ pixij − 1( + tp j )[w ⋅ LD + r ⋅ KD ] = 0 (7) i=1 j j
2.3.2 Households A fixed number of households in Makassar City are assumed to be homogeneous. Thus one can assume that the households share a common aggregate utility function. The households share a CES utility function with respect to the consumption of current and future goods. In this model, the current good is defined as a CES composite of current consumption goods and leisure time and the future good is derived from savings. The household utility function illustrated in Figure 4:
Figure 4: Hierarchical structure of households
Households select a bundle of current and future goods to maximize their utility function subject to a budget constraint. The current good is then divided into a composite consumption good and leisure time (labor supply). Household income consists of full wage income, which is obtained when households supply their entitre labor endowment, capital income after capital depreciation, current transfers from the government, labor income, property income and other current transfers from the external sector. A share of household wage and capital income is transferred to the external sector. A direct tax is imposed on households income after receive transfers. Households are then assumed to allocate their after direct tax income to current and future good. Here, the direct tax is assumed to include all current transfers from households to the government for simplicity. To explain the household behavior, future goods consumption is derived here. The future good indicates future household consumption derived from household saving; however, household saving also forms the basis for capital investment. Therefore, the capital good can be interpreted as a saving good. Investment is made using produced goods, and their shares in total investment are denoted by bi. When the price of the investment good is denoted by pI,
20 20 MiyataMiyata Y., Wahyuni Y., Wahyuni A., Shibusawa A., Shibusawa H., Regional H., Regional Science Scien Inquiryce Inquiry Journal, Journal, Vol. V, Vol. (2), V, 2013, (2), 2013,pp. 15 pp. 31 15 31
28 28 = p Ip =I ∑ ∑p Ip i I isi realized. is realized. The The price price of the of investment the investment good good is t hen is then expressed expressed I I i = 1i = 1i i 28 28 = as pas p= ∑ b∑ pb i p. Thisi . Thisprice price can becan regarded be regarded as the as price the price of the of sa theving sa vinggood good ps. ps. I I i = 1i =i1 i BecauseBecause the returnsthe returns to capital to capital net of net the of directthe direct tax on tax a on unit a unit of capital of capital investment investment is is expressedexpressed by (1 byty (1)(1tyk)(1ｏ)(1kkｏ)(1ｒ) krδｒ, ) therδ, expectedthe expected return return rate rateon the on pricethe price of saving of saving good g oodps, ps, that is,that the is, expected the expected net return net return rate ofrate household of household saving saving rs is rwrittens is written as follows: as follows:
= − − − δ (8) rs =rs1( − ty1( )(1ty−)(k1o )(k1o−)(k1r )rkδr /)rp s / p (8)s wherewhere ty: directty: direct tax rate tax imposedrate imposed on households on households ko: rateko: ofrate transfer of transfer of property of property income income to the to extern the external sectoral sector kr: capitalkr: capital depreciation depreciation rate rate δ: ratioδ: ratio of capital of capital stock stock in units in units of a physicalof a physical com moditycommodity to that to inthat units in units of capital of capital service. service.
Here,Here, the assumption the assumption is that is that the expected the expected returns returns to saving to saving finance finance future future consumption. consumption. InterpretingInterpreting the pricethe price of the of futurethe future good good as the as prtheice pr ofice the of currentthe current consumption consumption good good under under myopicmyopic expectations, expectations, and anddenoting denoting real realhousehold household saving sa vingS, we S , observe we observe that that the following the following equationequation holds. holds.
p ⋅ H p=⋅ H1( −=ty1( )(−1ty−)(k1o−)(1ko−)(k1r −)rkδr⋅)Srδ ⋅(9)S (9)
This This equation equation yields yields [ps p/ [p(1s typ/(1)(1tyk)(1ｏ)(1kkｏ)(1ｒ)rδk]ｒH=p)rδ]H=pｓS, andｓS, and setting setting the price the price of the of future the future goodgood pH associated pH associated with withreal savingreal saving S yields S yields the following: the following:
p= = p p−/(1 − ty−)(1 − k −)(1 − kδ )rδ (10) pH Hps p /(s1 ty)(1 ko )(1o kr )r r (10)
ThenThen psS = p spSH =H p isH Hrealized. is realized. Employing Employing the the abovementioned abovementioned future future good good and and its price, its price, the the household household utility utility maximizationmaximization problem problem is now is now specified specified as follows. as follows. The T maximizationhe maximization of household of household utility utility with withrespect respect to current to current good good consumption consumption will bewill de bescribed described in a subsequentin a subsequent section. section. /1 ν /1 (νv −(v/)1 v− /)1 v /1 v /1 v(v −(v/)1 v− v/)1 v/(vv −/()1 v − )1 max max u(G,H u(G,H) ≡ {α) ≡ {α1G 11G 1 1 + 1( 1−+α 1( )− α1)H 11H 1 1} 11}11 1 (11) (11) G,HG,H subjectsubject to to p⋅ +⋅ G + p⋅ ⋅=H =− 1( − ty )−FI − TrHO (12) pG G p H HH 1( ty ) FI TrHO (12)
FI ≡FI1( ≡− l1( o−) wlo⋅ )Ew+⋅ ELI+ +LI1( +− k1( o−)(k1o−)(k1r−)rk r⋅ KS)r ⋅ +KSKI+ +KITrGH+ TrGH+ TrOH+ TrOH (13) (13) wherewhere α: shareα: share parameter parameter v1: elasticityv1: elasticity of substitution of substitution between between the current the current good go andod futureand future good good G: currentG: current household household consumption consumption H: futureH: future household household consumption consumption pG: pricepG: price of the of current the current good good pH: pricepH: price of the of future the future good good FI: householdFI: household full incomefull income TrHOTrHO: current: current transfers transfers from from households households to the to external the external sector sector lo: thelo :rate the atrate which at which labor labor income income is transferred is transferred to the to external the external sector sector Miyata Y., Wahyuni A., Shibusawa H., Regional Science Inquiry Journal, Vol. V, (2), 2013, pp. 15 31 21
E: initial household labor endowment, which is specified as twice the actual working time based on actual working and leisure time in Makassar City. LI: labor income transferred from the external sector to households (exogenous variable) KS: initial household endowment of capital stock KI: property income transferred from the external sector to households (exogenous variable) TrGH: current transfers from the government to households TrOH：current transfers from the external sector to households
By solving this utility maximization problem, we obtain the demand functions for current and future goods, yielding a household saving function.
α [(1 − ty ) FI − TrHO ] G = v (14) 1 ⋅ pG
1( − α )[( 1 − ty ) FI − TrHO ] H = v (15) 1 ⋅ p H
= S p H H / p s (16)
1−v 1−v ≡ α 1 + − α 1 pG 1( ) p H (17)
We then describe the derivation of demands for composite consumption and leisure time from the current good G. The current good G is a composite of consumption and leisure time, and G is obtained from the following optimization problem.
1/v (v − /)1 v /1 v (v − /)1 v v /(v − )1 max G ≡ {β 2 C 2 2 + 1( − β ) 2 F 2 2 } 2 2 (18) C,F subject to
p ⋅ C + 1( − ty)(1 − lo )w ⋅ F = 1( − ty)FI − TrHO − SH (19) where β: share parameter v2: elasticity of substitution between composite consumption and leisure time C: composite consumption F: leisure time p: price of the composite consumption good SH: household nominal saving (＝PS･S )
Solving this utility maximization problem yields the demand functions for composite consumption, leisure time, and labor supply.
β [(1 − ty)FI − TrHO − SH ] C = v (20) p 2 ⋅
1( − β )[(1 − ty)FI − TrHO − SH ] F = (21) v2 [(1 − ty)(1 − lo )w] ⋅
LS = E − F (22)
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− − (1−v(1) v ) (1−v(1) v ) = β p 2 2 + 1( − β )[(1 − ty )(1 − l )w] 2 2 (23) = β p + 1( − β )[(1 − ty )(1 − lo )wo] (23) wherewhere LS reflects LS reflects the household the household labor labor supply supply SubstitutingSubstituting composite composite consumption consumption (20) (20)and leisureand leisure time time(21) (21)into (18),into (18), we derive we derive the price the price indexindex of the of current the current good good as follows: as follows:
1−v 1−v 1/(v −1) 1−v 2 1−v 1/(2v −1) 2 =p β = {β 2p + −+β 1( − β−)[(1− ty− )(1− lo )w2] 2} (24) pG {G p 1( )[(1 ty)(1 lo )w] } (24)
Moreover,Moreover, the composite the composite consumption consumption good good is disaggr is disaggregatedegated into into produced produced goods goods by by maximizingmaximizing a CobbDouglas a CobbDouglas subsub subsub utility utility function function given given household household income income and leisureand leisure time.time.
28γ γ 28 max C28≡ ∏iC i 28 ( ∑ γ = )1 (25) max C ≡ ∏ C = i ( ∑ γ = = i )1 (25) i=1 i i 1 i =1 i i 1 subjectsubject to to 28 28 ∑ p ⋅ C = 1( − ty )Y − TrHO − SH (26) ∑ p= ⋅ Ci = i1( − ty )Y − TrHO − SH (26) i=1 i i1 i wherewhere Ci: household consumption good produced by industry i Ci: household consumption good produced by industry i pi: the price of good i pi: the price of good i Y: household income ( =(1lo)w･LS+LI+(1ko)(1kr)r･KS+KI+TrGH+TrOH ) Y: household income ( =(1lo)w･LS+LI+(1ko)(1kr)r･KS+KI+TrGH+TrOH )
FromFrom this optimizationthis optimization problem, problem, consumption consumption good good i is derived. i is derived.
γ γ i C= =i −[(1 − ty−)Y − TrHO− − SH ] = (i = ⋅⋅⋅ ,1 ⋅⋅⋅ ,28 ) (27) C i i [(p1 ty )Y TrHO SH ] (i ,1 ,28 ) (27) p i i
The priceThe price of composite of composite consumption consumption is calculated is calculated as follows: as follows:
γ γ 28 pi i 28= p i p = p∏ ∏i (28) (28) iγ=1 γ i=1 i i
2.3.32.3.3 The TheGovernment Government The The government government sector sector in this in thisstudy study consists consists of the of activies the activies of the of national the national and and local local governmentsgovernments in Makassar in Makassar City. City. Thus, Thus, the concept the concept of government of government that wethat employ we employ corresponds corresponds to theto definition the definition used usedin the in SAM the SAM framework. framework. The goThevernment government obtains obtains its income its income from from direct direct and netand indirect net indirect taxes taxes collected collected Makassar Makassar City Cityand currentand current transfers transfers from from the external the external sector. sector. The The government government then then spends spends this incomethis income on governmen on government consumption,t consumption, current current transfers transfers to to householdshouseholds and currentand current transfers transfers to the to external the external sector. se ctor.The governmentThe government saves saves the difference the difference betweenbetween income income and and expenditures. expenditures. Nominal Nominal consumptio consumption n expenditures expenditures on on commodities/servicescommodities/services are assumed are assumed to be to proportional be proportional to the to government the government revenue revenue with with a a constantconstant sectorial sectorial share. share. These These expenditures expenditures are dearenoted denoted by the by followingthe following balance balance of of payments.payments.
28 28 28 ∑ p ⋅ CG + TrGH + TrGO + SG = ty ⋅28Y + ∑ tp (w ⋅ LD + r ⋅ KD ) + TrOG (29) ∑ p =⋅ CGi + TrGHi + TrGO + SG = ty ⋅Y + ∑ tp =(w ⋅iLD + ri⋅ KD ) + TrOGi (29) i=1 i 1 i i=1 ii 1 i i wherewhere CGi: government consumption expenditures on commodity I CGi: government consumption expenditures on commodity I Miyata Y., Wahyuni A., Shibusawa H., Regional Science Inquiry Journal, Vol. V, (2), 2013, pp. 15 31 23
TrGH: current transfers to households TrGO: current transfers to the external sector SG: government savings TrOG: current transfers from the external sector
2.3.4 The External Sector The external sector gains its income from Makassar City’s imports, current transfers from the government, labor income transfers and property income transfers. The sector then spends this income to finance Makassar City’s exports and imports, current transfers to households and the government, labor (employees in Makassar City) and property income transfers. These expenditures are also expressed by the following balance of payments.
28 28 ∑ p ⋅ EX + TrOH + TrOG + KI + LI + SO = ∑ p ⋅ EM + TrHO + TrGO + KIO + LIO (30) i=1 i i i=1 i i where EXi: export of commodity I EMi: import of commodity I SO: savings of the external sector (= national current surplus) LIO: labor income transfers to the external sector (= lｏ· w ·LS ) KIO: property income transfers to the external sector (= k0 · r · KS) 2.3.5 Balance of Investment and Savings Savings accumulated by the representative household, the government, the local department and total capital depreciation determine the total investment.
28 28 ∑ p ⋅ I = SH + SG + SO + ∑ DR (31) i=1 i i i=1 i where Ii: demand for commodity i by other investments, DRi: amount of fixed capital consumption in industry i
2.3.6 Commodity Prices Given the zero profit condition imposed on industry, we can determine commodity prices from the following equation:
28 p X = ∑ p x + 1( +tp )[w⋅ LD +r ⋅ KD ] (32) j j i=1 i ij j j j
Given a wage and a capital return rate, we can calculate the commodity prices as follows:
′ −1 P = (I − A ) [(1 + tp j )(w.ld j + r ⋅ kd j )] (33) where P: vector of commodity prices A': transposed matrix of industries' input coefficients [・]: a column vector whose elements are presented in parentheses: ldj≡LDj / Xj and kdj≡KDj / Xj
2.3.7 Derivation of Equilibrium The equilibrium conditions in the model can be summarized as follows:
Commodity Market
24 Miyata Y., Wahyuni A., Shibusawa H., Regional Science Inquiry Journal, Vol. V, (2), 2013, pp. 15 31 24 Miyata Y., Wahyuni A., Shibusawa H., Regional Science Inquiry Journal, Vol. V, (2), 2013, pp. 15 31
X1 a11 ⋯ a1２8 X1 C1 CG1 I1 EX1 EM1 X1 a11 ⋯ a1２8 X1 C1 CG 1 I1 EX 1 EM 1 ⋮ = ⋮ ⋱ ⋮ ⋮ + ⋮ + ⋮ + ⋮ + ⋮ − ⋮ (34) ⋮ = ⋮ ⋱ ⋮ ⋮ + ⋮ + ⋮ + ⋮ + ⋮ − ⋮ (34) X２8 a２81 ⋯ a２8２8X２8 C２8 CG２8 I２8 EX２8 EM２8 X a ⋯ a X C CG I EX EM ２8 ２81 ２8２8 ２8 ２8 ２8 ２8 ２8 ２8 Labor Market Labor Market 28 = LS28 ∑ LD j (35) = j=1 LS ∑ LD j (35) Capitalj=1 Market Capital Market 28 = KS28 ∑ KD j (36) = j=1 KS ∑ KD j (36) j=1
III Construction Data III ConstructionThe database used Data in this study is based on a 2006 IO table for Makassar City that includes Thetwentyeight database used industries in this listedstudy inis Tablebased 1.on The a 2006 data baseIO tabledeveloped for Makassar from the CityIO tablethat includesconsists of a twentyeightmatrix of industries industry listedinputs, in outputs Table 1.and The taxes. data Allbase d atadeveloped in the IO from table the areIO presented table consists in Indonesian of a matrixrupiah. of industry inputs, outputs and taxes. All data in the IO table are presented in Indonesian rupiah.
Table 1: The twentyeight sectors in the 2006 IO table for Makassar City NoTable 1: The twentyeight sectorsIndustries in the 2006 IO table for Makassar City Denoted No Industries Denoted 001 Food Crops Sector 1 001 002Food Plantation Crops Crops SectorSector 1 2 002 003Plantation Livestock Crops SectorSector 2 3 003 004Livestock Forestry SectorSector 3 4 004 005Forestry Fishery SectorSector 4 5 005 006Fishery Mining of oil and gas and nonoil and gas SectorSector 5 6 006 007Mining Manufacture of oil and ofgas food, and nonoilbeverages and and gas tobacco SectorSector 6 7 007 008Manufacture Manufacture of food, of textiles, beverages clothing and tobacco and leather SectorSecto 7 r 8 008 009Manufacture Manufacture of textiles, of wood, clothing bamboo and and leather furniture SectoSectorr 8 9 009 ManufactureManufacture of wood, of bamboo paper and and furniture paper products, printing andSector 9 010 Sector 10 Manufacturepublishing of paper and paper products, printing and 010 Sector 10 publishingManufacture of chemicals, petroleum, coal, rubber and plastic 011 Sector 11 Manufactureproducts of chemicals, petroleum, coal, rubber and plastic 011 Sector 11 012products Manufacture of cement and nonmetallic minerals Sector 12 012 013Manufacture Manufacture of cement of basic and metals nonmetallic minerals SectorSector 12 13 013 014Manufacture Manufacture of basic of fabricated metals metal SectorSector 13 14 014 015Manufacture Other manufactures of fabricated metal SectorSector 14 15 015 016Other Electricity, manufactures gas and water supply SectorSector 15 16 016 017Electricity, Construction/building gas and water supply SectorSector 16 17 017 018Construction/building Trade SectorSector 17 18 018 019Trade Hotels SectorSector 18 19 019 020Hotels Restaurants SectorSector 19 20 020 021Restaurants Highway transportation SectorSector 20 21 021 022Highway Other transportation transportation SectorSector 21 22 022 023Other Communications transportation SectorSector 22 23 023 024Communications Banks and other financial institutions SectorSector 23 24 024 Banks and other financial institutions Sector 24 Miyata Y., Wahyuni A., Shibusawa H., Regional Science Inquiry Journal, Vol. V, (2), 2013, pp. 15 31 25 Miyata Miyata Y., Wahyuni Y., Wahyuni A., Shibusawa A., Shibusawa H., Regional H., Regional Scien Science Inquiryce Inquiry Journal, Journal, Vol. V,Vol. (2), V, 2013, (2), 2013, pp. 15 pp. 31 15 31 25 25
025 Leasing, real estate and business services Sector 25 025 025Leasing, Leasing, real realestate estate and andbusiness business services services SectorSector 25 25 026 Education Sector 26 026 026Education Education SectorSector 26 26 027 Health Sector 27 027 027Health Health SectorSector 27 27 028 Social services and other services Sector 28 028Social Social services services and andother other services services SectorSector 28 28 028 Source: Makassar City Statistical Bureau, 2008 Source: Source: Makassar Makassar City CityStatistical Statistical Bureau, Bureau, 2008 2008 Instead of the IO table, the model developed in this paper considers the SAM table. Therefore, InsteadthisInstead studyof the of IOestimatedthe IOtable, table, the the modelthe SAM model developed table developed for in Makassar th inis thpaperis paper considersCit yconsiders based the on SAMthe the SAM table. 2006 table. Therefore, IO Therefore, table for thisthis Makassarstudy study estimated estimated City, the theSAM 2005 SAM table SAM table for table forMakassar Makassar for Indonesia Cit yCit basedy based and on related theon the2006 data2006 IO which IOtable table for are for as MakassarMakassarpresented City, in City, Table the the 2005 2. 2005 SAM SAM table table for for Indonesia Indonesia and and related related data data which which are are as as presentedpresented in Table in Table 2. 2. Table 2: The 2006 SAM table for Makassar City Economic Sectors ProductionTable Activitie 2: The s 2006Institution SAM table for MakassarProduction Factors City Capital Exte rnal Table 2: The 2006 SAM table for Makassar City Total EconomicEconomic(in Sectors million Sectors rupiah) ProductionProduction 28Activitie Industries Activitie s s GovernmentInstitutionInstitution Households Production CapitalProduction Factors Factors LaborCapital AccumuCapitallationExte rnalExteSector rnal Total Total (inProduction million(in rupiah)million rupiah) 28 Industries28 Industries Government Government Households Households Capital Capital Labor Labor Accumu Accumulation lationSectorSector 28 Industries 450,059 181,321 1,305,500 0 0 438,340 1,060,325 1,314,895 ProductionProductionActivities 28 Industries28 Industries 450,059450,059 181,321 181,321 1,305,500 1,305,500 0 0 0 0 438,340438,340 1,060,325 1,060,325 1,314,895 1,314,895 Activities Government 20,171 0 46,925 0 0 0 434,623 501,719 ActivitiesInstitution GovernmentGovernmentHouseholds 20,171 20,1710 0180,4990 46,925 46,9250 0476,7300 0301,7870 000 434,623 434,623523,448 501,7191,482,464 501,719 InstitutionInstitution ProductionHouseholds HouseholdsCapital 0476,7300 180,499180,4990 0 00 476,730476,7300 301,787301,7870 0 00 523,448523,4480 1,482,4641,482,464476,730 ProductionProductionFactors Capital CapitalLabor 476,730476,730301,787 0 00 0 00 0 00 0 00 0 00 0 00 476,730476,730301,787 FactorsFactorsCapitalLabor LaborFinance 301,787301,78766,1480 139,8990 0 130,0390 0 00 0 00 0 00 0102,2540 301,787301,787438,340 Capital CapitalExternalFinance Finance Sector 66,14866,14800000000 139,899 139,899 130,039 130,039 0 0 0 0 0 0 102,254102,254 438,340438,340 ExternalExternal SectorTotal Sector 1,314,8950000000000000000 501,719 1,482,464 476,730 301,787 438,340 0 Source:Total Authors’Total calculations1,314,8951,314,895 501,719 501,719 1,482,464 1,482,464 476,730 476,730 301,787 301,787 438,340 438,340 0 0 Source:Source: Authors’ Authors’ calculations calculations
Table 3: Emission Intensities and Carbon Dioxide Emissions for Each Sector in 2006 TableTable 3: Emission 3: Emission Intensities Intensities and andCarbon Carbon Dioxide Dioxide Em issionsEmissions for Eachfor Each Sector Sector in 2006 in 2006 Intensity of CO2 IntensityIntensityEmissions of CO of 2CO 2 CO2 Emissions No Sectors CO2 Emissions EmissionsEmissions CO2 EmissionsMRp/tCO 2 No No SectorsSectors MRp/tCO 2 MRp/tCOMRp/tCO2 2 MRp/tCOMRp/tCO2 2 001 Food Crops 0.319 56,988.308 001 001 Food Food Crops Crops 0.3190.319 56,988.308 56,988.308 002 Plantation Crops 0.495 22,219.434 002 002 Plantation Plantation Crops Crops 0.4950.495 22,219.434 22,219.434 003 Livestock 0.251 6,807.967 003 003 Livestock Livestock 0.2510.251 6,807.967 6,807.967 004 Forestry 0.525 91.387 004 004 Forestry Forestry 0.5250.525 91.38791.387 005 Fishery 1.386 294,518.322 005 005 Fishery Fishery 1.3861.386 294,518.322 294,518.322 006 Mining of oil and gas and nonoil and gas 0.495 3,130.547 006 006 Mining Mining of oil of and oil andgas andgas andnonoil nonoil and andgas gas 0.4950.495 3,130.547 3,130.547 007 Manufacture of food, beverages and tobacco 3.341 620,137.117 007 007 Manufacture Manufacture of food, of food, beverages beverages and andtobacco tobacco 3.343.341 1 620,137.117 620,137.117 008 Manufacture of textiles, clothing and leather 1.071 4,448.002 008 008 Manufacture Manufacture of textiles, of textiles, clothing clothing and andleather leather 1.0711.071 4,448.002 4,448.002 009 Manufacture of wood, bamboo and furniture 0.126 2,826.503 009 009 Manufacture Manufacture of wood, of of wood, paper bamboo bamboo and and paper andfurniture furniture products, printing 0.1260.126 2,826.503 2,826.503 010Manufacture Manufactureand publishing of paper of paper and and paper paper products, products, printing printing 1.782 9,232.334 010 010and andpublishingManufacture publishing of chemicals, petroleum, coal, rubber 1.7821.782 9,232.334 9,232.334 011Manufacture Manufactureand plastic of products chemicals, of chemicals, petroleum, petroleum, coal, coal, rubber rubber 20.364 87,726.732 011 011and andplastic plastic products products 20.36420.364 87,726.732 87,726.732 012 Manufacture of cement nonmetallic minerals 24.691 819,867.193 012 012 Manufacture Manufacture of cement of cement nonmetallic nonmetallic minerals minerals 24.69124. 691 819,867.193 819,867.193 013 Manufacture of basic metals 7.173 22,680.110 013 013 Manufacture Manufacture of basic of basic metals metals 7.1737.173 22,680.110 22,680.110 014 Manufacture of fabricated metal 0.139 659.182 014 014 Manufacture Manufacture of fabricated of fabricated metal metal 0.1390.139 659.182659.182 015 Other manufacturing 0.035 4.748 015 015 Other Other manufacturing manufacturing 0.0350.035 4.7484.748 016 Electricity, gas and water supply 10.305 157,096.064 016 016 Electricity, Electricity, gas andgas andwater water supply supply 10.30510.305 157,09 157,096.0646.064 017 Construction/building 0.249 25,868.746 017 017 Construction/building Construction/building 0.2490.249 25,868.746 25,868.746 018 Trade 0.036 2,866.157 018 018 Trade Trade 0.0360.036 2,866.157 2,866.157 019 Hotels 0.044 0.972 019 019 Hotels Hotels 0.0440.044 0.9720.972 020 Restaurants 0.168 3,122.555 020 020 Restaurants Restaurants 0.1680.168 3,122.555 3,122.555 021 Highway transportation 2.870 88,892.113 021 021 Highway Highway transportation transportation 2.8702.870 88,892.113 88,892.113 022 Other transportation 5.184 9,648.165 022 022 Other Other transportation transportation 5.1845.184 9,648.165 9,648.165 023 Communications 0.077 969.255 023 023 Communications Communications 0.0770.077 969.255969.255
26 Miyata Y., Wahyuni A., Shibusawa H., Regional Science Inquiry Journal, Vol. V, (2), 2013, pp. 15 31 26 Miyata Y., Wahyuni A., Shibusawa H., Regional Science Inquiry Journal, Vol. V, (2), 2013, pp. 15 31 26 Miyata Y., Wahyuni A., Shibusawa H., Regional Science Inquiry Journal, Vol. V, (2), 2013, pp. 15 31
024 Banks and other financial institutions 0.008 639.886 024 Banks and other financial institutions 0.008 639.886 025024 Leasing, Banks and real other estate financial and business institutions services 0.030.0087 1,955.915639.886 025 Leasing, real estate and business services 0.037 1,955.915 026025 Education Leasing, real estate and business services 0.7120.037 2,936.175 1,955.915 026 Education 0.712 2,936.175 027026 Health Education 0.2460.712 2,936.175131.187 027 Health 0.246 131.187 028027 Social Health services and other services 1.2880.246 238,19131.1878.137 028 Social services and other services 1.288 238,198.137 028 Total Social of services intermediate and other sectors services 83.4161.288 2,483,663.21 238,198.1370 Total of intermediate sectors 83.416 2,483,663.210 Household Total of intermediate consumption sectors expenditures 83.4160.065 2,483,663.21 85,264.6570 Household consumption expenditures 0.065 85,264.657 Total Household consumption expenditures 83.4810.065 2,568,927.867 85,264.657 Total 83.481 2,568,927.867 Source: TotalAuthors’ calculations 83.481 2,568,927.867 Source: Authors’ calculations Source: Authors’ calculations An additional database was compiled from data collected by Nansai et al. (2002), and the nationalAn greenhouseadditional database gas inventory was compiled guidelines from publis datahed colle by cted the Ministryby Nansai of et Environment al. (2002), and of the An additional database was compiled from data collected by Nansai et al. (2002), and the Indonesianational (2012) greenhouse were used gas inventory as a reference guidelines and to publis adjusthed the by theresults Ministry regarding of Environment embodied of national greenhouse gas inventory guidelines published by the Ministry of Environment of energyIndonesia and emissions (2012) intensity were used in each as a sector. reference In t his and database, to adjust CO the emissions results regardingwere calculated embodied Indonesia (2012) were used as a reference and to adjust the results2 regarding embodied by multiplyingenergy and theemissions energy intensityconsumption in each value sector. obtaine In tdhis for database, each fuel CO type2 emissions by its corresponding were calculated energyby multiplyingand emissions the intensity energy consumption in each sector. value In t hisobtaine database,d for eachCO2 emissionsfuel type by were its correspondingcalculated carbon dioxide emission factor. Furthermore, CO2 emissions emanating from limestone were by multiplyingcarbon dioxide the energyemission consumption factor. Furthermore, value obtaine COd emissionsfor each fuel emanating type by itsfrom corresponding limestone were considered, in addition to fossil fuel emissions. The2 direct emissions and CO2 emission carbon dioxide emission factor. Furthermore, CO2 emissions emanating from limestone were intensityconsidered, of each insector addition were aggregated to fossil fuel for each emissions. sector in The the direct IO table. emissions and CO2 emission considered, in addition to fossil fuel emissions. The direct emissions and CO emission Usingintensity data of from each Miyata sector etwere al. aggregated (2009), we for then each used sector IO in analysisthe IO table. to calculate 2 emissions intensity of each sector were aggregated for each sector in the IO table. intensitiesUsing for data consumption from Miyata expenditures et al. (2009), in the we hou thensehold used sector. IO analysisTable 3 topresents calculate emission emissions Using data from Miyata et al. (2009), we then used IO analysis to calculate emissions intensitiesintensities and COfor consumption emissions based expenditures on the IO in table the forhou Makassarsehold sector. City. Table 3 presents emission intensities for consumption2 expenditures in the household sector. Table 3 presents emission intensities and CO2 emissions based on the IO table for Makassar City. intensities and CO2 emissions based on the IO table for Makassar City. IV Simulation Scenarios and Results 4.1 IV Simulation Simulation Scenarios Scenarios and Results IV Simulation Scenarios and Results This4.1 article Simulation considers Scenarios two representative CO restriction policies, a carbon tax without 4.1 Simulation Scenarios 2 transfers This and article a carbon considers tax in which two representative all revenues ar COe transferred2 restriction to policies,households. a carbonThe impacts tax without of This article considers two representative CO restriction policies, a carbon tax without thesetransfers policies andare compareda carbon tax with in thewhich BAU all scenario.revenues2 Thisare transferred study considers to households. three scenarios: The impacts of transfers and a carbon tax in which all revenues are transferred to households. The impacts of (1) these Baseline policies scenario are compared (BAU): this with scenario the BAU was scenario. simulated This to study reproduce considers the baseline three scenarios: SAM of these policies are compared with the BAU scenario. This study considers three scenarios: (1)Makassar Baseline City, scenario Indonesia (BAU): this scenario was simulated to reproduce the baseline SAM of (1) BaselineMakassar scenario City, (BAU): Indonesia this scenario was simulated to reproduce the baseline SAM of (2) Scenario 1: a carbon tax of 0.01 MRp/tCO2 is imposed on all industries emitting CO2 (2)Makassar Scenario City, 1: aIndonesia carbon tax of 0.01 MRp/tCO is imposed on all industries emitting CO (3) Scenario 2: a carbon tax of 0.01 MRp/tCO2 is imposed on all industries, and the 2 (2) Scenario 1: a carbon tax of 0.01 MRp/tCO2 is imposed on all industries emitting CO2 (3)revenues Scenario of which 2: a are carbon transferred tax of to 0.01 households. MRp/tCO 2 is imposed on all industries, and the (3) Scenariorevenues 2: ofa carbonwhich aretax transferred of 0.01 MRp/tCO to households.2 is imposed on all industries, and the 4.2 Simulationrevenues of Results which are transferred to households. The4.2 effects Simulation of the simulated Results scenarios were analyzed in term of their impacts on economic 4.2 Simulation Results variables. The effects of the simulated scenarios were analyzed in term of their impacts on economic The effects of the simulated scenarios were analyzed in term of their impacts on economic Thisvariables. section presents the simulation results with respect to important economic variables variables. whichThis are sectionexplained presents below. the simulation results with respect to important economic variables Thiswhich section are presentsexplained the below. simulation results with respect to important economic variables 4.2.1which CO are2 Emissionsexplained below. The4.2.1 manufacture CO2 Emissions of cement and nonmetallic minerals and the manufacture of food, 4.2.1 TheCO 2 manufactureEmissions of cement and nonmetallic minerals and the manufacture of food, beverages and tobacco generated the greatest CO2 emissions in the baseline scenario: Thebeverages manufacture and tobaccoof cement generated and nonmetallic the greatest minerals CO emissions and the inmanufacture the baseline of food,scenario: 819,867.19 tCO2 and 620,137.12 tCO2, respectively. The2 carbon tax reduced overall CO2 beverages and tobacco generated the greatest CO2 emissions in the baseline scenario: emissions819,867.19 by 8.04 tCO %2 and (scenario 620,137.12 1) and tCO 8.252, %respectively. (scenario 2). The Households carbon tax responses reduced overall to the CO2 819,867.19 tCO and 620,137.12 tCO , respectively. The carbon tax reduced overall CO carbonemissions tax policies by2 8.04resulted % (scenarioin increased 1) CO2 and emissions 8.25 % (scenar of 7.78io % 2). in Householdsscenario 1 and responses 7.94 % in to2 the emissions by 8.04 % (scenario 1) and 8.252 % (scenario 2). Households responses to the scenariocarbon 2. tax policies resulted in increased CO2 emissions of 7.78 % in scenario 1 and 7.94 % in carbon tax policies resulted in increased CO emissions of 7.78 % in scenario 1 and 7.94 % in COscenario emissions 2. declined in thirteen sectors 2in scenario 1 and fourteen sectors in scenario 2. scenario2 2. The decline CO2 emissions ranged from declined 0.17 %in tothirteen 19.81 sectors%. The inlarg scenarioest changes 1 and occurred fourteen in sectors the manufacture in scenario 2. CO emissions declined in thirteen sectors in scenario 1 and fourteen sectors in scenario 2. of cementThe2 decline and nonmetallic ranged from minerals 0.17 % (19.81to 19.81 % %. in sceThenario larg est1 and changes 19.77 occurred % in scenario in the 2) manufacture and in The decline ranged from 0.17 % to 19.81 %. The largest changes occurred in the manufacture the manufactureof cement and of nonmetallicchemicals, petroleum, minerals (19.81coal, rubb % iner sce andnario tobacco 1 and (17.71 19.77 % % in in scenario scenario 1 2) and and in of cement and nonmetallic minerals (19.81 % in scenario 1 and 19.77 % in scenario 2) and in 17.39the % manufacture in scenario 2). of chemicals, petroleum, coal, rubber and tobacco (17.71 % in scenario 1 and the manufacture of chemicals, petroleum, coal, rubber and tobacco (17.71 % in scenario 1 and However,17.39 % CO in scenario emissions 2). increased in fifteen sectors in scenario 1 and in fourteen sectors in 17.39 % in scenario2 2). scenarioHowever, 2. The increaseCO2 emissions from 0.002 increased % to in656.86 fifteen % sectors and the in largest scenario changes 1 and werein fourteen observed sectors in in However, CO emissions increased in fifteen sectors in scenario 1 and in fourteen sectors in otherscenario manufactures 2. The2 (335.42increase % from in scenario 0.002 % 1 toand 656.86 656.86 % %and in thescenario largest 2) changes and forestry were (101.98observed in scenario 2. The increase from 0.002 % to 656.86 % and the largest changes were observed in % inother scenario manufactures 1 and 125.65 (335.42 % % in in scenario scenario 2). 1 Figureand 656.s 586 and % in 6 scenario depict the 2) changesand forestry in each (101.98 other manufactures (335.42 % in scenario 1 and 656.86 % in scenario 2) and forestry (101.98 sector.% in scenario 1 and 125.65 % in scenario 2). Figures 5 and 6 depict the changes in each % insector. scenario 1 and 125.65 % in scenario 2). Figures 5 and 6 depict the changes in each sector. Miyata Y., Wahyuni A., Shibusawa H., Regional Science Inquiry Journal, Vol. V, (2), 2013, pp. 15 31 27
Figure 5: CO2 Emissions
Figure 6: Changes in CO2 Emissions 4.2.2 Industrial Outputs The baseline scenario indicates that the largest sectors in terms of output were fishery; the manufacture of food, beverages and tobacco; and social services and other services. Convesely, the hotels, other manufactures and forestry sectors produced output slightly. The imposition of the carbon tax resulted in changes to output. The changes in industrial outputs are depicted in Figures 7 and 8. Total industrial outputs of industry declined in each scenario by: 0.38 % in scenario 1 and 0.74 % in scenario 2. Nearly identical numbers of sectors experienced changes in output (both positive and negative) in the scenario 1 and scenario 2. The following sectors exhibited increased output: food crops; plantation crops; livestock; forestry; the manufacture of fabricated metal; other manufactures; constructions/buildings; trade; hotels; restaurants; communications; banks and other financial institutions; leasing, real estate and business services; and social services and other services. The other manufactures (335.42 %) and forestry (101.98 %) sectors exhibited the greatest increases in output in scenario 1. Small increases were observed in other sector. These increases indicates that these sectors benefited from the imposition of the tax. In contrast, the manufacture of cement and nonmetallic minerals (19.81 %) and the manufacture of chemicals, paper products, printing and publishing (17.71 %) were harmed by policy, as these sectors exhibited the greatest declines in outputs. The declines observed in other sectors were relatively small. The simulation results for scenario 2 exhibited relatively small differences from the values observed for scenario 1. Similar to scenario 1, increases in outputs occurred in food crops; plantation crops; livestock; forestry; the manufacture of fabricated metal; other manufactures; trade; communications; banks and other financial institutions; leasing, real estate and business services; education; and health. The other manufactures and forestry sectors presented the largest increases in output in response to the city’s policy: 656.86 % and 125.65 %, respectively. Conversely, the largest declines were observed in the manufacture of cement and nonmetallic minerals (19.77 %) and in the manufacture of chemicals, paper products, printing and publishing (17.39 %).
Figure 7: Industrial Output
28 28 MiyataMiyata Y., Wahyuni Y., Wahyuni A., Shibusawa A., Shibusawa H., Regional H., Regional Science Scien Inquiryce Inquiry Journal, Journal, Vol. V, Vol. (2), V, 2013, (2), 2013,pp. 15 pp. 31 15 31
FigureFigure 8: Changes 8: Changes in Industrial in Industrial Output Output 4.2.34.2.3 Municipal Municipal GDP GDP The The largest largest contributions contributions to the to municipal the municipal GDP GDP under un theder BAU the BAU scenario scenario were were made made by by followingfollowing sectors: sectors: fishery; fishery; manufacture manufacture of food, of food, beverages beverages and tobacco;and tobacco; and socialand social services services and andother other services. services. The Theimpacts impacts of the of carbonthe carbon tax ptaxolicy policy are presentedare presented in Figure in Figure 9 and 9 and10. 10. Overall,Overall, the GDPthe GDP has declinedhas declined by more by more than than19 % 19 for % eachfor each scenario. scenario. In scenario In scenario 1, thirteen 1, thirteen sectorssectors contributed contributed to the to decline the decline in GDP, in GDP, compared compared with with fourteen fourteen sectors sectors in scenario in scenario 1. 1. SectorialSectorial declines declines ranged ranged from from approximately approximately 0.17 0.17% to % 19.80 to 19.80 %. The %. Themanufacture manufacture of cement of cement and and nonmetallic nonmetallic minerals minerals and andthe manufacture the manufacture of ch ofemicals, chemicals, petroleum, petroleum, coal, coal, rubber rubber and and plasticplastic products products exhibited exhibited the larges the larges declines declines in each in e scenario.ach scenario. However, However, these these declines declines were were accompanied accompanied by incre by increases asesin other in other sectors. sectors. Contributions Contributions to to increasedincreased GDP GDP were were observed observed fifteen fifteen sectors sectors in scen in arioscen ario1 and 1 fourteenand fourteen sectors sectors in scenario in scenario 2, 2, rangingranging from from approximately approximately 0.004 0.004 % to % 656.88 to 656.88 %. The %. The largest largest changes changes occurred occurred in other in other manufacturesmanufactures (335.44 (335.44 % in % scenario in scenario 1 and 1 656.88and 656.88 % in % scenario in scenario 2) and 2) forestryand forestry (101.98 (101.98 % for % for scenarioscenario 1 and 1 125.66and 125.66 % in % scenario in scenario 2). 2).
FigureFigure 9: Municipal 9: Municipal GDP GDP
FigureFigure 10: Changes 10: Changes in Municipal in Municipal GDP GDP
4.2.44.2.4 Labor Labor Demand Demand Figures Figures 11 and 11 12and indicate 12 indicate that thatlabor labor demand demand gene generallyrally responded responded negatively negatively to the to carbonthe carbon tax policiestax policies in the in sectorsthe sectors considered. considered. Overall, Overall, labor la demandbor demand declined declined by approximately by approximately 0.01 0.01 % to% 1.20 to 1.20 %. Labor %. Labor demand demand declined declined in twentytwo in twentytwo sectors sectors in scenario in scenario 1 and 1 andtwentyone twentyone sectorssectors in scenario in scenario 2. The 2. Thegreatest greatest changes changes occurre occurred in dthe in manufacturethe manufacture of cement of cement and nonand non metallicmetallic minerals minerals (20.90 (20.90 % in % scenario in scenario 1 and 1 20.54and 20.54 % in % scenario in scenario 2) and 2) theand manufacturethe manufacture of of chemicals,chemicals, petroleum, petroleum, coal, coal, rubber rubber and and tobacco tobacco (18. 70 (18. %70 in % scenario in scenario 1 and 1 and 18.09 18.09 % in % in scenarioscenario 2). 2). Certain Certain sectors sectors responded responded positively positively to the to carbo the carbon taxn policies tax policies in terms in terms of labor of labor demand. demand. Specially,Specially, six sectorssix sectors in scenario in scenario 1 and 1 sevenand seven sect orssect inors scenario in scenario 2 exhibited 2 exhibited increased increased labor labor demand,demand, ranging ranging from from 0.1 % 0.1 to % 650.73 to 650.73 %. The %. Theother other manufactures manufactures (98.80 (98.80 % in % scenario in scenario 1 and 1 and 123.15123.15 % in % scenario in scenario 2) and 2) and forestry forestry sectors sectors (330.4 (330.41 % 1 in % scenario in scenario 1 and 1 and 650.73 650.73 % in % in scenarioscenario 2) exhibited 2) exhibited the greatest the greatest increases increases in lab inor lab demand.or demand. Miyata Y., Wahyuni A., Shibusawa H., Regional Science Inquiry Journal, Vol. V, (2), 2013, pp. 15 31 29
Figure 11: Labor Demand
Figure 12: Changes in Labor Demand 4.4.5 Capital Demand Regarding the changes in the demand for capital by industry despicted in Figures 13 and 14, the pattern of changes differs substantially from that observed for labor demand. Increased demand for capital is observed in nineteen sectors in scenario 1 and in twenty sectors in scenario 2. The demand for capital responded positively to the carbon tax programs. The largest positive responses were observed in the other manufactures (339.007 % in scenario 1 and 661.23 % in scenario 2) and forestry (102.77 % in scenario 1 and 126.27 % in scenario 2) sectors. Declines in the demand for capital were observed in nine sectors in scenario 1 and in eight sectors in scenario 2, ranging from 0.44 % to 19.43 %. The manufacture of cement and non metallic minerals (19.32 % in scenario 1 and 19.43 % in scenario 2) and the manufacture of chemicals, petroleum, coal, rubber and tobacco (17.07 % in scenario 1 and 16.94 % in scenario 2) reported the largest declines.
Figure 13: Capital Demand
Figure 14: Changes in Capital Demand 4.2.6 Commodity Prices The price changes in all sectors are depicted in Figure 15. The carbon tax increased output prices by an average 2.32 % in scenario 1 and 2.61 % in scenario 2, and these changes were especially pronounced in sectors characterized by the heavy use of energyintensive commodities. The differences between scenarios 1 and 2 with respect to these changes are not large.
30 30 MiyataMiyata Y., Wahyuni Y., Wahyuni A., Shibusawa A., Shibusawa H., Regional H., Regional Scien ceScien Inquiryce Inquiry Journal, Journal, Vol. V, Vol. (2), V, 2013, (2), 2013,pp. 15 pp. 31 15 31
FigureFigure 15: Commodity15: Commodity Prices Prices
4.2.74.2.7 Other Other Variables Variables As despictedAs despicted in Figures in Figures 16 and 16 and 17, 17, household household inco me inco me did did not not change change significantly, significantly, exhibitingexhibiting an increase an increase of 0.12 of 0.12 % in % scenario in scenario 1. How 1. However,ever, as the as pricethe price of the of compositethe composite consumptionconsumption good good increased increased by 0.34 by 0.34 %, household%, household con sumptionconsumption declined declined by 0.17 by 0.17 %. Thus,%. Thus, leisureleisure time time increased increased 0.01 0.01 %, and %, and household household saving savings declineds declined by 0.42 by 0.42 %. As %. result,As result, equivalentequivalent variation variation reveals reveals a welfare a welfare gain gainloss lossof 0.5 of billion0.5 billion rupiah. rupiah. Regarding Regarding the government the government sector, sector, in scenario in scenario 1, t he 1, imposition the imposition of a of carbon a carbon tax reducedtax reduced revenuerevenue from from net indirectnet indirect taxation taxation by 4.3 by %.4.3 Howeve %. However, totalr, total government government revenue revenue increased increased by by 4.794.79 %, increasing %, increasing government government consumption consumption and and curre current transfersnt transfers to households to households and and the the externalexternal sector sector except except while while reducing reducing government government savings. savings. In scenario In scenario 2, household 2, household income income increased increased by 1.3 by %,1.3 including %, including the effectthe effect of the of directthe direct tax ontax on households.households. Household Household income income net ofnet the of directthe direct tax increased tax increased by 1.28 by 1.28 % relative % relative to the to the baselinebaseline scenario. scenario. Following Following the the increase increase in househ in household old income, income, household household composite composite consumptionconsumption increased increased by 0.86 by 0.86 %, leisure%, leisure time time incre increasedased by 1.14 by 1.14 % and % andhousehold household savings savings increasedincreased by 0.82 by 0.82 %. As%. result,As result, equivalent equivalent variatio variation indicatesn indicates a welfare a welfare gain gainof 1.33 of 1.33 billion billion rupiah.rupiah. Regarding Regarding the governmentthe government sector, sector, revenue revenue from from the netthe indirectnet indirect tax declinedtax declined by 3.82 by 3.82 %. The %. The governmentgovernment revenues revenues from from households households decreased decreased by 0.by26 0. %,26 whereas%, whereas the totalthe total government government revenuerevenue increased increased by 0.61 by 0.61 %. Because %. Because of this of this increa increase, governmentse, government expenditures, expenditures, current current transferstransfers to households to households and theand external the external sector, sector, and governmentand government savings savings increased. increased.
FigureFigure 16: Other16: Other Variables Variables
FigureFigure 17: Changes17: Changes in Other in Other Variables Variables Note:Note: 1) industrial1) industrial output, output, 2) GDP, 2) GDP, 3) full 3) income,full income, 4) ho 4)usehold household income, income, 5) composite 5) composite consumption, consumption, 6) leisure6) leisure time, time, 7) household 7) household saving, saving, 8) Direct 8) Direct tax, tax 9) , net 9) indirectnet indirect tax, tax, 10) 10) government government revenue,revenue, 11) 11) government government consumption, consumption, 12) 12) total total CO 2 COtax,2 tax, 13) 13) current current transfers transfers from from the the governmentgovernment to households, to households, 14) government14) government saving, saving, 15) total15) total investment, investment, 16) current16) current transfers transfers fromfrom the externalthe external sectors sectors to households, to households, 17) curren17) current transferst transfers from from the externalthe external sector sector to the to the government,government, 18) external18) external sector’s sector’s saving, saving, 19) labor19) labor supply, supply, 20) total20) total capital capital stock, stock, 21) wage21) wage Miyata Y., Wahyuni A., Shibusawa H., Regional Science Inquiry Journal, Vol. V, (2), 2013, pp. 15 31 31 rate, 22) capital return rate, 23) composite price, 24) per capita equivalent variation and 25) equivalent variation.
V Conclusions There is an urban economic change affecting the welfare household changes, which are characterized by value of equivalent variation. As a result, the implementation of carbon tax policies generally had negative impacts on the economy of Makassar City in scenario 1 and positive impacts in scenario 2, despite the fact that the total municipal GDP declined in all simulation scenarios. Because of the effects of government tranfers to households, household consumption declined in scenario 1 but it increased slightly in scenario 2. As results, the savings in the external sector increased. Government revenue increased in all scenarios. The costs of production increased following the declines in output prices. Declines in sectorial outputs resulted in a negative impact on household utility in scenario 1. Therefore the imposition of a carbon tax had positive environmental impacts, and the municipal GDP will increase if the government institutes a carbon permit trading schemes.
VI References [1] Hosoe, Nobuhiro., Gasawa, Kenji., and Hashimoto, Hideo. Textbook of Computable General Equilibrium Modelling. Programmming and Simulations. Palgrave Macmillan, UK., 2010 [2] Miyata, Yuzuru., Hirobata, Yasuhiro., Shibusawa, Hiroyuki. And Nakanishi, Hitomi. Economytransportenvironment interactive analysis: a spatial Modeling approach, Studies in Regional Science , 39 (1)., 2009, (pp) 109130. [3] Miyata, Yuzuru.. A General Equilibrium Analysis of the WasteEconomic System A CGE Modeling Approach, Infrastructure Planning Review, 12., 1995, (pp) 259 270. [4] Miyata, Yuzuru. An Intertemporal General Equilibrium Analysis of the Waste Economic System., Infrastructure Planning Review, 14., 1997, (pp) 421432. [5] Ministry of Environmental of Indonesia. Guidelines for National Greenhouse Gas Inventory, Book II Vol 1: Methodology of Energy Procurement and Use. Jakarta., 2012. [6] Nansai, Keisuke., Morigichi, Yuichi. and Tohno, Susumu. Embodied of Energy and Emissions Intensity Data for Japan Using InputOutput Tables, National Institute for Environmental Studies, Japan., 2002. [7] Oktaviani, Rina. Economic Model of General Equilibrium. Theory and Application in Indonesia. IPB Press, Bogor., 2011. [8] Statistic of Makassar. The 2006 Input Output Table for Makassar 2006. Makassar., 2008. [9] Statistic of Indonesia. The 2005 Social Accounting Matrix for Indonesia. Jakarta., 2008.
32 Regional Science Inquiry Journal, Vol. V, (2), 2013 Hamm R., Regional Science Inquiry Journal, Vol. V, (2), 2013, pp. 3344 33
LOCATION CONDITIONS OF ENERGYINTENSIVE ENTERPRISES
Rüdiger HAMM Niederrhein Institute for Regional and Structural Research Niederrhein University of Applied Sciences Mönchengladbach (Germany) ruediger.hamm@hsniederrhein.de
Abstract
There is an interdependent relationship between enterprises and the region in which they are located: On the one hand the conditions of this location influence turnover, costs, profits and thus the economic situation of the individual firm. On the other hand the economic situation of the regional firms is an important determinant of regional economic success and the wel fare of the people living in that region. This happens directly because the firms stabilize re gional income and employment; but there are also indirect effects running via income and inputoutputlinkages. Regional economic success and welfare in turn determine the regional tax receipts and the regions’ possibilities for positively influencing the location conditions. These interdependencies give an explanation for the high interest firms, politicians and re searchers normally have in regional location conditions and their quality. The better a region’s information about these issues, the better its possibilities to promote its location advantages and the more efficiently it can use its scarce financial means to reduce the locational disad vantages. Regional marketing and improvements of the region’s location conditions aim at the acquisition of new firms, at additional private investment in the region, at the creation and stabilization of employment and the population’s welfare.
In recent years the Niederrhein Institute for Regional and Structural Research (NIERS) has surveyed firms to thoroughly analyze the location conditions of Middle Lower Rhine Area – a German region located in the western part of NorthrhineWestphalia. This research especially aimed at judging the location conditions’ quality in Middle Lower Rhine Area. But as the firms had to evaluate not only the local quality but also the general importance of the location factors and as firms’ participation in these surveys has been sufficiently high the results also give the opportunity to rank the location factors by its relevance and to differentiate this kind of analysis by industry. So, the aim of the proposed paper is twofold: It firstly describes which locational factors are – on the basis of the above mentioned surveys – most important from the firms’ point of view. To find out whether energyintensive industries have special location requirements it secondly compares these general results with those from energyintensive in dustries.
Keywords: Location, location conditions, energyintensive industries JEL classification: R12
0. Introduction
There is an interdependent relationship between enterprises and the region in which they are located: On the one hand the conditions of this location influence turnover, costs, profits and thus the economic situation of the individual firm. On the other hand the economic situation of the regional firms is an important determinant of regional economic success and the wel fare of the people living in that region. This happens directly because the firms stabilize re gional income and employment; but there are also indirect effects running via income and inputoutputlinkages. Regional economic success and welfare in turn determine the regional tax receipts and the regions’ possibilities for positively influencing the location conditions.
The above briefly described interdependent causal structures give an explanation for the high interest firms, politicians and researchers normally have in regional location conditions and their quality. The better a municipality’s information about these issues, the better its possi
34 34 HammHamm R., Regional R., Regional Science Science Inquiry Inquiry Journal, Journal, Vol. V, Vol. (2), V, 2013, (2), 2013,pp. 3344 pp. 3344 bilitiesbilities to promote to promote its location its location advantages advantages and theand more the more efficiently efficiently it can it usecan itsuse scarce its scarce finan finan cial meanscial means to reduce to reduce the locationalthe locational disadvantages. disadvantages. Regional Regional marketing marketing and improvementsand improvements of of the region’sthe region’s location location conditions conditions aim aimat the at acquisithe acquisition tionof new of newfirms, firms, at additional at additional private private in in vestmentvestment in the in region,the region, at the at creationthe creation and stabiliand stabilizationzation of employment of employment and theand population’sthe population’s welfare.welfare.
In recentIn recent years years the Niederrhein the Niederrhein Institute Institute for Regio for Regional andnal Structuraland Structural Research Research (NIERS) (NIERS) at the at the NiederrheinNiederrhein University University of Applied of Applied Sciences Sciences has survhas eyed surveyed firms firms1 to 1 thoroughly to thoroughly analyze analyze the the locationlocation conditions conditions of Middle of Middle Lower Lower Rhine Rhine Area Area – a German– a German region region located located in the in westernthe western part partof NorthrhineWestphalia of NorthrhineWestphalia between between the river the river Rhine Rhi andne theand DutchGermanthe DutchGerman Border Border2. This2. This researchresearch especially especially aimed aimed at judging at judging the locationthe location conditions’ conditions’ quality quality in Middle in Middle Lower Lower Rhine Rhine AreaArea and atand deriving at deriving proposals proposals on how on howto improve to improve them. th Butem. asBut the as firms the firms had tohad evaluate to evaluate not not only onlythe local the local quality quality but also but alsothe general the general importa importance ofnce the of location the location factors factors and asand firms’ as firms’ par par ticipationticipation in these in these surveys surveys has beenhas been sufficiently sufficiently high htheigh resultsthe results also alsogive givethe opportunitythe opportunity to to rank rankthe location the location factors factors by its by relevance its relevance and toand d ifferentiateto differentiate this kindthis kindof analysis of analysis by industry. by industry. So, afterSo, after some some introductory introductory theoretical theoretical remarks remarks (chapter (chapter 1) the 1) aimthe ofaim the of followingthe following paper paper is is twofold:twofold: It firstly It firstly describes describes which which locational locational factors fact areors – are on –the on basis the basis of the of above the above mentioned mentioned surveysurvey – most – most important important from from the firms’the firms’ point point of vi ofew vi (chapterew (chapter 2) and 2) itand secondly it secondly compares compares thesethese general general results results with withthose those from from energyintens energyintensive industriesive industries (chapter (chapter 3). The 3). Thepaper paper ends ends with witha summary. a summary.
1. 1. Theoretical Theoretical Considerations Considerations – an –Overview an Overview
BesideBeside firminternal firminternal aspects aspects economic, economic, social, social, poli ticalpoli ticaland naturaland natural framework framework conditions conditions de de terminetermine entrepreneurial entrepreneurial success. success. A great A great deal deal of th ofese th conditionsese conditions depends depends on the on location; the location; locationlocation conditions conditions are are all all factors factors which which meet meet the thetwo two following following requirements requirements (MAIER/TÖDTLING,(MAIER/TÖDTLING, 2006, 2006, p. 20).: p. 20).: • • The The factor factor is relevant is relevant for the for firm’s the firm’s costs costs or sa orles sa revenue,les revenue, whereas whereas nonmonetary nonmonetary costscosts (e.g. (e.g. expenditure expenditure of time) of time) and and long long run effecrun effects (e.g.ts (e.g. on innovativeness) on innovativeness) have have to be to be regardedregarded as well. as well. • • The factor The factor must must show show spatial spatial differences differences concerni concerning availability,ng availability, quality quality and/or and/or price. price.
StartingStarting from from this definitionthis definition the factorsthe factors determini determining theng firm’sthe firm’s location location decision decision can becan sys be sys temizedtemized following following Berlemann Berlemann und und Tilgner Tilgner (BERLEMANN/ (BERLEMANN/TILGNER,TILGNER, 2006, 2006, p. 17); p. 17); in in generalgeneral they theydifferentiate differentiate between between … … • • … determinants … determinants of production of production conditions conditions (input), (input), • • … determinants … determinants of market of market conditions conditions (output) (output) and and • • … political … political and legaland legal framework framework conditions. conditions. In additionIn addition to that to thatit might it might be helpful be helpful to discuss to discuss agglomerative agglomerative factors factors as a asfurther a further group group of of locationlocation conditions. conditions.
DeterminantsDeterminants of production of production conditions conditions TalkingTalking about about determinants determinants of production of production conditions conditions means means talking talking about about regional regional factor factor en en dowmentsdowments – i.e. – workforce, i.e. workforce, private private and publicand public capit capital andal realand estate.real estate. In each In each case casequantitative quantitative and qualitativeand qualitative aspects aspects must must be distinguished be distinguished and iandn addition in addition to that to ofthat course of course prices prices do mat do mat ter. Usingter. Using workforce workforce as an as example an example this means:this means: At f irstAt fitirst is importantit is important whether whether there there is a sufis a suf ficientficient amount amount of labor of labor available available in a region.in a region. Nowa Nowadaysdays the quantitativethe quantitative availability availability of work of work forceforce usually usually is not is anot bottleneck a bottleneck of economic of economic devel developmentopment in German in German regions. regions. Although Although un un employmentemployment rates rates are quite are quite high highin many in many German German regi onsregi thereons there often often are deficits are deficits in qualified in qualified workforceworkforce because because the increase the increase in qualification in qualification requirements requirements of firms of firms has causedhas caused a shift a shiftfrom from
1 These1 These surveys surveys have havebeen beenpart ofpart two of projectstwo projects finis hedfinis inhed 2003 in 2003 and 2009and 2009 by NIERS by NIERS and financedand financed by by the Chamberthe Chamber of Industry of Industry and and Commerce Commerce Mittlerer Mittlerer Nied errhein. Niederrhein. (GOEBEL (GOEBEL/HAMM/HAMM/WENKE/WENKE, 2009;, 2009; HAMMHAMM/WENKE/WENKE, 2003)., 2003). 2 It consists2 It consists of the of two the citiestwo cities of Mönchengladbach of Mönchengladbach and Krefeld, and Krefeld, and the and counties the counties RheinKreis RheinKreis Neuss Neuss and and Viersen.Viersen. Hamm R., Regional Science Inquiry Journal, Vol. V, (2), 2013, pp. 3344 35 quantitative to qualitative aspects. Prices mean in this example wages and salaries. Similar considerations apply to real estate; again availability, quality and prices (rents) are relevant.
Concerning capital private and public capital must be distinguished. Availability and prices of real capital highly depends on the availability of financial capital; but as financial capital is mobile, it can be expected that there are hardly any regional differences in availability and prices; so financial capital does not fulfill the requirements for a regional location condition.
Public capital means infrastructure, which can be divided into production and household ori ented components. While production infrastructure is directly used by private firms, the household oriented infrastructure influences firms‘ location decisions only indirectly: It im proves a location’s living standards and quality of life thus making the location more attrac tive to high qualified workforce, which in turn makes the location more interesting for firms. Important examples of production oriented infrastructure are traffic connections (by road, railroad, water roads and airplanes), information and communication infrastructure, energy infrastructure and facilities for education on all levels as well as research institutions. On the contrary hospitals, homes for elder people or Kindergartens (social infrastructure) are part of household infrastructure; in addition cultural, recreational and leisure facilities could be men tioned in this context.
Determinants of market conditions One of the main motives of entrepreneurial location decisions is the opening up of markets. In this context the magnitude, the distance and the accessibility of markets internal and external to the region are relevant factors. So transport costs to providers and clients as well as trans port connections and the location in economicgeographical space gain special attention. The extent to which a region succeeds in attracting demand external to the region depends on the region’s structures by industry, because the industries’ export opportunities differ. Whether the regional exportbase actually can sell its products to other regions or not is determined by the entrepreneurial competitiveness which again is influenced by costs of inputs, productivity and technology.
Political, legal and social framework conditions On the macrolevel (i.e. nationwide) aspects like political stability, legal stability, system of property ownership and tax burden surely play an important role for firms’ location decisions. Framework conditions differing from region to region for instance are the business climate, the duration of permit procedures and the special local fees and taxes.
Agglomerative factors The fourth group of location conditions considered here is the regional agglomerative poten tial that cannot be clearly distinguished from the already discussed groups (MAIER/TÖDTLING, 2006, p. 101ff; STAUDACHER, 2005, p. 115). The spatial distribution of already existing economic activity directly and indirectly influences the location decisions of new and additional activities. These interdependencies between existing and new activities are called agglomerative effects. Agglomerative effects can be positive or negative; they can be internal or external to the firm. Economies of scale are positive effects internal to the firm. External Effects influence the economic success of one actor but are controlled by other actors. External agglomeration effects can be divided into two groups: • Effects of localization 3 (or rather effects of specialization) appear between firms of one industry and are the higher, the higher the regional concentration of this industry is. Re gional concentration can result in certain advantages because (for instance) all firms need the same resources, have similar requirements in infrastructure, have related forward and backward linkages, look for research facilities and possibilities for technology transfer or access a common pool of workforce with similar qualifications.
3 Sometimes called MARExternalities following MARSHALL (1890), ARROW (1962) and ROMER (1986).
36 36 HammHamm R., Regional R., Regional Science Science Inquiry Inquiry Journal, Journal, Vol. V, Vol. (2), V, 2013, (2), 2013,pp. 3344 pp. 3344
• • Effects Effects of urbanization of urbanization 4 in contrast4 in contrast arise arise between between enterprises enterprises of different of different industries. industries. TheyThey are inare most in most cases cases the resultthe result of a ofcertain a certain magn magnitudeitude combined combined with withurban urban attractiveness, attractiveness, of a ofvariety a variety of offerings of offerings stemming stemming from from different different fields fields that canthat becan used be used by firms by firms of all of indus all indus tries.tries. Examples Examples are urbanare urban lifestyle, lifestyle, the broadthe broad supp supply ofly highquality of highquality firmoriented firmoriented services, services, and and the variety the variety of worker’s of worker’s qualification qualification or facili or facilities thatties that increase increase a region’s a region’s attractiveness attractiveness executives.executives.
BesideBeside this morethis more traditional traditional systemization systemization of locat of location conditionsion conditions another another classification classification gained gained importanceimportance in the in lastthe decades,last decades, namely namely between between hard hardand softand softlocation location factors. factors. Soft Softlocation location factorsfactors are all are aspects all aspects that mightthat might determine determine a loca a tionloca tiondecision decision but that but canthat hardlycan hardly or not or at not all at all be expressedbe expressed in figures in figures or monetary or monetary terms terms – e.g. – ime.g.age, im age,living living conditions, conditions, leisure leisure or cultural or cultural facilitiesfacilities and theirand their quality. quality. Soft Softand hardand hardlocatio location factorsn factors are complementary are complementary and formand form in total in total the relevantthe relevant determinants determinants of location of location decisions decisions (GR ABOW,(GRABOW, 2005, 2005, p. 38). p. 38).Soft Softlocation location factors factors can havecan have direct direct effects effects – in –most in most cases cases difficult difficult to measure to measure – or –they or theycan becan relevant be relevant for em for em ployeesployees and/or and/or employers. employers. DILLER DILLER (1991, (1991, p. 29f. p. 29f. and and for fora similar a similar systematization systematization GRABOW,GRABOW, 1994, 1994, p. 148ff) p. 148ff) distinguishes distinguishes firm firm and andemp loymentoriented employmentoriented factors factors as well as wellas as personalpersonal preferences, preferences, while while GRABOW GRABOW (2005, (2005, p. 38f.) p. 38f.) denotes denotes the firstthe firstgroup group as firmas firm orientedoriented the twothe twoother other groups groups as personaloriented as personaloriented factors. factors. Furthermore Furthermore some some authors authors argue argue that that a location’s a location’s image image depends depends on the on one the onehand hand on the on occurrencethe occurrence of some of some other other already already mentionedmentioned aspects aspects but on but the on other the other hand hand can becan seen be seenas a factoras a factor of its of own, its own, too. too.
The The outline outline of location of location conditions conditions shows shows that that entre entrepreneurialpreneurial location location decisions decisions are deter are deter minedmined by a bybroad a broad variety variety of aspects. of aspects. Nevertheless Nevertheless it should it should be stressed be stressed that …that … • • … the … relevancethe relevance of these of these factors factors can becan very be verydifferent different – some – some of them of them are ofare higher of higher othersothers of less of lessimportance. importance. The Thefirst firstaim ofaim the of prethesent pre sentpaper paper is to iswork to work out theseout these differences differences usingusing empirical empirical methods. methods. • • … the … relevance the relevance of these of these factors factors differs differs by indus by industry. Thetry. Thesecond second aim isaim to isanalyze to analyze the the specialspecial requirements requirements of energyintensive of energyintensive industrie industries. s.
2. 2. The TheRole Role of Location of Location Conditions Conditions
2.1. 2.1. General General Requirements Requirements The Thefollowing following empirical empirical results results are based are based on a onfirm a firmsurvey. survey. In spring In spring 2008 2008 the memberthe member firms firms of theof Chamber the Chamber of Industry of Industry and andCommerce Commerce in Middle in Middle Lower Lower Rhine Rhine Area Area have have been been asked asked (GOEBEL/HAMM/WENKE,(GOEBEL/HAMM/WENKE, 2009) 2009) to judge to judge the importancethe importance and a thend specificthe specific quality quality in in NiederrheinNiederrhein Area Area for 59 for different 59 different location location factors factors. More. More than than 1500 1500 (from (from 6000 6000 asked) asked) enterprisesenterprises participated participated in the in survey. the survey. The Theresearc research projecth project tried tried to account to account for a for large a large number number of locationof location relevant relevant factors factors which which all are all relatedare related to the to theoreticalthe theoretical considerations considerations of the of lastthe last chapter.chapter. The firmsThe firms had tohad judge to judge each each single single locatio location factorn factor on a onscale a scale reaching reaching from from 1 to 41 5to. 4 5.
TableTable 1 summarizes 1 summarizes the firms’ the firms’ answers answers concerning concerning the relevance the relevance of location of location factors factors ranked ranked by by averageaverage marks. marks. The Theresults results show, show, that thatcost costaspects aspects are rankedare ranked most most important important by the by firms:the firms: EnergyEnergy costs, costs, costs costs of waste of waste removal removal as well as wellas wat aser wat ander wasteand waste water water fees feesare the are three the three most most importantimportant location location factors. factors. In addition In addition the municipthe municipal fiscalal fiscal burden burden seems seems to be to of be special of special im im portanceportance for the for firms;the firms; public public fees feesand localand local taxes taxes on entrepreneurial on entrepreneurial capital capital and onand land on landalso also belongbelong to the to ten the most ten most important important location location condition conditions. Furthermores. Furthermore there there are some are some „traditional“ „traditional“ locationlocation factors factors like like highways, highways, availability availability and andqualification qualification of workforce of workforce amongst amongst the ten the ten factorsfactors ranked ranked most most important. important. Finally Finally a businessf a businessfriendlyriendly climate climate of the of localthe local authorities authorities is is the lastthe oflast the of ten the most ten most relevant relevant location location determin determinants.ants. Tab. Tab.1: The 1: RoleThe Role of Location of Location Conditions Conditions
4 Sometimes4 Sometimes called called JacobsExternalities JacobsExternalities following following JACOBS JACOBS (1969). (1969). 5 With5 With1 = very1 = veryimportant, important, 2 = important,2 = important, 3 = less3 = ilessmportant, important, 4 = unimportant.4 = unimportant. The averageThe average possible possible markmark therefore therefore was 2,5.was 2,5. Hamm R., Regional Science Inquiry Journal, Vol. V, (2), 2013, pp. 3344 37
38 38 HammHamm R., Regional R., Regional Science Science Inquiry Inquiry Journal, Journal, Vol. V, Vol. (2), V, 2013, (2), 2013,pp. 3344 pp. 3344
ConverselyConversely railway railway connections connections have have been been the locati the location factoron factor with withthe lowest the lowest relevance. relevance. This This is plausibleis plausible bearing bearing in mind in mind that thatrailroad railroad connecti connections onlyons onlyare importantare important for afor small a small number number of industrialof industrial firms firms but notbut fornot a for great a great number number of retail of r etailtrade trade and serviceand service firms. firms. At first At firstglance glance doesdoes not seem not seem to be to plausible, be plausible, that thethat availabilit the availability of yreal of estatereal estate and theand supply the supply of commercial of commercial propertiesproperties are ofare minor of minor importance. importance. But theseBut these resul results mightts might stem stem from from a weakness a weakness of the of unthe un derlyingderlying research research method: method: The Thejudgment judgment of the of relevthe relevanceance of location of location conditions conditions are basedare based on on the answersthe answers of already of already established established enterprises; enterprises; for these for these firms firms bottlenecks bottlenecks stemming stemming from from the the availabilityavailability of real of estatereal estate or commercial or commercial property property seldom seldom exist. exist. Therefore Therefore surveying surveying firms firms that that actuallyactually want want to relocate to relocate or just or havejust have relocated relocated might mi beght a bebetter a better approach. approach. The Theresult result can becan be distorteddistorted by another by another disadvantage disadvantage of our of method:our method: If the If qualitythe quality of a oflocation a location factor factor is quite is quite goodgood in a incertain a certain region region firms firms will willhardly hardly see asee bo ttleneck;a bottleneck; in this in casethis casethe factorthe factor might might lose lose relevancerelevance in the in judgmentthe judgment of importance, of importance, because because the firmsthe firms do not do longernot longer clearly clearly distinguish distinguish betweenbetween importance importance and qualityand quality – a methodological – a methodological disadvantage disadvantage which which cannot cannot be completely be completely avoided.avoided. It cannot It cannot be accurately be accurately answered answered whether whether this targumenthis argument applies applies to real to realestate estate and and commercialcommercial properties, properties, but itbut apparently it apparently plays plays a ro lea roinle the in judgmentthe judgment of airport of airport connections: connections: TheoreticalTheoretical considerations considerations suggest suggest that inthat the in proc the essproc ofess globalization of globalization airports airports gained gained increas increas ing importanceing importance as a aslocation a location factor. factor. This Thiscannot cannot really re allybe seen be seenin the in firms’the firms’ answers answers to the to the questionnaire.questionnaire. But withBut withDüsseldorf Düsseldorf International International Airport Airport and someand some other other not sonot far so away far away air air portsports (Weeze, (Weeze, Köln, Köln, Maastricht, Maastricht, Eindhoven) Eindhoven) the airwthe ayairw connectionsay connections of Middle of Middle Lower Lower Rhine Rhine are quiteare quite good; good; so that so thata distortion a distortion between between „quali „quality“ andty“ and„importance“ „importance“ might might explain explain this this resultresult here. here.
It is Itsurprising, is surprising, too, too,that thatthe availabilitythe availability of tec ofhnological technological consulting consulting and theand regionalthe regional univer univer sity assity partner as partner for research for research and developmentand development is les iss importantless important than thanmost most other other location location condi condi tions.tions. The Theexplanation explanation might might be similar be similar to the to case the caseof railway of railway connections: connections: A high A highorientation orientation to newto newtechnologies technologies and innovationand innovation might might not be not rel beevant relevant for many for many of the of interviewed the interviewed firms. firms.
2.2. 2.2. Requirements Requirements of EnergyIntensive of EnergyIntensive Enterprises Enterprises
For workingFor working out whetherout whether the requirementsthe requirements of energy of energyintensiveintensive firms firms significantly significantly differ differ from from the average,the average, these these firms firms had tohad be to identified be identified in th ine survey. the survey. As the As classification the classification numbers numbers (WZ (WZ 2003)2003) of all of firms all firms participating participating in the in surveythe survey were were known known it was it wasnecessary necessary to have to have a clear a clear definitiondefinition of “energyintensiveness” of “energyintensiveness” based based on this on classification.this classification. The Theproblem problem of definition of definition is is discusseddiscussed in some in some more more detail detail in a in study a study by Eickmei by Eickmeier et.al.er et.al. (EICKMEIER/GABRIEL/ (EICKMEIER/GABRIEL/ PFAFFENBERGER,PFAFFENBERGER, 2005, 2005, p. 21ff). p. 21ff). They They argue argue that that there th ere is no is generally no generally accepted accepted definitiondefinition and thatand thethat chosenthe chosen relationship relationship to meas to measure energyintensityure energyintensity or electricityintensity or electricityintensity oftenoften depends depends on political on political motivation. motivation. Despite Despite this thicriticals critical comment comment their their discussion discussion was was helpfulhelpful for finding for finding a pragmatic a pragmatic solution solution for the for prtheesent present analysis: analysis: First First of all, of theall, definitionthe definition to to be usedbe used should should allow allow for a for clear a clear decision decision which which industry industry is energyintensive is energyintensive and whichand which is not. is not. As theAs paperthe paper does does not onlynot onlyfocus focus on electricity on electricity but alsobut alsoon energy on energy in total, in total, the amountthe amount of or of or the coststhe costs of energy of energy inputs inputs are correct are correct variables variables to be t oused be used in the in denominator the denominator of an of indicator. an indicator. CostsCosts of energy of energy inputs inputs are preferred are preferred here here not onlynot onlybecause because of data of data availability availability but alsobut also becausebecause the possible the possible nominators nominators of the of indicatorthe indicator are also are alsomonetary monetary variables. variables. With With regard regard to to the indicator’sthe indicator’s nominator nominator data dataavailability availability is the is mostthe most important important aspect aspect because because data dataat the at the 6 four four digit digit level level of the of German the German Classification Classification of Ec ofonomic Economic Activities Activities 6 is required. is required. The The GermanGerman Federal Federal Statistical Statistical Office Office publishes publishes gross gross value value added added as well as well as gross as gross value value of of 7 productionproduction 7 at this at this level level of disaggregation. of disaggregation. Hence Hence one one had had to choose to choose between between these these two two variables.variables. As gross As gross production production value value encloses encloses the ctheosts c ostsof all of intermediate all intermediate inputs inputs gross gross value value
6 6 See StatistischesSee Statistisches Bundesamt Bundesamt (Ed.), (Ed.), Klassifikation Klassifikation der Wirtschaftszweige, der Wirtschaftszweige, Ausgabe Ausgabe 2003 2003 (WZ (WZ2003), 2003), Wiesbaden.Wiesbaden. The ClassificationThe Classification WZ 2003WZ 2003 had tohad be to use bed usehered herebecause because the firms the firms that participatedthat participated in the in the surveysurvey are classified are classified by this by versionthis version of the of WZ the soWZ that so thisthat wasthis thewas only the onlypossibility possibility to identify to identify energy energy intensiveintensive firms firms in the in survey the survey via its via WZcode. its WZcode. 7 7 See Statistisches See Statistisches Bundesamt Bundesamt (Ed.), (Ed.), Fachserie Fachserie 4, Re 4,ihe Re 4.3.ihe The 4.3. Thelatest latest data data for the for WZ the 2003WZ 2003 are are availableavailable for 2007; for 2007; so these so these data aredata used are usedin the in p resentthe present paper. paper. Hamm R., Regional Science Inquiry Journal, Vol. V, (2), 2013, pp. 3344 HammHamm R., Regional R., Regional Science Science Inquiry Inquiry Journal, Journal, Vol. V,Vol. (2), V, 2013, (2), 2013, pp. 3344 pp. 3344 39 39 addedadded is the is thepreferred preferred indicator indicator to avoid to avoid distortio distortions thatns that depend depend on the on theindustries’ industries’ share share of of intermediateintermediate inputs. inputs.
TableTable 2: EnergyIntensive 2: EnergyIntensive Branches Branches 2007 2007 Gross Gross Energy Enery GrossGross Gross Gross EnergyEnergy Enery Enery No. Value Value Energy Consumption Consumption No. No. ValueValue Value Value Energy Energy Consumption Consumption Consumption Consumption WZ of firms of Added Consumption Share Share WZWZ of firms of firms ofof Added Added Consumption Consumption Share Share Share Share in Production (GVA) in GVA in GVP in in ProductionProduction (GVA) (GVA) in GVAin GVA in GVP in GVP sample (GVP) in % in % samplesample (GVP)(GVP) in %in % in % in % DA1597 Manufacture of malt 322.635 36.158 30.960 85,63 9,60 DA1597DA1597 ManufactureManufacture of malt of malt 322.635322.63536.15836.158 30.96030.96085,6385,63 9,60 9,60 DI2653 Manufacture of plaster 176.205 54.445 34.311 63,02 19,47 DI2653DI2653 ManufactureManufacture of plaster of plaster 176.205176.20554.44554.445 34.31134.31163,0263,02 19,4719,47 DI2652 Manufacture of lime 649.674 245.762 153.126 62,31 23,57 DI2652DI2652 ManufactureManufacture of lime of lime 649.674649.674245.762245.762 153.126153.12662,3162,31 23,5723,57 CA10 Mining of coal and lignite; extraction of peat 4.279.279 419.160 253.984 60,59 5,94 CA10CA10 MiningMining of coal of and coal lignite; and lignite; extraction extraction of peat of peat 4.279.2794.279.279419.160419.160 253.984253.98460,5960,59 5,94 5,94 DI2651 1 Manufacture of cement 2.520.286 868.877 431.267 49,63 17,11 DI2651DI2651 1 1ManufactureManufacture of cement of cement 2.520.2862.520.286868.877868.877 431.267431.26749,6349,63 17,1117,11 DE2112 3 Manufacture of paper and paperboard 16.252.688 3.718.550 1.761.694 47,38 10,84 DE2112DE2112 3 3ManufactureManufacture of paper of paper and paperboard and paperboard 16.252.68816.252.6883.718.5503.718.550 1.761.6941.761.69447,3847,38 10,8410,84 DG2413 Manufacture of other inorganic basis chemicals 5.124.057 1.141.518 533.379 46,73 10,41 DG2413DG2413 ManufactureManufacture of other of other inorganic inorganic basis basischemicals chemicals 5.124.0575.124.0571.141.5181.141.518 533.379533.37946,7346,73 10,4110,41 Manufacture of bricks, tiles and construction DI2640 1ManufactureManufacture of bricks, of bricks, tiles andtiles construction and construction 1.474.913 548.071 243.286 44,39 16,49 DI2640DI2640 1 1 produrcts in baked clay 1.474.9131.474.913 548.071 548.071 243.286 243.286 44,39 44,39 16,49 16,49 produrctsprodurcts in baked in baked clay clay DJ2742 1 Aluminium production 14.237.921 2.063.684 736.403 35,68 5,17 DJ2742DJ2742 1 1AluminiumAluminium production production 14.237.92114.237.9212.063.6842.063.684 736.403736.40335,6835,68 5,17 5,17 Manufacture of basic iron and steel and of ferro- DJ2710 ManufactureManufacture of basic of basiciron and iron steel and steeland of and ferro- of ferro- 41.523.840 10.577.925 3.663.448 34,63 8,82 DJ2710DJ2710 alloys 41.523.84041.523.840 10.577.925 10.577.925 3.663.448 3.663.448 34,63 34,63 8,82 8,82 alloysalloys CB141 Quarrying of stone 1.061.682 380.181 128.473 33,79 12,10 CB141CB141 QuarryingQuarrying of stone of stone 1.061.6821.061.682380.181380.181 128.473128.47333,7933,79 12,1012,10 DG2470 Manufacture of man-made fibres 4.242.699 917.318 307.666 33,54 7,25 DG2470DG2470 ManufactureManufacture of man-made of man-made fibres fibres 4.242.6994.242.699917.318917.318 307.666307.66633,5433,54 7,25 7,25 DA1562 1 Manufacture of starches and starch products 1.669.497 342.942 111.943 32,64 6,71 DA1562DA1562 1 1ManufactureManufacture of starches of starches and starch and starch products products 1.669.4971.669.497342.942342.942 111.943111.94332,6432,64 6,71 6,71 DI2630 Manufacture of ceramic tiles and flags 789.492 261.675 84.509 32,30 10,70 DI2630DI2630 ManufactureManufacture of ceramic of ceramic tiles andtiles flags and flags 789.492789.492261.675261.675 84.50984.50932,3032,30 10,7010,70 DI2611 Manufacture of flat glass 1.363.565 463.844 143.376 30,91 10,51 DI2611DI2611 ManufactureManufacture of flat of glass flat glass 1.363.5651.363.565463.844463.844 143.376143.37630,9130,91 10,5110,51 DI2613 Manufacture of hollow glas 2.570.075 1.013.622 307.145 30,30 11,95 DI2613DI2613 ManufactureManufacture of hollow of hollow glas glas 2.570.0752.570.0751.013.6221.013.622 307.145307.14530,3030,30 11,9511,95 Manufacture of plaster products for construction DI2662 ManufactureManufacture of plaster of plaster products products for construction for construction 1.398.966 370.693 109.218 29,46 7,81 DI2662DI2662 purposes 1.398.9661.398.966 370.693 370.693 109.218 109.218 29,46 29,46 7,81 7,81 purposespurposes CB1422 1 Mining of clays and koalin 349.530 146.467 40.791 27,85 11,67 CB1422CB1422 1 1MiningMining of clays of claysand koalin and koalin 349.530349.530146.467146.467 40.79140.79127,8527,85 11,6711,67 Manufacture of veneer sheets; manufacture of ManufactureManufacture of veneer of veneer sheets; sheets; manufacture manufacture of of DD2020 plywood, laminboard, particle board, fibre board 6.381.552 1.289.752 336.975 26,13 5,28 DD2020DD2020 plywood,plywood, laminboard, laminboard, particle particle board, board, fibre fibreboard board 6.381.5526.381.552 1.289.752 1.289.752 336.975 336.975 26,13 26,13 5,28 5,28 and other panels and boards and otherand other panels panels and boards and boards DG2414 1 Manufacture of other organic basic chemicals 24.365.531 5.334.872 1.333.165 24,99 5,47 DG2414DG2414 1 1ManufactureManufacture of other of other organic organic basic basicchemicals chemicals 24.365.53124.365.5315.334.8725.334.872 1.333.1651.333.16524,9924,99 5,47 5,47 DA1541 Manufacture of crude oil and fats 2.380.218 212.808 52.526 24,68 2,21 DA1541DA1541 ManufactureManufacture of crude of crude oil and oil fats and fats 2.380.2182.380.218212.808212.808 52.52652.52624,6824,68 2,21 2,21 CB1421 5 Operation of gravel and sand pits 2.265.621 854.770 209.950 24,56 9,27 CB1421CB1421 5 5OperationOperation of gravel of gravel and sand and sandpits pits 2.265.6212.265.621854.770854.770 209.950209.95024,5624,56 9,27 9,27 DG2415 Manufacture of fertilizers and nitrogen compounds 3.385.200 947.562 224.256 23,67 6,62 DG2415DG2415 Manufacture Manufacture of fertilizers of fertilizers and nitrogen and nitrogen compo compoundsunds 3.385.200 3.385.200 947.562 947.562 224.256 224.256 23,67 23,67 6,62 6,62 DB1723 Worsted-type weaving 176.174 45.958 10.719 23,32 6,08 DB1723DB1723 Worsted-typeWorsted-type weaving weaving 176.174176.17445.95845.958 10.71910.71923,3223,32 6,08 6,08 DB1711 Preparation and spinning of cotton-type fibres 485.467 132.283 30.470 23,03 6,28 DB1711DB1711 PreparationPreparation and spinning and spinning of cotton-type of cotton-type fibres fibres 485.467485.467132.283132.283 30.47030.47023,0323,03 6,28 6,28 DI2614 Manufacture of glass fibres 1.029.432 363.896 83.280 22,89 8,09 DI2614DI2614 ManufactureManufacture of glass of glassfibres fibres 1.029.4321.029.432363.896363.896 83.28083.28022,8922,89 8,09 8,09 DJ2745 1 Other non-ferrous metal production 2.174.413 154.085 33.582 21,79 1,54 DJ2745DJ2745 1 1OtherOther non-ferrous non-ferrous metal metal production production 2.174.4132.174.413154.085154.085 33.58233.58221,7921,79 1,54 1,54 DA1531 Porcessing and preserving of potatoes 1.487.343 356.006 74.991 21,06 5,04 DA1531DA1531 PorcessingPorcessing and preserving and preserving of potatoes of potatoes 1.487.3431.487.343356.006356.006 74.99174.99121,0621,06 5,04 5,04 DB1730 4 Finishing of textiles 976.591 372.896 78.271 20,99 8,01 DB1730DB1730 4 4FinishingFinishing of textiles of textiles 976.591976.591372.896372.896 78.27178.27120,9920,99 8,01 8,01 DJ2751 3 Casting of iron 6.162.893 2.049.878 426.762 20,82 6,92 DJ2751DJ2751 3 3CastingCasting of iron of iron 6.162.8936.162.8932.049.8782.049.878 426.762426.76220,8220,82 6,92 6,92 DG2412 Manufacture of dyes and pigments 3.100.923 958.044 198.026 20,67 6,39 DG2412DG2412 ManufactureManufacture of dyes of dyesand pigments and pigments 3.100.9233.100.923958.044958.044 198.026198.02620,6720,67 6,39 6,39 DA1512 Production and preserving of poultrymeat 3.492.724 425.153 86.489 20,34 2,48 DA1512DA1512 ProductionProduction and preserving and preserving of poultrymeat of poultrymeat 3.492.7243.492.724425.153425.153 86.48986.48920,3420,34 2,48 2,48 DA1583 Manufacture of sugar 2.871.076 829.579 165.181 19,91 5,75 DA1583DA1583 ManufactureManufacture of sugar of sugar 2.871.0762.871.076829.579829.579 165.181165.18119,9119,91 5,75 5,75 DJ2743 1 Lead, zinc and tin production 2.716.015 507.316 100.906 19,89 3,72 DJ2743DJ2743 1 1Lead,Lead, zinc and zinc tin and production tin production 2.716.0152.716.015507.316507.316 100.906100.90619,8919,89 3,72 3,72 Manufacture and processing of other glass, DI2615 1ManufactureManufacture and processing and processing of other of other glass, glass, 2.133.575 849.389 162.411 19,12 7,61 DI2615DI2615 1 1 including technical glassware 2.133.5752.133.575 849.389 849.389 162.411 162.411 19,12 19,12 7,61 7,61 includingincluding technical technical glassware glassware DN3720 4 Recycling of non-metal waste and scrap 1.715.704 472.377 90.165 19,09 5,26 DN3720DN3720 4 4RecyclingRecycling of non-metal of non-metal waste waste and scrap and scrap 1.715.7041.715.704472.377472.377 90.16590.16519,0919,09 5,26 5,26 DA1551 Operation of dairies and cheese making 26.101.322 2.417.618 454.504 18,80 1,74 DA1551DA1551 OperationOperation of dairies of dairies and cheese and cheese making making 26.101.32226.101.3222.417.6182.417.618 454.504454.50418,8018,80 1,74 1,74 CB1450 Other mining and quarrying n.e.c. 126.765 30.565 5.529 18,09 4,36 CB1450CB1450 OtherOther mining mining and quarrying and quarrying n.e.c. n.e.c. 126.765126.76530.56530.565 5.5295.52918,0918,09 4,36 4,36 DJ2734 6 Wire drawing 1.822.391 336.298 60.153 17,89 3,30 DJ2734DJ2734 6 6Wire Wiredrawing drawing 1.822.3911.822.391336.298336.298 60.15360.15317,8917,89 3,30 3,30 DG2416 1 Manufacture of plastic in primary forms 44.742.060 10.670.274 1.885.798 17,67 4,21 DG2416DG2416 1 1ManufactureManufacture of plastic of plastic in primary in primary forms forms 44.742.06044.742.06010.670.27410.670.274 1.885.7981.885.79817,6717,67 4,21 4,21 Manufacture of macaroni, noodles, couscous and DA1585 ManufactureManufacture of macaroni, of macaroni, noodles, noodles, couscous couscous and and 581.715 118.636 20.943 17,65 3,60 DA1585DA1585 similiär farinaceous products 581.715581.715 118.636 118.636 20.943 20.943 17,65 17,65 3,60 3,60 similiärsimiliär farinaceous farinaceous products products DA1532 Manufacture of fruit and vegetable juice 2.965.693 345.499 59.495 17,22 2,01 DA1532DA1532 ManufactureManufacture of fruit of andfruit vegetable and vegetable juice juice 2.965.6932.965.693345.499345.499 59.49559.49517,2217,22 2,01 2,01 Manufacture of other non-metallic mineral DI2682 ManufactureManufacture of other of other non-metallic non-metallic mineral mineral 4.315.568 1.133.190 192.103 16,95 4,45 DI2682DI2682 products n.e.c. 4.315.5684.315.568 1.133.190 1.133.190 192.103 192.103 16,95 16,95 4,45 4,45 productsproducts n.e.c. n.e.c. Manufacture of household and sanitary goods and DE2122 ManufactureManufacture of household of household and sanitary and sanitary goods goods and and 4.716.415 1.281.247 216.625 16,91 4,59 DE2122DE2122 of toilet requisites 4.716.4154.716.415 1.281.247 1.281.247 216.625 216.625 16,91 16,91 4,59 4,59 of toiletof toilet requisites requisites DA1571 1 Manufacture of prepared feeds for farm animals 4.576.934 548.930 90.602 16,51 1,98 DA1571DA1571 1 1ManufactureManufacture of prepared of prepared feeds feeds for farm for farmanimals animals 4.576.9344.576.934548.930548.930 90.60290.60216,5116,51 1,98 1,98 DJ2721 Manufacture of cast iron tubes 458.381 126.606 20.416 16,13 4,45 DJ2721DJ2721 ManufactureManufacture of cast of iron cast tubes iron tubes 458.381458.381126.606126.606 20.41620.41616,1316,13 4,45 4,45 DE2111 Manufacture of pulp 746.659 225.453 35.174 15,60 4,71 DE2111DE2111 ManufactureManufacture of pulp of pulp 746.659746.659225.453225.453 35.17435.17415,6015,60 4,71 4,71 DI2626 1 Manufacture of refractory ceramic products 1.669.310 522.650 78.554 15,03 4,71 DI2626DI2626 1 1ManufactureManufacture of refractory of refractory ceramic ceramic products products 1.669.3101.669.310522.650522.650 78.55478.55415,0315,03 4,71 4,71 Calculated on basis of German Ferderal Statistical Office CalculatedCalculated on basis on basisof German of German Ferderal Ferderal Statistical Statistical Office Office
TheThe second second question question to be to answeredbe answered was was the thedefiniti definition ofon aof threshold a threshold value. value. For Forpragmatic pragmatic purposespurposes an industry an industry is defined is defined to be to energyintens be energyintensive ive if the if theshare share of total of total energy energy costs costs in in grossgross value value added added exceeded exceeded 15 %15 in % 2007. in 2007. Table Table 2 sh 2ows shows the the industries industries whose whose energy energy
40 Hamm R., Regional Science Inquiry Journal, Vol. V, (2), 2013, pp. 3344 40 Hamm R., Regional Science Inquiry Journal, Vol. V, (2), 2013, pp. 3344
intensiveness lies above this threshold. Most of these industries can be assigned to the follow intensivenessing 2digitindustries: lies above this Manufacture threshold. Most of food of thproductese industriess (15), ofcan pulp, be assigned paper and to thepaper follow products ing 2digitindustries:(21), of chemicals Manufacture(24), of non metallicof food productminerals pr(15),oducts of pulp,(26) andpaper of andbasic paper metals products and metal (21),products of chemicals (27). (24),The tableof non also metallic gives informationmineral products about (26) the andnumber of basic of energyintensive metals and metal firms productsthat participated (27). The table in the also survey gives (37 information in total) and abo theirut the allocation number byof industryenergyintensive – energyintensive firms that firmsparticipated are distributed in the survey among (37 a relativelyin total) and wide their range allocation of different by industry fields of – production.energyintensive So num firmsber are of distributed the firms andamong their a relativelydistribution wide in therange samp of ledifferent suggest fields that theof production.database is Sosufficient num to ber ofanalyze the firms the special and their location distribution requirements in the sampof energyle suggestintensive that firms.the database is sufficient to analyze the special location requirements of energyintensive firms. Table 3: Location Requirements of Energyintensive Branches Table 3: Location Requirements of Energyintensive Branches HammHamm R., Regional R., Regional Science Science Inquiry Inquiry Journal, Journal, Vol. V, Vol. (2), V, 2013, (2), 2013,pp. 3344 pp. 3344 41 41
TableTable 3 summarizes 3 summarizes the returnsthe returns of these of these 37 firms 37 firms using us againing again average average marks. marks. In order In order to com to com parepare the rankingthe ranking of location of location factors factors based based on theon athenswers answers of all of firms all firms with with that that of energy of energy intensiveintensive firms firms in detail, in detail, table table 3 also 3 alsoshows shows the dtheifferences differences between between the positionsthe positions of all of single all single locationlocation factors factors in both in both rankings rankings and andthe analogousthe analogous deviations deviations concerning concerning the averagethe average marks; marks; for furtherfor further illustration illustration diagram diagram 1 depicts 1 depicts the latttheer latt deviations,er deviations, too. too.
StartingStarting with with the theranking ranking position, position, it can it can be seen be seenthat that some some location location factors factors noticeably noticeably changedchanged their their positions. positions. Especially Especially proximity proximity to im toportant important providers providers seems seems to be to much be much more more importantimportant to energyintensive to energyintensive firms. firms. The Thesame same appli applies fores proximityfor proximity to important to important customers, customers, landland prices prices and and privatization privatization of municipal of municipal responsi responsibilities.bilities. While While these these factors factors are rankedare ranked higherhigher by the by energyintensivethe energyintensive firms, firms, there there are othareer oth factorser factors that thatseem seem to be to of be less of lessimportance importance to theseto these firms: firms: Parking Parking fees, fees, sufficient sufficient parking, parking, cityscape cityscape seen seen from from its cleanliness its cleanliness as well as well as as fromfrom its architecture its architecture and andsafety safety in the in innerthe inner citie cities musts must be mentioned be mentioned in that in thatcontext. context. The Thefirst first generalizationgeneralization of these of these results results is hardly is hardly surprisin surprising at gall: at Apparentlyall: Apparently soft softfactors factors of location of location are ofare minor of minor relevance relevance for energyintensivefor energyintensive industr industries whichies which belong belong to the to industrialthe industrial nucleus nucleus of anof economy an economy while while spatial spatial contiguity contiguity is still is stilla crucial a crucial factor factor for them. for them.
DiagramDiagram 1: Evaluation 1: Evaluation Gaps Gaps of Energyintensive of Energyintensive Bran Branchesches Diagram 1: Evaluation Gaps of Energy-intensive Branches 0,60 0,60 Diagram 1: Evaluation Gaps of Energy-intensive Branches
0,40 0,40
0,20 0,20
0,00 0,00
-0,20 -0,20
-0,40 -0,40
-0,60 -0,60 Rents Rents schools Airport Parking schools Housing - Airport Parking Housing - Land price Land Wage level Wage Land price Land Parking fees Parking Wage level Wage Energy costs Parking fees Parking up consulting up Energy costs - Citymarketing up consulting up Publiccharges - Citymarketing Event premises Publiccharges Event premises Financing advice Financing oriented services oriented services - - Cultural offerings Cultural Financing advice Financing oriented services oriented services Localbusiness tax Local property tax Shopping facilities Shopping - - Cultural offerings Cultural Safety in inner city Localbusiness tax Start Local property tax Shopping facilities Shopping Railway connection Railway Safety in inner city Start Railway connection Railway Local public transport public Local Technology consulting Technology Cityscape(cleanliness) Local public transport public Local Costsof waste disposal Technology consulting Technology Cityscape(cleanliness) Comprehensive schools Comprehensive Cityscape (architecture) Cityscape Costsof waste disposal Availability of workforce of Availability Comprehensive schools Comprehensive Cityscape (architecture) Cityscape Road and highway access highway and Road Availability of workforce of Availability Environmental consulting Environmental Qualification of workforce of Qualification Road and highway access highway and Road Innercity traffic conditions traffic Innercity Environmental consulting Environmental Vocational training schools training Vocational Qualification of workforce of Qualification Availability of R&D facilities Innercity traffic conditions traffic Innercity Regional location marketing location Regional Vocational training schools training Vocational Availability of R&D facilities Adminstrativeresponse time Regional location marketing location Regional Waterand wastewater Taxes Duration of permit procedure permit of Duration Adminstrativeresponse time Waterand wastewater Taxes Offerings for further ecucation further for Offerings Duration of permit procedure permit of Duration Supply of commercial property commercial of Supply Recreation and leisure facilities leisure and Recreation Offerings for further ecucation further for Offerings Consulting in corporate descent corporate in Consulting Supply of commercial property commercial of Supply Recreation and leisure facilities leisure and Recreation Support in searching real estates real searching in Support Proximity to important providers Image and awareness of location Consulting in corporate descent corporate in Consulting Cooperation enterprises enterprises Cooperation Support in searching real estates real searching in Support Proximity to important customers important to Proximity Level of adminstrative regulations Proximity to important providers Image and awareness of location business municipal administration municipal business Availablity of industrial real estate Supply with firm with Supply Cooperation enterprises enterprises Cooperation - Proximity to important customers important to Proximity Level of adminstrative regulations business municipal administration municipal business Availablity of industrial real estate Supply with firm with Supply - Consulting on governmental funding governmental on Consulting Consulting on governmental funding governmental on Consulting Supply of household of Supply Pro Supply of household of Supply Pro Smooth cooperation of local authorities local of cooperation Smooth Smooth cooperation of local authorities local of cooperation Smooth Privatization of municipal responsibilities University of Applied Sciences (Research) Sciences Applied of University University of Applied Sciences (Education) Sciences Applied of University Privatization of municipal responsibilities Portfolio management of local enterprises University of Applied Sciences (Research) Sciences Applied of University University of Applied Sciences (Education) Sciences Applied of University Portfolio management of local enterprises Information and communication infrastructure communication and Information Information and communication infrastructure communication and Information Satisfaction with municipal business development business municipal with Satisfaction Accessabilit/Opening hours of local administration local of hours Accessabilit/Opening Satisfaction with municipal business development business municipal with Satisfaction Accessabilit/Opening hours of local administration local of hours Accessabilit/Opening
The Thedifferences differences in the in rankingthe ranking give give a first a firstidea ideaof the of specialthe special location location requirements requirements of energy of energy intensiveintensive industries; industries; the evaluationthe evaluation gaps gaps allow allow som esom furthere further concretization. concretization. Diagram Diagram 1 shows 1 shows that that there there are especially are especially three three groups groups of location of location factors factors that that are moreare more relevant relevant to energy to energy intensiveintensive industries industries than than to others to others (evaluation (evaluation gaps gap in brackets):s in brackets): • • Proximity:Proximity: Proximity Proximity to important to important providers providers (0,51) (0,51) and and to imp to ortant important customers customers (0,33)(0,33) show show the highestthe highest positive positive evaluation evaluation gaps gaps of all of locationall location factors. factors. That That underlines underlines the the highhigh relevance relevance of spatial of spatial proximity proximity for energyinte for energyintensivensive firms. firms. • • CostCost aspects: aspects: In addition In addition location location factors factors closely closely connected connected wit h wit costsh costs are moreare more importantimportant to energyintensive to energyintensive industries industries than than to th toe rest.the rest. This This of course of course holds holds for energy for energy costs: costs: WithWith the averagethe average mark mark 1,58 1,58 energy energy costs costs are byare far by thefar mostthe most important important factor factor of location of location in in the totalthe total survey. survey. But Butthe energyintensivethe energyintensive firms firms judge ju dgethe energythe energy costs costs even even more more important important (0,22);(0,22); for two for two third third of them of them this this is a is “very a “very impor important”tant” location location factor. factor. Besides Besides water water and and
42 Hamm R., Regional Science Inquiry Journal, Vol. V, (2), 2013, pp. 3344 42 Hamm R., Regional Science Inquiry Journal, Vol. V, (2), 2013, pp. 3344
wastewater taxes (0,25), local property and business taxes (0,17 respectively 0,11), land wastewaterprices (0,12), taxes (0,25), public local charges property (0,10) and and busines costs ofs taxes waste (0,17 disposal respectively (0,08) are 0,11), cost landinducing priceslocation (0,12), factors public which charges are (0,10)more relevant and costs for ofenergy wasteintensive disposal firms. (0,08) An are explanation cost inducing why cost locationcomponents factors which are of are special more relevancerelevant for for energy these intensivefirms might firms. be theAn relativelyexplanation high why degree cost of componentsglobal (price)are of special competition relevance in these for these energyintensi firms mightve industries.be the relatively So for high them degree factors of that globalincrease (price) cost competition pressure are in of these special energyintensi importance. ve industries. So for them factors that increase• costGovernmental pressure are of specialbehavior: importance. The third group encompasses factors which are combined • withGovernmental governmental behavior: behavior: PortfolioThe third managementgroup encompasses of local factors enterprises which (0,29),are comb durationined of with permit governmental procedures behavior: (0,24), Portfoliothe quality management of cooperatio ofn with local local enterprises authorities (0,29), and durationadministration of permit(0,20), procedures the level(0,24), of the administrative quality of cooperatio regulationsn with (0,local16) authorities and a probusinessand administration municipal (0,20),administration the level (0,12) of administrative are all aspects regulationsunderlining (0,that16) the andlevel aof probusinessgovernmental municipalregulation and administrationintervention (0,12) might are be all more aspects important underlining than average that the f orlevel these of firms.governmental regulation and intervention• Themight only be more other important location than factor average not belonging for these firms. to the three groups above which is • evaluated The only higher other by energyintensive location factor notfirms belonging is road and to highway the three access groups (0,27). above which is evaluated higher by energyintensive firms is road and highway access (0,27). While on the one hand spatial proximity, cost aspects and governmental behavior apparently Whileare on more the oneimportant hand spatial location proximity, factors for cost the aspec energyts andintensive governmental branches, behavior there are apparently on the other are morehand important location conditionslocation factors that seemfor the to energy be of lessintensive relevance branches, to them; there theseare on aspects the other can be handgrouped location as conditions follows (negative that seem evaluation to be ofgaps less in rebralevanceckets): to them; these aspects can be grouped• as followsInner (negativecity conditions: evaluation It is gaps hardly in bra surprisingckets): that all location conditions related to • innerInner city conditionscity conditions: are unimportant It is hardly for surprisingfirms being that part all of location a highly conditioindustrializedns related branch. to So innerparking city conditions fees (0,55), are unimportant cityscape as for to firms cleanliness being part (0,43) of a andhighly architecture industrialized (0,42), branch. parking So fa parkingcilities fees (0,33), (0,55), city cityscape marketing as (0,28), to cleanliness safety in (0 inner,43) city and (0,27), architecture shopping (0,42), facilities parking (0,25) fa and cilitiesinner (0,33), city trafficcity marketing conditions (0,28), (0,18) safety are remarkably in inner city less (0,27), relevant shopping for energyintensive facilities (0,25) firms and than innerthey city are traffic for allconditions firms. The (0,18) way are by remarkably which these less fact relevantors affect for industrial energyintensive location firmsdecisions than is an they indirectare for allone: firms. If firms The haveway bya high which demand these factfor orsskill affected workforce industrial they location will be decisions to certain is anextend indirectinterested one: If in firms attractive have aliving high conditionsdemand for for skill thesede workforce workers. But they a willqualified be to workforcecertain extend does not interestedseem toin beattractive more important living conditions for energyintensive for these workers. industries But thana qualified for all workforceothers; so consequentlydoes not seemthe to innerbe more city important conditions for are energyintensive of minor importance. industries These than factors for all should, others; of so course, consequently be of much the innerhigher city relevance conditions for areretailers of minor and importance.householdorient Theseed factors services. should, of course, be of much higher• relevanceOther for soft retailers location and factorshouseholdorient: All locationed services. factors just mentioned can be seen as part of • the Othersoft location soft location factors factorsand their: All special location attribu factorste is justrelated mentioned to the inner can be city. seen Other as part soft of loca the softtion location factors arefactors image and of their the speciallocation attribu (0,10),te recris relatedeation toand the leisure inner city.facilities Other (0,13), soft loca cultural tion offeringsfactors are (0,14), image supplyof the location of householdoriented (0,10), recreation serv andices leisure (0,23) facilities and housing (0,13), (0,24).cultural These offeringsfactors (0,14), are also supply of minor of householdorientedimportance for the energy services intensive (0,23) industries. and housing (0,24). These factors• are alsoConsulting of minor services:importance A forthird the group energy of intensivelocation factors industries. that tend to be less relevant for • energyintensiveConsulting services: firms are A consultingthird group services of location like factors startup that consulting tend to be (0,06), less relevant consulting for on energyintensivegovernmental firms funding are (0,09),consulting technology services consulting like startup (0,16), consulting consulting (0,06), in corporate consulting descent on governmental(0,18) or financialfunding (0,09),advice (0,25).technology A possible consulting expla (0,16),nation consultingmight be that in corporateconsulting descent services are (0,18)of or special financial importance advice (0,25). for young A possible enterprises explanation and itmight can be be that supposed consulting that services there are are more of specialestablished importance enterprises for amongst young enterprises the energyintensiv and it cane firms. be supposed that there are more established• enterprisesEducation: amongst At first the sight energyintensiv it is a little bite firms. surprising that aspects concerning schooling • and Education:education – Ati.e. first offerings sight itfor is furthera little biteducatio surprisingn (0,10), that Universityaspects concerning education schooling (0,18), com and educationprehensive – schoolsi.e. offerings (0,23), for vocational further educatio trainingn (0,10), schools University (0,24) and education cooperation (0,18), between com en prehensiveterprises schools and schools (0,23), (0,27) vocational – are less training important scho olsto the (0,24) energyintensive and cooperation industries. between If demand en terprisesof qualification and schools would (0,27) be– are high less these important factors t oshould the energyintensive be of special interest industries. to the If demandfirms; as the of qualificationlatter does would not seem be high to hold these true factors one should might concludbe of speciale on ainterest less than to the average firms; demandas the of latterqualification does not seem by energyintensive to hold true one firms. might conclude on a less than average demand of qualification• Thereby energyintensive are not many firms. location factors of minor importance to energyintensive firms • that Therehave not are been not manymentioned location yet; factorsairport connectio of minor ns impo (0,30)rtance and to factors energyintensive related to commercial firms that haveproperties not been (0,31) mentioned and their yet; rents airport (0,09) connectio should bens mentioned(0,30) and infactors this context. related to commercial properties (0,31) and their rents (0,09) should be mentioned in this context. 3. Summary 3. Summary The aim of the present paper was to discuss the role of different location factors for energy The intensiveaim of the enterprises. present paper Using was the to resultsdiscuss of the a rolbroade ofly different based firm location survey factors run in for Middle energy Lower intensiveRhine enterprises. Area in 2008 Using it was the possible results ofto ranka broad nearlyly based 60 different firm survey location run factorsin Middle by importance. Lower Rhine Area in 2008 it was possible to rank nearly 60 different location factors by importance. Hamm R., Regional Science Inquiry Journal, Vol. V, (2), 2013, pp. 3344 43
After the identification of energyintensive industries a ranking based on the answers of all participating firms could be compared with a special ranking calculated only for the energy intensive firms.
The analysis shows that cost aspects and local fiscal burdens are the most important location factors to all firms followed by some „traditional“ factors like highways and availability and qualification of workforce. Above all, a businessfriendly climate of the local authorities seems to be another relevant location determinant.
As could be expected the results for energyintensive industries remarkably differ from that, though these differences are hardly surprising. They can be summarized in the following way: On the one hand spatial proximity to customers and suppliers, cost aspects – especially energy costs – and the degree of governmental regulation and institutional constraints are factors of special relevance for energyintensive firms. On the other hand soft factors of location – espe cially those related to inner city conditions – consulting services and some aspects of school ing and education are of lesser importance to energyintensive firms than to the rest of the economy.
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Hadjou L., Duquenne M., Regional Science Inquiry Journal, Vol. V, (2), 2013, pp. 4558 45
A THEORETICAL AND METHODOLOGICAL APPROACH OF «FRAGILE» AREAS: THE CASES OF GREEK REGIONS CROSSED BY THE EGNATIA ROAD
Lamara HADJOU University of Thessaly, Polytechnic School, Department of Planning and Regional Development, Pedion Areos, 38334 Volos and University Blaise Pascal (CERAMAC), Maison des Sciences de l'Homme 4, rue Ledru 63057 ClermontFerrand, [email protected]
Marie Noëlle DUQUENNE University of Thessaly, Polytechnic School, Department of Planning and Regional Development, Pedion Areos, 38334 Volos [email protected]
Abstract Rural areas socalled ‘fragile’ have rarely been object of theoretical and methodological approach, aiming at delimiting the concept of fragility and at specifying his components. As well as there is no theoretical approach to define these milieus, there is no either general agreement on the notion of fragile space. Numerous are the authors who use this notion without specifying contents, or defining its outlines. Arise then the question to know, what is really meant by this concept. This is the first task of this article which seeks to trace the history of the concept and its use by authors. If the concept of fragility seems to have obvious filiations with the concepts of periphery, marginal and underprivileged space, we propose to show that this concept refers to a more complex reality and in any case, a fact. Assuming that the fragility is not a state but indeed a process, the question is then, in on one hand, to specifyit through its multiple constituents and on the other hand to translate these last ones on a set of appropriate and quantifiable indicators. By taking as study area, the northern region of Greece which has recently benefited from a great highway infrastructure (Via Egnatia), we propose using the methods of multicriteria analysis, to highlight the types and degrees of fragility of the subregional areas of northern Greece. The use of factor analysis methods and classification confer us the possibility to make a typology of these areas well beyond traditional approaches of disadvantaged areas, marginal or peripheral.
Keywords: Fragility, typology of spaces, multicriteria analysis, Greece JEL classification: O18, O21, P25
Résumé Les milieux ruraux fragiles ont rarement fait l’objet d’une approche conceptuelle et méthodologique, visant à délimiter le concept de fragilité et en préciser ses composantes. De même qu’il n’existe pas d’approche théorique propre à définir ces milieux, il n’existe pas non plus de consensus sur la notion d’espace fragile. Nombreux sont les auteurs qui emploient cette notion sans en préciser le contenu, ni définir ses contours. Se pose dés lors la question de savoir ce qui est réellement entendu par ce concept. C’est la première tache de cet article qui s’attache à retracer l’historique du concept et son utilisation par les auteurs. Si le concept de fragilité semble avoir des filiations évidentes avec les concepts de périphérie, d’espace marginal et défavorisé, nous nous proposons de montrer que ce concept renvoie à une réalité plus complexe et en aucun cas, à un état de fait. Partant de l’hypothèse que la fragilité n’est pas un état mais bien un processus, il s’agit alors d’une part, de le spécifier au travers de ses multiples composantes et d’autre part de traduire ces dernières en un ensemble d’indicateurs appropriés et quantifiables. En prenant pour terrain d’étude, la région Nord de la Grèce qui a récemment profité d’une grande infrastructure autoroutière (Via Egnatia), nous nous proposons à l’aide des méthodes d’analyse des données multicritères, de mettre en exergue les types et degrés de fragilité des
46 46 HadjouHadjou L., Duquenne L., Duquenne M., Regional M., Regional Science Science Inquiry Inquiry Journal, Jo urnal,Vol. V, Vol. (2), V, 2013, (2), pp.2013, 4558 pp. 4558 espacesespaces infrarégionaux infrarégionaux du Nord du Nord de la de Grèce. la Grèce. Le reco Le ursreco auxurs méthodesaux méthodes d’analyse d’analyse factorielle factorielle et et de classificationde classification permet permet en effet en effet de procéder de procéder à une à une typologie typologie de ces de espaces ces espaces qui dépasse qui dépasse largementlargement les approches les approches traditionnelles traditionnelles d’espaces d’espaces défavorisés, défavorisés, marginaux marginaux ou périphériques. ou périphériques.
MotsMots clés :clés Fragilité, : Fragilité, typologie typologie des espaces,des espaces, analyse analyse multicri multicritère, tère,Grèce Grèce
1. Introduction1. Introduction
The Theobjective objective of this of thisresearch research is to is contribute to contribute both bot conceptuallyh conceptually and andmethodologically methodologically to a to a betterbetter understanding understanding of the of spacethe space called called 'fragile'. 'fragile'. This Thisnotion notion of fragile of fragile space space has emergedhas emerged in in the 1980sthe 1980s to define to define rural rural areas areas neglected neglected by the by ‘p theroductivist ‘productivist model’, model’, suffers suffers from, from, many many ambiguitiesambiguities that itthat is necessaryit is necessary to overcome. to overcome. In a Infirst a firstphase, phase, we trace we trace the originthe origin of the of concepthe concept of fragilet of fragile space. space. Emphasis Emphasis is given is given to the to the willingnesswillingness of researchers of researchers who who worked worked on this on this conce concept, topt, go to beyond go beyond the thetraditional traditional approachesapproaches in terms in terms of peripheral of peripheral spaces, spaces, marginal marginal and anddisadvantaged disadvantaged spaces. spaces. In a Insecond a second phasephase we try we to try show to show that thethat approaches the approaches that havethat have attempted attempted to apprehend to apprehend the fragility the fragility do not do not allowallow us to us clearly to clearly define define and anddelimit delimit this thisconcept concept. For. thisFor thisreason, reason, we propose we propose to adopt to adopt a a territorialterritorial approach, approach, putting putting in the in centerthe center of the of definition,the definition, the difficultiesthe difficulties of coordination of coordination of of actors,actors, evaluated evaluated in terms in terms of internal of internal and andexternal external proximity proximity relationships, relationships, the lowthe low level level of of valorizationvalorization of resource, of resource, and andfinally, finally, the objectiv the objective disabilities.e disabilities. It is It thus is thus a quite a quite different different approachapproach that inthat terms in terms of methodology, of methodology, requires requires the construction the construction of new of neworiginal original indicators. indicators. Our Ourmethod method for assessingfor assessing the fragilitythe fragility of rural of rural areas are isas therefore is therefore based based on a onrange a range of fifteen of fifteen indicatorsindicators in total. in total. The Theextent extent of the of informationthe information is synthesized is synthesized by applying by applying a factor a factor analysis analysis and and then then a classification a classification method, method, which which allows allows us to us propose to propose a typology a typology of rural of rural areas areas accordingaccording to their to their degree degree of fragility. of fragility. Our Our study study area area concerns concerns all the all municipalities the municipalities of t he of eleven the eleven provinces provinces crossed crossed by theby new the new highwayhighway Via EgnatiaVia Egnatia. By . characterizingBy characterizing the nature the nature of the of economic the economic dyna dynamicsmics observed observed in in thesethese territories, territories, it will it will be thus be thus possible possible in the in future the future to assess to assess the contribution the contribution of the of Via the Via EgnatiaEgnatia to the to development the development of the of region the region north north of Greece. of Greece.
2. Origin2. Origin of the of conceptthe concept of fragile of fragile space space
The The concept concept of fragile of fragile space space is difficult is difficult to define to define and and quantify. quantify. It is It often is often employed employed by by researchersresearchers without without giving giving a precise a precise definition. definition. Specifically, Specifically, the conceptthe concept of fragility of fragility has beenhas been usedused by “many by “many European European authors” authors” (Simard, (Simard, 2003), 2003), as P. as Houée, P. Houée, H. Gumuchian, H. Gumuchian, F. Bret, F. Bret, Ch.MignonCh.Mignon and and many many researchers researchers of CERAMAC of CERAMAC (P. Estie(P. Estienne, nne, A. Fel, A. Fel, J.P. J.P. Diry, Diry, L. L. Rieutort,...)Rieutort,...) worked worked for a for long a longtime timeon this on notionthis notion. The. Theemergence emergence of the of conceptthe concept of fragility of fragility in thein writingsthe writings of geographers of geographers and and the studiesthe studies of the of planningthe planning organizations organizations (formerly (formerly DATAR,DATAR, SEGESA SEGESA and SEDES)and SEDES) dates dates back back to the to 1980s.the 1980s. The Tconcepthe concept of fragile of fragile space space takes takes over overnotions notions of peripheral of peripheral space, space, marginal marginal space space and thenand thenunderprivileged underprivileged spaces, spaces, which which were were alreadyalready used used to qualify to qualify the "regions the "regions that that do not do go not well" go well" (Rieutort, (Rieutort, 2006) 2006) or those or those distant distant clustersclusters growth. growth.
VeryVery early early in fact, in fact,economists economists interested interested by space by space issues issues have have stipulated stipulated that thethat organization the organization of spaceof space is based is based on a ondualistic a dualistic model model center center per iphery. periphery. The Thetheory theory of center of center / periphery / periphery is is indeedindeed one one of the of first the first theories theories of spatial of spatial analysi analysis (Hypergeo,s (Hypergeo, 2004). 2004). It begins It begins with with an an empiricalempirical observation observation that that the spacethe space is not is nothomogen homogeneous;eous; it is it the is placethe place where where many many multiscalemultiscale spatial spatial differentiations differentiations are produced,are produced, attributed attributed to various to various forces. forces. The The Marxist Marxist modelmodel centerperiphery centerperiphery appears appears first firstin the in writing the writings of thes of German the German economist economist and sociologistand sociologist WernerWerner Sombart Sombart in 1902 in 1902 (modern (modern capitalism), capitalism), before before being being retaken retaken by the by theoriststhe theorists of of imperialismimperialism (Luxemburg, (Luxemburg, Bukharin), Bukharin), then thenby developmby development ent economists economists such such as Prebisch as Prebisch (1950),(1950), Emmanuel Emmanuel (1969) (1969) and and Samir Samir Amin Amin (1973) (1973) and and finally finally authors authors that that propose propose to to relativizerelativize the model,the model, to go to beyond go beyond (the (theeconomy economy of archipelagos of archipelagos P . Veltz) P . Veltz) focusing focusing on the on the balancebalance of centripetal of centripetal and andcentrifugal centrifugal forces forces (new (new economic economic geography geography of Krugman). of Krugman). The The eminenteminent French French historian historian F. Braudel F. Braudel in his in book his book " M "aterial Material civilization civilization and and capitalism, capitalism, fifteentheighteenthfifteentheighteenth century" century" (1979), (1979), also alsohad recohad ursereco urseto the to notion the notion of periphery of periphery or marginal or marginal Hadjou L., Duquenne M., Regional Science Inquiry Journal, Vol. V, (2), 2013, pp. 4558 47 space to qualify the structure of world economy, composed by nested or juxtaposed space but interconnected, the heart, the center and periphery.
The model Center/Periphery describes the later as the result of unequal exchange relations between the center and the periphery. Underdevelopment, we should say today the low dynamics of a space is attributed to the nature of its relations with the central poles. Between the center and periphery the exchanges relations are asymmetrical and of various natures: people, goods, capital, information, etc. The center that benefits more from these relationships dominates the periphery which is then down in the spatial hierarchy.
This approach in terms of center and periphery is very limited and places the peripheral areas always in a situation of dominance by the center. It’s certainly useful to explain in part the causes of this structuring of space. It is however not sufficient to apprehends all the complexity of the spatial system at different scales. It is necessary to relativize this model and this was done by number of authors (Cattan, 2006, Grataloup, 2009), highlighting other structured components of space (archipelagos economy) and other forces in effect (economies of agglomeration and dispersion, integration into networks, information ...). The center periphery model needs to evolve to be able to explain the different forces that cross the spaces.
The concept of marginality (espace marginal) is associated with the notion of periphery "as a limit or boundary, as a march or area, the marginal is always at a certain distance from the center" (Roux, 1992). However, even if the concept of marginal is often associated with the couple Center / Periphery, the meaning attributed to it is different. Marginality is primarily considered in terms of space, distance and isolation from the center. For Bailly (1986), "The marginal is a state of isolation in a relationship (whether wanted or not) that generates a specific spatial practice which contributes in turn to exclude interaction process. This is not only the unequal relations which are a problem but the remoteness, isolation and specifically the lack of these relationships that explain the marginality. This recent years have seen the emergence of new approaches inspired by the sociology and psychology to explain the marginality not only from the spatial point of view but also from the social and cultural one. Authors like E. Durkheim consider the marginality as a need for change and the evolution of society (Roux, 1992).
The approach in terms of marginal space suffers like the model center/periphery from several limits. To reduce the concept of marginality to a question of distance or remoteness from the centers is an unsatisfactory approach of spatial dynamics. There are many other factors involved in the marginality of spaces. We must therefore go beyond this approach in terms of distance, especially today, with the improving of accessibility and mobility which reflects the relativity of the notion of distance. There are many other approaches of marginality that take into account various causes. However, they suffer from the absence of a precise definition (Dugas, 1988).
The notion of underprivileged space appears in the years 1975 (Rieutort, 2006) with the beginning of the European CAP for underprivileged areas in which the mountain areas occupy a great place (Directive 75/268 of European Union). This recognition is based on a definition of an underprivileged space taking into account its intrinsic characteristics. It is therefore regions with a range of disabilities "imposed from the beginning by the nature (climate, slope, poor soil ...), making them fragile and uncompetitive in a global environment increasingly competitor. Contrary to the notions of periphery defined by the nature of its relationship with its environment and marginality defined by the absence of structural relationship with the poles, the notion of underprivileged space is defined relatively to its internal characteristics. Space is classified as underprivileged when it is less well endowed with factors propitious to development.
It is finally through geomorphologic disability (relief, slope) that disadvantaged areas are
48 48 HadjouHadjou L., Duquenne L., Duquenne M., Regional M., Regional Science Science Inquiry Inquiry Journal, Jo urnal,Vol. V, Vol. (2), V, 2013, (2), pp.2013, 4558 pp. 4558 defineddefined at European at European level. level. These These objectives objectives handica handicaps areps supposed are supposed have have a direct a direct influence influence on on the agriculturalthe agricultural economy economy (low (low productivity) productivity) of thes of ethes areas.e areas. A weakness A weakness in agricultural in agricultural activity activity generatesgenerates the the population population decline decline (low (low density) density) and anddifficulty difficulty in preservation in preservation of of environment.environment. This Thisapproach approach is restrictive is restrictive as it asmai itnly mai underlinesnly underlines the "agroeconomic the "agroeconomic approach approach of theof ruralthe rural spaces" spaces" (Duquenne, (Duquenne, 2009). 2009). The Theassociat association “agriculturalion “agricultural and rural”and rural” is more is more and and moremore outdated outdated with withthe emergence the emergence of new of newfunctions functions (consumption (consumption spaces) spaces) and newand newactivities activities in thesein these areas areas (tourism, (tourism, residence residence ...). Moreover,...). Moreover, the approachthe approach based based on physical on physical disabilities disabilities tendstends to limit to limit the concept the concept of disadvantaged of disadvantaged space space to the to rural the rural areas areas (Goussos, (Goussos, Duquenne, Duquenne, 2006)2006) while while disadvantaged disadvantaged spaces spaces are also are alsopresent present in urban in urban areas. areas.
AfterAfter 1985, 1985, the concept the concept of fragile of fragile space space is more is more and anmored more bring bring up, especially up, especially in France in France wherewhere different different studies, studies, implemented implemented by institution by institutions as DATAR,s as DATAR, SEGESA SEGESA and SEDES,and SEDES, try to try to detectdetect the contoursthe contours and theand contentsthe contents of this of typethis typeof space of space and definedand defined it as ita aspredominantly a predominantly agriculturalagricultural area, area, where where farms farms have have been been less less moder modernizednized and and diversified, diversified, and and the other the other sectorssectors of activity of activity underdeveloped underdeveloped (Simard, (Simard, 2003). 2003). For theFor Ceramacthe Ceramac1, the1, comprehensionthe comprehension of of fragilefragile space space requires requires to identify to identify all its all contours its contours that overstepthat overstep the agricultural the agricultural components components and and includeinclude demographic demographic structure structure as well as wellas tourism, as tourism, industry, industry, transports, transports, policies. policies. The Thedefinition definition of theof fragilethe fragile space space is nevertheless is nevertheless vague vague and accoand accordingrding to J.P. to Diry,J.P. Diry, refer refer to "rural to "rural areas areas of of developeddeveloped countries, countries, confronted confronted to integration to integration prob lems problems into into a modern a modern economy, economy, which which resultsresults in demographic in demographic (in particular (in particular the decreasethe decrease of population), of population), economic economic and sociologicaland sociological originaloriginal characteristics”. characteristics”. These These areas areas classified classified as fragile as fragile or sensitive or sensitive "often "often occur occur in the in the uplands.uplands. But theBut rule the isrule not is absolute: not absolute: some some midEur midEuropeanopean mountains mountains have have known known for decade’s for decade’s sustainedsustained development development while while the plainsthe plains and uplandsand uplands suffer suffer economic economic and socialand social lethargy lethargy and and are thereforeare therefore stored stored in fragile in fragile areas”. areas”. The Thecomplex complexity ofity the of phenomenonthe phenomenon justifies justifies precisely, precisely, as mentionedas mentioned by the by researchersthe researchers of Ceramac, of Ceramac, the nectheessity necessity "to develop"to develop appropriate appropriate methods methods for anfor appropriate an appropriate approach" approach" of the of fragile the fragile space. space.
3. Conceptual3. Conceptual approaches approaches of fragility: of fragility: Towards Towards a terri a territorialtorial approach approach
In theIn 1990s, the 1990s, rebelling rebelling against against the overly the overly optimist optimistic visionsic visions of rural of rural renewal renewal (Kayser, (Kayser, Chapuis, Chapuis, DatarDatar ...) F. ...) Bret F. Bret(1991) (1991) proposes proposes to review to review the co thencept concept of fragility. of fragility. He defined He defined the latter the latter as "a as "a complexcomplex system system that thatcannot cannot be summarized be summarized through through the analysisthe analysis of population of population trend trend ... the ... the fragilityfragility is expressed is expressed through through three three components: components: the human, the human, the economic the economic and theand spatial the spatial one one ... this... leadsthis leads to think to think about about indicators indicators to be to used be used (analytical (analytical approach), approach), required required information information and and assessment assessment of degrees of degrees of fragility of fragility (synthetic (synthetic approach)". approach)". He proposesHe proposes a geographical a geographical approach,approach, which which from from his pointhis point of view of view is the is mostthe most comprehensive comprehensive and and facilitate facilitate the the identificationidentification of all of the all facets the facets of fragility. of fragility. In o rderIn o rder to avoid to avoid the duplication the duplication of the of various the various analysisanalysis of fragility of fragility phenomenon, phenomenon, F. Bret F. Bretoffers offers a new a newvision vision based based on the on threethe three components components of fragilityof fragility and and takes takes care care to eliminate to eliminate false false tend entious tendentious indicators. indicators. He suggestsHe suggests new new parametersparameters taking taking into intoaccount account the true the truemechanisms mechanisms of fragility of fragility as well as wellas a transversalas a transversal lecture lecture of theof problemsthe problems in order in order to eliminate to eliminate partial partial appro approach, ach,and finallyand finally a systematic a systematic retrospective retrospective appliedapplied for indicators. for indicators. The The author author argues argues that thatit is it necessary is necessary to take to take into intoaccount account the basic the basic principlesprinciples of geography of geography to understand to understand the fragility the fragility. These. These principles principles are five: are five: the notion the notion of of limitlimit (which (which geographical geographical limits limits to the to fragility),the fragility), the conceptthe concept of degree of degree (extent (extent of fragility), of fragility), the conceptthe concept of mutation of mutation and disruptionand disruption (evolution (evolution of fragility), of fragility), the concept the concept of recurrence of recurrence (is it (is it a cyclicala cyclical or longterm or longterm phenomenon) phenomenon) and andfinally finally the concept the concept of relativity of relativity (the (the fragility fragility is is relative).relative). It is It also is also necessary necessary in the in definition the definition of the of fragility the fragility to distinguish to distinguish the difference the difference betweenbetween the result, the result, the process the process and theand problem the problem of fragility of fragility (Piveteau, (Piveteau, 1995). 1995).
It is It therefore is therefore a geographical a geographical approach approach of fragility of fragility that that is proposed is proposed by F. by Bret F. Bret but this but this approachapproach has itshas own its ownlimits limits due todue the to factthe factthat thatit is itdifficult is difficult to apply to apply this methodthis method at a atlarge a large scalescale as region as region or province. or province. This Thisapproach approach is very is veryinteresting interesting for thefor studythe study of small of small rural rural or or urbanurban areas areas by attempting by attempting to identify to identify and and understan understand howd how society society is evolving is evolving over over time time
1 Ceramac1 Ceramac = Centre = Centre d’Etudes d’Etudes et de etRecherches de Recherches Appliqu Appliquées auées Massif au Massif Central, Central, à la moyenneà la moyenne montagne montagne et auxet espaces aux espaces fragiles fragiles Hadjou L., Duquenne M., Regional Science Inquiry Journal, Vol. V, (2), 2013, pp. 4558 49 toward a state of fragility. The rigor of such an approach makes it difficult indeed to go beyond the municipal level, or subcommunal. Moreover, this approach neglects the role of actors and capacity of local actors to impulse actions. F Bret does not refer to the problems of coordination and valorization of resources. Beyond the objective handicaps that may limit the development of a territory or increase its fragility, the failures of actors coordination, their inability to build close relationships and latent resources or participate in the specification of the latter, are all criteria necessary for understand the fragility.
Despite the numerous work and publications on fragile rural areas, some difficulties still remain in terms of theoretical but also empirical views. Theoretically, there is no specific conceptual approach to define fragile space (Rieutort, 2006, Couturier, 2005). That is why Couturier proposes two approaches:
A systemic approach of fragility which consider fragile areas as a systems that ' components and relationships between these components are marked by a low stability in the short or medium term "and strongly" dependent on external factors themselves labile and are not likely be influenced by the local systems’. This approach is like the model Centre / periphery that consider the dependency relations as fundamental to explain the phenomena of peripherality.
A dynamic – action approach of fragility "to which the initiatives of local actors are deployed in an environment unfavorable to their success and their synergy." So it is the environment in which the actions of local actors are deploying which is in question. This approach is considered as deterministic (Rieutort, 2006).
Nowadays, there is a "limit" to these theoretical approaches, as new dynamics in the fragile regions are ongoing, they result in part from mutations in the world context with globalization, and in the local context with the emergence of local (Guigou, 1997, Pecqueur, 2006). Moreover, in the last two above mentioned approaches, the very important temporal dimension is absent. Indeed it helps to understand how the process of fragility settled and how it is possible to be transformed from the state of fragile to the state of emergence or dynamism.
Wanting to go beyond the limits of both approaches in terms of peripheral, marginal and underprivileged space on the one hand, and the three approaches of fragility in terms of geographical, systemic and action perspective in the other hand, we propose a territorial issue putting in the center of this phenomenon the question of coordination between actors and construction of resources. Such an approach supposes to take into account the temporal dimension. Thus, if fragile areas exist today, this has not always been the case. The example of the highlands is significant. While some plains overvalued today were synonymous in the past of swampy areas infected by epidemics of all genres and mountain inhabited by high densities of population, and a remarkable flourishing economic activity, nowadays, the relationship was reversed (Sivignon, 1999). This transformation process takes years to settle, as the fragility or the dynamics of a space.
Thus our conception of fragile space attempts to introduce a dynamic dimension. The fragility of a space is not conceptualized as a state, as is the case of disadvantaged areas, or as the result of a set of relations of subordination to a dominant space. We define it as a complex process, a movement in time that has transformed space formerly wellintegrated, to space today devitalized. This temporal dimension is important, because it removes all forms of determinism to this definition. In other words, if there is fragility, it is due to unfavorable conditions inside and outside the territory. This conception means as well, that a fragile space or become fragile can be transformed into a dynamic space, if the internal and/or external conditions are transformed and become favorable.
Fragility is for us a complex process of failure of internal and/or external coordination and
50 Hadjou L., Duquenne M., Regional Science Inquiry Journal, Vol. V, (2), 2013, pp. 4558 50 Hadjou L., Duquenne M., Regional Science Inquiry Journal, Vol. V, (2), 2013, pp. 4558
deconstruction of resources. By coordination internal/external we mean really the type of deconstructionrelationship of between resources. actors By coordination within and outside internal/external the territory. we meanReformulated really the otherwise, type of the relationshipfragility between is the result actors of within a non and irreversible outside the proce territory.ss of Reformulated deconstruction otherwise, of resources the and fragilityrelationships is the result between of the a non different irreversible actors, due proce toss mutations of deconstruction in the internal of resourcesas well as andexternal relationshipsenvironment. between Even the if differentobjective actors, handicaps due toare mutations important in to the detect internal the asunfavorable well as external conditions environment.(state of fragility),Even if objective the two handicapsdimensions are of importinternaantl and to detectexternal the coordination unfavorable are conditions determinant (statefor of the fragility), better understanding the two dimensions of the processof interna in litse andlf andexternal its different coordination degrees are (Duquenne determinant M.N, for the2009). better Moreover, understanding coordination of the process requires in proximity itself and beitstween different actors degrees and local (Duquenne societies M.N, which is 2009).not Moreover, exclusively coordination a geographic requires one. Consequently, proximity between it is necessary actors and to local take societiesinto account which the is level not exclusivelyof proximity a geographic internally withinone. Consequently, the territory it and is necessary then externally to take withinto account the environment the level and of proximitytherefore, internally propose within appropriate the territory indicators and to th en identi externallyfy these with two the facets environment of proximity. and In therefore,definitive, propose to the appropriate objectives indicators handicaps, to our identi approafy thesech includes two facets two others of proximity. dimensions In of definitive,fragility: to the the coordination objectives handicaps,between actors our and approa the chconstruction includes twoof resources. others dimensions of fragility: the coordination between actors and the construction of resources. Fragile areas are not condemned because the same process that affects them can be Fragiletransformed areas are to notreconstruct condemned both new because resources the and same n ew pr ocessforms of that coordination. affects them In this can case, be we transformedmust speak to reconstruct of innovation both and new innovative resources environment and new formss. The of coordination.transition from In a this fragile case, state we to a muststate speak of of less innovation fragility andor dynamic innovative is related environment to the s.action The transitionof actors from at various a fragile spatial state toscales a , stateespecially of less fragility as regards or dynamic their is ability related to to construct the action en ofdogenous actors at or various exogenous spatial resources scales , and especiallypromote as innovation. regards their So it ability is a territorial to construct approach endogenous that is underlying or exogenous our definition resources based and on promotethe resources,innovation. coordination So it is a territorial of actors approach and innovatio that isn. underlying We can represent our definition this by based two on design the resources,patterns, one coordination reflecting of the actors internal and and innovatio externaln. We relations can represent of the fragile this by space, two design the other patterns,circular, one a reflectingloop of actions the internal that can andbe positive external or relations negative. of the fragile space, the other circular, a loop of actions that can be positive or negative. Fig1. Territorial approach to the concept of fragile space Fig1. Territorial approach to the concept of fragile space
The relevance of this loop (Fig1.) passing the territories from a state of fragility to a state of The emergencerelevance of or this at least loop of(Fig1.) new dynamicpassing theis illustrated territories throughfrom a statenumerous of fragility studies to (Kayser, a state of 1993) emergenceand INSEE or at dataleast onof newthe new dynamic realities is illustrated of fragile throughareas. From numerous the fragile studies mountainous (Kayser, 1993) areas in and INSEEthe Massif data Central on the to new the realitiessmall isolated of fragile rural area areas., FromRyedale the in fragile North mountainousYorkshire in theareas UK, in new the Massifpositive Central trends to arethe small evident isolated everywhere rural area in, Ryedale Europe. Ginlobalization North Yorkshire seems in tothe challengeUK, new the positivedominant trends development are evident everywhere model based in on Europe. intensive Globalization agriculture, seems which to challenge is especially the in dominantdisadvantaged development areas. modelFarming based is changing, on intensive new requi agricrementsulture, appear, which and is they especially are benefit in to disadvantagedfragile areas areas. that Farminghave seized is changing, this opportunity. new requi Nerementsw offerings appear, in terms and theyof products are benefit of quality, to fragileand areas guaranteed that have quality seized label this participate opportunity. in theNe wreh offeringsabilitation in ofterms agriculture of products in fragile of quality, areas. The and guaranteedglobal society quality propagates label participate new values, in the new reh concernsabilitation (environment) of agriculture as in well fragile as areas.a new Thepositive globalperception society propagates of the fragile new ruralvalues, areas. new Theconcerns low dens(environment)ity, natural as landscapes, well as a new rural positive amenities, perceptionlifestyle of and the even fragile the ruralisolation areas. of Thefragile low areas, dens especiallyity, natural mountainous landscapes, strengths rural amenities, and become lifestyleeven and resources even the that isolation urban societyof fragile wishes areas, to especially consume .mountainous The service sectorstrengths with and tourism, become small evenindustries resources and that handicrafts urban society offer wishes new opportunities to consume. andThe adaptservice to sectorglobalization. with tourism, The low small level of industriespopulation and handicrafts in fragile offerareas newseems opportunities to reverse andat lea adaptst in tosome globalization. territories. The Also, low there level is of "new population in fragile areas seems to reverse at least in some territories. Also, there is "new Hadjou L., Duquenne M., Regional Science Inquiry Journal, Vol. V, (2), 2013, pp. 4558 51 uses of space, combined with new sociospatial practices (mobility, multiresidence), demonstrating a 'natural need' from urban populations" (Rieutort, 1997). It is clear that, those mutations transform certain fragile areas in emerging territories. These changes confirm our approach of fragility as a process not irreversible, but in constant mutation and the importance of both resources and coordination of actors that turn opportunities into new applications and projects.
The emerging new forms of rurality are very different from each other. The type of resources used and the nature of the coordination lead generally to varied models of rural societies (Houée, 1990). The fragility of these spaces is also changing, since according to the development model adopted, rural societies suffer more or less the constraints inherent in these models. Also to demonstrate the relevance of the loop action / feedback fragile rural areas, remember that 3040 years old, fragile rural areas have experienced major changes, breakups, crisis and rebirth (Kayser, 1993). The demographic crisis has reduced the population of the French countryside from 40% of the total population in 1950 to 20% in 1994 (John, 1995). Perceived as structural (Beteille, 1981) this demographic crisis is fading, however, in the 1980s and 1990s and 2000s have witnessed a turnaround since the campaigns are gaining new residents (Diry, 1995), including campaigns fragile. The farm crisis then, which had influence greatly farmers is considered by Hervieu (1993) as a crisis of society and of civilization. Farm households that represent 48% of total households in 1950 are only 20% of the total (John, 1995). This agricultural crisis let however for the development of an industry "by specialized labor pool: the wood industry (Jura, Alps, Vosges), textiles and clothing (BasDauphiné, Vosges, Aube, Choletais, Vendée, Roanne, Sud Ardèche, Nîmes, Castres, Céret), furniture, mechanical, food, stationery (Charente Valley), leather, footwear (Rochechouart Notron) etc.." (John, 1995, p. 20), industry which in turn enters into crisis in the 1980s. Finally, a third transformation in the countryside is the way to live and work. There is a separation between place of residence and work that generates part of demographic and economic renewal of rural areas from new residents. The rural fragile areas are transformed from territories of especially agricultural production to territories based on residential economy. The income received by the campaigns from their new permanent residents (commuters, retirees, new residents ...) and temporary (Tourists) dominate their new economic structures (Davezies, 2005, Talandier, 2007).
An approach that is complementary to what we propose is that of Laurent Rieutort (2006), which depend the fragility of «representations of each other,". This conception is joined by B. Prost (2004) "About the territorial margins, which are" a transitional element in the perception and organization attributed by men to the territory they represent, and P. Couturier (2005) for whom "the marginal areas are not subject to collective practices or representations, that may be embedded in processes of construction of their identity. "Now these imaginary are also put forward by local actors steeped in pejorative perceptions and wish to underline the fragility of their situation, or express a feeling of abandonment." This approach is quite complementary to our territorial approach of the notion of fragile space that, in the process of construction or deconstruction, the nature of the representations that are conveyed in the territory are crucial. They allow the awareness of disabilities but also the potential that may generate a new dynamic.
4. The evaluation of fragility: methodology and tools
From the methodological point of view, it is first necessary to highlight the lack of work about the concept of rural fragility. When they exist, they are limited and varied. Several authors also employ the term of fragility without giving a precise definition. The physicals criteria (topography, slope ...) are often most used with demographics variable. Both are supposed to have direct effects on employment and incomes of rural areas. The analysis often focuses on the agricultural sector since it dominates the countryside until the last decade. The proposed method aims to overcome these limitations by taking into account two fundamental characteristics of fragility as defined above: the complexity and temporality. They are
52 52 HadjouHadjou L., Duquenne L., Duquenne M., Regional M., Regional Science Science Inquiry Inquiry Journal, Journal, Vol. V,Vol. (2), V, 2013, (2), 2013, pp. 4558 pp. 4558 neverthelessnevertheless interesting interesting approach approach to define to define the the fragile fra gile rural rural by authors by authors like like Gumuchian Gumuchian (1990),(1990), Bret Bret (1991) (1991) and and Simard Simard (2003). (2003). These These approa approachesches are are all tryingall trying to construct to construct a a summarysummary measure measure of fragility. of fragility.
ThisThis work work is an is effort an effort in modeling in modeling and and understandin understanding theg themultiple multiple facets facets of fragility of fragility by by constructingconstructing a definition a definition essentially essentially operational. operational. The The method method we we propose propose is far is far from from canalizingcanalizing all the all thecomplexity complexity of the of thephenomenon phenomenon of the of the fragility fragility of rural of rural areas areas in some in some indicators.indicators. They They suffer suffer from from two twomajor major constraints: constraints: lack lack of data of data on someon some phenomena phenomena at the at the locallocal level, level, and and the difficultythe difficulty to transcribe to transcribe some some qualitative qualitative variables variables into into quantitative quantitative data data (perceptions).(perceptions). It is Ituseful is useful to propose to propose new new tools tools to better to better understanding understanding the complexitythe complexity of the of the ruralrural fragility. fragility. We We use use original original indicators indicators built built specifically specifically to identify to identify the the phenomenon. phenomenon. However,However, the the proposed proposed indicators indicators must must be regarded be regarded as indirect as indirect measures measures of the of the three three dimensionsdimensions of fragility of fragility taking taking in account in account in this in thisarticle. article. The Theuse useof sophisticated of sophisticated methods methods of of factorfactor analysis analysis and and kmeans kmeans classification classification will will allow all ow us to us achieve to achieve a typology a typology that that goes goes beyondbeyond traditional traditional approaches approaches in terms in terms of underpriv of underprivilegedileged areas, areas, marginal marginal or peripheral. or peripheral.
The Theapproach approach presented presented below below is a ismacroscopic a macroscopic appro approach,ach, applied applied to Greece. to Greece. It is Ittherefore is therefore basedbased on geographical on geographical and and socioeconomic socioeconomic data data at re atlatively relatively disaggregated disaggregated territorial territorial units, units, namelynamely the Greekthe Greek demes. demes. The Thedemes demes are theare primarythe primary components components of administrative of administrative regions regions (LAU1(LAU1 the Europeanthe European classification). classification). In fact, In fact, at thi ats thiscales scale can canbe collected be collected in a insystematic a systematic way, way, manymany data data while while the the analysis analysis at the at the second second level level of administrative of administrative units units (Dimotiko (Dimotiko diamerisma,diamerisma, LAU2) LAU2) reduces reduces substantially substantially the fieldthe field of study, of study, because because of lack of lack of data. of data. Most Most of of the datathe data are relatedare related to the to lastthe lastpopulation population census census of Greece of Greece (2001). (2001). Moreover, Moreover, the macroscopicthe macroscopic approachapproach requires requires that that the the chosen chosen indicators indicators are are "clear", "clear", thus thus directly directly or indirectly or indirectly quantifiable,quantifiable, easily easily interpretable interpretable and and allowing allowing to transcribe to transcribe the thevarious various components components of the of the phenomenonphenomenon in space in space and andin time. in time.
In orderIn order to evaluate to evaluate the threethe three dimensions dimensions of rural of rural fragility: fragility: objective objective handicaps, handicaps, difficulties difficulties of of coordinationcoordination and and degree degree of diversification of diversification of resou of resources rces (see (see fig. fig. 2), we 2), havewe have selected selected 15 15 indicatorsindicators that that can can be consideredbe considered at least at least as appro as approximatedximated measures measures that that reflect reflect the the componentscomponents of fragile of fragile areas. areas.
Fig2.Fig2. Methodological Methodological approach approach of fragile of fragile rural rural areas areas
DIMENSIONS OF FRAGILITY DIMENSIONS OF FRAGILITY
Difficulties Difficulties of coordination of coordination of actors of actors Less Lessvalorization valorization of of ObjectiveObjective disabilities disabilities resources resources
Low Lowinternal internal Low Lowexternal external Low Lowdiversification diversification NaturalNatural accessibility accessibility proximity proximity of activities and conditions of proximity proximity of activities and conditions of produproductionction difficult difficult
Dispersed Dispersed - Low- Low - Concentration- Concentration of of PhyscalsPhyscals population population accessibilityaccessibility to to workwork in generic in generic handicapshandicaps (relief, (relief, slope…) servicesservices and and activitiesactivities slope…) marketmarket - Low- Lowdimographical dimographical - Enclavement- Enclavement dynamicdynamic - Less- Lessprofessional professional educationeducation
Hadjou L., Duquenne M., Regional Science Inquiry Journal, Vol. V, (2), 2013, pp. 4558 53 a. The objectives disability referring to the mountainous terrain and physical disabilities that impede mobility and proximity. To evaluate these handicaps, we selected four (4) indicators:
Id1: The average height of DD forming each deme, weighted by their respective population; Id2: the average height of the same DD weighted by their respective area; Id3: the part of population of deme living in a mountainous DD, as defined by the National Office of Statistics; Id4: the part of the area of the deme classified as mountain area by Esey. b. The coordination problems although difficult to assess, the weakness of coordination can be approached by using indirect indicators. Coordination is evaluated in its internal and external dimension. The internal proximity or face to face, even if it is not sufficient to encourage people to cooperate, is a permissive condition for Coordination (Rallet, 1995). If the capacity of cooperation and coordination cannot be evaluated directly, we suggest using indirect measures reflecting the permissive condition. Two (2) indicators can reflect more or less the internal proximity:
Id5: population density (inhabitants per km2), this indicator is generally very used in the analysis of the rural fragility; Id6: the part of population living in DD characterized by the National Office of Statistics, as urban. These are districts whose main town has a permanent population of more than 2,000 inhabitants.
The External proximity captures the degree of integration or marginalization of rural areas. It refers to accessibility to services that are largely concentrated in the center of the department and local employment areas. It is here approached through four (4) indicators are:
Id7: the degree of contiguity of order k at the administrative center of the department. This level corresponds to the number of borders (k) to cross to go from one deme to the main town in the department; Id8: intensity of road infrastructure, measured by the number of km of roads to 10 km2. This ratio refers directly to the notion of accessibility; Id9: the intensity of alternant migrations between home and work. This indicator measures for each deme, the weight of alternate migrations compared to total assets residing in the same deme. Although this kind of mobility occurs mainly in and around urban areas, it was shown that it also presents in the rural areas, a high variability, reflecting a differential of spatial proximity that is not negligible (Duquenne, Kaklamanis, 2009); Id10: the autonomy of the labor market measures the ability of the deme to use its own assets. This indicator gives us the number of jobs of the deme provided by the active nonmobile for 100 reels jobs within the deme (jobs covered by the nonmobile assets and mobile assets whose place of residence is in another deme). It is between 0 and 100. A strong autonomy tends to be a failure in integrating the deme in regional economic activity, often coupled with a lack of attractiveness. c. The degree of diversification of economic and human resources. Five (5) indicators have been selected to consider the capacity of valorization of local resources:
Id11: the population change, measured between the two last population censuses (19912001). A net loss of population reflects the lack of attractiveness of the deme and therefore its difficulties to maintain the local workforce and the economic activities; Id12: the standard index of employment concentration (entropy). Calculated from the distribution of employment in the branches of economic activity, it evaluates the degree of diversification of the economy. Because this indicator has been normalized,
54 Hadjou L., Duquenne M., Regional Science Inquiry Journal, Vol. V, (2), 2013, pp. 4558 54 Hadjou L., Duquenne M., Regional Science Inquiry Journal, Vol. V, (2), 2013, pp. 4558
it is between 0 (absolute concentration) and 1 (equal distribution of assess between it is branches);between 0 (absolute concentration) and 1 (equal distribution of assess between branches); Id13: The indicator of aging, ratio giving the number of persons aged 65 years and Id13:over The per indicator 100 inhabitants of aging, of ratio the deme. giving the number of persons aged 65 years and over per 100 inhabitants of the deme. Id14: The indicator of youth ratio giving the number of persons under 15 years per Id14:100 The inhabitants indicator of of youth the deme. ratio Thisgiving indicator the number permit of personsto discuss under about 15 years the issueper of 100 keeping inhabitants young of families the deme. in Thisthe deme, indicator so that permit coupled to discuss with the about previous the issueindicator, of it keepingmay youngreflect familiesa permissive in the condition deme, sofor that future coupled dynam withics. the previous indicator, it may reflect a permissive condition for future dynamics. Id15: The degree of higher education of the population at age of working. This Id15:indicator The degree gives the of highernumber education of persons of who the have population acquired at a agehigher of education working. This per 100 indicatorinhabitants gives theaged number 20 years of andpersons older. who It canhave allow acqu ired at leasta higher indirectly education – evaluating per 100 the inhabitantsability ofaged local 20 population years and toolder. valorizes It can its allow resour atces least and indirectlyknowhow. – evaluating the ability of local population to valorizes its resources and knowhow. From all this indicators, we propose to conduct a principal components factor analysis. This Fromgives all this us theindicators, possibility we propose to synthesize to conduct voluminous a principal and components complex information factor analysis. by producing This givescomposite us the possibility indicators to of synthesize fragility (factor voluminous axes). aFrndom complex these new information composite by variables, producing it is compositepossible indicators to realize of a fragility classification (factor of axes). all demesFrom these studied new according composite to theirvariables, more it or is less possiblepronounced to realize fragility. a classification of all demes studied according to their more or less pronounced fragility. The approach presented below is a macroscopic issue, applied to Greece. It is therefore based The onapproach data collected presented at belowrelatively is a macroscopic disaggregated issue terri, torialapplied units, to Greece. namely It theis therefore Greek demes. based The on datademes collected are the at primaryrelatively components disaggregated of terri administrativetorial units, regions namely the (LAU1 Greek in demes. the European The demesclassification). are the primary In fact, components at this scale can of administrativebe collected in regionsa systematic (LAU1 way, in many the data European while the classification).analysis at In the fact, second at this level scale of can administrative be collected unitin as systematic (Dimotiko way, diamerisma, many data LAU2) while reducesthe analysissubstantially at the second the field level of study, of administrative because of lack unit so (Dimotikof data. Moreover, diamerisma, the macroscopic LAU2) reduces approach substantiallyrequires thatthe fieldthe chosen of study, indicators because are of lack"clear", of data. thus Moreover,directly or theindirectly macroscopic quantifiable, approach easily requiresinterpretable that the chosenand allowing indicators to transcribe are "clear", the thvariouus directlys components or indirectly of the quantifiable, phenomenon easily in space interpretableand in time. and allowing to transcribe the various components of the phenomenon in space and in time. 5. Implementation of the proposed methodology: the case of the provinces crossed by 5. Implementationthe new highway of the Viaproposed Egnatia methodology: in the Northern the case of Gree of thece provinces crossed by the new highway Via Egnatia in the Northern of Greece Factor analysis and especially Principal Component Analysis has been implemented in order Factorto analysis detect the and structure especially in Principal the relationships Component betwee Analysisn the has selected been 15implemented above indexes in order and to to detectreduce the the structure number inof theinitial relationships dimensions. betwee The analysn the is selected concern 15 the above 200 local indexes administrative and to reduceunits the (LAU1), number located of initial in the dimensions. North of GreeceThe analys aroundis concern the new theEgnatia 200 Roadlocal (seeadministrative Fig. 3). units (LAU1), located in the North of Greece around the new Egnatia Road (see Fig. 3). Using the Kaiser criterion (1960) which is the one most widely used, four (4) factors with Usingeigenvalues the Kaiser greatercriterion than (1960) one which have is beenthe one retained. most widely With used, a percentage four (4) factors of total with variance eigenvaluesaccounted greater for by than these one 4 extracted have been components retained. arounWithd a 76%, percentage the complexity of total of variance the initial accounteddataset for has by been these considerably 4 extracted components reduced. The aroun solutiond 76%, obtained the complexity can be of considered the initial as a datasetsatisfactory has been one: considerably from 15 reduced. correlated The dimensions, solution obtained the dataset can has be considered been reduced as a to 4 satisfactoryuncorrelated one: dimensions. from 15 correlatedMoreover, dimensions,the sampling thadee quacy dataset measured has been by the reduced KaiserMeyer to 4 uncorrelatedOlkin index dimensions. is verified Moreover, (KMO =the 0,743) sampling while ade extractquacyion measured communalities by the KaiserMeyer that estimate the Olkinvariance index of is each verified variable (KMO taking = 0,743) into account while extractin the finalion communalitiessolution, are all that pertinent estimate (more the than variance60% of eachthe variance variable for taking 13 variables into account while in the th etwo final other solution, are higher are all than pertinent 46%). (more than 60% of the variance for 13 variables while the two other are higher than 46%). Consequently, the degree of fragility relative to the 200 examined municipalities can be Consequently,explained by the the degree following of fragilityuncorrelated relative components: to the 200 examined municipalities can be explained by the following uncorrelated components: - The first one, which by itself explained over 43% of the total variance in the 15 variables, - The hadfirst highone, which correlation by itself with explained the 4 variablesover 43% related of the total to objective variance in handicaps the 15 variables, and can be had interpreted high correlation has a with measure the 4 of variables marginality related due to objectiveto geomorphologic handicaps and disability can be and interpretedmountainous has character. a measure of marginality due to geomorphologic disability and mountainous- The second character. one, corresponding to 15% of the total variance, had high correlation 5 - The variables second one,related corresponding with the capacity to 15% to diversify of the total economic variance, activities had highand valorize correlation the 5local variablesresources related and with consequently the capacity to to offer diversify to local economic popula activitiestion, perspectives and valorize of the employment local resources and consequently to offer to local population, perspectives of employment Hadjou L., Duquenne M., Regional Science Inquiry Journal, Vol. V, (2), 2013, pp. 4558 55
(propensity for a municipality to employ its own labor force). Considering also the high correlation with labor mobility, this component can be interpreted as a degree of economic diversification and integration in the regional economy. In fact, developed hometowork commuting from and to the municipality (Out and in flows) reflects the strength of functional linkages between this municipality and its regional environment. - The third one, which explained 10% of the total variance, is correlated with 3 variables related to the demographic structure and the degree of urbanization of the municipalities and communes. There is an especially high correlation with the ageing index and the percent of young population less than 15 years old. This component can be interpreted as a measure of human resources and demographic dynamics. - The last one, which explained around 8% of the total variance, is highly correlated with population density and density of road network and to some extent, with contiguity level of municipalities and communes with the main urban center of the province. This component can be interpreted as a measure of proximity and permissive condition for coordination between actors.
On the basis of these four new composite variables, we proposed to classify the 200 municipalities and communes, using the kmeans cluster analysis method in order to detect different groups of municipalities and communes as regards their fragility’s situation. The goal of this method is to obtain an appropriate partition of the 200 municipalities so that the local territorial units within a group have to be similar to one another but different from the territorial units included in other groups.
The implementation of this method allows us to detect three meaningful groups with final centroids clearly distinct.
- The first group incorporates 45 dynamic urban or peri urban municipalities (Fig 3) with an important demographic growth in between the two last censuses, around 35% on average. The majority of them are located at proximity of Thessaloniki, the most important urban center of Northern Greece. Moreover, all the administrative centers of the provinces cross by the new highway Via Egnatia are included in this dynamic group. These urban municipalities without objective handicaps, present high proximity indexes (internal and external) with a diversify production system and qualify labor force. As it was expected, they are also characterized by intense hometowork commuting (table 1), especially in terms of incoming mobility, confirming their important attractiveness.
- The second group of municipalities is an intermediate one, presenting some aspects of fragile areas but not necessary in a very intense way. This group concerns nearly half of the examined municipalities and communes (95). With only 22% of the population living in urban areas2, these municipalities are mainly rural. If they maintain their population, they nevertheless present a relatively high ageing ratio: the percentage of elderly people stood at 22% compared with only 13% for the dynamic municipalities. A large part of these intermediate territorial units are located in the region of Thraki, at the borders with Bulgaria and Turkey (NorthEast of Greece). Their relative fragility is a direct consequence of the geographical situation and remoteness from decision centers. The other municipalities included in this 2nd group are located in semimountainous areas of Ipiros, Central and Western Macedonia. If they are partly confronted to objective handicaps, they generally gain from relative proximity to urban centers (convenient accessibility) so that, they are still at least partially integrated in the regional economy. Finally, if the territorial units of the 2nd group are not in the present devitalized, they are confronted to some unfavorable conditions that they have to transcend, if they want to stop the process and develop new perspectives.
2 As defined by the National Service of Statistics, a local territorial unit (LAU2: Dimotiko Diamerisma) is defined as urban if at least 2000 inhabitants live in its main commune.
56 56 Hadjou HadjouL., Duquenne L., Duquenne M., Regional M., Regional Science ScienceInquiry InquiryJournal, Jo Vol.urnal, V, Vol.(2), 2013,V, (2), pp. 2013, 4558 pp. 4558 56 Hadjou L., Duquenne M., Regional Science Inquiry Journal, Vol. V, (2), 2013, pp. 4558
Fig3. Fig3.Degree Degree of fragility of fragility of northern of northern Greek Greek municip municipalitiesalities (ήοι) (ήοι) Fig3. Degree of fragility of northern Greek municipalities (ήοι)
- The- thirdThe thirdgroup group is composed is composed of 60 of municipalities 60 municipalities and communes and communes mainly mainly located located in the in the - mountainThe mountain third of group Ipiros. of is Ipiros. composed With With only of 11%only 60 municipalities11% of population of population an livding communes liv ining urban in urban mainly areas areas as located previously as previouslyin the defined,mountaindefined, these of thesemunicipalities Ipiros. municipalities With only are mainly 11% are mainly of rural population andrural present and liv presenting an inintense an urban intense degree areas degree asof previouslyfragility of fragility. . Thedefined, population these municipalitiesdensity is especially are mainly low rural(14 inhabi and presenttants by an km intense2) and2 degreeat least ofthree fragility time . The population density is especially low (14 inhabitants by2 km ) and at least three time lessThe than lesspopulation the than second the density second group. isgroup. especially low (14 inhabitants by km ) and at least three time Theless geomorphologicthanThe the geomorphologic second group. and demographic and demographic handicaps handicaps are st rongly are strongly marked, marked, comparatively comparatively to to theThe previous the geomorphologic previous group group of and territorial ofdemographic territorial units. units.handicaps Most Most of th areese of st th municipalitiesronglyese municipalities marked, have comparatively have a weighted a weighted to altitudethe previousaltitude more more than group 700m.than of 700m. territorialAs we As can we units. observe, can Mostobserve, they of arthey theese not ar municipalitieseanymore not anymore able to haveable maintain to a maintain weighted their their populationaltitudepopulation more and thanare and confronted 700m. are confronted As towe a candecrease to aobserve, decrease in betw they ineen betwar ethe noteen last anymorethe two last censuses two able censuses to about maintain about10% their by10% by average.populationaverage. The and ageing The are ageingconfronted process process isto especiallya decrease is especially intensein betw intense een with the aw lastith percent atwo percent censuses of ageing of ageingabout population 10% population by greateraverage.greater than The 30% than ageing while30% process while in some in is some cases, especially cases, it can intense it reach can reachw40%.ith a 40%. Moreover, percent Moreover, of the ageing median the population median age is age is nearlygreater 67 than years 30% old against while in 42 some and 58 cases, respectively it can reach for the 40%. 1st and Moreover, st2nd groups.nd the median age is nearly 67 years old against 42 and 58 respectively for thest 1 andnd 2 groups. nearly 67 years old against 42 and 58 respectively for the 1 and 2 groups. Table Table1: Main 1: Maincharacteristics characteristics of the ofmunicipalities the municipalities cross bycross the by new the Via new Egnatia Via Egnatia Table 1: Main characteristics of the municipalities cross by the new Via Egnatia GroupsGroups of municipalities of municipalities DynamicGroupsDynamic Intermediate of municipalities Intermediate Fragile Fragile Dynamic Intermediate Fragile NumberNumber of municipalities of municipalities 45 45 95 95 60 60 Number of municipalities 45 95 60 PopulationPopulation variation variation 34,5 34,5 ,4 ,49,4 9,4 Population variation 34,5 ,4 9,4 AverageAverage weighted weighted altitude altitude 220 220 183 183777 777 Average weighted altitude 220 183 777 PercentPercent of population of population living livingin mountainous in mountainous areas areas 3,7 3,7 7,3 7,391,2 91,2 Percent of population living in mountainous areas 3,7 7,3 91,2 PercentPercent of mountainous of mountainous surface surface 15,0 15,0 14,4 14,492,4 92,4 Percent of mountainous surface 15,0 14,4 92,4 PopulationPopulation density density 3339 3339 50 50 14 14 Population density 3339 50 14 PercentPercent of urban of urbanpopulation population 79,5 79,5 22,5 22,511,1 11,1 Percent of urban population 79,5 22,5 11,1 MedianMedian age age 36,3 36,3 44,2 44,250,1 50,1 Median age 36,3 44,2 50,1 Hadjou L., Duquenne M., Regional Science Inquiry Journal, Vol. V, (2), 2013, pp. 4558 57
Ageing ratio 13,5 22,5 30,2 Youngness ratio 17,1 13,9 11,6 Percent of High education level in population more than 20 15,9 5,1 4,6 years old Contiguity index ,66 1,76 2,38 Road network density (km for 10 km2) 36,7 3,9 2,7 Outgoing mobility 87,2 27,4 24,8 Ingoing mobility 58,3 9,6 8,2 Index of hometowork commuting ,68 ,25 ,18 Index of entropy ,910 ,725 ,692
It is undeniable that all these fragile municipalities suffer from a lake of internal and external proximity. It is not only a question of lake of contiguity with the provincial administrative center (order of contiguity greater than 2) but also a question of low density of road network which brakes the hometowork commuting and finally reinforces their objective handicaps. Contrary to the 2nd group, we can admit that the third group of municipalities is in an advanced stage of fragility with a deficient diversification of economic activities and services. This situation combined with the distance, explains that migration to urban centers is still continuing. For these municipalities, one of the new challenges is effectively how they could benefit of and valorize the recent highway Via Egnatia in order to reverse the actual tendency.
5. Conclusion
The territorial approach developed in this article, based on the three dimensions of Fragility, specifically the lack of coordination of actors, the low level of valorization of resource and the objective disabilities, proves its effectiveness in discriminating between the dynamic and fragile areas. This more clear approach allows us to go beyond the traditional approaches of fragile areas, since in addition to the factors of distance and objective disabilities, other indicators reflecting the organization of local territories are taken into account. The implementation of this approach to the Greek municipalities crossed by the Via Egnatia highlight three groups with a degree of fragility more or less intense. It is important to underline the fact that some municipalities, even if they are characterized by high rates of disability in terms of objective handicaps and distance, are not classified automatically in the most fragile group. Urban areas having a high degree of coordination of actors, a more diversification of resources and low disabilities are thus, classified as the least fragile of the region. The peri urban areas, municipalities suffering from low degree of proximity to urban centers are classified as intermediate degree of fragility. The last group of municipalities that are heavily concentrated in Epirus combines, at the same time, objective disabilities, low internal and external proximity and a low degree of diversification. Our methodological approach built on an original set of indicators and methods of factor analysis and classification permit to capture interesting dimensions of fragile rural areas that are generally neglected, specifically the permissive conditions of coordination betwen actors and the capacity to valorize local resources. This methodology of classification of spaces according to their more or less degree of fragility is of course very open and could be improved.
58 Hadjou L., Duquenne M., Regional Science Inquiry Journal, Vol. V, (2), 2013, pp. 4558 58 Hadjou L., Duquenne M., Regional Science Inquiry Journal, Vol. V, (2), 2013, pp. 4558
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Margarian A., Regional Science Inquiry Journal, Vol. V, (2), 2013, pp. 5974 59
THE RELATION BETWEEN INDUSTRIAL AND SOCIOECONOMIC FUNDAMETALS IN GERMAN DISTRICTS
Anne MARGARIAN ThünenInstitute of Rural Studies, Bundesallee 50. 38116 Braunschweig, Germany [email protected]
Abstract For the impartial observer of German regions, differences in regional industry structures and prosperity are quite obvious. On the one side, there are regions characterised by different industries, firm structures and labour qualification profiles. On the other side, some of these regions are prosperous, dynamic and growing in terms of inhabitants, labor force and income while others obviously suffer from high unemployment, low tax base and an unsatisfactory income situation. The analysis presented in this paper relates the regional industry structure to the socioeconomic fundamentals that describe the regions' productivity, its income distribution and its population dynamics. The statistical model is based on the approach of moderated mediation. It is thereby able to show that the estimated relations are conditional on the degree of regions' centrality respectively remoteness. Moreover, the analysis distinguishes direct and indirect relations and therefore allows for an identification of the multiple dimensions of the potential effects of local industry structures in cultural, productivity and distributive terms.
Keywords Rural development, socioeconomic development, agglomeration, localisation, industry structure, labour qualification, moderated mediation
JEL Classification: R11, R12, O18, P25
1 Introduction For the impartial observer of German regions differences in regional industry structures and prosperity are quite obvious. On the one side, there are regions characterised by heavy industries, or by primary production based on agriculture, fishery and/or forestry, or by a multitude of firms from manufacturing, or by hospitality industry, or by services in the finance and insurance industry, or by knowledge intensive production and services or by big industry. On the other side, some of these regions are prosperous, dynamic and growing in terms of inhabitants, labor force and income while others obviously suffer from high unemployment, low tax base and an unsatisfactory income situation. The analysis presented in this paper relates the regional industry structure to the socioeconomic fundamentals that describe the regions' productivity, its income distribution and its population dynamics. The analysis differentiates between direct and indirect relationships between industrystructure and the socioeconomic situation. In the estimation model, relations are conditional on districts' centrality, respectively remoteness. Such an analysis might be judged as naive and simplistic for two reasons. From a methodological perspective, one cannot expect to identify causal effects of industry structures upon the economic development in such a crosssectional analysis. The identification of these causal effects is not the purpose of the present analysis. It is content with a description of the observed relation between a multitude of different indicators that picture the local industry on one side and the socioeconomic situation on the other. From a theoretical perspective, many might expect more subtle relations between local production and the socioeconomic situation. According to standard economic theory, productivity differences should not be explained in terms of industry characteristics but rather in terms of firm and region specific characteristics. At the same time, productivity differences should be the main reason for other differences in socioeconomic aspects.
60 60 MargarianMargarian A., Regional A., Regional Science Science Inquiry Inquiry Journal, Journal, Vol. V, Vol (2),. V, 2013, (2), 2013,pp. 5974 pp. 5974
AccordingAccording to standard to standard economic economic theories, theories, there there shou should beld no be difference no difference in the in incomethe income generatinggenerating capability capability of different of different industries. industries. Acco Accordingrding to respective to respective models, models, the economythe economy is is in equilibriumin equilibrium as long as longas no as exogenous no exogenous disturbances disturbances occur. occur. In this In equilibrium,this equilibrium, the marginalthe marginal productivityproductivity of all of factors all factors of all of activities all activities are i denticalare identical (Paci (Paci and Pigliaru,and Pigliaru, 1997). 1997). Accordingly, Accordingly, differencesdifferences in income in income and incomeand income distribution distribution shoul should notd dependnot depend on industry on industry characteristics characteristics but ratherbut rather on exogenous, on exogenous, fundamental fundamental site siterelated related factors. factors. The The evolutionary evolutionary paradigm, paradigm, in in contrast,contrast, takes takes into into account account the possibility the possibility of end of ogenous endogenous dynamics. dynamics. The The course course and and the the directiondirection of endogenous of endogenous dynamics dynamics depend depend upon upon decisi decisions ofons economic of economic actors actors themselves. themselves. In In alternativealternative economic economic models, models, the assumption the assumption of endo of endogenousgenous differences differences often often relies relies on the on the argumentargument of positive of positive external external effects effects of production of production. These. These general, general, not industry not industry specific specific effectseffects are usuallyare usually referred referred to as to urbanization as urbanization effects. eff ects.They They are mostare most famously famously introduced introduced by by MarshallMarshall (1890) (1890) and haveand have been been formalised formalised based based on s pecificon specific assumptions assumptions and monopolisticand monopolistic competitioncompetition by Krugmanby Krugman (1998). (1998). Thereby Thereby he founded he founded the "New the "New Economic Economic Geography". Geography". In In recentrecent decades, decades, most most famously famously represented represented by Porter by Porter (1998), (1998), industry industry specific specific external external effects effects of production,of production, the localisationthe localisation effects, effects, have have also alsobeen been taken taken into intoaccount, account, in order in order to explain to explain an unevenan uneven distribution distribution of industries of industries in space. in space. Neve Nevertheless,rtheless, in these in these cases, cases, differences differences in in regionalregional productivity productivity have have usually usually not beennot been attribu attributed toted the to prevalencethe prevalence of specific of specific industries industries but ratherbut rather to the to clustering the clustering of these of these industries industries in space. in space. Industries'Industries' potential potential differences differences in economic in economic produ productivityctivity are aremainly mainly acknowledged acknowledged by by theoriestheories of a of Schumpeterian a Schumpeterian origin. origin. In respective In respective models, models, profits profits and andthereby thereby growth growth are are determineddetermined by innovativeby innovative activities. activities. Due Dueto pioneer to pioneering rentsing rents the most the most innovative innovative firms firms and and industriesindustries show show the highest the highest economic economic productivity productivity and createand create the highest the highest income. income. While While these these rentsrents are of are a oftemporary a temporary character character principally principally due todue the to adoption the adoption of innovations of innovations by followers by followers and andtheir their replacement replacement in the in coursethe course of creative of creative destruction, destruction, it has it frequentlyhas frequently been been observed observed that that different different industries industries differ differ in their in their propensit propensity fory innovation. for innovation. Accordingly, Accordingly, "countries "countries specialisedspecialised in technological in technological areas areas with withopportuniti opportunities fores higherfor higher rates rates of productivity of productivity growth growth mightmight be in be a in better a better position position to achieve to achieve fast fast overa overall growth"ll growth" (Jungmittag, (Jungmittag, 2004:248). 2004:248). JungmittagJungmittag (2007) (2007) analyses analyses the relationthe relation between between total totproductivityal productivity growth growth and andemployment employment sharesshares in different in different sectors sectors which which are divided are divided accor according dingto their to their knowledge knowledge intensity. intensity. He finds He finds a significanta significant correlation correlation between between shares shares in high in high and a mediumnd medium technology technology production production and and knowledgeknowledge intensive intensive services services on the on one the sideone sideand prandoductivity productivity growth growth on the on other the other side. side. Pavitt Pavitt (1984)(1984) provides provides a taxonomy a taxonomy of patterns of patterns of innovatio of innovation whichn which is based is based on industryspecific on industryspecific characteristicscharacteristics (Castellacci, (Castellacci, 2006). 2006). He differentia He differentiates manufacturingtes manufacturing industries industries into into science science based,based, scale scale intensive intensive and supplierand supplier dominated dominated secto sectors andrs specialisedand specialised suppliers. suppliers. In theIn innovation the innovation based based "evolutionary "evolutionary view, view, the imp the act imp ofact innovation of innovation on the on international the international competitivenesscompetitiveness of industries of industries must must therefore therefore be ana be lysed analysed within within a complex a complex framework framework comprisingcomprising both, both, the broaderthe broader systemic systemic context context shapi shaping innovativeng innovative activities, activities, and theand sectoralthe sectoral specificitiesspecificities that that characterize characterize the creation the creation and anddiffusion diffusion of knowledge" of knowledge" (Castellacci, (Castellacci, 2008). 2008). Due Dueto longterm to longterm endogenous endogenous differences differences between between regions reg ionsand givenand given exogenous exogenous differences differences in sitespecificin sitespecific factors, factors, absolute absolute convergence convergence will will not benot reached be reached with with industry industry specific specific differencesdifferences in productivity in productivity if different if different industries industries have have different different requirements requirements with withrespect respect to to theirtheir location. location. Especially, Especially, different different industries industries might mi takeght takediffering differing advantages advantages of urbanisation of urbanisation and localisationand localisation effects. effects. Specifically, Specifically, evidence evidence and theoryand theory imply imply that thatit is itmainly is mainly knowledge knowledge intensiveintensive industries industries with with high high propensity propensity for innov for innovationation that that profit profit from from agglomeration agglomeration effects.effects. Therefore, Therefore, peripheral peripheral regions regions might might be dis beadvantaged disadvantaged because because their their industry industry mix mixis is less lessknowledge knowledge based based and thoseand those firms firms in peripheral in peripheral regions regions that thatbelong belong to knowledge to knowledge based based industriesindustries might might be less be lessproductive productive due todue the to lackthe lackof positive of positive external external effects effects of production. of production. Nevertheless,Nevertheless, these these negative negative effects effects might might differ differ across across industries. industries. Accordingly, Accordingly, preferable preferable industryindustry compositions compositions might might differ differ for agglomerated for agglomerated and forand peripheral for peripheral regions. regions. OnceOnce the rigidthe rigid assumptions assumptions of standard of standard economic economic theory the isory dropped, is dropped, it becomes it becomes evident evident that that not onlynot onlytotal totalproductivity productivity and prosperityand prosperity of regio of regions mightns might be linked be linked to the to local the local industry industry mix mix but but income income distribution distribution as well. as well. As Sener As Sener (2001:121 (2001:121) writes,) writes, standard standard models models ignore ignore "dynamic"dynamic linkages linkages between between trade, trade, technological technological chan change, andge, andlabor labor markets". markets". Nevertheless, Nevertheless, alternativealternative Schumpeterian Schumpeterian models models of economic of economic growth growth have have been been developed developed (Dinopoulos (Dinopoulos and and Segerstrom,Segerstrom, 1999; 1999; Sener, Sener, 2001), 2001), which which show show that that if higher if higher degree degree of innovative of innovative activity activity causescauses a higher a higher relative relative demand demand for skilled for skilled labour labour it may it maygo along go along with witha rise a inrise the in relativethe relative Margarian A., Regional Science Inquiry Journal, Vol. V, (2), 2013, pp. 5974 61 wage of skilled workers and a rise in the unemployment rate of lessskilled workers. The regional industry mix might therefore have significant implications for the local income distribution. Depending on the mobility of different kinds of labour it will thereby also affect regional development in terms of population dynamics. Important political consequences result. Under the standard economic assumptions there is no necessity to support a change in industry structure in order to support regional convergence. Instead, efficiency and the amelioration of productivity would have to be supported irrespective of regional industry mix. If the relation between industry mix and productivity that is implied by innovation based approaches would be confirmed, in contrast, addressing the productivity of existing industries might not suffice in order to support regional convergence. Instead, the local reallocation of resources between industries would have to be supported (Fagerberg, 2000). Based on these insights we postulate that a region's wealth and income distribution should at least partly be explained by its industry structure, i.e. by its industry composition, the size of its firms and the qualification of its labour. This analysis is a modest first attempt to get an idea of the observable relation between local industry structures in agglomerated and peripheral regions on the one side and regional wealth and income distribution on the other.
2 Indicators and measurement issues In this study, economic fundamentals of districts are related statistically to the local industry structure and the districts' remoteness. The economic fundamentals to be explained are the district's GDP per inhabitant, its unemployment rate, mean wages paid in the district, mean household income, the district's tax receipts and its population development (Table 1). Industry structure is defined by the qualification of the work force, the size distribution of firms (Table 1) and by the industry mix. The local industry structure is characterised by the firm size distribution and the qualification of employees (Table 1) and by the share of employees in different industry on the twodigit level of the NACE classification.1 Some industries were omitted from the analysis due to problems with missing values due to disclosure rules.2 Remoteness is measured with three indicators, the distance to the next regional metropolis, the distance to the next highway and the district's population potential (Table 1).
1 Due to space restrictions, statistics on the 63 variables from manufacturing and nonmanufacturing industries are not presented here. The complete presentation of data, methodology and results can be found in a technical report (Margarian, 2013). 2 There were too many missing values in all activities related to mining (NACE section B, twodigit classification industries 5 to 9). The same applies to manufacturing of tobacco products (12), manufacture of coke and refined petroleum products (19), water transport (50), air transport (51), programming and broadcasting activities (60) and creative, arts and entertainment activities (90). We deliberately did not take into account those "industries" that represent ubiquitous public services and therefore have little potential for industry differentiation, specifically water collection, treatment and supply (36), sewerage (37), remediation activities and other waste management services (39), public administration and defense, compulsory social security (84), Education (85), residential care activities (87), social work activities without accommodation (88) and libraries, archives, museums and other cultural activities (91). Also not included were all industries starting from section S or industry 94 upward.
Margarian A., Regional Science Inquiry Journal, Vol. V, (2), 2013, pp. 5974 62 62 Margarian A., Regional Science Inquiry Journal, Vol. V, (2), 2013, pp. 5974 62 Margarian A., Regional Science Inquiry Journal, Vol. V, (2), 2013, pp. 5974
TableTable 1: 1: Size Size of firms, of firms, qualification qualification of labour of labour and and socioeconomic socioeconomic fundamentals fundamentals in in Table 1: Size the thedistricts of firms,districts qualification of labour and socioeconomic fundamentals in Variable the Label districts N Mean Std Dev Min Max Variable Label N Mean Std Dev Min Max Variable Label N Mean Std Dev Min Max Share of employees 2007: (data from Federal Labour Office) Share of employees 2007: (data from Federal Labour Office) ShareShareLargeFirms of employees 2007: Share of(data firms from with Federal 250 and Labour more em Office)ployees 372 0.42 0.17 0.00 0.96 ShareLargeFirms Share of firms with 250 and more employees 372 0.42 0.17 0.00 0.96 ShareLargeFirmsShareSmallFirms Share Share ofof firmsfirms withwith 250one andto nine more empl emoyeesployees 372372 0.42 0.08 0.17 0.04 0.00 0.00 0.96 0.31 ShareSmallFirms Share of firms with one to nine employees 372 0.08 0.04 0.00 0.31 ShareSmallFirmsShareMedFirms Share Share ofof firmsfirms withwith one100 toto nine249 employeemployeeses 372372 0.08 0.19 0.04 0.07 0.00 0.00 0.31 0.46 ShareMedFirms Share of firms with 100 to 249 employees 372 0.19 0.07 0.00 0.46 ShareMedFirmsShareHighqual Share Share ofof firmsemployees with 100 with to university 249 employe degreees 372372 0.19 0.04 0.07 0.03 0.00 0.01 0.46 0.26 ShareHighqual Share of employees with university degree 372 0.04 0.03 0.01 0.26 ShareHighqualShareAddqual ShareShare ofof employeesemployees withwith universityuniversity degentranceree and 372372 0.04 0.08 0.03 0.03 0.01 0.02 0.26 0.23 ShareAddqual Share of employees with university entrance and 372 0.08 0.03 0.02 0.23 occupational qualification or with polytechnic degree ShareAddqual Shareoccupational of employees qualification with university or with entrance polytechnic and degree 372 0.08 0.03 0.02 0.23 ShareNoqual occupationalShare of employees qualification without or occupationalwith polytechnic or degree 372 0.18 0.06 0.05 0.37 ShareNoqual Share of employees without occupational or 372 0.18 0.06 0.05 0.37 university entrance qualification ShareNoqual Shareuniversity of employees entrance without qualification occupational or 372 0.18 0.06 0.05 0.37 DominantFirm universityShare of "lost" entrance employees qualification due to disclosure rules as 371 0.07 0.08 0.00 0.60 DominantFirm Share of "lost" employees due to disclosure rules as 371 0.07 0.08 0.00 0.60 indicator for the dominance of one to three large firms DominantFirm Shareindicator of "lost" for employees the dominance due to ofdisclosure one to three rules large as firms371 0.07 0.08 0.00 0.60 within specific industries indicatorwithin for specific the dominance industries of one to three large firms within specific industries Other indicators for socioeconomic situation: (Data from INKAR) Other indicators for socioeconomic situation: (Data from INKAR) OtherPopPotential indicators for Weighted socioeconomic population situation: within (Data radiusa from of 100 INKAR) km 371 432.88 392.33 50.60 2,308.60 PopPotential Weighted population within a radius of 100 km 371 432.88 392.33 50.60 2,308.60 (in 1000), 2008 PopPotential Weighted(in 1000), population 2008 within a radius of 100 km 371 432.88 392.33 50.60 2,308.60 DistCity(in Journey 1000), time 2008 to the next regional metropolis 371 28.77 18.11 0.00 79.60 DistCity Journey time to the next regional metropolis 371 28.77 18.11 0.00 79.60 (minutes), 2010 DistCity Journey(minutes), time to 2010the next regional metropolis 371 28.77 18.11 0.00 79.60 DistHighway(minutes), Journey time 2010 to the next highway (minutes), 2010 371 14.49 9.60 0.40 63.30 DistHighway Journey time to the next highway (minutes), 2010 371 14.49 9.60 0.40 63.30 DistHighwayIncome JourneyHousehold time income, to the next 2007 highway (Euro/inhabitant) (minutes), 2010 371371 1,506.53 14.49 196.96 9.60 1,117.10 0.40 2,397.00 63.30 Income Household income, 2007 (Euro/inhabitant) 371 1,506.53 196.96 1,117.10 2,397.00 IncomeUnempl HouseholdUnemployment, income, 2008 2007 (in (Euro/inhabitant)percent) 371371 1,506.53 8.31 196.96 4.25 1,117.10 1.90 2,397.00 21.50 Unempl Unemployment, 2008 (in percent) 371 8.31 4.25 1.90 21.50 UnemplWages Unemployment,Wages, 2007 (Euro/employee/month) 2008 (in percent) 371371 2,648.42 8.31 35 4.255.04 1,880.50 1.90 4,124.30 21.50 Wages Wages, 2007 (Euro/employee/month) 371 2,648.42 355.04 1,880.50 4,124.30 WagesGDP Wages,Gross domestic 2007 (Euro/employee/month) product (GDP), 2007 371371 2,648.42 27.40 35 10.025.04 1,880.50 15.10 4,124.30 83.50 GDP Gross domestic product (GDP), 2007 371 27.40 10.02 15.10 83.50 (1000 Euro/inhabitant) GDP Gross(1000 domestic Euro/inhabitant) product (GDP), 2007 371 27.40 10.02 15.10 83.50 Tax (1000Tax receipts, Euro/inhabitant) 2008 (Euro/inhabitant) 369 644.35 215.11 238.90 1,912.20 Tax Tax receipts, 2008 (Euro/inhabitant) 369 644.35 215.11 238.90 1,912.20 TaxPopDev TaxPopulation receipts, development, 2008 (Euro/inhabitant) 20032008 (in percent)369 371 644.35 1.27 215 2.83.11 238.90 9.00 1,912.20 6.50 PopDev Population development, 20032008 (in percent) 371 1.27 2.83 9.00 6.50 PopDev Population development, 20032008 (in percent) 371 1.27 2.83 9.00 6.50 Source:Source: Own Own calculation calculation based based on data on data from from sources sources named named in the in Tablethe Table Source: Own calculation based on data from sources named in the Table 2.1 2.1 Factor Factor analysis analysis 2.1 Factor analysis In orderIn order to handle to handle the the large large number number of indicators of indicators that that characterise characterise industry industry structure structure and and Inremoteness orderremoteness to onhandle theon the right the right large hand hand number side side of of the of indicators the regression regression t hat equation, characterise equation, two two separate industry separate factor structure factor analyses analyses and remotenesswerewere conducted conducted on the for right forthe the measurement hand measurement side of theof remoteness of regression remoteness an equation,d an industryd industry two structure. separate structure. Factor factor Factor analyses analyses analyses wereallowallow conducted to capture to capture the for thelargerthe larger measurement part part of the of theinformation of informationremoteness contained containedand industry in a in number a structure.number of indicators of Factor indicators analyseswithin within a a allowsmallersmaller to capture number number the of larger artificially of artificially part of constructed the constructed information indicato indicato containedrs, rs, the in the factors. a number factors. Therein, of Therein, indicators the the covariance within covariance a smallerbetweenbetween number factors factors of is artificially minimised is minimised constructed and and the the common indicato common variancrs, varianc the e factors. ofe indicatorsof indicators Therein, within the within covariance factors factors is is betweenmaximised.maximised. factors Depending Depending is minimised on theon the common and common the variance common variance of varianc theof theindicators,e indicators, of indicators their their contribution within contribution factors to eachto iseach maximised.factorfactor is weighted is Depending weighted by byonthe the the so common calledso called factor variance factor loading. loading.of the A indicators, high A high factor factortheir loading contribution loading shows shows to that each that an an factorindicatorindicator is contributes weighted contributes by a high the a high soshare calledshare to the to factor thecommon common loading. variance va Ariance high of all of factor indicatorsall indicators loading combined combined shows within that within an a a indicatorfactor.factor. contributes a high share to the common variance of all indicators combined within a factor. In theIn the present present analysis analysis we we rely rely on onprincipal principal compon component ent analysis, analysis, a specific a specific type type of factor of factor Inanalysis theanalysis present that that aims analysis aims at the at we the reproduction rely reproduction on principal of the of compon the struc structureentture of analysis, data of data by a bya specific minimised a minimised type number of number factor of of analysisfactorsfactors (Backhaus that (Backhaus aims et at al., et the al.,2003). reproduction 2003). Each Each factor, of factor, the or strucpr orincipal prtureincipal component, of datacomponent, by aexplains minimised explains a specific a number specific share ofshare factorsof theof thevariance(Backhaus variance of et allof al., indicators,all 2003). indicators, Each which factor,which is express oris expressprincipaled byed component, theby thefactor's factor's explainseigenvalue. eigenvalue. a specific Technically Technically share ofspoken, thespoken, variance the theprincipal principalof all componentindicators, component analysiswhich analysis is aims express aims at a edat reproduction aby reproduction the factor's of the of eigenvalue. thecorrelation correlation Technically matrix matrix that that spoken,formsforms the the thestarting principal starting point componentpoint of the of thefactor analysis factor analysis. analysis. aims Th at e aTh communality,reproductione communality, ofi.e., the i.e., the correlation theshare share of the ofmatrix thevariance variance that formsto beto the reproduced,be starting reproduced, point is always is of always the assumedfactor assumed analysis. to be to Th onebe e one communality, in th ine th principale principal i.e., component the component share of analysis the analysis variance as in as in tocontrast becontrast reproduced, to theto theexplanatory isexplanatory always factor assumed factor analysis. analysis. to be The one The va inriance va thriancee principalof allof indicatorsall componentindicators is distributed is analysis distributed assuch in such contrastthatthat the thevarianceto thevariance explanatory of allof indicatorsall indicatorsfactor cananalysis. canbe capturedbe The captured va byriance aby minimised aof minimised all indicators number number isof distributed factors.of factors. Finally, suchFinally, thatthose thosethe coefficients, variance coefficients, of or all factor or indicators factor loadings loadings can are be arecalculatcaptured calculated, by ed,which a minimisedwhich describe describe number the thequantitative quantitativeof factors. relation Finally, relation of of those coefficients, or factor loadings are calculated, which describe the quantitative relation of Margarian A., Regional Science Inquiry Journal, Vol. V, (2), 2013, pp. 5974 63 the single indicators to the common factors. The squared factor loading equals the share of the variance of an indicator that is explained by the factor. All squared factor loadings of a variable sum up to its communality, i.e., to the share of the indicator's variance that is captured by the factors. The eigenvalue of a factor, on the contrary, describes the share of the variance of all indicators that is ascribed to the factor. Usually, only those factors with a relatively high share in the reproduction of the variance of all indicators are extracted. Geometrically, these factors can be seen as axes of a coordinate system. A rotation of theses axes often enables a more unambiguous attribution of indicators to specific factors and therefore facilitates interpretation without damaging the analysis' validity (Backhaus et al., 2003). With respect to the measurement of remoteness, one single factor was created in a principal component analysis based on the three indicators (see Table 1). With a screetest we test the adequateness of the selection of a single factor. The screetest is based on a graphic representation of the share of total variance that can be explained by each additional factor. If the resulting curve kinks downward at one place, the optimal number of factors is determined by the last factor previous to the kink. With respect to remoteness, the screetest clearly confirms the selection of one single factor. Moreover, only the first factor has a eigenvalue larger one. With a eigenvalue of 1.44 it explains significantly more from the overall variance than its own variance and therefore complies to the Kaisercriterion for the determination of the number of factors. The KaiserMeyerOlkin criterium tests for undesired endogenity of indicators. Its value of 0.67 is sufficiently high in order to justify the factor analysis with our three indicators. The unexplained variance aside the main diagonal is 0.057 in the mean, which indicates that the deviation of the reproduced matrix from the original matrix is sufficiently low. Factor loadings of the factor that describes remoteness are presented in Table 2. Table 2: Loadings of variables on the remoteness factor
Loadings factor "remoteness"
PopPotential 0.60 DistCity 0.75 DistHighway 0.71
Source: Own calculation based on data from Table 1
2.2 Measurement of industry mix Obviously, the number of variables would get far too large for an estimation if all industry shares were included separately. Therefore, as in the case of the measurement of remoteness, factors were created in order to capture the relevance of groups of industries that are commonly located close to each other in the different districts. As in the measurement of remoteness we rely on principal component analysis (see above). Eight factors were selected (Table 3).
64 Margarian A., Regional Science Inquiry Journal, Vol. V, (2), 2013, pp. 5974
Table 3: Industry factors and loadings of 0.2 and higher of the underlying variables Factor1 Factor2 Factor3 Factor4 Factor5 Factor6 Factor7 Factor8 Ind69 Legal and accounting activities 0.76 ...... 0.25 Ind66 Activities auxiliary to financial services and insurance activities0.73...... Ind64 Financial service activities, except insurance and pension funding0.73...... Ind73 Advertising and market research 0.68 ...... Ind65 Insurance, reinsurance and pension funding, except compulsorysocial0.58...... security Ind70 Activities of head offices; management consultancy activities0.58...... Ind79 Travel agency, tour operator reservation service and related0.51...... activities Ind58 Publishing activities 0.46 . . . . . 0.23 . Ind63 Information service activities 0.38 0.21 ...... Ind74 Other professional, scientific and technical activities 0.38 . . 0.20 . . . . Ind61 Telecommunications 0.34 ...... Ind92 Gambling and betting activities 0.27 . . . . . 0.20 . Ind59 Motion picture, video, and television programme production,0.26 sound . recording . and music . publishing . activities . 0.21 . Ind71 Architectural and engineering activities; technical testing...... and analysis Ind68 Real estate activities 0.29 0.60 . . 0.24 . . . Ind49 Land transport and transport via pipelines . 0.57.0.22.... Ind38 Waste collection, treatment and disposal activities; materials0.250.56...... recovery Ind81 Services to buildings and landscape activities . 0.54...... Ind80 Security and investigation activities 0.25 0.47 ...... Ind82 Office administrative, office support and other business. suppoert activities0.43 . . 0.25 . . . Ind78 Employment activities . 0.38 . . . 0.26 . . Ind53 Postal and courier activities . 0.31 ...... Ind35 Electricity, gas, steam and air conditioning supply . 0.30 . 0.24 . . . . Ind33 Repair and installation of machinery and equipment.0.20...... Ind15 Leather and related products ...... Ind18 Printing and reproduction of recorded media . 0.26...... Ind14 Wearing apparel . 0.26 ...... Ind31 Furniture . 0.29 0.28 . . . . . Ind32 Other manufacturing . 0.31...... Ind22 Rubber and plastic products . 0.33 0.26 . . . . . Ind27 Electrical equipment . 0.43 . . 0.31 . . . Ind25 Fabricated metal products except machinery and equipments0.22 0.46 . 0.32 0.37 . 0.29 . Ind28 Machinery and equipment . 0.54 ...... ShareNoqual . 0.66 . . . . 0.30 . Ind16 Wood and products of wood and cork except furniture. ; articles of straw0.32 and plaiting 0.63 materials . . . . . Share of workforce in Agriculture .. 0.62 . 0.39 . . . Ind41 Construction of buildings .. 0.59 . . . . . Ind02 Forestry and logging .. 0.56 . . . . . Ind43 Specialised construction activities 0.26 . 0.44 . 0.31 . . . Ind23 Other nonmetallic mineral products .. 0.39 . . . . . Ind42 Civil engineering . 0.26 0.31 . . . . . DominantFirm ... 0.83.... Ind29 Motor vehicles, trailers and semitrailers ... 0.69.... ShareLargeFirms .. 0.31 0.66 . . . . Ind30 Other transport equipment ... 0.42 . . . . Ind11 Beverages .. 0.20 0.30 . . . . Ind21 Basic pharmaceutical products and pharmaceutical pr..eparations 0.24 0.24 . . 0.24 . Ind17 Paper and paper products ... 0.21 . . . . Ind20Chemicals and chemical products...... ShareMedFirms .. 0.25 0.51 . 0.20 . 0.22 Ind75 Veterinary activities .... 0.58 . . . Ind47 Retail trade except of motor vehicles and motorcycles.. 0.27 . 0.58 . . . Ind45 Wholesale and retail trade and repair of motor vehicles.... and motorcycles 0.47... Ind10 Food products .. 0.24 . 0.45 . . . Ind46 Wholesale trade except of motor vehicles and motorc.ycles 0.28 0.27 0.27 0.36 . . 0.34 Ind55 Accomodation ..... 0.88 . . Ind03 Fishing and aquaculture ..... 0.72 . . Ind56 Food and beverage service activities ..... 0.71 . . ShareSmallFirms ... 0.37 . 0.48 . . Ind93 Sports activities and amusement and recreation activities. 0.21 . . . 0.25 . . Ind13 Textiles ...... ShareHighqual .. 0.22 . . . 0.61 . ShareAddqual .. 0.41 . . . 0.54 . Ind72 Scientific research and development ...... 0.47 . Ind26 Computer, electronic and optical products . 0.41 . . 0.24 . 0.45 . Ind62 Computer programming, consultancy and related activities 0.30 . 0.21 . . . 0.41 . Ind24 Basic metals .. 0.33 . 0.24 . 0.41 . Ind86 Human health activities ...... 0.72 Ind77 Renting and leasing activities 0.24 ...... 0.39 Ind52 Warehousing and support activities for transportation. 0.24 . . 0.21 . . 0.43 Note: Values < 0.2 not printed Source: Own calculation based on data on employment shares calculated from data from Federal Labour Office MargarianMargarian A., Regional A., Regional Science Science Inquiry Inquiry Journal, Journal, Vol. V, Vol (2),. V, 2013, (2), 2013,pp. 5974 pp. 5974 65 65
The Thescreetest screetest in this in thiscase case did notdid providenot provide unambig unambiguousuous guidance. guidance. The Theeighth eighth factor factor is the is lastthe last factorfactor to have to have an eigenvalue an eigenvalue larger larger one. one. The Theselect selection ofion eight of eight factors factors therefore therefore complies complies to to the Kaisercriterion.the Kaisercriterion. The TheKaiserMeyerOlkin KaiserMeyerOlkin criter criterium iumshows shows a value a value of 0.78 of 0.78 and andtherefore therefore confirmsconfirms the theadequateness adequateness of a of factor a factor analysis analysis base based ond our on our indicators indicators for localfor local industry industry structure.structure. The The unexplained unexplained variance variance aside aside the mainthe main diagonal diagonal is 0.037 is 0.037 in the in mean,the mean, which which indicatesindicates that thatthe deviationthe deviation of the of reproducedthe reproduced matr matrix fromix from the originalthe original matrix matrix is sufficiently is sufficiently low.low. The The rotated rotated factors factors are wellare well interpretable. interpretable. Factor Fa ctor 1 is 1 mainly is mainly constructed constructed by services by services relatedrelated to financial, to financial, legal legal and and market market services. services. They Th mightey might be summarised be summarised as business as business or or professionalprofessional services services (Table (Table 4). 4). TableTable 4: Characterisation 4: Characterisation of factors of factors by industry by industry and aninnovationd innovation type type
FactorsFactors ProductionProduction ServiceService TypeType TypeType InnovationInnovation type type TypeType
Factor1Factor1 Service Service ProfessionalProfessional Factor2Factor2 Production Production Simple Simple SpecializedSpecialized supplier supplier Factor3Factor3 Production Production Primary Primary and relatedand related SupplierdominaSupplierdominated ted Factor4Factor4 Production Production Large Large scale/motor scale/motor vehicles vehicles Scale Scale intensive intensive Factor5Factor5 Service Service Food Food related related TradeTrade Factor6Factor6 Service Service RecreationRecreation Factor7Factor7 Production Production Knowledge Knowledge intensive intensive SciencebasedSciencebased Factor8Factor8 Service Service HealthHealth
Source:Source: Own Own figure figure FactorFactor 2 shows 2 shows that thatthere there is a ispolarisation a polarisation between between regions regions that thatare characterisedare characterised by low by lowlevel level professionalprofessional services services and and regions regions that that are characteare characterisedrised by production by production activities activities and and a high a high shareshare of unqualified of unqualified labour. labour. We decidedWe decided to define to define the factorthe factor via thevia latterthe latter pole. pole. Therefore, Therefore, the the signssigns of the of factor'sthe factor's loadings loadings are reversed,are reversed, and anda high a high value value of factor of factor 2 accordingly 2 accordingly implies implies the the prevalenceprevalence of a of high a high share share of simple of simple production production activities activities (Table (Table 4), specifically 4), specifically of metal of metal productionproduction including including machinery machinery and and equipment. equipment. Respe Respectivective firms firms are areoften often organised organised as as "specialised"specialised suppliers". suppliers". Therefore Therefore this thisfactor factor corr espondscorresponds to the to respectivethe respective innovation innovation pattern pattern in Pavitt'sin Pavitt's (1984) (1984) classification classification (Table (Table 4; see 4; see cha pter cha pter 1). Factor 1). Factor 3 has 3 has high high loadings loadings on on activitiesactivities related related to construction to construction or primary or primary produ production.ction. Especially Especially primary primary production production is is characterisedcharacterised by rapid by rapid technical technical progress, progress, but but this this technical technical progress progress is imported is imported from from upstreamupstream sectors. sectors. The Thefactor factor therefore therefore is related is related to the to supplierdominatedthe supplierdominated innovation innovation pattern pattern as itas is it described is described in Pavitt's in Pavitt's taxonomy. taxonomy. Factor Factor 4 h as 4 h highas high loadings loadings on the on theindicator indicator for for dominantdominant firms firms and andon the on sharethe share of large of large firms firms as w asell w asell on as the on productionthe production of motor of motor vehicles vehicles and andother other transport transport equipment. equipment. The Thefactor factor therefore therefore reflects reflects industries industries that thatbelong belong to the to scalethe scale intensiveintensive innovation innovation pattern pattern in Pavitt's in Pavitt's taxonomy. taxonomy. Factors Factors 5 and 5 and 6 are 6 arecreated created based based on on servicesservices related related to trade to trade and andrecreation recreation respective respectively. Factorly. Factor 7 has 7 highhas high loadings loadings on activities on activities relatedrelated to research to research and and development development and and on highly on highly qualified qualified employees, employees, which which support support knowledgeknowledge intensive intensive types types of production. of production. It therefo It therefore relatesre relates to the to sciencebasedthe sciencebased innovation innovation patternpattern in Pavitt's in Pavitt's taxonomy. taxonomy. Factor Factor 8 is defined8 is defined by its by high its high loading loading on health on health related related services. services.
3 3 Estimation Estimation The Theeconomic economic fundamentals fundamentals described described in the in lastthe chalastpter cha pterare notare independentnot independent from from each each other. other. Accordingly,Accordingly, if one if onewishes wishes to comprehensively to comprehensively addre address thess relationthe relation between between industry industry structure structure and andthe localthe local socioeconomic socioeconomic situation situation as it as is itdep is icteddepicted by the by sixthe indicators,six indicators, a simultaneous a simultaneous estimationestimation approach approach needs needs to be to applied be applied that thataccoun accounts forts thefor indicators'the indicators' partial partial endogeneity. endogeneity. Here,Here, the modelthe model is formulated is formulated in a inmediation a mediation approa approach, whichch, which allows allows testing testing direct direct impacts impacts of of variablesvariables upon upon each each other other as well as well as indirect as indirect effec effects, i.e.,ts, i.e.,effects effects that thatare mediatedare mediated by another by another additionaladditional variable. variable. The Theconstruction construction of the of modelthe model to be to estimated be estimated is guided is guided by a by simple a simple logic logic of causation:of causation: It is It assumed is assumed that that the the local local economic economic productivity productivity (GDP) (GDP) is the is the most most
66 Margarian A., Regional Science Inquiry Journal, Vol. V, (2), 2013, pp. 5974 66 Margarian A., Regional Science Inquiry Journal, Vol. V, (2), 2013, pp. 5974
fundamental indicator that is determined by industry structure. GDP per inhabitant in turn fundamentalpartly determines indicator unemployment, that is determined both by are industr influentiay structure.l upon wages. GDP per BIP, inhabitant unemployment in turn and partlywages determines partly determineunemployment, household both are income, influentia all ofl upon them wages. influence BIP, localunemployment tax revenues, and and wagesfinally, partly regional determine demographic household development income, all depends of the mupon influence all the other local variables. tax revenues, Additionally, and finally,each regional one of demographic the socioeconomic development indicators depends is assumeupon alld the to other be directly variables. affected Additionally, by industry eachstructure. one of the Accordingly, socioeconomic each indicators of the indicators is assume d besi to des be directly GDP is affected additionally by industry indirectly structure.influenced Accordingly, by industry each structure of the via indicators their dependen besidesce onGDP the is other additionally variables indirectly in the chain. influencedFinally, byeach industry of these structure effects is via allowed their dependento differ betweence on the agglomerated other variables and peripheral in the chain. regions Finally,(remoteness). each of these In alleffects regressions is allowed a westeastto differ between dummy agglomeratedis included in and order peripheral to control regions for the (remoteness).historically In caused all regressions fundamental a westeast differences dummy in is indu includedstry, employment in order to control and demographic for the historicallystructures caused between fundamental regions in the differences former West in and indu Estry,ast Germanys. employment and demographic structures between regions in the former West and East Germanys. The mediation approach allows testing direct impacts of variables upon each other as well as The indirectmediation effects, approach i.e., allows effects testing that are direct mediated impact bs yof another variables additional upon each variable. other as The well idea as of indirectmediation effects, is i.e., conceptually effects that a are challenge mediated while by another it is rather additional easy to variable. implement The technically.idea of mediationMediation is conceptually models simply a challenge consist of while a series it of is regrratheressions easy with to implement a subsequent technically. inclusion of Mediationmediation models variables simply (Hayes, consist 2012). of a series In the of following regressions explanation, with a subsequent we relinquish inclusion from of the mediationinclusion variables of the interaction (Hayes, 2012). terms and In the thereby following simplify explanation, our moderated we relinquishmediation approach from the to a inclusionsimple of mediationthe interaction approach terms and in order thereby to simp facilitatelify our un moderatedderstanding. mediation Remoteness approach is therefore to a simpletreated mediation as if it approach were an exogenous in order to control facilitate variable understanding. in the principal Remoteness explanation. is therefore In order to treatedidentify as if theit were indirect an exogenouseffects of the control exogenous variable vari inable the on principal the endogenous explanation. variable In order via tothe m identifymediators, the indirect m+1 effects models of are the estimated exogenous in vari an able overarching on the endogenous logical mod variableel with avia hierarchical the m mediators,causal structure.m+1 models The arefirst estimatedmodel explains in an the overarching first mediator logical (GDP mod) elin withterms aof hierarchical the exogenous causalvariables structure. (West The and first Remote model) andexplains the n thecovariates first mediator (the industry (GDP )factors, in terms Industry of the iexogenous): variables (West and Remote) and the n covariatesi (the industry factors, Industryi): GDP = β + β West + β Re motei + []β Industry + e = β +10β 11 + β 12 + β∑ ;1 i+2 + i 1 GDP 10 11West 12 Re mote ∑[]1 ;1 i+2 Industryi e1 (5) 1 (5) The second model explains the second mediator (Jobless) in terms of the exogenous variables, The thesecond covariates model andexplains the first the mediator:second mediator (Jobless) in terms of the exogenous variables, the covariates and the first mediator: i Jobless = β + β West + β Re mote + β GDPi + []β Industry + e = β +20β 21 + β 22 + β 23 + β∑ ;2 i+3 + i 2 Jobless 20 21West 22 Re mote 23GDP ∑[]1 ;2 i+3 Industryi e2 (6) 1 (6) The third (mth) model explains the third mediator (Mediatorm) in terms of the exogenous The third (mth) model explains the third mediator (Mediator ) in terms of the exogenous variable and the first and second (nth) mediator (Mediatorn)m and so on: variable and the first and second (nth) mediator (Mediator ) and so on: Mediator = β + β West + β Re mote n = mβ +mβ0 m1 + β m2 Mediatorm−1 m m0 m1West i m2 Re mote m−+1 β Mediator i + []β Industry + e + β∑ m;n+2 + n β∑ m;i+m+2 + i m ∑ m1 ;n+2 Mediatorn ∑[]1m;i+m+2 Industryi em 1 (7) 1 (7) βm;n+2 β determines the direct effects of the mediators and β m;i+m+2 determines the direct effects m;n+2 determines the direct effects of the mediators and β determines the direct effects of the covariates upon the mediator on the left hand sidem;i+ ofm+ 2equation (7). The indirect effects of theof covariatesthe covariates upon upon the mediatorthe different on theendogenous left hand varsideiables of equation via selected (7). The mediators indirect is effectscalculated of theby covariatesthe multiplication upon the different endogenous variables via selected mediators is calculated by the multiplication – of the estimated effect of the covariate under interest upon the first mediator upon – of theinterest estimated effect of the covariate under interest upon the first mediator upon interest – with the estimated effect of this first mediator upon the following mediators under – withinterest the estimated in the causal effect chain of this first mediator upon the following mediators under interest in the causal chain – with the estimated effect of the last mediator under interest in the causal chain upon – withthe the endogenous estimated effect variable of theunder last interest. mediator under interest in the causal chain upon the endogenous variable under interest. A summation of all direct and indirect effects gives the total effect of a covariate upon any of A summationthe endogenous of all directvariables and ( SocioEconomicindirect effects ngive). Thes the total total effect effect could of aalso covariate be estimated upon any as of the endogenous variables (SocioEconomicn). The total effecti could also be estimated as SocioEconomic = β + β West + β Re motei + []β Industry + e = nβ +nβ0 n1 + β n2 + β∑ n;i+3 + i n SocioEconomicn n0 n1West n2 Re mote ∑[]1n;i+3 Industryi en . (8) 1 . (8) Margarian A., Regional Science Inquiry Journal, Vol. V, (2), 2013, pp. 5974 67
The total effect may be insignificant despite significant direct and indirect effects if the signs of single effects are oppositional. The assessment of the significance of indirect effects necessitates some further calculations. As we not only deal with mediation but simultaneously introduce moderator variables, i.e. multiplicative interactions among explanatory variables, matters get further complicated (see Margarian, 2013, Figure 1). The different regressions to be estimated in this case have the following structure with interaction effects:
Mediatorm = β m0 + β m1West + β m2 Re mote m−1 i i j + ∑ β m;n+2 Mediatorn + ∑[]β m;i+m+2 Industryi + ∑∑[]β m (2; i+m)+2 Industryi Industry j 1 1 11 m−1 i + ∑ β m (3; i+m)+2 Mediatorn Re mote + ∑[]β m (4; i+m)+2 Industryi Re mote 1 1 i j + ∑∑[]β m (5; i+m)+2 Industryi Industry j Re mote + em 11 (9) This implies that we expect to find a relation between the prevalence of specific industries and different indicators of a district's socioeconomic situation. This relation is assumed to be conditional upon, or moderated by, the prevalence of a second important industry as indicated by the interaction between industry factor i and industry factor j. This moderated effect is assumed to be partially mediated by the relation between industry structure and other socio economic indicators. This mediation is accounted for by the sequential regression of hierarchically models that build upon each other by the sequential introduction of mediating variables. The mediated effect is calculated by the subsequent multiplication of coefficients as explained above. Nevertheless, in order to complicate matters further, equation (9) shows that the direct industry effect as well as the mediated industry effect are assumed to be conditional upon, or moderated by, the remoteness factor. This is indicated again by the three last interaction terms in equation (9). Thereby the direct relation of the prevalence of a specific industry type as well as its indirect relation to one of the socioeconomic dimensions via other socioeconomic dimensions are allowed to differ, depending on districts' remoteness. Even in this case, the calculation of conditional indirect effects via the product of coefficients method (Preacher et al., 2007) as described above is rather unproblematic. Nevertheless, working with interaction effects introduces some specific difficulties in the interpretation of coefficients as the different coefficients need to be combined, and the effect often depends on the level of the intervening variable itself. Standard errors, too, need to be corrected taking into account the correlation of variables with the interacted terms. In the calculation of the significance of estimated overall effects the covariance between distinct estimators needs to be taken into account (Aiken and West, 1991).3 We present marginal overalleffects whose combined significance is evaluated separately for each observation in the final model to be presented below. Preacher et al. propose a bootstrapping approach to the calculation of standard errors and confidence intervals. This is the preferred method as the alternative normal theory based approach's assumptions concerning the normal distribution of effects does often not apply for conditional indirect effects, i.e., for moderated mediated effects.4 Despite this problem, the analysis in this paper relies on the normal theory based approach, which has also been described by Preacher et al. (2007). The reason for this choice is simple: Due to the various mediators, moderators and the large number of relevant covariates the bootstrapping approach is too computational intensive to be practicable for us. We implement the normal theory based approach as it is described by Preacher et al. (2007) in STATA.5 The
3 For a more detailed treatment see the technical report (Margarian, 2013). See also Aiken and West (1991) and https://files.nyu.edu/mrg217/public/interaction.html#code 4 For an assessment of different test of the significance of mediated effects refer also to MacKinnon et al. (2002). 5 There is a very good description of the possibility to implement moderated mediation in STATA on http://www.ats.ucla.edu/stat/stata/faq/modmed.htm. The most flexible and easily accessible approach in
6868 68 MargarianMargarianMargarian A., A., Regional RegionalA., Regional Science Science Science Inquiry Inquiry Inquiry Journal, Journal, Journal, Vol Vol. .V,Vol V, (2), .(2), V, 2013, (2),2013, 2013, pp. pp. 5974 5974pp. 5974
"nlcom""nlcom""nlcom" (nonlinear (nonlinear (nonlinear combination) combination) combination) command command command we we use weuse usein in STATA STATAin STATA in in order orderin order to to calculate calculateto calculate mediated mediated mediated effectseffectseffects and and andtheir their their standard standard standard errors errors errors from from from the the originalthe original original separate separate separate regressions regressions regressions computes computes computes the the standardthe standard standard errorserrorserrors using using using the the the delta delta delta method method method which which which assumes assumes assumes that that that th the e th estimates estimatese estimates of of the ofthe the indirect indirect indirect effect effect effect are are are normallynormallynormally distributed distributed distributed (UCLA, (UCLA, (UCLA, 2013). 2013). 2013). TheTheThe resultsresults results showshow show thethe the kindkind kind ofof relationofrelation relation betweenbetween between indusindus industriestriestries andand and socioeconomicsocioeconomic socioeconomic fundamentals,fundamentals, fundamentals, theytheythey help help help to to distinguish to distinguish distinguish between between between direct direct direct and and and indirec indirec indirect t (mediated) (mediated)t (mediated) effects effects effects and and and they they they allow allow allow assessing,assessing,assessing, whether whether whether relations relations relations are are are significant significant significant in in cen incen tral, central,tral, medium medium medium and and and remote remote remote locations. locations. locations. The The The resultingresultingresulting moderated moderated moderated and and and mediated mediated mediated effects effects effects for for for differ differ differentent ent combinations combinations combinations in in the inthe the levels levels levels of of the of the the mediatingmediatingmediating and and andmoderating moderating moderating variables variables variables with with with their their their point point pointspecificspecificspecific significances significances significances are are discussedare discussed discussed in in the thein the followingfollowingfollowing chapter. chapter. chapter.
44 4 Selected Selected Selected results results results TheTheThe resultsresults results ofof theofthe the initialinitial initial seeminglyseemingly seemingly unrelatedunrelated unrelated regrregr regressionessionession (SUR)(SUR) (SUR) onon whichonwhich which thethe the calculationcalculation calculation ofof of marginalmarginalmarginal effects effects effects is is based is based based (Table (Table (Table 5) 5) give5) give give a a first first a first im im pressionpression impression of of theof the the relations relations relations between between between endogenousendogenousendogenous and and and exogenous exogenous exogenous variables variables variables and and and the the the industry industry industry covariatescovariates covariates (f1(f1 (f1toto f8)tof8) f8)andand and theirtheir their interactionsinteractionsinteractions (fxfv). (fxfv). (fxfv). The The The Table Table Table has has hasbeen been been abbreviated abbreviated abbreviated in in that thatin thatnot not notall all interaction allinteraction interaction coefficients coefficients coefficients are are are presented.presented.presented. With With With concern concern concern to to them, to them, them, only only only the the the marginal marginal marginal effectseffects effects and and and their their their significance significance significance is is is informative.informative.informative. The The The Table Table Table gives gives gives a a condensed condensed a condensed overview overview overview t hatthat tallowshat allows allows for for an foran intuitive anintuitive intuitive understanding understanding understanding ofof theof the the estimation: estimation: estimation: In In the Inthe the first first first two two two columns columns columns only only only th the e th covariates covariatese covariates explain explain explain the the the first first first mediator mediator mediator variablevariablevariable ( GDP(GDP (GDP).). The The). The first first first column column column shows shows shows the the theestimated estimated estimated effects effects effects for for central forcentral central regions, regions, regions, the the thesecond second second columncolumncolumn shows shows shows the the changethe change change in in respective respectivein respective coefficients coefficients coefficients for for remote forremote remote regions. regions. regions. Professional Professional Professional services services services (f1)(f1) (f1) forfor example,forexample, example, relaterelate relate accordinglyaccordingly accordingly toto thetheto theinitial initial initial SUR,SUR, SUR, positivelypositively positively toto GDP GDPto GDP inin central centralin central regions regions regions (coefficient(coefficient(coefficient 1.72)1.72) 1.72) andand and onlyonly only slightlyslightly slightly lessless less positivelpositivel positivelyy (0.20,(0.20,y (0.20, insignificantinsignificant insignificant difference) difference) difference) inin remoteremotein remote regions.regions.regions. The The The Rsquares Rsquares Rsquares reported reported reported in in Table Tablein Table 5 5 show show 5 show the the relativelythe relatively relatively high high high explanatory explanatory explanatory power power power of of the theof the modelsmodelsmodels as as they theyas they reach reach reach values values values around around around 0.9. 0.9. 0.9. TableTableTable 5: 5: 5: Estimation Estimation Estimation results results results from from from the the theseemingly seemingly seemingly unre unre unrelatedlatedlated regressions regressions regressions GDPGDPGDP RemoteRemoteRemoteJoblessJoblessJoblessRemoteRemoteRemoteWageWageWage RemoteRemoteRemoteIncomeIncomeIncome RemoteRemoteRemoteTaxTax Tax RemoteRemoteRemotePopulationPopulationPopulationRemoteRemoteRemote InterInterInter20.8720.8720.87****** ***0.950.95 0.95 11.2911.2911.29****** ***0.330.33 0.33 2410.02410.02410.0****** ***5.65.6 5.6 1464.21464.21464.2****** ***34.234.2*34.2* 623.9*623.9623.9****** ***6.76.7 6.7 1.3771.3771.377** * 0.0940.0940.094 cept ceptcept (1.44)(1.44)(1.44) (0.71)(0.71)(0.71) (0.63)(0.63)(0.63) (0.31)(0.31)(0.31) (35.5)(35.5)(35.5) (17.0)(17.0)(17.0) (35.6)(35.6)(35.6) (15.8)(15.8)(15.8) (26.9)(26.9)(26.9) (11.6)(11.6)(11.6) (0.609)(0.609)(0.609) (0.261)(0.261)(0.261) taxtax tax 0.0000.0000.000 0.0050.0050.005** * (0.001)(0.001)(0.001) (0.002)(0.002)(0.002) incomeincomeincome 0.10.1****0.1 **0.00.0 0.0 0.0010.0010.001 0.0000.0000.000 (0.0)(0.0) (0.0) (0.1)(0.1) (0.1) (0.001)(0.001)(0.001) (0.001)(0.001)(0.001) wagewagewage 0.00.0 0.0 0.10.1 0.1 0.20.2******0.2 ***0.00.0 0.0 0.0010.0010.001 0.0010.0010.001 (0.1)(0.1) (0.1) (0.1)(0.1) (0.1) (0.0)(0.0) (0.0) (0.0)(0.0) (0.0) (0.001)(0.001)(0.001) (0.001)(0.001)(0.001) joblessjoblessjobless 4.54.5 4.5 0.30.3 0.3 12.812.8***12.8*** ***4.84.8 4.8 10.810.8***10.8*** ***2.12.1 2.1 0.4490.4490.449****** ***0.0080.0080.008 (3.2)(3.2) (3.2) (3.2)(3.2) (3.2) (2.9)(2.9) (2.9) (3.0)(3.0) (3.0) (2.2)(2.2) (2.2) (2.3)(2.3) (2.3) (0.052)(0.052)(0.052) (0.059)(0.059)(0.059) GDPGDPGDP 0.130.13***0.13*** ***0.010.010.01 13.813.8***13.8*** ***6.46.4******6.4 *** 3.93.9**3.9 * 1.11.1 1.1 8.48.4******8.4 ***0.30.3 0.3 0.0160.0160.016 0.0810.0810.081** * (0.03)(0.03)(0.03) (0.03)(0.03)(0.03) (1.6)(1.6) (1.6) (1.9)(1.9) (1.9) (1.7)(1.7) (1.7) (2.0)(2.0) (2.0) (1.2)(1.2) (1.2) (1.5)(1.5) (1.5) (0.031)(0.031)(0.031) (0.037)(0.037)(0.037) f1f1 f1 1.721.72*1.72* *0.200.200.20 0.380.38 0.38 0.220.22 0.22 33.633.6*33.6* *73.373.3**73.3** ** 45.045.0**45.0** **14.114.1 14.1 30.230.2*30.2* *33.033.0°33.0° ° 0.6680.6680.668** * 0.1020.1020.102 (0.73)(0.73)(0.73) (0.99)(0.99)(0.99) (0.31)(0.31)(0.31) (0.42)(0.42)(0.42) (17.1)(17.1)(17.1) (23.0)(23.0)(23.0) (15.9)(15.9)(15.9) (23.1)(23.1)(23.1) (11.9)(11.9)(11.9) (17.5)(17.5)(17.5) (0.273)(0.273)(0.273) (0.398)(0.398)(0.398) f2f2 f2 0.780.78 0.78 0.480.480.48 2.152.15***2.15*** ***0.220.22 0.22 37.937.9*37.9* *24.124.1 24.1 51.351.3***51.3*** ***16.316.3 16.3 0.40.4 0.4 3.83.8 3.8 0.6890.6890.689**** **0.5370.5370.537° ° ° (0.58)(0.58)(0.58) (0.65)(0.65)(0.65) (0.25)(0.25)(0.25) (0.28)(0.28)(0.28) (15.1)(15.1)(15.1) (19.6)(19.6)(19.6) (14.1)(14.1)(14.1) (18.3)(18.3)(18.3) (10.7)(10.7)(10.7) (13.7)(13.7)(13.7) (0.241)(0.241)(0.241) (0.312)(0.312)(0.312) f3f3 f3 1.501.50*1.50* *0.550.55 0.55 0.530.53*0.53* *1.291.29***1.29*** ***41.241.2**41.2** **34.934.9*34.9* * 14.214.214.2 36.836.8*36.8* * 3.33.3 3.3 17.317.317.3 0.8230.8230.823****** ***0.2770.2770.277 (0.63)(0.63)(0.63) (0.66)(0.66)(0.66) (0.27)(0.27)(0.27) (0.28)(0.28)(0.28) (14.6)(14.6)(14.6) (15.9)(15.9)(15.9) (13.8)(13.8)(13.8) (15.6)(15.6)(15.6) (10.5)(10.5)(10.5) (11.6)(11.6)(11.6) (0.239)(0.239)(0.239) (0.262)(0.262)(0.262) f4f4 f4 0.280.28 0.28 0.460.46 0.46 0.410.41*0.41* *0.600.60*0.60* * 44.344.3***44.3*** ***34.234.2*34.2* * 26.226.2*26.2* * 6.56.5 6.5 21.821.8**21.8** **4.74.7 4.7 0.3070.3070.307° ° ° 0.0770.0770.077 (0.49)(0.49)(0.49) (0.68)(0.68)(0.68) (0.21)(0.21)(0.21) (0.29)(0.29)(0.29) (11.2)(11.2)(11.2) (15.7)(15.7)(15.7) (10.6)(10.6)(10.6) (15.3)(15.3)(15.3) (7.9)(7.9) (7.9) (11.3)(11.3)(11.3) (0.183)(0.183)(0.183) (0.257)(0.257)(0.257) f5f5 f5 3.013.01***3.01*** ***1.381.38°1.38° °0.760.76***0.76*** ***0.370.370.37 79.179.1***79.1*** ***5.45.4 5.4 5.15.1 5.1 13.413.413.4 11.211.2 11.2 5.65.6 5.6 0.7050.7050.705****** ***0.0000.0000.000 (0.52)(0.52)(0.52) (0.77)(0.77)(0.77) (0.23)(0.23)(0.23) (0.33)(0.33)(0.33) (12.7)(12.7)(12.7) (18.6)(18.6)(18.6) (12.6)(12.6)(12.6) (17.3)(17.3)(17.3) (9.4)(9.4) (9.4) (12.6)(12.6)(12.6) (0.212)(0.212)(0.212) (0.286)(0.286)(0.286) f6f6 f6 1.621.62*1.62* *2.012.01*2.01* *0.970.97**0.97** **0.880.88*0.88* * 57.957.9***57.9*** ***79.679.6***79.6*** ***23.023.0 23.0 11.311.311.3 11.011.011.0 14.914.9 14.9 0.4700.4700.470° ° ° 0.7410.7410.741** * (0.72)(0.72)(0.72) (0.94)(0.94)(0.94) (0.31)(0.31)(0.31) (0.40)(0.40)(0.40) (17.0)(17.0)(17.0) (22.2)(22.2)(22.2) (16.0)(16.0)(16.0) (21.2)(21.2)(21.2) (11.8)(11.8)(11.8) (15.6)(15.6)(15.6) (0.266)(0.266)(0.266) (0.352)(0.352)(0.352) f7f7 f7 1.551.55**1.55** **2.182.18*2.18* *0.510.51*0.51* *0.130.13 0.13 64.664.6***64.6*** ***21.921.9 21.9 25.025.0*25.0* *10.110.1 10.1 28.028.0**28.0** **21.321.3 21.3 0.3340.3340.334 0.2200.2200.220 (0.55)(0.55)(0.55) (1.08)(1.08)(1.08) (0.23)(0.23)(0.23) (0.46)(0.46)(0.46) (12.8)(12.8)(12.8) (24.9)(24.9)(24.9) (12.4)(12.4)(12.4) (23.1)(23.1)(23.1) (9.3)(9.3) (9.3) (16.8)(16.8)(16.8) (0.213)(0.213)(0.213) (0.382)(0.382)(0.382) f8f8 f8 0.450.45 0.45 1.071.071.07 0.790.79***0.79*** ***0.140.14 0.14 19.819.8°19.8° °27.027.0 27.0 25.825.8*25.8* * 5.75.7 5.7 14.314.3°14.3° °12.812.8 12.8 0.4440.4440.444** *0.4130.4130.413 (0.50)(0.50)(0.50) (0.75)(0.75)(0.75) (0.21)(0.21)(0.21) (0.32)(0.32)(0.32) (11.9)(11.9)(11.9) (17.4)(17.4)(17.4) (11.0)(11.0)(11.0) (16.0)(16.0)(16.0) (8.1)(8.1) (8.1) (11.7)(11.7)(11.7) (0.183)(0.183)(0.183) (0.267)(0.267)(0.267) f2f1f2f1 f2f10.630.630.63 1.301.30 1.30 0.140.14 0.14 0.200.20 0.20 60.160.1***60.1*** ***44.444.4*44.4* * 29.629.6°29.6° °23.223.2 23.2 29.029.0*29.0* *29.529.5*29.5* *0.3140.3140.314 0.1700.1700.170 (0.74)(0.74)(0.74) (0.81)(0.81)(0.81) (0.31)(0.31)(0.31) (0.34)(0.34)(0.34) (17.0)(17.0)(17.0) (18.7)(18.7)(18.7) (16.0)(16.0)(16.0) (17.3)(17.3)(17.3) (11.7)(11.7)(11.7) (12.8)(12.8)(12.8) (0.270)(0.270)(0.270) (0.293)(0.293)(0.293) fxf1fxf1 fxf1…… … …… … …… … …… … …… … …… … …… … …… … …… … …… … …… … …… … fxfyfxfy fxfy…… … …… … …… … …… … …… … …… … …… … …… … …… … …… … …… … …… …
WestWestWest4.634.63**4.63** ** 4.634.63***4.63*** *** 298.2298.2298.2****** *** 69.769.7°69.7° ° 11.911.9 11.9 0.0620.0620.062 1.611.61 1.61 0.690.69 0.69 40.240.2 40.2 41.141.1 41.1 31.431.4 31.4 0.7100.7100.710 r2r2 r2 0.860.86 0.86 0.860.86 0.86 0.940.94 0.94 0.840.84 0.84 0.930.93 0.93 0.790.79 0.79 pp p 0.0000.0000.000 0.0000.0000.000 0.0000.0000.000 0.0000.0000.000 0.0000.0000.000 0.0000.0000.000 Source:Source:Source: Own Own Own calculation; calculation; calculation; interactions interactions interactions among among among industr industr industryy factors factorsy factors (fxfy) (fxfy) (fxfy) are are left areleft outleft out due outdue dueto to space space to space limitati limitati limitationsons ons WhileWhileWhile the the the initial initial initial estimates estimates estimates give give give a a comprehensive comprehensive a comprehensive im im pressionpression impression of of the of the the relationships, relationships, relationships, only only only marginalmarginalmarginal effects effects effects and and and their their their significances significances significances show show show the the the k kindind k ind of of relation of relation relation between between between industries industries industries and and and socioeconomicsocioeconomicsocioeconomic fundamentals, fundamentals, fundamentals, help help help to to distinguish to distinguish distinguish be between tween between direct direct direct and and and indirect indirect indirect (mediated) (mediated) (mediated)
technicaltechnicaltechnical terms terms terms is is via via is a viaa combination combination a combination of of the theof sureg thesureg sureg c commandommand command and and theand the nlcom thenlcom nlcom command command command in in STATA. STATA. in STATA. MargarianMargarian A., Regional A., Regional Science Science Inquiry Inquiry Journal, Journal, Vol. V,Vol (2),. V, 2013, (2), 2013, pp. 5974 pp. 5974 69 69 effectseffects and andallow allow assessing, assessing, whether whether relations relations are aresignificant significant in central, in central, medium medium and andremote remote locations.locations. The The estimation estimation of the of the moderated moderated mediatio mediation modeln model produces produces a large a large number number of of differentdifferent marginal marginal effects effects and anda highly a highly differentia differentiated patternted pattern of coefficients. of coefficients. All systematicallyAll systematically calculatedcalculated marginal marginal effects effects for allfor combinationsall combinations of industries of industries and anddegrees degrees of remoteness of remoteness are are presentedpresented in the in the technical technical report report (Margarian, (Margarian, 2013) 2013). This. This section section provides provides selected selected results results fromfrom the the large large number number of resulting of resulting moderated moderated and and me diated mediated marginal marginal effects effects for fordifferent different combinationscombinations in the in levelsthe levels of the of mediatingthe mediating and andmod moderatingerating variables variables with with their their pointspecific pointspecific significances.significances. Specifically, Specifically, the thepresentation presentation conce concentratesntrates on theon theestimated estimated relations relations between between the the professional professional service service industry industry factor factor respective respectively thely the recreation recreation service service factor factor and and the the districts'districts' socioeconomic socioeconomic conditions. conditions.
4.1 4.1 Relation Relation between between professional professional services services and and soci socioeconomicoeconomic fundamentals fundamentals ProfessionalProfessional services services is the is firstthe first factor factor and andaccou accounts fornts thefor highestthe highest share share in the in variancethe variance in the in the variablesvariables related related to industry to industry structure. structure. Profession Professional servicesal services are aregenerally generally believed believed to beto ofbe of fundamentalfundamental importance importance for for economic economic development development in the in the knowledge knowledge society society but but little little is is knownknown about about their their relevance relevance in remote in remote regions. regions. It h asIt hhighlyas highly significant significant marginal marginal relations relations to to the the economic economic fundamentals fundamentals that that are are shown shown to depend to depend on on remoteness remoteness and and on on other other accompanyingaccompanying industries industries (Table (Table 6). 6). TableTable 6: 6: Selected Selected marginal marginal relations relations between between facto factor "Professionalr "Professional services" services" and and economic economic fundamentals fundamentals with with point point specific specific signifi significancescances conditional conditional on on other other industry industry factors factors in central in central and and remote remote loca locationstions GDPGDP WageWage TaxTax Population Population InteractionInteraction Level Level directdirect directdirect directdirect via taxes via taxes with with CentralCentral Remote Remote CentralCentral Remote Remote Remote Remote RemoteRemote NoneNone 2.3562.356 1.3371.337 174.993 174.993 *** *** 99.887 99.887 ** ** 25.227 25.227 0.220 0.220 (1.688)(1.688) (1.597)(1.597) (38.871)(38.871) (37.075)(37.075) (27.059)(27.059) (0.250)(0.250) SimpleSimple lowlow 4.948 4.948 *** *** 0.094 0.094 180.999 180.999 *** *** 218.496 218.496 *** *** 100.294 100.294 ** ** 0.874 0.8 * 74 * productionproduction (1.428)(1.428) (1.997)(1.997) (34.512)(34.512) (46.109)(46.109) (32.713)(32.713) (0.437)(0.437) highhigh 0.236 0.236 2.5792.579 168.986 168.986 ** ** 18.723 18.723 49.840 49.840 0.4340.434 (2.444)(2.444) (2.406)(2.406) (55.569)(55.569) (55.337)(55.337) (39.092)(39.092) (0.378)(0.378) PrimaryPrimary and andlow low 5.628 5.628 *** *** 0.181 0.181 120.755 120.755 *** *** 79.516 79.516 21.656 21.656 0.189 0.189 relatedrelated (1.260)(1.260) (2.080)(2.080) (31.606)(31.606) (48.949)(48.949) (33.734)(33.734) (0.303)(0.303) productionproduction highhigh 0.916 0.916 2.4932.493 229.230 229.230 *** *** 120.257 120.257 ** ** 28.799 28.799 0.251 0.251 (2.319)(2.319) (2.037)(2.037) (52.815)(52.815) (46.538)(46.538) (33.870)(33.870) (0.310)(0.310) LargeLarge scale scale lowlow 0.296 0.296 3.9453.945 ° ° 172.100 172.100 *** *** 76.776 76.776 29.454 29.454 0.2570.257 productionproduction (1.736)(1.736) (2.285)(2.285) (39.918)(39.918) (54.174)(54.174) (38.801)(38.801) (0.352)(0.352) highhigh 4.416 4.416 * * 1.272 1.272 177.885 177.885 *** *** 122.997 122.997 * * 79.908 79.908 * * 0.696 0.696 ° ° (1.979)(1.979) (2.260)(2.260) (45.765)(45.765) (51.851)(51.851) (35.408)(35.408) (0.406)(0.406) TradeTrade services serviceslowlow 1.404 1.404 3.3473.347 ° ° 162.039 162.039 *** *** 71.605 71.605 31.841 31.841 0.277 0.277 (1.863)(1.863) (2.000)(2.000) (42.780)(42.780) (46.221)(46.221) (32.447)(32.447) (0.302)(0.302) highhigh 3.307 3.307 0.673 0.673 187.946 187.946 *** *** 128.169 128.169 ** ** 18.614 18.614 0.162 0.162 (2.040)(2.040) (2.143)(2.143) (46.957)(46.957) (49.419)(49.419) (35.097)(35.097) (0.312)(0.312) RecreationRecreation lowlow 2.684 2.684 2.3062.306 148.908 148.908 *** *** 109.646 109.646 ° ° 26.100 26.100 0.227 0.227 serviceservice (1.799)(1.799) (2.517)(2.517) (41.077)(41.077) (57.382)(57.382) (41.067)(41.067) (0.368)(0.368) highhigh 2.028 2.028 0.3670.367 201.077 201.077 ** ** 90.128 90.128 24.354 24.354 0.212 0.212 (2.894)(2.894) (2.496)(2.496) (66.511)(66.511) (57.940)(57.940) (39.222)(39.222) (0.351)(0.351) KnowledgeKnowledge lowlow 4.536 4.536 * * 4.826 4.826 * * 131.770 131.770 ** ** 68.814 68.814 63.513 63.513 ° ° 0.553 0.553 intensiveintensive (1.891)(1.891) (2.283)(2.283) (43.983)(43.983) (53.312)(53.312) (36.112)(36.112) (0.378)(0.378) productionproduction highhigh 0.176 0.176 7.4997.499 ** ** 218.215 218.215 *** *** 130.960 130.960 * * 13.059 13.059 0.1140.114 (1.739)(1.739) (2.366)(2.366) (39.767)(39.767) (54.749)(54.749) (39.695)(39.695) (0.349)(0.349) HealthHealth service servicelowlow 1.319 1.319 2.490 2.490 132.267 132.267 ** ** 71.980 71.980 59.605 59.605 ° ° 0.519 0.519 (1.811)(1.811) (2.028)(2.028) (41.804)(41.804) (47.100)(47.100) (32.668)(32.668) (0.346)(0.346) highhigh 3.393 3.393 ° ° 5.163 5.163 * * 217.718 217.718 *** *** 127.793 127.793 * * 9.150 9.150 0.0800.080 (1.881)(1.881) (2.241)(2.241) (43.258)(43.258) (51.693)(51.693) (36.720)(36.720) (0.321)(0.321) Note: Note:Standard Standard errors errors in parentheses in parentheses below below coeffici coefficients. Significanceents. Significance levels levels in percent: in percent: °<10; °<10;*<5; ***<5;<1; *****<0.1.<1; ***<0.1. Source:Source: Own Own calculation calculation TheThe selected selected marginal marginal effects effects with with their their point point spec specific ificsignificances significances presented presented in Table in Table 6 show 6 show that that a high a high share share of employees of employees in professional in professional serv servicesices go alonggo along with with a relatively a relatively high high regionalregional productivity productivity in terms in terms of GDP of GDP per perinhabitan inhabitant in tcentral in central districts districts if there if there is a islow a lowshare share
70 70 MargarianMargarian A., Regional A., Regional Science Science Inquiry Inquiry Journal, Journal, Vol. V, Vol (2),. V, 2013, (2), 2013,pp. 5974 pp. 5974 of simple,of simple, primary primary and and related related and and knowledge knowledge intens intensive productionive production activity activity in the in same the same district.district. Accordingly, Accordingly, in central in central regions regions with witha hi gha hidensitygh density of economic of economic activity, activity, a relative a relative specialisationspecialisation in services, in services, specifically specifically in profess in professionalional services, services, seems seems to produce to produce positive positive localisationlocalisation effects effects that that are favourable are favourable for centra for central regions'l regions' productivity. productivity. In remote In remote districts districts with with sparse sparse economic economic activity, activity, on the on other the other side, side, professional professional services' services' complementarity complementarity to to specificspecific other other activities, activities, rather rather than than regional regional specialisation, specialisation, seems seems to support to support the industry's the industry's productivity.productivity. According According to the to secondthe second column column in Tab in leTab 6, leprofessional 6, professional services services contribute contribute to to regionalregional productivity productivity if they if theycomplement complement knowledge knowledge intensive intensive production production or health or health service. service. WagesWages are positivelyare positively related related to a tohigh a highprevalence prevalence of professional of professional service service activities activities in central in central regionsregions and andnegatively negatively in remote in remote regions. regions. The Theobser observationvation that thatthere there is no is positive no positive relation relation betweenbetween wages wages and and professional professional service service activities activities in remote in remote districts districts independent independent of the of the accompanyingaccompanying industries industries supports supports the notion the notion of a oflack a laofck specialisation of specialisation in the in most the most profitable profitable activitiesactivities due todue missing to missing urbanisation urbanisation effects. effects. In conclusion, In conclusion, there there seems seems to be to a befundamental a fundamental heterogeneityheterogeneity in professional in professional service service character character between between central central and peripheraland peripheral regions. regions. FigureFigure 1 is 1an is alternative an alternative representation representation of select of selected estimateded estimated direct direct and indirectand indirect relations. relations. It It showsshows that thatprofessional professional services' services' positive positive relation relation to wages to wages in central in central and andmedium medium districts districts translatestranslates into intoan indirect an indirect positive positive relation relation to lo tocal lo taxcal revenues tax revenues as well. as well. This Thisindirect indirect effect effect is is paralleledparalleled by a bydirect a direct effect. effect. The Thedirect direct tax effectax effect is positivet is positive for central for central and mediumand medium districts districts but itbut is negativeit is negative for remote for remote districts districts under under speci specific conditions.fic conditions. These These conditions conditions are identified are identified in Tablein Table 6. According 6. According to the to fifththe fifthcolumn column professio professional servicesnal services relate relate directly directly negative negative to tax to tax revenuesrevenues in remote in remote districts districts if they if theyare accompanie are accompanied by da bylow a sharelow share of simple of simple production production or a or a high high share share of large of large scale scale production. production. Specifically Specifically the dependencethe dependence on simple on simple production production underlinesunderlines the complementarity the complementarity between between the two the typetwo stype of activity.s of activity. FigureFigure 1 also 1 alsoillustrates illustrates the opposed the opposed direct direct and inanddirect indirect relation relation between between professional professional services services and and population population development. development. The The differentiated differentiated rela tions relations highlight highlight the complex the complex conditional conditional effectseffects that canthat becan revealed be revealed by the by moderatedthe moderated media mediation tionmodel. model. On theOn onethe side,one side, the positivethe positive relationrelation between between professional professional services services and taxesand taxes in central in central districts districts translates translates into intoan indirect an indirect negativenegative relation relation to population to population development development due todue a tonegative a negative relation relation between between tax revenuestax revenues and populationand population development development in central in central districts districts (see (selaste columnlast column in Table in Table 5)6. This5)6. Thisnegative negative effecteffect of taxes of taxes is explainable is explainable if one if oneinterprets interprets tax revenues tax revenues as an as indicator an indicator of the of general the general incomeincome level level and theand related the related cost costof living. of living.
FigureFigure 1: 1: Relation Relation between between professional professional services, services, wage wage level, level, tax revenues tax revenues and and population population development development in different in different types types of regi of onsregi ons ++ ++WageWage + + - -
+ + + + + ProfessionalProfessional + +Tax Tax (-) (-) ServiceService
DistrictsDistricts of … of … … central… central (-) -(-) - … medium… medium + +PopulationPopulation … remote… remote location location developmentdevelopment Source:Source: Own Owncalculation calculation Nevertheless,Nevertheless, in remote in remote districts districts there there is a is positi a positive relationve relation between between tax revenuestax revenues and and populationpopulation development. development. Apparently Apparently in remote in remote distri districts, cts, not thenot cost the cost of living of living aspect aspect but but
6 Recall6 Recall that thethat marginal the marginal effect effect with withRemote Remote = 1 =for 1 central for central regions regions and the and coefficients the coefficients from fromTabl eTabl 5 e 5 is δPopulationis δPopulation / δTax / δTax=0.000 =0.000 + 0.005*(1)=0.005 + 0.005*(1)=0.005 Margarian A., Regional Science Inquiry Journal, Vol. V, (2), 2013, pp. 5974 71 rather the district's relative (public) prosperity is relevant for population dynamics. Due to this reversed relation between tax and population development, the likewise negative relation between professional services and taxes in remote districts translates into an indirect negative effect on population development as in central regions. The important insight is that the observed seemingly consistent estimated gross relations are due to opposed underlying relations. The indirect negative relation between professional services and population development is conditional upon the accompanying industries, just like the direct negative relation to tax revenues that mediated the effect (Table 6). Figure 1 finally shows that there also exists a direct positive relation between professional services and population development in districts of medium location. This direct effect is not mediated via regional productivity, joblessness, wages, household income or tax revenues. It therefore hints at the relevance of unmeasured social or cultural traits that are related to the industry and to positive population developments. One possible explanation in the case of professional service abundance in medium districts is that these services might go along with alternative income sources and occupational alternatives that attract new citizens or allows old citizens to create their own work place and stay.
4.2 Relation between recreation services and socioeconomic fundamentals Recreation services indicate a strong tourism industry. Tourism is often propagated as a way for remote regions to make the most economically out of their specific advantages especially concerning natural amenities. Recreation services are labour intensive and provide income opportunities for unqualified labour as well as for small and microenterprises. Nevertheless, tourism does not support innovative activity and represents a sector under high competitive pressure. Accordingly, there is little established knowledge concerning the actual relevance of tourism and recreation for remote regions. In central regions, a high relevance of recreation services is negatively related to regional productivity in terms of GDP per inhabitant (not shown) and to wages (Table 7). The lower wages in central regions with a relatively high share of recreation services translate into lower taxes in central regions (column 7 in Table 7). Nevertheless, recreation services are positively related to wages in remote regions, specifically if accompanied by a relatively high share in simple or large scale production, respectively by a relatively low share of primary production and related activities. This can be interpreted as positive synergies between production activities and recreation services which contribute to a higher marginal productivity of labour in recreation services than in regions without strong production activities. While wages relate negatively to tourism and recreation activities in central regions, joblessness relates negatively to recreation services in central regions as well, indicating a positive socioeconomic impact of this sector. It is important to note that this is a direct employment effect that is not mediated by the lower wage level. Accordingly, tourism probably offers lowwage jobs to employees with low qualification which remain unemployed in the knowledgecentered economy of central regions without activities in recreation services. This lower unemployment translates into relatively higher household incomes (column 5 in Table 7) and into more positive population developments (column 11 in Table 7). These employmentrelated positive socioeconomic effects cannot be observed in remote regions. There, other than in central regions, a strong focus in recreation services often implies a lack of occupational alternatives. In many cases, there are lowwage jobs in remote regions, while opportunities for better qualified employees are missing. Nevertheless, there is a positive direct relation between tourism and recreation services and population development in regions of remote location (column 10 in Table 7). This positive direct relation may be interpreted as a hint on the relevance of natural amenities and other factors positively related to quality of life as well as to tourism for population development specifically in peripheral regions. These “soft factors” attract people especially to regions that offer also qualified and potentially wellpaid jobs in large scale and knowledge intensive production (column 10 in Table 7). Accordingly, we observe a positive relation between recreation services and population development in central and remote regions but the underlying causes for this observation are quite different. All in all, tourism and its promoting
Margarian A., Regional Science Inquiry Journal, Vol. V, (2), 2013, pp. 5974 72 72 72 MargarianMargarian A., A.,Regional Regional Science Science Inquiry Inquiry Journal, Journal, Vol Vol. V,. (2),V, (2),2013, 2013, pp. pp.5974 5974 factorsfactors factors contribute contribute contribute to to remote remote to remote regions’ regions’ regions’ positive positive positive soci socioeconomic oeconomic socioeconomic development, development, development, specifically specifically specifically to to to higherhigher higher wages wages wagesand and more andmore positive more positive positive population population population developme developme development,nt, if alternativeifnt, alternative if alternative economic economic economic activities, activities, activities, specificallyspecificallyspecifically in in manufacturing manufacturing in manufacturing industries industries industries are are in in plaare place. ince. On pla On ce. its its On own, own, its tourism own, tourism tourism is isnot not a is panacea a not panacea a panacea againstagainst againstremote remote remoteregions’ regions’ regions’ structural structural structural decline. decline. decline. TableTable 7:Table 7: 7: Marginal Marginal Marginal relations relations relations between between between factor factor "Recreafactor "Recrea "Recreationtion services" tionservices" services" and and selected andselected selected fundamentalsfundamentalsfundamentals conditional conditional conditional on on remoteness remoteness on remoteness and and other andother in other dustryindustry in dustryfactors factors factors with with point with point specific point specific specific significancessignificancessignificances Wage Wage Joblessness Joblessness Household incomeHousehold income Tax Tax Population develoPopulationpment develoPopulationpment developmentPopulation development Wage Joblessness Household income Tax Population development Population development InteractionInteraction Level Level direct direct direct direct via joblessnessvia joblessness via wages via wages direct direct via joblessnessvia joblessness Interaction Level direct direct via joblessness via wages direct via joblessness with with CentralCentral Remote Remote Central Central Remote RemoteCentralCentral Remote Remote Central Central Remote Remote Central Central Remote RemoteCentralCentral Remote Remote with Central Remote Central Remote Central Remote Central Remote Central Remote Central Remote None None 190.768 ***190.768 78.579 *** * 78.579 2.468 * *** 2.468 0.523 *** 0.523 53.783 ** 53.783 1.776 ** 1.776 40.073 ** 40.0 10.56773 ** 10.567 0.776 0.776 1.715 *** 1.715 1.140 *** ** 1.140 0.228 ** 0.228 None 190.768 *** 78.579 * 2.468 *** 0.523 53.783 ** 1.776 40.073 ** 10.567 0.776 1.715 *** 1.140 ** 0.228 (40.028) (40.028)(32.723) (32.723)(0.726) (0.726)(0.605) (0.605)(20.606) (20.606)(3.336) (3.336)(15.334) (15.33(8.240)4) (8.240)(0.624) (0.624)(0.508) (0.508)(0.414) (0.414)(0.269) (0.269) (40.028) (32.723) (0.726) (0.605) (20.606) (3.336) (15.334) (8.240) (0.624) (0.508) (0.414) (0.269) Professional Professionallow 217.042low *** 217.042 68.750 *** 68.750 2.309 * 2.309 0.750 * 0.750 50.314 * 50.314 2.550 * 2.550 45.593 * 45.59 9.2453 * 9.245 0.661 0.661 2.483 *** 2.483 1.067 *** * 1.067 0.327 * 0.327 Professional low 217.042 *** 68.750 2.309 * 0.750 50.314 * 2.550 45.593 * 9.245 0.661 2.483 *** 1.067 * 0.327 service service (55.375) (55.375)(46.607) (46.607)(1.011) (1.011)(0.856) (0.856)(25.261) (25.261)(4.764) (4.764)(18.659) (18.65(8.743)9) (8.743)(0.868) (0.868)(0.714) (0.714)(0.519) (0.519)(0.381) (0.381) service (55.375) (46.607) (1.011) (0.856) (25.261) (4.764) (18.659) (8.743) (0.868) (0.714) (0.519) (0.381) high 164.494high ** 164.494 88.409 ** 88.409 2.627 * 2.627 0.295 * 0.295 57.253 * 57.253 1.003 * 1.003 34.554 * 34.55 11.8884 * 11.888 0.891 0.891 0.948 0.948 1.214 * 1.214 0.129 * 0.129 high 164.494 ** 88.409 2.627 * 0.295 57.253 * 1.003 34.554 * 11.888 0.891 0.948 1.214 * 0.129 (57.204) (57.204)(62.665) (62.665)(1.052) (1.052)(1.163) (1.163)(26.898) (26.898)(4.223) (4.223)(16.330) (16.33(11.509)0) (11.509)(0.878) (0.878)(0.978) (0.978)(0.550) (0.550)(0.508) (0.508) (57.204) (62.665) (1.052) (1.163) (26.898) (4.223) (16.330) (11.509) (0.878) (0.978) (0.550) (0.508) Simple Simplelow 132.862low *** 132.862 33.604 *** 33.604 1.951 ** 1.951 0.648 ** 0.648 42.509 * 42.509 2.204 * 2.204 27.909 * 27.9 4.51909 * 4.519 0.136 0.136 1.426 ** 1.426 0.901 ** * 0.901 0.283 * 0.283 Simple low 132.862 *** 33.604 1.951 ** 0.648 42.509 * 2.204 27.909 * 4.519 0.136 1.426 ** 0.901 * 0.283 production production (38.571) (38.571)(30.798) (30.798)(0.701) (0.701)(0.568) (0.568)(18.495) (18.495)(3.789) (3.789)(12.059) (12.05(5.102)9) (5.102)(0.592) (0.592)(0.490) (0.490)(0.376) (0.376)(0.256) (0.256) production (38.571) (30.798) (0.701) (0.568) (18.495) (3.789) (12.059) (5.102) (0.592) (0.490) (0.376) (0.256) high 248.674high *** 248.674 123.555 *** ** 123.555 2.985 ** ** 2.985 0.397 ** 0.397 65.058 * 65.058 1.348 * 1.348 52.238 * 52.238 16.614 * 16.614 1.688 ° 1.688 2.005 ° ** 2.005 1.379 ** * 1.379 0.173 * 0.173 high 248.674 *** 123.555 ** 2.985 ** 0.397 65.058 * 1.348 52.238 * 16.614 1.688 ° 2.005 ** 1.379 * 0.173 (61.636) (61.636)(47.162) (47.162)(1.131) (1.131)(0.874) (0.874)(29.370) (29.370)(3.578) (3.578)(21.144) (21.14(12.658)4) (12.658)(0.949) (0.949)(0.717) (0.717)(0.599) (0.599)(0.383) (0.383) (61.636) (47.162) (1.131) (0.874) (29.370) (3.578) (21.144) (12.658) (0.949) (0.717) (0.599) (0.383) Primary Primarylow 249.764low *** 249.764 117.303 *** * 117.303 2.815 * ** 2.815 1.082 ** 1.082 61.353 * 61.353 3.676 * 3.676 52.466 ** 52 15.774.466 ** 15.774 0.797 0.797 2.360 ** 2.360 1.301 ** ** 1.301 0.471 ** 0.471 Primary low 249.764 *** 117.303 * 2.815 ** 1.082 61.353 * 3.676 52.466 ** 15.774 0.797 2.360 ** 1.301 ** 0.471 and related and related (51.141) (51.141)(47.496) (47.496)(0.896) (0.896)(0.871) (0.871)(24.671) (24.671)(6.193) (6.193)(19.932) (19.93(12.205)2) (12.205)(0.815) (0.815)(0.739) (0.739)(0.498) (0.498)(0.395) (0.395) and related (51.141) (47.496) (0.896) (0.871) (24.671) (6.193) (19.932) (12.205) (0.815) (0.739) (0.498) (0.395) production productionhigh 131.772high * 131.772 39.856 * 39.856 2.121 ° 2.121 0.037 ° 0.037 46.214 ° 46.214 0.124 ° 27.681 0.124° 27.681 5.359° 5.359 0.754 0.754 1.070 * 1.070 0.980 * ° 0.980 0.016 ° 0.016 production high 131.772 * 39.856 2.121 ° 0.037 46.214 ° 0.124 27.681 ° 5.359 0.754 1.070 * 0.980 ° 0.016 (61.139) (61.139)(31.821) (31.821)(1.127) (1.127)(0.591) (0.591)(27.047) (27.047)(2.016) (2.016)(15.601) (15.60(5.549)1) (5.549)(0.925) (0.925)(0.486) (0.486)(0.561) (0.561)(0.257) (0.257) (61.139) (31.821) (1.127) (0.591) (27.047) (2.016) (15.601) (5.549) (0.925) (0.486) (0.561) (0.257) Large scale Largelow scale low 33.491 33.491 43.694 43.694 2.036 * 2.036 0.352 * 0.352 44.363 * 44.363 1.197 * 1.197 7.035 7.035 5.876 5.87 0.2596 0.259 0.534 0.534 0.941 * 0.941 0.153 * 0.153 Large scale low 33.491 43.694 2.036 * 0.352 44.363 * 1.197 7.035 5.876 0.259 0.534 0.941 * 0.153 production production (47.648) (47.648)(44.627) (44.627)(0.877) (0.877)(0.825) (0.825)(22.001) (22.001)(3.317) (3.317)(10.259) (10.25(7.143)9) (7.143)(0.726) (0.726)(0.686) (0.686)(0.452) (0.452)(0.361) (0.361) production (47.648) (44.627) (0.877) (0.825) (22.001) (3.317) (10.259) (7.143) (0.726) (0.686) (0.452) (0.361) high 348.045high *** 348.045 113.464 *** * 113.464 2.900 * ** 2.900 1.397 ** ° 1.397 63.204 ° * 63.204 4.749 * 4.749 73.112 ** 73.112 15.257 ** 15.257 1.811 ° 1.811 2.896 ° *** 2.896 1.340 *** * 1.340 0.609 * 0.609 high 348.045 *** 113.464 * 2.900 ** 1.397 ° 63.204 * 4.749 73.112 ** 15.257 1.811 ° 2.896 *** 1.340 * 0.609 (58.860) (58.860)(46.447) (46.447)(1.056) (1.056)(0.840) (0.840)(27.757) (27.757)(7.584) (7.584)(26.462) (26.46(11.841)2) (11.841)(0.937) (0.937)(0.722) (0.722)(0.565) (0.565)(0.392) (0.392) (58.860) (46.447) (1.056) (0.840) (27.757) (7.584) (26.462) (11.841) (0.937) (0.722) (0.565) (0.392) Trade Tradelow 158.590low ** 158.590 65.968 ** 65.968 2.894 ** 2.894 0.815 ** 0.815 63.064 * 63.064 2.769 * 2.769 33.314 * 33.31 8.8714 * 8.871 0.579 0.579 1.796 * 1.796 1.337 * * 1.337 0.355 * 0.355 Trade low 158.590 ** 65.968 2.894 ** 0.815 63.064 * 2.769 33.314 * 8.871 0.579 1.796 * 1.337 * 0.355 services services (51.225) (51.225)(45.452) (45.452)(0.939) (0.939)(0.843) (0.843)(25.663) (25.663)(4.999) (4.999)(15.147) (15.14(8.460)7) (8.460)(0.783) (0.783)(0.700) (0.700)(0.519) (0.519)(0.376) (0.376) services (51.225) (45.452) (0.939) (0.843) (25.663) (4.999) (15.147) (8.460) (0.783) (0.700) (0.519) (0.376) and food andhigh food 222.946high *** 222.946 91.191 *** * 91.191 2.042 * * 2.042 0.231 * 0.231 44.503 ° 44.503 0.784 ° 0.784 46.833 * 46. 12.262833 * 12.262 0.973 0.973 1.634 * 1.634 0.944 * ° 0.944 0.100 ° 0.100 and food high 222.946 *** 91.191 * 2.042 * 0.231 44.503 ° 0.784 46.833 * 12.262 0.973 1.634 * 0.944 ° 0.100 (52.479) (52.479)(42.692) (42.692)(0.953) (0.953)(0.785) (0.785)(23.461) (23.461)(2.909) (2.909)(18.604) (18.60(9.916)4) (9.916)(0.809) (0.809)(0.650) (0.650)(0.484) (0.484)(0.343) (0.343) (52.479) (42.692) (0.953) (0.785) (23.461) (2.909) (18.604) (9.916) (0.809) (0.650) (0.484) (0.343) Knowledge Knowledgelow 166.911low *** 166.911 83.764 *** * 83.764 2.138 * * 2.138 0.347 * 0.347 46.585 * 46.585 1.180 * 1.180 35.062 * 35.0 11.26462 * 11.264 0.121 0.121 0.874 0.874 0.988 * 0.988 0.151 * 0.151 Knowledge low 166.911 *** 83.764 * 2.138 * 0.347 46.585 * 1.180 35.062 * 11.264 0.121 0.874 0.988 * 0.151 intensive intensive (48.647) (48.647)(41.879) (41.879)(0.887) (0.887)(0.774) (0.774)(22.465) (22.465)(3.159) (3.159)(15.176) (15.17(9.320)6) (9.320)(0.752) (0.752)(0.643) (0.643)(0.461) (0.461)(0.339) (0.339) intensive (48.647) (41.879) (0.887) (0.774) (22.465) (3.159) (15.176) (9.320) (0.752) (0.643) (0.461) (0.339) production productionhigh 214.625high *** 214.625 73.395 *** 73.395 2.798 * 2.798 0.698 * 0.698 60.982 * 60.982 2.372 * 2.372 45.085 * 45.0 9.86985 * 9.869 1.673 ° 1.673 2.556 ° ** 2.556 1.293 ** * 1.293 0.304 * 0.304 production high 214.625 *** 73.395 2.798 * 0.698 60.982 * 2.372 45.085 * 9.869 1.673 ° 2.556 ** 1.293 * 0.304 (59.961) (59.961)(54.866) (54.866)(1.102) (1.102)(1.017) (1.017)(28.302) (28.302)(4.927) (4.927)(19.152) (19.15(9.838)2) (9.838)(0.931) (0.931)(0.836) (0.836)(0.579) (0.579)(0.449) (0.449) (59.961) (54.866) (1.102) (1.017) (28.302) (4.927) (19.152) (9.838) (0.931) (0.836) (0.579) (0.449) Health Healthlow 175.737low *** 175.737 81.908 *** * 81.908 1.933 * * 1.933 0.291 * 0.291 42.130 ° 42.130 0.990 ° 0.990 36.916 * 36.9 11.01416 * 11.014 0.705 0.705 1.594 ** 1.594 0.893 ** ° 0.893 0.127 ° 0.127 Health low 175.737 *** 81.908 * 1.933 * 0.291 42.130 ° 0.990 36.916 * 11.014 0.705 1.594 ** 0.893 ° 0.127 service service (52.339) (52.339)(40.024) (40.024)(0.963) (0.963)(0.742) (0.742)(23.403) (23.403)(2.918) (2.918)(16.138) (16.13(9.039)8) (9.039)(0.800) (0.800)(0.614) (0.614)(0.484) (0.484)(0.325) (0.325) service (52.339) (40.024) (0.963) (0.742) (23.403) (2.918) (16.138) (9.039) (0.800) (0.614) (0.484) (0.325) high 205.799high *** 205.799 75.251 *** * 75.251 3.003 * *** 3.003 0.754 *** 0.754 65.436 ** 65.436 2.562 ** 2.562 43.231 ** 43.231 10.119 ** 10.119 0.846 0.846 1.837 *** 1.837 1.387 *** ** 1.387 0.329 ** 0.329 high 205.799 *** 75.251 * 3.003 *** 0.754 65.436 ** 2.562 43.231 ** 10.119 0.846 1.837 *** 1.387 ** 0.329 (44.472) (44.472)(31.559) (31.559)(0.803) (0.803)(0.579) (0.579)(23.762) (23.762)(4.271) (4.271)(16.692) (16.69(7.907)2) (7.907)(0.702) (0.702)(0.495) (0.495)(0.474) (0.474)(0.263) (0.263) (44.472) (31.559) (0.803) (0.579) (23.762) (4.271) (16.692) (7.907) (0.702) (0.495) (0.474) (0.263) Note: Standard errorsNote: Standardin parentheses errors below in parentheses coefficients. below Significance coefficients. levels Significance in percent: levels °<10; in *<5; percent: **<1; °<10; ***<0.1. *<5; **<1; ***<0.1. Note: Standard errors in parentheses below coefficients. Significance levels in percent: °<10; *<5; **<1; ***<0.1. Source:Source: Source:Own Own calculation Owncalculation calculation
5 5 5 Conclusion Conclusion Conclusion TheThe analysis Theanalysis analysis generates generates generates conceptual conceptual conceptual / methodological / methodological / methodological and and factual factualand factualinsights. insights. insights. On On the the Onfactual factualthe factuallevel level level it it becomes becomesit becomes apparent apparent apparent that that the that the relation relationthe relation between between between local local industrytypes local industrytypes industrytypes and and socioeconomic and socioeconomic socioeconomic fundamentalsfundamentalsfundamentals is is conditional conditional is conditional on on regions' regions' on regions' remoteness, remoteness, remoteness, respectively respectively respectively centrality, centrality, centrality, and and on and on the the on the specificationspecificationspecification of of accompanying accompanying of accompanying industries. industries. industries. According According Accordingly, ly, the thely, type the type of type of activities activities of activities or or the the or the productivityproductivityproductivity of ofactivities activities of activities within within specificwithin specific specific industry industry industry factors factors factorsdiffers differs differsdepending depending depending on onthe the densityon density the density and and and diversitydiversitydiversity of of local local of economic local economic economic activity. activity. activity. Specifically, Specifically, Specifically, the the complementarity complementarity the complementarity between between between different different different industrialindustrialindustrial activities activities activities and and thereby andthereby thereby the the local local the industr local industr y industr compositiony compositiony composition seem seem to seem to gain gain to importance gain importance importance in in in remoteremote remotedistricts' districts' districts' sparse sparse sparsemarkets. markets. markets. In Inagglomerated agglomerated In agglomerated districts, districts, districts, on onthe the oncontrary, contrary,the contrary, specialisation specialisation specialisation in in in professionalprofessionalprofessional services services services contributes contributes contributes to regionalto regional to regional produ productivity productivity duectivity due to topositivedue positive to positive localisation localisation localisation effects. effects. effects. NotNot only onlyNot are onlyare the the arerelations relations the relations conditional conditional conditional on on(respecti (respecti on (respectivelyvely moderated velymoderated moderated by) by) remoteness remotenessby) remoteness and and industry industryand industry composition,composition,composition, the the results theresults results also also show also show the show the differentiat thedifferentiat differentiated ed direct directed directand and indirect and indirect indirect (respectively (respectively (respectively mediated)mediated)mediated) relations relations relations to todifferent different to different socioeconomic socioeconomic socioeconomic ind indicators.icators. indicators. The The importance Theimportance importance of ofdistributional distributional of distributional effectseffects effects is isunderlined underlined is underlined by by professional professional by professional services' services' services' rel relationation rel toation to wages wages to wagesin in remote remote in remote districts. districts. districts. While While While professionalprofessionalprofessional services services services here here relate here relate relatepositively positively positively to to GDP GDP to per GDP per inhabitant per inhabitant inhabitant if if accompanied accompanied if accompanied by by by knowledgeknowledgeknowledge intensive intensive intensive production, production, production, they they relate theyrelate negativrelate negativ negativelyely to towagesely wages to underwages under theunder the same samethe conditions. same conditions. conditions. Apparently,Apparently,Apparently, under under theseunder these conditions these conditions conditions the the majority majoritythe majority of ofjobs jobs of is jobs is positioned positioned is positioned in in the the in low low the wage low wage wage segment.segment.segment. Accordingly, Accordingly, Accordingly, while while professional while professional professional services services services are a rerather rather are positiverather positive positive for for regional regional for regional productivity productivity productivity in in terms termsin ofterms of GDP GDP of per GDP per inhabitant perinhabitant inhabitant specifically specifically specifically in in cent cent inral ral cent regions, regions,ral regions, they they might they might might be be judged judged be judged negativelynegativelynegatively in interms terms in ofterms ofincome income of income distribution distribution distribution and and furt furtandherher furtsocioeconomic socioeconomicher socioeconomic consequences consequences consequences on ontax tax on tax revenuesrevenuesrevenues and and population populationand population development development development in inremote remote in remoteareas areas. Quiteareas. Quite . theQuite the contrary contrarythe contrary holds holds trueholds true for truefor the the for the effecteffect ofeffect ofrecreation recreation of recreation services services services in incentral central in centralregions. regions. regions. W hileWhile recreationW hilerecreation recreation services services services relate relate negativelyrelate negatively negatively to to to economiceconomiceconomic fundamentals fundamentals fundamentals like like GDP like GDP and GDP and wages and wages wages in in central central in central regions, regions, regions, they they relate they relate positively relate positively positively to to to distributionaldistributionaldistributional and and social socialand indicators social indicators indicators like like employmen employmenlike employment andt and populationt populationand population development. development. development. OnOn the the On conceptual conceptual the conceptual level, level, thelevel, the results results the results provide provide provide differ different different insights insightsent insights as as well. well. as Firstly, well. Firstly, Firstly,the the different differentthe different directdirect relationsdirect relations relations between between between tax tax revenues revenuestax revenues and and populatio and populatio population n development developmentn development show show that show that the that the same samethe same Margarian A., Regional Science Inquiry Journal, Vol. V, (2), 2013, pp. 5974 73 variable indicates different phenomena under different conditions. In this case, high tax revenues indicate high public wealth in remote districts and high costs of living in central regions. Secondly, the relation between professional services and population development in remote and central districts show that seemingly consistent gross relations may be caused by fundamentally different underlying mechanisms and relations: The negative gross relation in central districts is due to a positive tax effect of professional services and a negative population development effect of tax revenues, while the negative gross relation in remote areas is due to a (conditional) negative tax effect of professional services and a positive population development effect of tax revenues. Similarly with recreation services: They show a positive relation to population development in central regions due to (mediated by) their positive employment effect; in remote regions, recreation services relate directly to more positive population developments, indicating that the cause is in some common underlying factors like favourable natural amenities. Thirdly, direct and indirect effects are sometimes opposite in direction as for example in the case of the direct and the indirect relation via joblessness between population development and recreation services in central regions. In this case, they would cancel out if only the gross effect was estimated, resulting in insignificant estimators. Nevertheless, the existence of two significant net effects is obviously an important information for example for the design of rational policies. The important insight that should be gained for future inquiry is that industry structure matters, that it matters in multiple dimensions and that the effects are conditional upon location and multiple dimensions of industry structure. This implies that not only the strategies of empirical inquiry will need to be reconsidered but the theoretical foundation of these inquiries as well. Specifically, the acknowledgement of the different social, economic and cultural dimensions of industry structure and the relevance of distributional effects require careful further developments of theories within the evolutionary economic paradigm.
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Ribeiro B.M,. Fernandes G.A., Diniz S.F., Regional Science Inquiry Journal, Vol. V, (2), 2013, pp. 7585 75
PROPENSITY FOR ENTREPRENEURSHIP AMONG COLLEGE UNDERGRADUATES: THE CASE OF A PUBLIC UNIVERSITY IN NORTH EASTERN PORTUGAL
Maria Isabel BARREIRO RIBEIRO Bragança Polytechnic Institute, Bragança Centre for Transdisciplinary Development Studies, Vila Real Research Unit for Inland Development, Guarda Portugal [email protected]
António José GONÇALVES FERNANDES (corresponding author) Bragança Polytechnic Institute , Bragança Centre for Transdisciplinary Development Studies, Vila Real Portugal [email protected]
Francisco José Lopes de SOUSA DINIZ University of TrásosMontes e Alto Douro, Vila Real Centre for Transdisciplinary Development Studies, Vila Real Portugal [email protected]
Corresponding author address: Instituto Politécnico de Bragança Escola Superior Agrária Campus de Santa Apolónia 5300855 Bragança, Portugal
Tlm. +351 965057246 Tel. +351 273303280 Fax +351 273325405 Abstract
This study looked into the entrepreneurial ability of the students of a public university in Bragança (Portugal) to identify differentiation factors of their entrepreneurial potential. A quantitative, transversal, and observational analysis was conducted involving 598 student participants. Data gathering took place between November and December 2012 and used the Entrepreneurial Potential Indicator questionnaire. The respondents were mostly female (61.0%), between 18 and 21 years old (53.8%), corresponding to an average of 22.6 years of age (±4.59), studied under an ordinary regime (82.6%), were from the northern region (83.9%), lived in an urban centre (53.8%) and attended the first study cycle (92.8%) of two scientific areas, namely Education Sciences (28.4%) and Technology and Management (28.4%). Over half of the respondents showed entrepreneurial skills (72.4%). Of all the human capital factors considered, the attendance regime was the only one which had no influence on the entrepreneurial potential. In fact, all the others, namely the course’s scientific area and the study cycle have proven to be relevant for reinforcing or developing the students’ entrepreneurial skills. None of the sociodemographic factors that were taken into consideration had any influence on entrepreneurial potential differentiation. Binary logistic regression (logit model) revealed a cause and effect relationship between all the characteristics and the entrepreneurial tendency.
Keywords: Higher Education; Entrepreneurial potential; TrásosMontes; Portugal JEL Classification: D21, D24
76 Ribeiro B.M,. Fernandes G.A., Diniz S.F., Regional Science Inquiry Journal, Vol. V, (2), 2013, pp. 7585 76 Ribeiro B.M,. Fernandes G.A., Diniz S.F., Regional Science Inquiry Journal, Vol. V, (2), 2013, pp. 7585
Introduction Introduction
According to Bronosky [1], Higher Education Institutions have been feeling the need According to Bronosky [1], Higher Education Institutions have been feeling the need to motivate their students and give them the necessary skills to take entrepreneurial initiatives to motivate their students and give them the necessary skills to take entrepreneurial initiatives capable of generating employment and economic development. In Hull’s et al [2] view capable of generating employment and economic development. In Hull’s et al [2] view identifying and subsequently using their entrepreneurial potential will, no doubt, be beneficial identifying and subsequently using their entrepreneurial potential will, no doubt, be beneficial for society. Sociodemographic variables (such as gender, age, residing area, among others) for society. Sociodemographic variables (such as gender, age, residing area, among others) and human capital variables (like the course) are pinpointed by Teixeira and Davey [3], as and human capital variables (like the course) are pinpointed by Teixeira and Davey [3], as differentiating factors of the entrepreneurial potential. differentiating factors of the entrepreneurial potential. The main goals of this study involved analysing the students’ entrepreneurial skills in The main goals of this study involved analysing the students’ entrepreneurial skills in a public Higher Education institution in northeastern Portugal and trying to ascertain whether a public Higher Education institution in northeastern Portugal and trying to ascertain whether there are significant differences in the students’ entrepreneurial potential, taking into there are significant differences in the students’ entrepreneurial potential, taking into consideration sociodemographic as well as human capital factors. 598 students participated consideration sociodemographic as well as human capital factors. 598 students participated in the study which was quantitative, transversal, analytical and observational. Data were in the study which was quantitative, transversal, analytical and observational. Data were collected between November and December 2012 through the application of the collected between November and December 2012 through the application of the Entrepreneurial Potential Indicator questionnaire validated for Portugal by Ferreira et al. [4]. Entrepreneurial Potential Indicator questionnaire validated for Portugal by Ferreira et al. [4]. This paper is structured into five sections: introduction, literature review, This paper is structured into five sections: introduction, literature review, methodology, results and discussion and final remarks. The present section provides an methodology, results and discussion and final remarks. The present section provides an explanation of the subject in question and presents both the aims and the structure of the explanation of the subject in question and presents both the aims and the structure of the paper. Section two does a literature review in order to give a theoretical Framework of the paper. Section two does a literature review in order to give a theoretical Framework of the subject under study. The third section consists of the description of the methodology that was subject under study. The third section consists of the description of the methodology that was used to conduct this research, depicting the participants, the materials and procedures. In the used to conduct this research, depicting the participants, the materials and procedures. In the fourth section, results of the statistical analysis are presented. Finally, in the last section, fourth section, results of the statistical analysis are presented. Finally, in the last section, results are discussed and final considerations offered. results are discussed and final considerations offered.
Literature Review Literature Review
In Koh’s [5] opinion, there is little consensus as to what entrepreneurship means or an In Koh’s [5] opinion, there is little consensus as to what entrepreneurship means or an entrepreneur does. entrepreneur does. Cunningham and Lischeron [6] have identified six currents of thought on the subject Cunningham and Lischeron [6] have identified six currents of thought on the subject and provide a different view of what it is to be an entrepreneur. The Great Person School and provide a different view of what it is to be an entrepreneur. The Great Person School defines the entrepreneur as someone who is born with intuition, stamina, vigor, persistence defines the entrepreneur as someone who is born with intuition, stamina, vigor, persistence and selfesteem; on the other hand, the Classical School recognises the entrepreneur’s and selfesteem; on the other hand, the Classical School recognises the entrepreneur’s innovative and discovery skills and creativity; for the Management School, the entrepreneur innovative and discovery skills and creativity; for the Management School, the entrepreneur organizes, manages and takes risks; whereas the Leadership School sees him/her as the person organizes, manages and takes risks; whereas the Leadership School sees him/her as the person who motivates, advises and leads; the Intrapreneurship School conceives the entrepreneur as who motivates, advises and leads; the Intrapreneurship School conceives the entrepreneur as the skillful manager of big organisations; and finally, the Psychological Characteristics the skillful manager of big organisations; and finally, the Psychological Characteristics School associates the entrepreneur with both unique values and attitudes and distinct needs. School associates the entrepreneur with both unique values and attitudes and distinct needs. Deo [7] claims the entrepreneur can be seen both from the economist’s and the Deo [7] claims the entrepreneur can be seen both from the economist’s and the psychologist’s perspective. According to Rwigema and Venter [8], the economist considers psychologist’s perspective. According to Rwigema and Venter [8], the economist considers the entrepreneur as someone who is prone to innovate, to become an agent of change, to the entrepreneur as someone who is prone to innovate, to become an agent of change, to create wealth and add value to resources and other assets while introducing changes to the create wealth and add value to resources and other assets while introducing changes to the economy. In this context, Acs et al. [9] refer they generate employment and innovation and economy. In this context, Acs et al. [9] refer they generate employment and innovation and strength competitiveness. Filion [10] posits the entrepreneur is often someone who is able to strength competitiveness. Filion [10] posits the entrepreneur is often someone who is able to identify business opportunities, market niches and therefore bring about progress. identify business opportunities, market niches and therefore bring about progress. On the other hand, Deo [7] thinks that from the psychologist’s viewpoint, an On the other hand, Deo [7] thinks that from the psychologist’s viewpoint, an entrepreneur is driven by the need to obtain or achieve something, to try and accomplish new entrepreneur is driven by the need to obtain or achieve something, to try and accomplish new things. Alves and Bornia [11] for instance defend that an entrepreneur has some things. Alves and Bornia [11] for instance defend that an entrepreneur has some characteristics and displays personality traits that are distinct compared to the rest of the characteristics and displays personality traits that are distinct compared to the rest of the population and that is the key to a successful entrepreneurship. As for Brockhaus and population and that is the key to a successful entrepreneurship. As for Brockhaus and Horwitz [12], they consider that one of the basic prerequisites to entrepreneurial potential is Horwitz [12], they consider that one of the basic prerequisites to entrepreneurial potential is the intention to do things and survive. Despite intensive research, it is still very difficult and the intention to do things and survive. Despite intensive research, it is still very difficult and challenging to define entrepreneurship, according to Mitton [13]. Departing from the challenging to define entrepreneurship, according to Mitton [13]. Departing from the Psychological Characteristics School and based on all the characteristics likely to potentiate Psychological Characteristics School and based on all the characteristics likely to potentiate entrepreneurship reported in the literature, several models have been developed and tested in entrepreneurship reported in the literature, several models have been developed and tested in order to identify entrepreneurial potential; all of them pinpoint such characteristics as the need order to identify entrepreneurial potential; all of them pinpoint such characteristics as the need for achievement, selfcontrol, risktaking propensity, ambiguity tolerance, selfconfidence and for achievement, selfcontrol, risktaking propensity, ambiguity tolerance, selfconfidence and Ribeiro B.M,. Fernandes G.A., Diniz S.F., Regional Science Inquiry Journal, Vol. V, (2), 2013, pp. 7585 77 innovativeness. Therefore, these are also the characteristics addressed in the present research, seeing as Mitton [13], Markman and Baron [14] and Curral et al. [15] claim, that individuals who display them are more likely to become entrepreneurs in the future.
Methodology
In order to conduct this study, the authors adopted a quantitative, analytical, transversal and observational methodology. The study focused on analysing the entrepreneurial potential in a sample of students from a Higher Education Institution located in TrásosMontes in northeastern Portugal. The aim was to identify the students’ entrepreneurial potential and decide which of the sociodemographic and human capital factors considered were likely to differentiate entrepreneurial potential. A representative sample of the universe under study was randomly collected, consisting of 598 students. The collection of data occurred in the period between November and December 2012, using the Entrepreneurial Potential Indicator validated for Portugal by Ferreira et al. [4]. The questionnaire was created on Google Docs and directly administered by the students online. The questionnaire in question focus on six entrepreneurial features (Table 1) referred by Ferreira et al. [4] and Koh [5] and result from a set of 15 attitudes assessed with recourse to a 1 to 5 Likert scale discriminated as follows: 1 totally disagree; 2 disagree; 3 – neither agree nor disagree; 4 agree; and, 5 – totally agree.
The features to be assessed are in Table 1 and, according to Ferreira et al. [4] and Koh [5], may be described as follows: The need for achievement can be found in individuals with a strong desire to succeed who are consequently more prone to entrepreneurial attitudes. Selfcontrol is linked to the individuals’ ability to conduct their own lives. Therefore, individuals who have selfcontrol believe they are capable of controlling their own lives, unlike those who do not display such characteristic who believe that what happens in their lives like luck or misfortune, are always the result of external factors. Risktaking propensity is typical of individuals whose attitudes are oriented towards making decisions in an uncertainty context. It should be noted that the risk involved is controlled. Ambiguity tolerance is at the basis of ambiguous situations for which there is not enough information. Individuals capable of understanding such situations and of organizing the available information prior to acting usually have this characteristic. Selfconfidence is related to the individual’s positive and confident perception about him/herself and his/her skills and abilities. Innovativeness has to do with seeking and developing new activities or ways of developing them.
Table 1 – Entrepreneurial features and attitudes Features Attitudes I could describe myself as a gambler I believe I take higher risks than most people Risktaking I do not engage in anything without coming up with an action plan propensity first I always keep an eye on my money I always make rational decisions Need for I have a strong need to do independent work achievement I succeed at facing challenges and getting over problems
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OnceOnce I start I start a project a project I see I itsee through it through until until the ethend e nd I believeI believe failures failures are butare learningbut learning opportunities opportunities I haveI have a strong a strong need need to do to independent do independent work work SelfcontrolSelfcontrol I clearlyI clearly separate separate work work from from leisure leisure I believeI believe we makewe make our ownour own luck luck I haveI have a strong a strong need need to do to independent do independent work work I oftenI often follow follow my intuitionmy intuition SelfconfidenceSelfconfidence I succeedI succeed at facing at facing challenges challenges and andgetting getting over over problems problems I believeI believe failures failures are butare learningbut learning opportunities opportunities InnovativenessInnovativeness I’m I’ma person a person of new of new and anddifferent different ideas id andeas andsolutions solutions I giveI give up easily up easily when when things things do not do worknot work out myout waymy way I doI not do notengage engage in anything in anything without without coming coming up with up with an actionan action plan plan Tolerance to Tolerance to first first uncertaintyuncertainty I’m I’mgood good at dealing at dealing with with ambiguous ambiguous situations situations I alwaysI always make make rational rational decisions decisions
The The data data collected collected were were treated treated using using SPSS SPSS 20.0 20.0 (Statistical (Statistical Package Package for forSocial Social SciencesSciences). Their). Their statistical statistical treatment treatment was wasdescriptive descriptive so a sos to a scharacterise to characterise the sample.the sample. Thus, Thus, accordingaccording to Maroco to Maroco [16] [16] and and Pestana Pestana and and Gageiro Gageiro [17] [1 absolute7] absolute and and relative relative frequencies frequencies werewere calculated calculated whenever whenever variables variables were were nominal; nominal; similarly, similarly, the meanthe mean (measures (measures of central of central tendency)tendency) and andthe standardthe standard deviation deviation (measures (measures of d ispersion)of dispersion) were were also alsocalculated calculated whenever whenever variablesvariables were were ordinal ordinal or superior. or superior. Because Because this this was wa ans analytical an analytical study, study, several several statistical statistical teststests were were applied, applied, such such as: localisation as: localisation tests tests to determine to determine whether whether there there were were significant significant statisticalstatistical differences differences between between the the samples; samples; associ associationation tests tests to findto find out out how how the the entrepreneurialentrepreneurial potential potential correlated correlated with with the the entre entrepreneurialpreneurial features features considered; considered; and and multivariatemultivariate analysis analysis to estimate to estimate a binary a binary logistic logistic regression regression model model that thatcould could identify identify which which characteristicscharacteristics go hand go hand in hand in hand with with the students’the students’ entrepreneurial entrepreneurial skills, skills, while while understanding understanding theirtheir explanatory explanatory power. power. FollowingFollowing the methodologythe methodology suggested suggested by Maroco by Maroco [16] [16] and andPestana Pestana and andGageiro Gageiro [17], [17], nonparametricnonparametric tests tests were were applied applied to compare to compare the the entrepreneurial entrepreneurial potential, potential, since since the the necessarynecessary conditions conditions for usingfor using parametric parametric tests tests wer ewer note fulfilled.not fulfilled. As aAs matteroffact, a matteroffact, when when datadata normality normality was wastested tested using using the KolmogorovSmirnovthe KolmogorovSmirnov test testwith with the Lillieforsthe Lilliefors correction correction (N (N ≥ 30)≥ 30) or ShapiroWilk or ShapiroWilk test test(N <(N 30), < 30),it stood it stood out outthat thatat least at least one oneof theof t conditionshe conditions was was violated;violated; the samethe same occurred occurred regarding regarding the homogeneithe homogeneity ofty variance of variance when when the Levenethe Levene test testwas was applied.applied. In view In view of the of the reasons reasons that that have have already already been b een mentioned, mentioned, the theMannWhitney MannWhitney WilcoxonWilcoxon test test was was used used alternatively alternatively to TStudent to TStudent for for independent independent samples samples whenever whenever comparisonscomparisons involved involved only only two twosamples samples (gender, (gender, age, age,residing residing area, area, attendance attendance regime). regime). The The MannWhitneyWilcoxonMannWhitneyWilcoxon test testallows allows us to us test to testwhether whether the nullthe nullhypothesis hypothesis of the of mediansthe medians is is equalequal (H0 :( Hη10=: ηη12=) againstη2) against the alternativethe alternative one oneof their of their being being differ different (entH1 :( Hη11 :≠ η η12 ≠), ηwhere2), where η is η is the median.the median. StillStill according according to the to the methodology methodology suggested suggested by Marby Maroco oco [16] [16] and and Pestana Pestana and and GageiroGageiro [17], [17], the KruskalWallisthe KruskalWallis was wasused used as an as alternativean alternative to ANOVA to ANOVA One One Way Way whenever whenever the comparisonthe comparison involved involved more more than than two two(k) independent(k) independent samples samples (area (area of origin, of origin, study study cycle cycle attendedattended and and course’s course’s scientific scientific area). area). The TheKruskalWallis KruskalWallis test test allows allows us to us test to test the the null null hypothesishypothesis of the of equalitythe equality of medians of medians (H0 :( Hη10=: ηη12== η…=2= …=ηk) againstηk) against the alternativethe alternative one onethat that theythey are notare allnot equal all equal (H1: ( ∃H 1i,: j:∃ i,η ij: ≠ ηη i j).≠ η j). Similarly,Similarly, in in order order to to study study how how entrepreneurial entrepreneurial po tential potential correlates correlates to to entrepreneurshipentrepreneurship related related features features the rthe – Pearsonr – Pearson test testwas wasdiscarded, discarded, since since the conditionthe condition for for the applicationthe application of such of such a test a test(data (data normality) normality) was wasnot fulfilled.not fulfilled. Instead, Instead, the Spearmanthe Spearman ordinal ordinal correlationcorrelation test testwas wasused used to measure to measure the intensitythe intensity of the of relationthe relation between between ordinal ordinal variables. variables. It It uses,uses, instead instead of the of theobserved observed values, values, the theobservati observations ons order. order. Thus, Thus, this this coefficient coefficient is not is not sensitivesensitive neither neither to asymmetries to asymmetries in distribution in distribution nor noto rthe to presencethe presence of outliers of outliers, which, which means means Ribeiro B.M,. Fernandes G.A., Diniz S.F., Regional Science Inquiry Journal, Vol. V, (2), 2013, pp. 7585 79 that data do not have to be originating from Normal populations. It tests the null hypothesis (H0: Variables are not correlated) against the alternative one (H1: Variables are correlated). Regression analysis is an econometric technique used to shape and analyse the cause and effect relationship between variables. Therefore, it is particularly useful in studying the relationship between entrepreneurial potential and the students’ entrepreneurial characteristics so as to establish whether those characteristics have any influence or not on their tendency toward entrepreneurship. Since the dependant variable (entrepreneurial potential) was transformed into a dummy one (yes = 1/no = 0), regression must be based on a linear probability model which uses nonlinear functions that delimits the estimation scale. In this study, the estimation scale was delimited with recourse to one of the most frequently used distribution functions: the logistic function or logit model (Figure 1), as suggested by Cramer [18]. The logit function is an approximation where E(Yi) tends to 0 when Xi tends to ∞ and E(Yi) tends to1 when Xi tends to + ∞. The function values vary between 0 and 1 and are interpreted as the possibility that the phenomenon that is being studied may occur. In fact, as it can be seen in Figure 1, Mi is the element’s probability of belonging to group 1, that is, the probability that the phenomenon that is being studied (being entrepreneurial) may occur and (1Mi) the probability that the element belongs to group 0 (not being entrepreneurial).
P( Z) 1 | | | | | | | | | (1Mi) 0,8 eα +βXi Yi = + ε i 0,6 1+ eα +βXi
0,4 Mi 0,2
0 | | | | | | | | | 4 3 2 1 0 1 2 3 4 Z = α + ßx Figure 1 – Logit function configuration. Source: Cramer [18].
Variables were chosen using the stepwise method, a process which is frequently used in situations in which the relationships or associations between the explanatory variables and the dependent variable are not known. Of the variants within the stepwise method, the forward stepwise was chosen because it departs from an original model without any explanatory variable, only the constant term, to which the most significant variables are then continuingly added until the “best model” is obtained. According to Pestana and Gageiro [17], this method has the advantage of eliminating any likely multicollinearityrelated problems which usually question the significance of the estimated coefficients. One of the commonest methods to assess the model’s overall quality is the “likelihood ratio” which allows us to test the null hypothesis of the coefficients being null (H0: β1 = β2 =... = βk = 0) against the alternative one of there being at least one that is unequal to zero (H1: ∃ i,j: βi ≠ βj). The critical approximate value is obtained in the chisquare distribution tables with a number of degrees of freedom which equals the number of restrictions considered in the nullhypothesis Cramer [18]. According to Pestana and Gageiro [17], the test to the model’s overall quality allows us only to conclude that is explanatory power is greater than that of the model with only one independent term, in which case it is not possible to draw any conclusions as to the individual significance of each of the estimated coefficients. To do so, the Wald test should be used for it tests the null hypothesis H0: βj = 0 against the alternative H1: βj ≠ 0. Once the model’s validity as regards each estimator and the whole set of estimators is tested, the adjustment quality should also be tested. Pestana and Gageiro [17] suggest the use of Nagelkerke R2.
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As itAs can it becan seen be seen in Table in Table 2, most 2, most participants participants wer ewer femalee female (61.0%); (61.0%); between between 18 and 18 and 21 years21 years old (53.8%)old (53.8%) corresponding corresponding to an to average an average of 22.6 of 22.6 years years of age of (±4.59);age (±4.59); studied studied under under an ordinaryan ordinary regime regime (82.6%); (82.6%); were were from from Portugal Portugal nort hernnorthern region region (83.9%), (83.9%), lived lived in an in urban an urban centrecentre (53.8%); (53.8%); attended attended the firstthe firststudy study cycle cycle (92. 8%);(92.8%); and andhad hadchosen chosen either either technological technological and managerialand managerial courses courses or science or science education education ones, ones, each e withach with 28.4%. 28.4%.
TableTable 2 – Characteristics2 – Characteristics of the of Participantsthe Participants FrequenciesFrequencies VariableVariable CategoriesCategories % % N N GenderGender MaleMale 39.039.0 233 233 (N =(N 597) = 597) FemaleFemale 61.061.0 364 364 Age Agegroup group 18 to18 21years to 21years old old 53.853.8 322 322 (N =(N 598) = 598) ≥ 22≥ years 22 years of age of age 46.246.2 276 276 OrdinaryOrdinary 82.682.6 494 494 AttendanceAttendance Regime Regime (N = (N 598) = 598) StudentStudent worker worker 17.417.4 104 104 NorthNorth 83.983.9 502 502 CentreCentre 11.411.4 68 68 RegionRegion of origin of origin SouthSouth 1.8 1.8 11 11 (N =(N 598) = 598) MadeiraMadeira and Azoresand Azores 1.6 1.6 10 10 OtherOther 1.2 1.2 7 7 ResidingResiding area area RuralRural 46.246.2 276 276 (N =(N 598) = 598) UrbanUrban 53.853.8 322 322 TechnologicalTechnological Specialization Specialization 1.5 1.5 9 9 StudyStudy cycle cycle CoursesCourses (N =(N 596) = 596) LicentiateLicentiate 92.892.8 553 553 PostPost graduation/Master’s graduation/Master’s 5.7 5.7 34 34 AgrarianAgrarian Sciences Sciences 9.4 9.4 56 56 EducationEducation Sciences Sciences 28.428.4 170 170 ScientificScientific area area HealthHealth Sciences Sciences 20.120.1 120 120 (N =(N 598) = 598) TechnologyTechnology and Managementand Management 28.428.4 170 170 AdministrationAdministration and Tourismand Tourism 13.7 13.7 82 82
ResultsResults
As seenAs seen in Figure in Figure 2, more 2, more than than half halfof the of respondethe respondents showednts showed entrepreneurial entrepreneurial skills skills (72.4%).(72.4%). Risktaking Risktaking propensity propensity stands stands out positiveout positively (90.8%).ly (90.8%). It is Itpossible is possible to conclude, to conclude, then, then, that that these these students students are are capable capable of making of making risky risky dec isions decisions but but based based on wellfounded, on wellfounded, previouslypreviously conceived conceived action action plans. plans. Contrarily, Contrarily, innovativeness innovativeness proved proved to be to a be weak a weak point point (39.7%)(39.7%) that that can can be solved, be solved, though, though, with with proper proper training training in creativity in creativity techniques techniques in the in the workplace.workplace. As Asfor for the the other other features, features, namely namely selfc selfcontrol,ontrol, selfconfidence, selfconfidence, ambiguity ambiguity tolerancetolerance and especiallyand especially the need the need for achievement for achievement there t hereis, obviously, is, obviously, room room for improvement. for improvement.
Ribeiro B.M,. Fernandes G.A., Diniz S.F., Regional Science Inquiry Journal, Vol. V, (2), 2013, pp. 7585 81
Figure 2 – Students’ characteristics and entrepreneurial skills (%)
The averages registered for risktaking propensity, innovativeness, selfconfidence, selfcontrol, need for achievement and ambiguity tolerance hover around a value of 3, which is considered satisfactory (Table 3). Furthermore, the Spearman test allowed us to observe that at the 1% significance level, the entrepreneurial features that contributed most to developing entrepreneurial potential were, by order of importance, selfconfidence (ρ = 0.757), need for achievement (ρ = 0.750), Innovativeness (ρ = 0.699), Risktaking propensity (ρ = 0.678), selfcontrol (ρ = 0.668) and ambiguity tolerance (ρ = 0.627).
Table 3 Correlation of features with entrepreneurial skills Features ρ Mean Standard deviation Risktaking propensity 0.678* 3.12 0.615 Innovativeness 0.699* 3.27 0.932 Selfconfidence 0.757* 3.22 0.738 Selfcontrol 0.668* 3.26 0.849 Need for achievement 0.750* 3.19 0.779 Ambiguity tolerance 0.627* 3.22 0.632 * Meaningful correlations at 0.01significance level.
The KruskalWallis test allowed us to verify with 99% confidence level that there are significant differences in the entrepreneurial potential (pvalue = 0.000) as regards the study cycle where the first cycle (licentiate) stands out as having the largest potential (Mean rank = 309.04) (see Table 4). Similarly, through the KruskalWallis test it was possible to identify significant differences in the entrepreneurial potential (pvalue = 0.002) bearing in mind the course’s scientific area. Science Education students are potentially more entrepreneurial (Mean rank = 334.55). Table 4 presents the results obtained after the MannWhitneyWilcoxon test had been applied which showed the entrepreneurial potential does not vary according to the attendance regime (pvalue = 0.757).
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TableTable 4 – Entrepreneurial4 – Entrepreneurial Potential Potential according according to so tome so humanme human capital capital factors factors FactorFactor CategoriesCategories N N AttendanceAttendance regime regime OrdinaryOrdinary 494 494 300.47 300.47 0.7570.757 (N =(N 598) = 598) StudentStudent worker worker 104 104 294.88 294.88 TechnologicalTechnological Specialization Specialization 9 9 227.17 227.17 StudyStudy Cycle Cycle CoursesCourses 0.000*0.000* (N =(N 596) = 596) LicentiateLicentiate 553 553 309.04309.04 PostPost graduation/master’s graduation/master’s 34 34 145.99 145.99 AgrarianAgrarian Sciences Sciences 56 56 258.95 258.95 EducationEducation Sciences Sciences 170 170 334.55334.55 ScientificScientific area area HealthHealth Sciences Sciences 120 120 265.74 265.74 0.002*0.002* (N =(N 598) = 598) TechnologyTechnology and andManagement Management 170 170 293.83 293.83 AdministrationAdministration and andTourism Tourism 82 82 315.70 315.70 * Significant* Significant differences differences at 0.01significance at 0.01significance level level. .
The TheMannWhitneyWilcoxon MannWhitneyWilcoxon test test allowed allowed us tous establish to establish that that no no significant significant differencesdifferences were were observed observed when when sociodemographic sociodemographic factors, factors, such such as gender as gender (pvalue (pvalue = 0.052) = 0.052) and andage age(pvalue (pvalue = 0.476), = 0.476), were were taken taken into intoconsideration. consideration. Likewise, Likewise, the KruskalWallisthe KruskalWallis test test showedshowed that thatthe regionthe region where where the studentsthe students came came from from (pvalue (pvalue = 0.191) = 0.191) and andtheir their residing residing area area (pvalue(pvalue = 0.696) = 0.696) do not do differentiatenot differentiate the students’the students’ entrep entrepreneurialreneurial potential potential (Table (Table 5). 5).
TableTable 5 – Entrepreneurial5 – Entrepreneurial potential potential according according to so tome so sociodemographicme sociodemographic factors factors FactorFactor CategoriesCategories N N GenderGender MaleMale 233 233 315.62 315.62 0.0520.052 (N =(N 597) = 597) FemaleFemale 264 264 288.36 288.36 AgeAge group group 18 to18 21 to years 21 years old old 322 322 304.02 304.02 0.4760.476 (N =(N 598) = 598) ≥ 22≥ years 22 years of age of age 276 276 294.23 294.23 NorthNorth 502 502 293.72 293.72 CentreCentre 68 68 315.20 315.20 RegionRegion of origin of origin SouthSouth 11 11 380.41 380.41 0.1910.191 (N =(N 598) = 598) MadeiraMadeira and andAzores Azores 10 10 330.00 330.00 OtherOther 7 7 389.21 389.21 ResidingResiding Area Area RuralRural 276 276 296.61 296.61 0.6960.696 (N =(N 598) = 598) UrbanUrban 322 322 301.98 301.98
The TheNagelkerke Nagelkerke R2 registered R2 registered an 89.5% an 89.5% value value (see (seeTable Table 6). Therefore 6). Therefore it is itpossible is possible to to say saythat thatproneness proneness to entrepreneurship to entrepreneurship is 89.5% is 89.5% accounted accounted for byfor independent by independent variables, variables, that that is tois say, to say,by theby students’the students’ entrepreneurial entrepreneurial charact characteristics.eristics. On theOn otherthe other hand, hand, the analysisthe analysis of of logisticlogistic regression regression results results reveals reveals a well a well adjusted adjusted model, model, since since pvalue pvalue = 0.000. = 0.000. The Thebinary binary logistic logistic regression regression proved proved there there is a isca usea ca anduse andeffect effect relationship relationship between between all theall entrepreneurialthe entrepreneurial features features but thebut ambiguitythe ambiguity tolerance tolerance and andthe entrepreneurialthe entrepreneurial potential, potential, withwith a 99% a 99% confidence confidence level. level. The The confidence confidence level level for thefor theambiguity ambiguity tolerance tolerance was was only only 95%.95%. Coefficients’Coefficients’ positive positive signs signs indicate indicate that that those those wh o wh areo are more more prone prone to being to being entrepreneurialentrepreneurial are alsoare alsomore more innovative, innovative, more more ambi ambiguityguity tolerant, tolerant, more more willing willing to take to take risks, risks, moremore selfcontrolled selfcontrolled and andselfconfident selfconfident and andhave have a greater a greater need need for achievement.for achievement.
Ribeiro B.M,. Fernandes G.A., Diniz S.F., Regional Science Inquiry Journal, Vol. V, (2), 2013, pp. 7585 83
Table 6 – Binary logistic regression model Proneness to entrepreneurship Independent variables β Standard deviation Selfconfidence 0.693 0,145 0.004* Risktaking propensity 0.551 0.135 0.000* Selfcontrol 0.691 0.240 0.000* Innovativeness 1.512 0.169 0.000* Need for achievement 0.849 0.238 0.000* Ambiguity tolerance 0.340 0.359 0.012** Constant 39.846 5.180 0.000* N = 598 R2 Nagelkerke = 0.895 χ2 = LR = 577.77; GL= 6 pvalue to reject H0: 0.000 * Significant parameters at 0.01significance level. ** Significant parameters at 0.05 significance level.
Discussion and final remarks
This study allowed its authors to conclude that most of the students who were interviewed had entrepreneurial skills. Selfconfidence, need for achievement and innovativeness were identified as the features which contribute the most to the students’ entrepreneurial potential. As to ambiguity tolerance, it was referred as the feature which contributes least for entrepreneurial potential. This situation may be improved through training seminars which will help students develop skills at the level of planning and decision making. Thus, they will be able to draw up action plans and make rational decisions while acquiring the necessary skills to handle ambiguous situations and the setbacks that are always part of any entrepreneurial process. Kyro [19] posits that some entrepreneurial skills may be innate, whereas others are acquired, developed or potentiated through education and training. According to Minuzzi et al. [20], the development of entrepreneurship has been the concern of several institutions, namely Higher Education institutions, which deem the spreading of culture important for the progress of a nation. In Keogh’s and Galloway’s [21] view, education in general and Higher Education in particular have been playing an essential role in transmitting and adapting teaching methodologies in the field of entrepreneurship to the students’ needs and circumstances and to the demands of future jobs in the context of the present economy. Academic entrepreneurship is currently considered to be a fundamental means of creating new businesses and generating wealth. Therefore, according to Filion [10], Higher Education institutions must focus on developing the concept and achieving knowhow and not only on simply spreading knowledge. The results of this research have shown that human capital factors, such as the course’s scientific area (Education Sciences) and the study cycle (licentiate) differentiate the entrepreneurial potential. As regards human capital factors, only when the attendance regime was taken into consideration were there no significant differences between the two regimes studied. Also, none of the sociodemographic factors proved to be differentiating in terms of the entrepreneurial potential. In fact, such factors as gender, age, region of origin and residing area have no influence on the students’ entrepreneurial potential. Moreover, the results obtained in the course of this research for gender and age are consistent with Koh’s [5]. Finally, the estimated binary logistic regression showed that features, such as innovativeness capacity, ambiguity tolerance, risktaking propensity, need for achievement, selfcontrol and selfconfidence were determinant for proneness to entrepreneurship. These results are well in accordance with the Psychological Characteristics School which ascribes
84 84 RibeiroRibeiro B.M,. B.M,.Fernandes Fernandes G.A., DinizG.A., S.F.,Diniz Regional S.F., Regional Science Science Inquiry Inquiry Journal, Journal, Vol. V, Vol. (2), V, 2013, (2), 2013,pp. 75 pp.85 7585 uniqueunique values values and andattitudes attitudes and anddistinct distinct needs needs to e ntrepreneurship. to entrepreneurship. The The results results of the of logit the logit modelmodel are also are alsoconcurrent concurrent with withthose those obtained obtained by Ko byh Ko[5]h and [5] Gartnerand Gartner [22]. [22].
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[14]Markham,[14]Markham, G. and G. andBaron, Baron, R., Personentrepreneurship R., Personentrepreneurship fit: Whyfit: Why some some people people are more are more successfulsuccessful as entrepreneurs as entrepreneurs than thanothers, others, Human Human Resource Resource Management Management Review, Review, Vol. Vol.13, 13, nº. 2,nº. 2004, 2, 2004, pp. 281301. pp. 281301. [15]Curral,[15]Curral, L., Caetano, L., Caetano, A. and A. and Santos, Santos, S., Atitude S., Atitude dos dosestudantes estudantes universitários universitários face face ao ao empreendedorismo.empreendedorismo. Como Como identificar identificar o potencial o potencial empr empreendedor?eendedor? Revista Revista Portuguesa Portuguesa e e BrasileiraBrasileira de Gestão de Gestão, Vol., Vol.9, nº. 9, 4, nº. 2010, 4, 2010, pp. 214. pp. 214. [16]Maroco,[16]Maroco, J., Análise J., Análise Estatística Estatística com comutilização utilização do SPSS do SPSS, Lisboa:, Lisboa: Edições Edições Sílabo, Sílabo, 2003. 2003. [17]Pestana,[17]Pestana, M. M. and and Gageiro, Gageiro, J., J.,Análise Análise de deDados Dados para para Ciências Ciências Sociais: Sociais: A A complementaridadecomplementaridade do SPSS do SPSS, Lisboa:, Lisboa: Edições Edições Sílabo, Sílabo, 2002. 2002. [18]Cramer,[18]Cramer, J., The J., The Origins Origins and andDevelopment Development of the of Logit the Logit Model Model, Cambridge:, Cambridge: Cambridge Cambridge Publishers,Publishers, 2003. 2003. Ribeiro B.M,. Fernandes G.A., Diniz S.F., Regional Science Inquiry Journal, Vol. V, (2), 2013, pp. 7585 85
[19]Kyro, P., “Entrepreneurship Education and Finnish Society”, Working Papers in Economics, 2006, nº. 21. [20] Minuzzi, J., Santos, P., Lezana, A. and Filho, N., Intenção empreendedora em alunos de Engenharia de Produção: Uma análise com uso de regressão logística In Actas do XXVII ENEGEP, 2007. [21]Keogh, W. and Galloway, L., Teaching enterprise in vocational disciplines: reflecting on positive experience, Management Decision, Viol. 42, nº. 3/4 , 2004, pp. 531541. [22]Gartner, W., Some suggestions for research on entrepreneurial traits and characteristics, Entrepreneurship: Theory and Practice, Vol. 14, 1989, pp. 2737.
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Cechella C., Regional Science Inquiry Journal, Vol. V, (2), 2013, pp. 8798 87
ESTIMATING BRAZILIAN FDI MOTIVATIONS IN PORTUGAL BY STRUCTURAL EQUATIONS MODEL (SEM)
Cristiano CECHELLA University of Azores [email protected]
Abstract: Portugal is a strategic regional location for multinational companies (MNEs) from various countries. This article, through a model based on structural equations (Structural Equations Model), will address the motivations of Brazilian companies to invest in this country compared with firms of other nationalities, which are represented by German companies, Italian, Spanish, American and Japanese. The structural equations allow to infer the safety test results and theoretical constructs. From a theoretical model (known as "structural") constructed from a measurement model (or measurement) is scanned a set of dependency relations, linking the constructs of the hypothesized model. The structural equation modeling is suggested by Hair Jr. et al. (2006) for three purposes: confirming models, evaluation of competing models and the development of new models. In this study, we opted for the development of models related to the first situation, namely the confirmation of a particular model from a theory of FDI. This article has the following structure: first, it will enter the Portuguese economy from the twentieth century. Soon after, it will analyze the internationalization of the Portuguese economy, particularly foreign investment in Portugal. Thirdly, it will put the analysis model, with its conclusions regarding the differences and similarities in the determinants of investments between Brazilian companies and other nationalities in the decision to settle in Portugal, for example, the influence of linguistic affinity and logistics, respectively.
KEY WORDS: Structural Equations Model, Portuguese economy, investments, Brazilian companies, nationalities. JEL classification: E22, F21, H54
1. AN EARLY EVOLUTION OF PORTUGUESE Over the past century, Portugal was an underdeveloped economy and, progressively, turned to a developed country. From a per capita income of 1068 euros in 1910, rose to 13,383 euros in 2010. In order to contextualize the foreign direct investment in Portugal, we start with a brief evolution of the Portuguese economy since 1910 until now, trying to integrate the development of the country in the European Union. To achieve this objective, we use the classification of Mateus (2006), which divided the Portuguese in four growth stages, and it was after 1950 that growth accelerated significantly. Among the EU countries (12), Portugal was the one that has the highest growth rate in the last 55 years, with about 3.7% a year, though this growth has virtually stagnated in the 2000s. According to the author, during the First Republic (19101926) the country was dominated by political instability and social participation in the First World War, leading to macroeconomic imbalances and inflation. Since 1930 there have been two decades of slow growth, but that would create the conditions for sustained growth of the country. Portugal's position as a neutral country during World War II helped to improve their reasons for exchanging and accumulating foreign exchange and gold reserves. Portugal was an important supplier of food and raw materials to belligerents, increasing savings and investment. The illiteracy rate dropped from 65% to about 50% during that period, and investment rose from about 8% to about 20% compared to the total GDP of the country in the early 50s. From this period until 1973, was the golden age of Portuguese economic growth, with an annual growth rate of GDP per capita of 5.7% between 1953 and 1973. Contributed to this development the three Growth Plans, the European integration started in 1960 (entry into EFTA), the accession to GATT in 1962, the Marshall Plan aid (albeit rather limited on the amounts), the relative liberalization of economy and the developmental orientation of the period. At this stage, the countries of
88 Cechella C., Regional Science Inquiry Journal, Vol. V, (2), 2013, pp. 8798 88 Cechella C., Regional Science Inquiry Journal, Vol. V, (2), 2013, pp. 8798
southern Europe grew at rates higher than those of Western Europe, is rejoining the southerninternational Europe trade grew flows at rates (which higher had than been those broken of be Westerntween the Europe, wars), obtaining is rejoining technology the internationaltransfer, tradeinvestment flows and (which explosion had been of broken tourism be andtween remittances the wars), (restoring obtaining the technology balance of transfer,payments). investment The investment and explosion rate reaches of tourism 36% and in 1973, remittances one of (restoringthe highest the in balance the world of (not payments).lowering The the investment average of rate 23.6% reaches since 36% 1953). in 1973, The onerevo lution of the of highest April in 25, the 1974 world ended (not the loweringdictatorship the average and began of 23.6% a process since of 1953).independence The revo of lutioncolonies. of The April social 25, 1974and political ended theunrest, dictatorshipprofound and change began in a ownership, process of theindependence socialization of ofcolonies. the economy The social and theand two political great unrest,oil shocks profoundled to changea period in ofownership, successive the crises socialization in the balance of the ofeconomy payments and (depletion the two great of foreign oil shocks reserves led toof athe period country of successiveagreements crises with inthe the IMF balance in 1978 of paymentsand 1983 (depletionand the consequent of foreign divergence reserves in of theliving country standards agreements compared with to the Europe, IMF in with 1978 average and 1983 growth and of the 1.8% consequent from 1974 divergence to 1984) inwas a livingmain standards facts of compared this time. to Europe, with average growth of 1.8% from 1974 to 1984) was a mainThe facts application of this time. of Portugal's accession to the CEE in 1977 and its integration in 1986, were The keyapplication considerations of Portugal's for increasing accession economic to the CEE welfare, in 1977 as itand allowed its integration free movement in 1986, within were the key CEE,considerations the transfer for increasing of structural economic funds, thewelfare, introduc as ittion allowed of IVA free and movement the harmonization within the of CEE,economic the transfer and of commercial structural funds,law. The the integration introduction since of IVA 1986 and compounded the harmonization by the of rapid economiceconomic and growth, commercial providing law. consumersThe integration with sincea greater 1986 variety compounded and quality by the of rapidproducts, economictechnology growth, transfer, providing higher consumers productivity with of portugu a greaterese varietyindustry and and qualityrestoring of the products, balance of technologypayments. transfer, EU transfers higher productivityaccounted on of average portugu betweenese industry 1986 and and restoring 1992, 1.4% the balanceof GDP ofin net payments.terms. EUThe transfersaverage accounted number of on years average of schooling between of1986 the andpopulation 1992, 1.4% rose of from GDP 2.2 in years net in terms.1973 The to averageseven years number in the of mid1990s. years of schooling Portugal ofback the topopulation converge roseto European from 2.2 income years inlevels 1973in to 1993 seven and years exceeds in the mid1990s. the threshold Portugal of per back capita to converge GDP for to developed European income countries levels usually in 1993considered. and exceeds As a member the threshold of the EU, of benefiting per capita from GDP European for developed funds and countries having to usually meet the considered.standards As requireda member for of entrythe EU, into benefiting monetary from union. European The stabilization funds and having policy to has meet produced the standardsresults required in mid1990, for entry correcting into monetary the serious union. macroec Theonomic stabilization imbalances policy of has the producedprevious two resultsdecades. in mid1990, In 2010, correcting the country the reached serious macroecU.S. $ 21235onomic per imbalances capita, with of the profound previous changes two in decades.terms Inof 2010,infrastructure, the country industrial reached park U.S. and $full 21235 integration per capita, within with Europe. profound changes in termsIt ofis alsoinfrastructure, important industrialto relate thepark growth and full of iPortugntegrational compared within Europe. to the world. Maddison (1995) It is identifiesalso important five stages to relate of thesuch growth growth. of ThePortug thirdal comparedphase (191350) to the world. was a Maddisonvery troubled (1995) period identifiesmarked five by stages two worldof such wars, growth. hyperinflation, The third ph thease Great(191350) Depression, was a very protectionism troubled period and the markedcollapse by two of globalworld wars, financial hyperinflation, system. The the fourth Great pha Depression,se (195073) protectionism known by and European the collapsehistorians of global (Crafs financial and Toniolo, system. 1996) The as fourth the golden phase age (195073) of growth, known with by growth European rates of historianstechnical (Crafs progress and Toniolo,and never 1996) seen before, as the goldenthe liber agealization of growth, of trade with and growththe Bretton rates Woods of technicalsystem. progress The last and phase, never from seen 1973, before, notes the theliber slowdoalizationwn ofin tradegrowth, and by the the Bretton two oil Woods crises, the system.debt The crisis last of phase, developing from 1973, countries notes and the the slowdo fall ofwn socialism in growth, in by Eastern the two Europe. oil crises, In the the new debtmillennium crisis of developing saw the revolution countries of and information the fall of techno socialismlogy, in the Eastern emergence Europe. of global In the terrorismnew millenniumand the sawgrowth the ofrevolution AsianPacific of information region in technoworld logy,GDP, thein particularemergence China, of global a major terrorism player in and thethe worldgrowth of of highgrowth AsianPacific emerging region inmarkets world inGDP recent, in particularyears. At China,the pace a majorfrom 1985player to in 1995 the worldPortugal of neededhighgrowth 12 years emerging to reach markets the EU in average. recent years.However, At thethe pacepace fromof 1995 1985 to 2009to 1995 would Portugaltake aboutneeded 50 12 years. years Thus, to reach there the was EU a average.clear slowdo However,wn in convergencethe pace of 1995 in the to last 2009 decade. would takeEconomic about 50 years. policies Thus, geared there to was boosting a clear private slowdo consumwn in convergenception and public in the debt last induces decade. the rise of Economicthe public policies debt geared in the to boosting economy, private which consum was notption accom and publicpanied debt by induces increased the total rise of factor the productivity, public debt in the the pace economy, of convergence which was became not accom untenapaniedble. To by improve increased this total scenario factor the productivity,structural thereforms pace are of vital. convergence became untenable. To improve this scenario the structural reforms are vital.
2 THE INTERNATIONALIZATION OF PORTUGUESE AND FDI IN PORTUGAL 2 THEThe INTERNATIONALIZATION hightech exports in 1967 represented OF PORTUGUESE about 2% of total AND exports FDI IN in PORTUGAL2009 reached 13,2%. The Inhightech the reverse exports way, in 1967 the lowtechrepresented goods, about which 2% of encom total exportspassed 77%in 2009 in reached 1967 and 13,2%. in 2009 In thedropped reverse to way, less thethan lowtech half that goods, 1967 which amount, encom 33%.passed Products 77% like in 1967 textiles, and clothing in 2009 and droppedfootwear, to less although than half positioned that 1967 as lowtech, amount, can 33%. inve Prstoducts in quality like textiles,and design, clothing increasing and its footwear,value. althoughVehicles, positionedmachinery asand lowtech, mechanical can and inve electst inrical quality appliances, and design, such increasingas molds for its the value.plastic Vehicles, industry, machinery electrical and wires mechanical and cables, and tranelectsformersrical appliances, and micro such electronic as molds form for anotherthe plasticimportant industry, group electrical of exports. wires Modern and cables, enterprises transformers with advanced and micro technologies, electronic form as AutoEurope, another importantis important group of too. exports. Although Modern this enterprises process with needs advanced to be strengthened,technologies, as as AutoEurope, the example of is importantQuimonda. too. Although this process needs to be strengthened, as the example of Quimonda.This trend continued as Portugal continues to make the reforms necessary to increase the Thiscompetitiveness trend continued of as its Portugaleconomy, continues increasing to their make at tractivenessthe reforms and necessary thereby toparticipate increase more the in competitivenesstrade flows andof its investment economy, worldwide.increasing their The atdegreetractiveness of internationalization and thereby participate of the morePortuguese in trade flows and investment worldwide. The degree of internationalization of the Portuguese Cechella C., Regional Science Inquiry Journal, Vol. V, (2), 2013, pp. 8798 89 economy, measured by total exports of goods and services / GDP is still relatively low. In a comparative context, in 1990 and 2010, Portugal did not increase their degree of internationalization in the period, with exports of goods and services / GDP accounting for about 30%. Spain, however, increased from 16.1% to 26.3% and Ireland, from 56.6% to 81.3%, respectively, the degree of internationalization, indicating a faster pace of internationalization1. Complementing this analysis, we identified the geographic destination for Portuguese exports. With a small downward trend, we see the huge representation of the EU15 in total exports from Portugal (about 75% in 2010), in particular the increase of Spain (from 14.8% in 1995 to 28.2% 2008). Currently there are movements, including the support of government agencies that has the objective to diversify its export basket in terms of geography and products, particularly to Asian countries like China (0.1% in 1995 to 0.5% in 2008) and India, Africa (1.7% in 1995 to 4.8 in 2008) and Latin America, including Mexico and Brazil, stable, with about 0.8% and 0.3% of total Portuguese exports, respectively.
PORTUGAL COUNTRY AS HOST AND INVESTOR OF FDI FDI has undergone major transformations in the two decades after the Portugal accession to the European Community. In this section, we discuss foreign direct investment in Portugal, and briefly on the Portuguese investments abroad, a new and important reality for the Portuguese economy. Throughout the nineteenth century, and until now, there are three main stages of FDI in Portugal. The first phase includes the 2nd half of the nineteenth century until the mid twentieth century, predominantly the english capital placed in the industry, the financial sector and the external trade. The second phase begins with the membership of EFTA in 1960 until 1973, within the context of global liberalization and the exhaustion of the current model of development, and the need for public spending cuts stemming from the colonial war. Foreign capital was directed to manufacturing such as textiles and clothing, pulp, electronics to harness natural resources and lower cost of portuguese manpower. The years immediately following April 25 were with political instability.
Since then, the country slowly makes some structural reforms in the economy to regain credibility and begins with the integration of Portugal into de CEE in 1986, the third phase of IDE. Notes the entry of a high capital directed to the financial sector and industry, particularly targeting foreign markets and supermarkets. In 1987 came the first big jump, when FDI almost doubled compared to 1986 (72.9 versus 38.0 billion of escudos). The second time happened to peak around 1990s, corresponding to the privatization process. Considering the period from the late 1980s, which FDI became the principal route of global integration, the portuguese economy was relatively unattractive, except in a few years. Since 2000, the year large flow of FDI worldwide, there were over 3 years of substantial FDI inflows into Portugal. In 2002 was created the Portuguese Investment Agency (API), currently AICEP in order to develop mechanisms that would facilitate foreign investment in Portugal. Even with the advancement of FDI in Portugal from the year 2000, there is not a continuing evolution, reflecting an environment more punctual than enduring characteristics of business environment, which is grounded by the country's weak economic growth and other internal vulnerabilities. Regarding the origin of foreign capital (accumulated net balance between 1996 and 2007 of 40.6 billion euros), we evidence the dominance of the Euro Area countries, with a balance of 67.5%, in particular Spain (35%) and France (8%). Following is the importance of other countries in the Euro Area (24%) and UK (13%), according Bank of Portugal. Germany has negligible positive balance, and Brazil is negative. Here we see the importance of research as case studies because these two countries have, however, many companies in Portugal, with
1 The actual economic crises show that this is an important factor to economic development, but other elements are important too.
90 90 CechellaCechella C., Regional C., Regional Science Science Inquiry Inquiry Journal, Journal, Vol. V, Vol. (2), V, 2013, (2), pp.2013, 8798 pp. 8798 investmentsinvestments in diverse in diverse economic economic sectors. sectors. This This is ev isidenced evidenced in the in thenext next section section by a by a comparativecomparative study study of some of some countries countries investors investors in Po inrtugal, Portugal, including including Germany Germany and Brazil.and Brazil. If weIf show we show the FDI the FDI in Portugal in Portugal by sectors, by sectors, is conce is concentratedntrated in the in activities the activities of securities of securities businessbusiness services services (60.4%) (60.4%) and financialand financial (12.6%). (12.6%).
3 COMPARATIVE3 COMPARATIVE STUDY STUDY OF OF FOREIGN FOREIGN INVESTMENT INVESTMENT IN IN PORTUG PORTUGAL AL This This section section will will be based be based on empirical on empirical research research through through a questionnaire a questionnaire conducted conducted with with MNEsMNEs of six of nationalitiessix nationalities installed installed in Portugal, in Portugal, about ab theout determinantsthe determinants of FDI of FDIidentified identified in in eclecticeclectic paradigm paradigm (Dunning, (Dunning, 2008). 2008). We Wecompare compare the d theeterminants determinants of FDI of FDI in Portugal in Portugal of of BrazilianBrazilian companies companies in relation in relation to the to Italian,the Italian, Ame American,rican, Japanese, Japanese, Spanish Spanish and German.and German. For For this, this,it will it willidentify identify a general a general model, model, based based on th one methodology the methodology of structural of structural equations equations (using (using softwaresoftware SPSS SPSS AMOS AMOS 6.0), 6.0), after after that that measuring measuring the e thextent extent to which to which the motivations the motivations of of companiescompanies vary. vary.
3.1 3.1 Methodology Methodology and and theoretical theoretical aspects aspects of Struct of Structural ural Equations Equations Modeling Modeling (SEM) (SEM) The The methodology methodology used used is the is thedata data modeling modeling technique technique of structural of structural equations, equations, which which correspondscorresponds to the to symbol the symbol adopted adopted in English in English Struct Structural ural Equations Equations Modeling Modeling (SEM). (SEM). This This allowsallows the theresearcher researcher to test to test hypotheses hypotheses of relatio of relationshipsnships among among latent latent variables variables and and observables,observables, being being an important an important resource resource for evalua for evaluating ting theories theories and and causal causal relationships relationships (Schuler,(Schuler, 1995, 1995, McQuitty, McQuitty, 1999). 1999). Or endogenousOr endogenous latent latent variables variables are arethose those that that repre represent sent the theeffect effect of other of other variables variables (constructs),(constructs), similar similar to the to dependentthe dependent variables variables in experimental in experimental studies studies (Kline, (Kline, 1998, 1998, p. 16). p. 16). AccordingAccording to Hair to HairJr. et Jr. al. et (2006), al. (2006), are consideredare considered manifest manifest variables variables (also (also called called observable, observable, exogenousexogenous or orindicators) indicators) as asobservable observable values values for for a specific a specific item item or orissue. issue. The The structural structural equation equation models models allow allow to infer to infer safet safety testy resultstest results and andtheoretical theoretical constructs. constructs. FromFrom a theoretical a theoretical model model (known (known as "structural") as "structural") constructed constructed from from a measurement a measurement model, model, is is checkedchecked the set the of set dependency of dependency relations, relations, linking linking the constructs the constructs of the of hypothesized the hypothesized model. model. The Themeasurement measurement model model analyzes analyzes the structuralthe structural model model from from a set a of set variables of variables examined examined and and relatedrelated to to each each latent latent variable variable (Hair (Hair Jr. Jr. et et al. al. 20 06; 20 06; Ullman, Ullman, 2000). 2000). The The structural structural equation equation modeling modeling is suggested is suggested by Ha byir Ha Jr.ir et Jr. al. et (2006) al. (2006) for three for three purposes: purposes: confirmingconfirming models, models, evaluation evaluation of competing of competing models models and theand developmentthe development of new of newmodels. models. In In the firstthe firstsituation, situation, we trywe to try check to check the adjustmentthe adjustment of the of statisticalthe statistical model model proposed proposed from from the the theorytheory in order in order to prove to prove his confirmation his confirmation or reject or rejection (testion (testthe level the level of adjustment of adjustment between between the the modelmodel and sampleand sample data). data). In the In evaluationthe evaluation of compet of competing models,ing models, different different theoretical theoretical models models are comparedare compared using using formats formats developed developed based based on theor on theories contraryies contrary to or to inconsistent or inconsistent with withthe the purposespurposes of identifying of identifying the one the thatone bestthat bestfits the fits data. the data. The Thethird third use concernsuse concerns the development the development of models,of models, when when it aims it aims to evaluate to evaluate and improveand improve theoretical theoretical models models predesigned, predesigned, however, however, requirerequire improvements improvements in their in their statistical statistical adjustmen adjustment usingt using modifications modifications based based on arguments on arguments basedbased on theory on theory (MacCallum, (MacCallum, 1995). 1995). In this In study,this study, we optedwe opted for thefor developmentthe development of models of models relatedrelated to the to firstthe firstsituation, situation, namely namely the confirmathe confirmation tionof a ofparticular a particular model model from from a theory a theory of of FDI.FDI. For implementationFor implementation of this of thisstrategy strategy were were followed followed steps s teps suggested suggested in the in literature the literature on the on the structuralstructural equation equation modeling modeling (Anderson (Anderson and Gerbing,and Gerbing, 1988; 1988; MacCallum, MacCallum, 1995; 1995; Hair HairJr. et Jr. al. et al. 2006;2006; Kline, Kline, 1998, 1998, Garver Garver and andMentzer, Mentzer, 1999; 1999; Ullman Ullman, 2000),, 2000), as well as wellas empirical as empirical studies studies that thathave have employed employed the techniquethe technique (Santos, (Santos, 2001). 2001). Initially, Initially, models models developed developed measures measures and and structures;structures; thereafter, thereafter, the data the data matrix, matrix, the techni the technique que for estimating for estimating and andadjustment adjustment criteria criteria werewere defined defined and, and,lastly, lastly, the constructs the constructs in the in mod the elmod measuresel measures and theand integrated the integrated model model were were evaluated.evaluated. As a As technique a technique for estimatingfor estimating the proposthe proposed model,ed model, the suggestionsthe suggestions were were accepted accepted GarverGarver & Mentzer & Mentzer (1999) (1999) using using the thetwostep twostep approach approach (twostep (twostep approach), approach), which which is is characterizedcharacterized by evaluating by evaluating the themeasurement measurement model model by employing by employing factor factor analysis analysis that that confirmsconfirms that that each each individually individually construct construct the modelthe model (Reise, (Reise, Widaman, Widaman, and and Pugh, Pugh, 1993, 1993, GarverGarver and Mentzer,and Mentzer, 1999). 1999). DemonstratedDemonstrated the theappropriateness appropriateness of the of themeasure measure are arechecked checked hypothesized hypothesized structural structural relationshipsrelationships among among the latent the latent variables variables from from the e thestimation estimation of the of adjustment the adjustment measures measures in the in the integratedintegrated model model (Garver (Garver & Mentzer, & Mentzer, 1999; 1999; Ullmann, Ullmann, 2000). 2000). The Thesteps steps of the of processthe process of structural of structural equation equation mod elingmodeling are detailedare detailed in the in followingthe following items: items:
Cechella C., Regional Science Inquiry Journal, Vol. V, (2), 2013, pp. 8798 91 a) Development of Measurement and Structural Models Before you even deal with the construction of structural models and measurement, the researcher develop a theoretical model to be empirically proven throughout the study. From the proposition of a theoretical model and the definition of relations between constructs, is constituted the path diagram, which consists of graphical and schematic representation of the causal relationships between constructs. In this diagram, the researcher can provide not only the predictive relationships between the constructs (relations between dependent and independent variables), but also the relations of association (correlation) between constructs and indicators (Hair Jr. et al., 2006). With its establishment, it is possible to perform a model specification with the definition of structural equations, their connections between the constructs and measurement model adopted to measure the constructs. The study model is developed from a theoretical model of definitions and operationalization of variables. It should be noted that the models set out the notation used is as follows:
• "e" corresponds to the measurement errors. • "rectangles" indicate the manifest variables (observable) of the study. • "ellipses" correspond to the latent variables or constructs. b) Selection Matrix Input Method, Estimation and Adjustment Indices The data matrix used in structural equation modeling is automatically generated from a correlation matrix or a covariance matrix between variables of the model. The next step to take is to establish how the model will be estimated. Among the existing techniques for estimating parameters, we highlight the Maximum Likelihood (ML) and Standard Generalized Theory Least Squares (GLS), which require the use of metric variables and the normality of their distribution. According to Hair Jr. et al. (2006), the first approach has the advantage of increased efficiency when the assumption of multivariate normality is considered, and is widely used in most software for the structural equation modeling. One limitation of such estimation lies in its susceptibility to the size of the survey sample, since the greater the number of cases under review (over 400 cases), the more sensitive technique to detect differences between data. In this study, we chose to use the Maximum Likelihood. In assessing the adequacy of the proposed model to the data, adjustment measures were used to verify that enabled the degree which the model predicts the covariance matrix or correlation (absolute measurements) and the comparison of the proposed model with a null model incremental steps (Hair Jr. et al., 2006). For purposes of this study, two groups were considered the index below.
Index of General Adjustment . Chisquare over degrees of freedom: it is an absolute fit index that shows the differences between the observed and estimated matrices, indicating that the greater the magnitude of chi square relative to degrees of freedom, greater is the differences between the two arrays. Acceptable values for this ratio are less than five (5). Importantly, is an extremely sensitive indicator of sample size for research should not be interpreted in isolation (Anderson and Gerbing, 1988; Hair Jr. et al., 2006). . Goodnessoffit (GFI): As no absolute standard that varies from 0 (poor fit) to 1 (optimal setting), based on the comparison of waste arising from the two arrays of data (observed and estimated), with the acceptable values greater than or equal to 0.8. . Root Mean Square Error of Approximation (RMSEA) index used to correct the trend of the chisquare test to reject specified models from large samples. Is to assess the discrepancy between the degree of freedom of the root mean square of model residues observed and expected squared, with the acceptance ranges between 0.04 and 0.08 (Hair Jr.et al., 2006)
Comparative Fit Index . Comparative Fit Index (CFI), incremental measure that compares, in aggregate terms, the estimated models and zero or independent. Its range is 0 to 1, with values near 1 indicate satisfactory fit. According to Hair Jr. et al. (2006), is the most appropriate measure for studies that seek to develop models.
Cechella C., Regional Science Inquiry Journal, Vol. V, (2), 2013, pp. 8798 92 92 Cechella C., Regional Science Inquiry Journal, Vol. V, (2), 2013, pp. 8798
Indices Indices of parsimony of parsimony Are Arerelative relative indexes indexes that thatinclude include a penalty a penalty due dueto the to complexitythe complexity of the of modelthe model by including by including moremore free free parameters parameters to improve to improve the theadjustment adjustment (few (fewer degreeser degrees of freedom). of freedom). They They are are representedrepresented by indicesby indices such such as the as PCFIthe PCFI PGFI PGFI and and with wi acceptableth acceptable values values between between 0.6 and0.6 and 0.8; 0.8;bad ifbad the if values the values are smaller are smaller than thanthis range,this range, and veryand very good good if more if more than thanthese these values. values. TheThe evaluation evaluation indices indices of adjustment of adjustment means means allows allows the researcherthe researcher to judge to judge the needthe need for for potentialpotential changes changes in the in proposed the proposed model, model, thereby thereby seeking seeking greater greater consistency consistency of the of constructs the constructs and theand generalthe general model. model. The Thereespecification reespecification a model a model should should be performed be performed with with the theoreticalthe theoretical contributioncontribution in order in order to maintain to maintain the conceptualthe conceptual logic. lo gic.Hair Hair Jr et Jr al. et (2006) al. (2006) recommend recommend that that the modelthe model is adjusted is adjusted from from the initialthe initial examination examination of waste,of waste, excluding excluding variables variables that that are are underminingundermining the covariancethe covariance model model with with Tvalue Tvalue (or a(ordjusted adjusted residue) residue) greater greater than than2.58. 2.58. This This techniquetechnique is referred is referred to often to often by trimming by trimming model model wh ich wh ich is to is remove to remove nonsignificant nonsignificant parametersparameters in the in themodel, model, while while it increases it increases the thedeg rees deg rees of freedom of freedom associated. associated. Another Another techniquetechnique is the is analysisthe analysis of the of modificationthe modification indic indices (MI)es (MI) data datafrom from one analysisone analysis to the to valuesthe values of chisquareof chisquare test, test, and and that that the technique the technique requires requires the establishment the establishment of relationships of relationships whose whose valuevalue exceeds exceeds 3.84. 3.84. This This approach, approach, like likethe previouthe previous one,s one,is step is stepby step, by step, where where the highestthe highest valuesvalues of MI of willMI will be those be those who who enter enter the establishmthe establishment ofent new of new relationships. relationships. Finally, Finally, the the modelmodel fitting fitting the datathe datawill willalways always support support theory theory as the as guideline,the guideline, and andthe establishmentthe establishment of of new newrelations relations from from the MIthe andMI andexclusion exclusion of variable of variables and/ors and/or meaningless meaningless parameters parameters will willbe be consideredconsidered only only if there if there is a theoreticalis a theoretical sense sense to do to so. do so. The The measures measures outlined outlined above above were were used used in the in evaluathe evaluation tion of the of measurementthe measurement model model or or measure,measure, from from the thedetailed detailed individual individual assessment assessment of each of each construct construct that that makes makes up the up the theoreticaltheoretical model. model. For purposesFor purposes of analysis, of analysis, we conwe sideredconsidered a set a ofset indicators of indicators of adjustment, of adjustment, namely,namely, chisquare chisquare and itsand probability its probability level, level, the C theFI, C PCFI,FI, PCFI, GFI, GFI, RMSEA, RMSEA, and theand PGFI. the PGFI. c) Assessmentc) Assessment of measurement of measurement model model As forAs thefor evaluationthe evaluation of the of measurementthe measurement model, model, Gar verGar &ver Mentzer & Mentzer (1999) (1999) state state that thatthe usethe use of confirmatoryof confirmatory factor factor analysis analysis is a techniqueis a technique to v erifyto verify the properthe proper analysis analysis of each of each construct construct or or latentlatent variable variable that thatforms forms the proposedthe proposed model. model. This This technique technique differs differs from from exploratory exploratory factor factor analysisanalysis by allowing by allowing researchers researchers to identify to identify the rethelationship relationship between between latent latent and and manifest manifest variablesvariables with with the greatestthe greatest degree degree of control of control by as bysigning assigning the indicatorsthe indicators of positive of positive charges charges in in his allegedhis alleged factors factors and and loads loads restricted restricted to zero to zero in other in other factors factors (Hair (Hair Jr.et Jr.et al., 2006). al., 2006). It is It is usuallyusually used used as a astool a toolfor verifyingfor verifying the validitythe validity of constructs of constructs and andevaluation evaluation of measurement of measurement scalesscales (Anderson (Anderson & Gerbing, & Gerbing, 1988; 1988; Hair Hair Jr. et Jr. al., et 2006). al., 2006). In evaluatingIn evaluating the properties the properties of a of construct, a construct, the fi therst fi pointrst point to be to diagnosed be diagnosed is to is verify to verify the the identificationidentification of the of model.the model. According According to Hair to Hair Jr. et Jr. al. et (2006, al. (2006, p.608), p.608), the identificationthe identification problemsproblems are characterizedare characterized by the by inabilitythe inability of the of modelthe model estimates estimates to generate to generate meaningful meaningful and and logical.logical. One Oneway wayto generate to generate a greater a greater identificati identification ofon the of modelthe model is to is fix to thefix valuethe value of the of the variancevariance in the in constructs the constructs "1", "1",which which allows allows the ca thelculation calculation of load of loadfactors factors of the of construct. the construct. The Thesecond second property property to be to analyzed be analyzed is the is unidimensthe unidimensionalityionality of the of constructs.the constructs. It is Itthe is degreethe degree to whichto which the indicators the indicators represent represent a single a single latent latent variable variable or construct or construct (Garver (Garver & Mentzer, & Mentzer, 1999).1999). A basic A basic condition condition for the for reliabilitythe reliability assess assessmentment of a ofconstruct, a construct, represented represented as indicators as indicators of a ofconstruct a construct trainers trainers have have an acceptable an acceptable fit for fit afor model a model with with a single a single factor factor or dimension or dimension (Hair(Hair Jr. et Jr. al., et 2006).al., 2006). In this In study,this study, unidimensio unidimensionalitynality was wasassessed assessed from from the residualthe residual analysis analysis for thefor construct. the construct. Unidimensionality Unidimensionality is confirmed is confirmed when w hen the standardizedthe standardized residuals residuals are loware low (less(less than than 2.58) 2.58) and aand significance a significance level level of 5%. of 5%. The The verification verification of the of thevalidity validity indicates indicates whether whether the the measurement measurement instrument instrument captures captures preciselyprecisely what what you you want want to measure. to measure. Among Among the themajor major forms forms of validity of validity checked checked by by researchersresearchers (Hair (Hair Jr. et Jr. al., et 2006,al., 2006, Churchill, Churchill, 1999 1999) are:) are:the predictivethe predictive validity, validity, linked linked to the to the predictionprediction accuracy accuracy of an of external an external form form of behavior of behavior as the as instrumentthe instrument itself, itself, the contentthe content validity,validity, linked linked to the to correspondencethe correspondence between between the manifestthe manifest variables variables used used in the in instrumentthe instrument and andthe theoreticalthe theoretical definitions definitions of the of constructthe construct assessed, assessed, the constructthe construct validity, validity, which which seeks seeks to to identifyidentify if this if thisindeed indeed is being is being measured measured and andwhat what are theare empiricalthe empirical indicators indicators that thatrelate relate to to theirtheir theoretical theoretical constructs constructs and isand considered is considered both both the convergentthe convergent validity validity (measures (measures related related to to the samethe same construct construct that thatare correlated)are correlated) and discrimand discriminantinant validity validity (divergence (divergence measures measures related related Cechella C., Regional Science Inquiry Journal, Vol. V, (2), 2013, pp. 8798 93 to different constructs) and, finally, the validity, linked to the correspondence of results obtained with formed the theoretical basis. d) Evaluation of the structural model The evaluation of structural relationships between hypothesized constructs was performed to evaluate the proposed integrated model. Hereby, we assessed the indicators of adjustment model and the significance and magnitude of the estimated regression coefficients for each structural equation (Hair Jr.et al., 2006, Garver and Mentzer, 1999; Ullman, 2000). Possessing significant coefficients, there is empirical evidence of the relationship established between the constructs in the model (Hair Jr. et al., 2006). Regarding the use of adjustment measures for model evaluation, Garver and Mentzer (1999) state that with a satisfactory evaluation of these indices within the ranges of acceptability, the model has predictive validity. Finally, as the findings of the evaluation process of the model, reespecification model can be claimed. This process occurs from the addition or reduction in the number of parameters estimated in the original model, since there is theoretical justification for its achievement (Hair Jr. et al., 2006). Another recommended process improvement model is the comparison of the original model to rival models. From this evaluation, attempts to identify the model that fits better into the survey data, with the premise that, just as the reespecification models require, they have a strong theoretical foundation. Anyway, for the study that was conducted was used to follow the path that presents itself, in line with the theoretical aspects of SEM.
3.2 The Model Analysis The model that you want to confirm is based on a questionnaire answered by the Brazilian, Japanese, Italian, German, Spanish and American present in Portugal, through contacts on the spot, mail or telephone, they were 219 validated responses from a total of 250. By country, we are Brazil (50), USA (38), Spain (41), Germany (37), Italy (35) and Japan (18), of various sectors and sizes. These questions refer to Eclectic Paradigm Approach (factors related to the assets, factors of internalizing and location factors) and Scandinavian school (cultural affinity influence). These questions were answered in Likert scale. Based on this conceptual model theory, given the large number of manifest variables from the questionnaire, we opted to do a factor analysis to help identify the most relevant for the model. According to the theory of FDI, we thought of the determinants are all interrelated, it was to construct a whole and for the two groups. After the factor analysis and with the addition and subtraction of other variables contained in the questionnaire, we find three models: model with all countries, with other countries and another with Brazil in order to verify the similarities and the differences between this country and others evaluated in this study regarding the determinants of foreign direct investment in Portugal. Such models are in anexesd below:
94 94 94 CechellaCechella CechellaC., Regional C., Regional C., RegionalScience Science Inquiry Science Inquiry Journal, Inquiry Journal, Vol.Journal, Vol.V, (2), Vol.V, 2013,(2), V, 2013,(2), pp. 2013, 8798 pp. 8798 pp. 8798
FigureFigureFigure 3.1 3.1 General 3.1 General General Model Model Model with with all with allcountries countriesall countries
CechellaCechellaCechella C., C.,Regional Regional C., Regional Science Science ScienceInquiry Inquiry Journal,Inquiry Journal, Journal,Vol. Vol. V, V,Vol.(2), (2), 2013, V, 2013, (2), pp. 2013, pp. 8798 8798 pp. 8798 9595 95
FigureFigureFigure 3.2 3.2 – Model3.2– Model – Model with with otherwith other othercountries countries countries without without without Bra Brazil Brazil zil
CechellaCechella C., Regional C., Regional Science InquiryScience Journal, Inquiry Vol.Journal, V, (2),Vol. 2013, V, (2), pp. 2013, 8798 pp. 8798 9696 96 CechellaCechella C., Regional C., Regional Science Science Inquiry Inquiry Journal, Journal, Vol. V, Vol. (2), V, 2013, (2), 2013, pp. 8798 pp. 8798
FigureFigureFigure 3.3 3.3 – Brazil–3.3 Brazil – Brazil model model model
FromFrom theFrom the model, model,the model, the the sample samplethe sample was was divided wasdivided divided between between between Braz Brazil Braziland and ilother andother countriesother countries countries in inorder order in toorder tocheck check to check whetherwhetherwhether the the model modelthe model is isequivalent equivalent is equivalent between between between the the two twothe gro twogroupsups gro for upsfor analysis. analysis.for analysis. Such Such modelsSuch models models are are shown shownare shown in infigures figuresin figures 3.1, 3.1, 3.2 3.1,3.2 and and3.2 3.3. and3.3. There 3.3.There Therehas, has, thus, has,thus, the thus, the comparative ctheomparative comparative analysis analysis analysis between between between Brazil Brazil Braziland and other andother other countriescountriescountries (Table (Table (Table 3.1), 3.1), and3.1), and tried and tried totried to respond respond to respond even even ifeven if the the if model the the model model model fits fits equally fits fits equally equally equally well well to well well to the the to to the the determinantsdeterminantsdeterminants of of FDI FDI of in FDI inPortugal Portugal in Portugal from from Brazil from Brazil Braziland and oth andother er countries.oth countries.er countries.
. Model. Model.. ModelModel results results resultsresults AsAs for forAs the thefor adjustment adjustmentthe adjustment measures, measures, measures, have have the have the following followingthe following results: results: results: . X2/df. X2/df.. X2/dfX2/df= 1.694= 1.694 == 1.6941.694 Very Very good VeryVery good good good . Pva . Pva lue.. PvaPvalue = 0.000=lue 0.000 = 0.000 Very Very goodVery good good . CFI. CFI =.. CFICFI0.794= 0.794 == 0.7940.794 Almost Almost AlmostAlmost acceptable acceptable acceptableacceptable . PCFI . PCFI .. =PCFIPCFI 0.685= 0.685 == 0.685– Acceptable– Acceptable – Acceptable . GFI. GFI =.. GFIGFI0.852= 0.852 == 0.852–0.852 Acceptable– Acceptable –– AcceptableAcceptable . PGF . PGF I.. =PGFPGFI 0.665= 0.665I = 0.665– Acceptable– Acceptable – Acceptable . RMSEA. RMSEA.. RMSEARMSEA = 0.04= 0.04 == – 0.04 0.04 Acceptable– Acceptable –– AcceptableAcceptable Cechella C., Regional Science Inquiry Journal, Vol. V, (2), 2013, pp. 8798 97
As we can see, the general model and therefore the models for Brazil and other countries have acceptable rates of adjustment, and the overall pattern, therefore, valid also with respect to the results for subgroups other countries and Brazil. Manifest variables and relationships that, in principle, would not explain the investment of foreign companies in Portugal, are important for building the model generally and are essential to determine the model as a whole.
Table 3.1 Comparative analysis of three models Variabel General Model Other countries Brazil Scale 0,31 0,25 0,52 Logistic 0,94 0,97 0,82 Strategic Assets 0,91 0,93 0,82
Estability Portugal 0,45 0,37 0,68 Geographical distance 0,46 0,42 0,40 Labor costs 0,48 0,44 0,57 Transport costs 0,48 0,45 0,48 Portuguese market potential 0,53 0,52 0,49 Portuguese infrastructures 0,44 0,35 0,57 European Union enlargement 0,16 0,10 0,33 Human resources disponibility 0,31 0,26 0,54 Buy other companies 0,47 0,36 0,74 Joint ventures 0,32 0,33 0,12 Portugal receptivity 0,26 0,18 0,74
Tecnology 0,45 0,39 0,58 Image and brand 0,47 0,47 0,42 Product quality 0,50 0,46 0,58 Financial stability 0,47 0,39 0,65
0,12 0,07 0,30 0,09 0,05 0,39
We found a high correlation between the location factors and assets (0.83), and this is what best explains the profitability and performance. In the model of other countries, the correlation between location factors and assets was high (0.85). However, the location seems to be the factor that explains a little more profitability and performance. Finally, the model related to Brazil, we have a good level of correlation among the three latent variables: location and internalization (0.55), location and assets (0.64), and assets and internalization (0.61), and factors related to the assets which best explain the profit and the practical result. This higher level of correlation between the three latent variables may provide the greatest explanatory power of this model for the dependent variables: profitability and performance, perhaps because the sample is more homogeneous. It is noteworthy also in relationship to the theoretical aspects, the variable cultural affinity, linked school in Uppsala, was not significant in this model, probably by membership of the sample countries in which this item is irrelevant.
4 – FINAL REMARKS This paper examined the determinants of investment by multinational companies in Portugal, using the model of structural equations. We tried, in summary form, describing the evolution of the Portuguese economy since the early decades of last century. It is also showed Portugal as a host of international investment, with an accelerated regional integration of economies and globalization.
98 98 CechellaCechella C., Regional C., Regional Science Science Inquiry Inquiry Journal, Journal, Vol. V, Vol. (2), V, 2013, (2), pp.2013, 8798 pp. 8798
In orderIn order to see to thesee mainthe main motivations motivations of MNEs of MNEs to inv toest inv inest Portugal in Portugal and verifyand verify the extentthe extent to to whichwhich the motivationsthe motivations of brazilian of brazilian companies companies invest invest in portuguese in portuguese market market vary varyranging ranging from from enterprisesenterprises from from Italy, Italy, Spain, Spain, German, German, Japan Japan and andUnited Un itedStates States of America, of America, built built up a up still a still modelmodel based based on structural on structural equations. equations. We identifiedWe identified a type a typeinvariant invariant for these for these two groups,two groups, with with variationsvariations in intensity in intensity correlations correlations in the in motivat the motivations ionsfor investing for investing in Portugal. in Portugal. Although Although with with the samethe same set of set explanatory of explanatory variables, variables, which which is des is irable desirable for this for this type type of models, of models, their their importanceimportance varies varies according according to the to motivations the motivations of each of emodel.ach model.
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Avdi E,. Regional Science Inquiry Journal, Vol. V, (2), 2013, pp. 99110 99
THE SYSTEM OF CONTRIBUTIONS FOR HEALTH INSURANCE SCHEME IN ALBANIA PERFORMANCE AND MAIN CHALLENGES
Enkelejda AVDI Department of Management, Faculty of Economy, University of Tirana National Health Insurance Institute, Tirana [email protected]
Abstract Albanian health care system is undergoing comprehensive changes. The paper focuses on the system of contributions for health insurance scheme. The paper will argue the need for immediate measures regarding this issue. Based on the primary and secondary data, through an economic analysis is studying the trend of contributor’s number for five years. Are identified the economic, social and political factors, that affect this process and whole health insurance scheme (HIS). In Albania, partly scheme function, an informal labor market, lack of incentives for participation in health scheme, weak administration capacity for contributions collecting and poor structure, regulatory and supervisor and all in all its funding challenges, are the main factors that accompanies for years the health care system and as the result the contributions system for health insurance. The main economic factor is a little economic growth and a problem with which Albania has already begun to face. As a result Albania faces a greater inequity in the ability to receive health care. In order to evasion of contributions expected path, immediate measures administrative, managerial, and financial monitoring are needed. Mechanisms for revenue collection should be strengthened. Health care reform has been and will remain one of the major challenges of politics in Albania. Full implementation of its efficiency requires a broad political consensus. Keywords: health scheme, contribution, health care reform, Albania. JEL Classification: I1, I13, I18, H51.
1. Introduction The Albanian health insurance system is a Bismarck model of HIS. Health services are provided by a mix of public and private health service providers. Recourses of public financing of the health sector are: State budget, contributions of compulsory health insurance (collected by GTDSII)1, direct payments /copayment and foreign finances. Public expenditures for health in 2013 are planed 2.56% of GDP. The State remains the major source of health care financing in Albania2. Compulsory health insurance schemecoveres all the citizens in Republic of Albania (RA) with a permanent residence and also foreigners employed and insured in Albania. HII administers the health care scheme, provides and manages the compulsory health insurances in the RA. HII is the main purchaser of health services and also the main actor of the health care reforms. Participation in the scheme is based on the payment of contributions by; (i) economically active persons (employees, employers, selfemployed, unpaid family employees, persons who receive revenues from their property on regular basis), (ii) State, which pays for economically nonactive persons, (children, students, pensioners, unemployed, mothers on maternity leave, disabled people, persons living on assistence and economic aid, based on the consumption per capita of the healthcare during the successive year) and (iii) voluntary insured persons. Social health insurance contribution rate in Albania for salaried workers is 3.4%. Contributions for the
1From 1995 up to 2003 the data for the number of contributors and contribution’s revenue is taken from the Social Insurance Institute (SII) and from this year onwards from the General Directorate of Taxation (GDT).
2Other regional countries have a different composition (social insurance to tax funding), for example Czech Republic 90:10, Poland 84:16, Hungary 90:10 and Slovenia 93:7 (WHO Statistics, 2008).
100 100 Avdi E,.Avdi Regional E,. Regional Science Science Inquiry Inquiry Journal, Journal, Vol. V, Vol. (2), V, 2013, (2), pp.2013, 99110 pp. 99110 employeesemployees are paidare paidby employer by employer and employeeand employee at (50: at 50).(50: 50).To the To selfemployed the selfemployed workers workers and and voluntarilyvoluntarily insured insured is 3% is up3% to up 7% to of7% statutory of statutory minimum minimum wage. wage. In AlbaniaIn Albania the contributionthe contribution rate rateis at isthe at lowestthe lowest levels levels amongst amongst the economiesthe economies in transitionin in transitionin CEECEE region region (Table (Table 1). Healthcare 1). Healthcare systems systems in the in reg theional regional countries countries is mostly is mostly financed financed through through healthhealth insurance insurance contributions, contributions, based based on the on Bismarthe Bismarck modelck model – a mandatory– a mandatory health health insurance insurance systemsystem in which in which health health insurance insurance payments payments are deduc are deducted fromted from incomes, incomes, with with pooling pooling of of contributionscontributions and thusand thusrisks. risks. Although Although in all in count all countries ofries the of region, the region, mandatory mandatory payrollbased payrollbased insuranceinsurance has beenhas been established, established, the contribution the contribution rates ra differtes differ widely. widely. TableTable 1 Social 1 Social health health insurance insurance contribution contribution rate inrate regio in regional countriesnal countries CountryCountry Contribution Contribution Rate Rate for for Employer:Employer: SalariedSalaried Workers Workers EmployeeEmployee shares shares AlbaniaAlbania 3.4 3.4 50:5050:50 CzechCzech Republic Republic 13 13 66:3366:33 HungaryHungary 14 14 79:2179:21 RomaniaRomania 14 14 50:5050:50 MacedoniaMacedonia 9.2 9.2 100:0100:0 MontenegroMontenegro 15 15 50:5050:50 SerbiaSerbia 15.9 15.9 50:5050:50 BulgariaBulgaria 6 6 75:2575:25
SlovakiaSlovakia 131/4 131/4 50:5050:50
SloveniaSlovenia 131/4 131/4 53:4753:47 BosniaBosnia 17 17 24:7624:76 HerzegovinaHerzegovina Sources:Sources: Bredenkamp Bredenkamp and Gragnolatiand Gragnolati (2007); (2007); Dixon Dixon et al. et (2004); al. (2004); Preker Preker et al. et (2002). al. (2002).
The Thebasic basic contribution contribution rates rates for mandatoryfor mandatory health health insurance insurance vary varywidely, widely, from from around around 36%36% in Albania in Albania and Bulgaria,and Bulgaria, to 17% to 17% in Bosnia in Bosnia He rzegovina. Herzegovina. HealthHealth services services covered covered by HIS by HISare; healthare; health services services of the of primary the primary health health care, care, hospital hospital health health care careservices services and pharmaceuticalsand pharmaceuticals of the of opened the opened pharmaceutical pharmaceutical network. network. The Thehealth health services services of HISof HIS are funded are funded through through a mix a mix of taxation of taxation and andcon tributions contributions of health of health insurances. insurances. HII HII managesmanages a total a totalbudget budget of approximately of approximately 200 200million million Euros. Euros. This Thisbudget budget in 2013 in 2013 is planed is planed approximatelyapproximately 2% of2% GDP, of GDP, while while for three for three years, years, 20102012 20102012 the rate the ofrate 2.1% of 2.1% has nothas change.not change. The Thescheme scheme revenues revenues in 2011 in 2011 and 2012and 2012 came came approxima approximately tely23% 23% from from health health contributions contributions and approximatelyand approximately 77% 77% from from State State budget/tax budget/tax funding funding (Figure (Figure 1). The 1). TheState State budget budget revenues revenues remainremain the main the main sources sources not only not onlyfor all for health all health sectors, sec tors,but also but alsofor the for HIS. the HIS. This Thismisbalanced misbalanced situationsituation continuous continuous since since the HIS the HISestablishment establishment in 1995. in 1995. Avdi E,. Regional Science Inquiry Journal, Vol. V, (2), 2013, pp. 99110 101 Avdi E,. Regional Science Inquiry Journal, Vol. V, (2), 2013, pp. 99110 101
FigureFigure 1 HIS 1 HISRevenues, Revenues, 2007 2007 – 2011 – 2011 Source:Source: HII data,HII data, author’s author’s calculations calculations
The Thereview review above above makes makes Albania Albania one oneof the of fewthe fewcount countries riesin region, in region, together together with with Bulgaria, Bulgaria, wherewhere health health insurance insurance contributions contributions are notare thenot mathein ma sourcein source of health of health care care financing financing (WHO, (WHO, 2006).2006). 2. 2. HealthHealth insurance insurance contributions contributions in Albania in Albania – An – Anecon economicomic analysis analysis of the of the trendtrend of contributor’s of contributor’s number number from from 2007 2007 – 2011. – 2011.
The The key key problems, problems, clearly clearly evident, evident, of HIS of HIS in Albani in Albania, area, arethe thesmall small contributor’s contributor’s numbernumber for healthfor health insurance insurance and andsome some difficulties difficulties in collecting in collecting payroll payroll taxes. taxes. The Therevenues revenues are are collected collected based based of six of sixcontributors’ contributors’ categories categories: budget: budget workers, workers, nonbudget nonbudget workers, workers, privateprivate firms, firms, self self employed, employed, agricultural agricultural privat private sectore sector and andvoluntary voluntary contributors. contributors.
In orderIn order to analyze to analyze the problematicthe problematic situation situation in th ine systemthe system of contributions of contributions for healthfor health insurance,insurance, I made I made an economic an economic analysis analysis of the of numbethe number of rcontributors of contributors in 5 inyears, 5 years, from from 2007 2007 to to 2011,2011, based based on the on averagethe average number number of contributors, of contributors, declared declared by SII by toSII HII to HII(Appendix, (Appendix, Table Table 2). 2). FirstFirst I compared I compared the thenumber number of contributors, of contributors, accord according ing to six to sixcategories categories by finding by finding the the differencedifference with with the previousthe previous year year in percentage in percentage (Table (Ta 3).ble 3). SecondSecond I calculated I calculated the indixesthe indixes of change of change of contri of contributorsbutors by category by category (Table (Table 4). 4). ThirdThird I calculated I calculated the coefficientthe coefficient of the of averagethe average annual annual growth growth in the in numberthe number of contributors of contributors by categories.by categories.
2.1 2.1 TheThe comparisons’ comparisons’ results results by health by health contributor’s contributor’s category category
The Thecomparisons comparisons show show that thatdespite despite of frequent of frequent fluct fluctuationsuations in the in numberthe number of participants of participants in in the scheme,the scheme, their their level level remains remains almost almost the samethe same from fro yearm year to year. to year.
Budget workers –compared to 2007, 2008 has the largest decreases, with about 9.4%. Budget workers –compared to 2007, 2008 has the largest decreases, with about 9.4%. AndAnd compared compared to 2009, to 2009, 2010 2010 has thehas largestthe largest increase increase, with, with about about 5.8%. 5.8%. For Forthe entirethe entire periodperiod studied, studied, from from 2011 2011 compared compared to 2007, to 2007, this thiscategory category is 1.7% is 1.7% decreased. decreased. Nonbudget workers the largest decrease is in 2008, compared to 2007, with about Nonbudget workers the largest decrease is in 2008, compared to 2007, with about 37.1%.37.1%. A small A small increase increase of 0.6% of 0.6% was wasonly only in 2011, in 2011, compared compared to 2010. to 2010. For Forthe entirethe entire periodperiod from from 2011 2011 compared compared to 2007, to 2007, this thiscategory category has hathes greatestthe greatest reduction reduction (54%), (54%), of allof categories. all categories. Private firms is a category mainly resulting increased in 2011, compared to 2010 Private firms is a category mainly resulting increased in 2011, compared to 2010 (9.3%).(9.3%). There There is an is increase an increase of 19.3% of 19.3% in 2011 in 2011 compa compared tored 2007. to 2007. Selfemployed –The only reduction of the contributors’ number in this category was Selfemployed –The only reduction of the contributors’ number in this category was in 2008in 2008 (8.5%), (8.5%), compared compared to 2007.The to 2007.The largest largest increa increase wasse was in 2011, in 2011, compared compared to to
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2010,with2010,with about about 25%. 25%. For the For entire the entire period period of five of years, five years, from from 2011 2011 compared compared to to 2010,with2010,with about about 25%. 25%. For For the the entire entire period period of of five five years, years, from from 2011 2011 compared compared to to 2007,2007, this category this category has an has increase an increase of 24.2%. of 24.2%. 2007,2007, this this category category has has an an increase increase of of 24.2%. 24.2%. Agricultural Agricultural private private sector sector – It is – characterized It is characterized by a bnonstabley a nonstable situation. situation. Only Only in in AgriculturalAgricultural private private sector sector – – It It is is characterized characterized b y b y a a nonstable nonstable situation. situation. Only Only in in these thesetwo years, two years, 2009 2009and 2011, and 2011, the contributors’ the contributors’ number number is increased. is increased. And forAnd the for the thesethese two two years, years, 2009 2009 and and 2011, 2011, the the contributors’ contributors’ n umbernumber is is increased. increased. And And for for the the periodperiod of five of years five yearsthis category this category has a hasdecrease. a decrease. periodperiod of of five five years years this this category category has has a adecrease. decrease. Voluntary Voluntary contributors contributors have thehave highest the highest growth growth of all ofcategories, all categories, with aboutwith about131.9% 131.9% VoluntaryVoluntary contributors contributors have have the the highest highest growth growth of of all all categories, categories, with with about about 131.9% 131.9% in fivein years. five years. The only The decreaseonly decrease is in 2011 is in compare2011 compared to 2010.d to 2010. inin five five years. years. The The only only decrease decrease is is in in 2011 2011 compare compared dto to 2010. 2010. In total,In total, for all for categories, all categories, the number the number of contrib of contributors utors for five for years, five years, from from2007 2007 to to InIn total, total, for for all all categories, categories, the the number number of of contrib contributorsutors for for five five years, years, from from 2007 2007 to to 2011 2011 has a has little a littleincrease increase of 2.6%. of 2.6%. Only Only in 2008 in 2008 result re insult a decreasein a decrease of 10.5%, of 10.5%, 20112011 has has a a little little increase increase of of 2.6%. 2.6%. Only Only in in 2008 2008 re resultsult in in a a decrease decrease of of 10.5%, 10.5%, comparedcompared to 2007. to 2007. comparedcompared to to 2007. 2007.
TableTable 3 Comparend 3 Comparend numbers numbers of contributors, of contributors, according according to six tocategories six categories TableTable 3 3Comparend Comparend numbers numbers of of contributors, contributors, according according to to six six categories categories
CategoriesCategories of of CategoriesCategories ofof ContributionsContributions I 2008/2007I 2008/2007 I 2009/2008 I 2009/2008 I 2010/2009 I 2010/2009 I 2011/2010 I 2011/2010 I 2011/2007 I 2011/2007 ContributionsContributions I I2008/2007 2008/2007 I I2009/2008 2009/2008 I I2010/2009 2010/2009 I I2011/2010 2011/2010 I I2011/2007 2011/2007 Budget Budget workers workers 9.4%9.4% 1.5% 1.5% 5.8% 5.8% 4.1% 4.1% 1.7% 1.7% Budget Budget workers workers 9.4%9.4% 1.5% 1.5% 5.8% 5.8% 4.1% 4.1% 1.7% 1.7% Nonbudget Nonbudget workers workers 37.1% 37.1% 13.5% 13.5% 15.9% 15.9% 0.6% 0.6% 54.0% 54. 0% Nonbudget Nonbudget workers workers 37.1% 37.1% 13.5% 13.5% 15.9% 15.9% 0.6% 0.6% 54. 54.0%0% Private Private firms firms 4.2%4.2% 7.3% 7.3% 6.3% 6.3% 9.3% 9.3% 19.3% 19.3% Private Private firms firms 4.2%4.2% 7.3% 7.3% 6.3% 6.3% 9.3% 9.3% 19.3% 19.3% Self employed Self employed 8.5%8.5% 6.2% 6.2% 2.3% 2.3% 25.0% 25.0% 24.2% 24.2% Self Self employed employed 8.5%8.5% 6.2% 6.2% 2.3% 2.3% 25.0% 25.0% 24.2% 24.2% AgriculturalAgricultural private private sector sector 10.6% 10.6% 9.1% 9.1% 17.2% 17.2% 13.7% 13. 7% 8.2% 8.2% AgriculturalAgricultural private private sector sector 10.6% 10.6% 9.1% 9.1% 17.2% 17.2% 13. 13.7%7% 8.2% 8.2% Voluntary Voluntary contributors contributors 14.1% 14.1% 66.7% 66.7% 30.0% 30.0% 6.2% 6.2% 131.9% 13 1.9% Voluntary Voluntary contributors contributors 14.1% 14.1% 66.7% 66.7% 30.0% 30.0% 6.2% 6.2% 13 131.9%1.9% TOTALTOTAL Categories Categories 10.5%10.5% 3.2% 3.2% 1.0% 1.0% 10.0% 10.0% 2.6% 2.6% TOTALTOTAL Categories Categories 10.5%10.5% 3.2% 3.2% 1.0% 1.0% 10.0% 10.0% 2.6% 2.6% 2.2 2.2 The average The average annual annual growth growth of contributors of contributors of HI Sof HIS 2.22.2 The The average average annual annual growth growth of of contributors contributors of of HI HISS
From Fromcalculations calculations of the of contribution the contribution index indexcategor categories, takingies, taking time basistime basisin 2007, in 2007, result: result: FromFrom calculations calculations of of the the contribution contribution index index categor categories,ies, taking taking time time basis basis in in 2007, 2007, result: result:
TableTable 4 The 4 indixes The indixes of change of change of contributors of contributors by category by category TableTable 4 4The The indixes indixes of of change change of of contributors contributors by by category category
CategoriesCategories of of CategoriesCategories of of ContributionsContributions I 2008/2007I 2008/2007 I 2009/2008 I 2009/2008 I 2010/2009 I 2010/2009 I 2011/2010 I 2011/2010 I 2 011/2007 I 2011/2007 ContributionsContributions I I2008/2007 2008/2007 I I2009/2008 2009/2008 I I2010/2009 2010/2009 I I2011/2010 2011/2010 I I2 011/20072011/2007 Budget Budget workers workers 0.91 0.91 0.98 0.98 1.06 1.06 1.04 1.04 0.98 0.98 Budget Budget workers workers 0.91 0.91 0.98 0.98 1.06 1.06 1.04 1.04 0.98 0.98 Nonbudget Nonbudget workers workers 0.63 0.63 0.86 0.86 0.84 0.84 1.01 1.01 0.46 0.46 Nonbudget Nonbudget workers workers 0.63 0.63 0.86 0.86 0.84 0.84 1.01 1.01 0.46 0.46 Private Private firms firms 0.96 0.96 1.07 1.07 1.06 1.06 1.09 1.09 1.19 1.19 Private Private firms firms 0.960.96 1.07 1.07 1.06 1.06 1.09 1.09 1.19 1.19 Selfemployed Selfemployed 0.91 0.91 1.06 1.06 1.02 1.02 1.25 1.25 1.24 1.24 Selfemployed Selfemployed 0.910.91 1.06 1.06 1.02 1.02 1.25 1.25 1.24 1.24 AgriculturalAgricultural private private AgriculturalAgricultural private private sectorsector 0.89 0.89 1.09 1.09 0.83 0.83 1.14 1.14 0.92 0.92 sectorsector 0.890.89 1.09 1.09 0.83 0.83 1.14 1.14 0.92 0.92 Voluntary Voluntary Voluntary Voluntary contributorscontributors 1.14 1.14 1.67 1.67 1.30 1.30 0.94 0.94 2.32 2.32 contributorscontributors 1.141.14 1.67 1.67 1.30 1.30 0.94 0.94 2.32 2.32 TOTALTOTAL 0.89 0.89 1.03 1.03 1.01 1.01 1.10 1.10 1.03 1.03 TOTALTOTAL 0.890.89 1.03 1.03 1.01 1.01 1.10 1.10 1.03 1.03
The averageThe average annual annual growth growth rate coefficient rate coefficient of the of n umberthe number of contributions of contributions by category, by category, is calculated is calculated TheThe average average annual annual growth growth rate rate coefficient coefficient of of the the n umbernumber of of contributions contributions by by category, category, is is calculated calculated with towwith formulas: tow formulas: withwith tow tow formulas: formulas:
K = (1) K = K = (1) (1) K = (1) K = (1)
For example,For example, K in “BudgetK in “Budget Workers”, Workers”, where: where: ForFor example, example, K K in in “Budget “Budget Workers”, Workers”, where: where:
I1 = I2008/2007 I2=I2009/2008 I3=I2010/2009 I51=I2011/2010 I1= I2008/2007I1= I2008/2007 I2=I2009/2008 I2=I2009/2008 I3=I 2010/2009 I3=I2010/2009 I51=I 2011/2010 I51=I2011/2010 I1I== I 2008/2007I I2I=I=I2009/2008 I3I=I=I2010/2009 I51I =I=I2011/2010 1 2008/2007 2 2009/2008 3 2010/2009 51 2011/2010
K Budget workers = = = 0.994 or 99.49% K BudgetK workers Budget workers= = = = = 0.994 = 0.994or 99.49% or 99.49% KK Budget workers = == = = 0.994 0.994 oror 99.49%99.49% Budget workers =
K = (2) K = K = (2) (2) KK = = (2) (2) Avdi E,. Regional Science Inquiry Journal, Vol. V, (2), 2013, pp. 99110 103
K Average annual growth rate coefficient n = 5, number of years to study qn = the number of contributors in 2011 q0 = the number of contributors in 2007
For example, K in “Budget Workers” results:
K = = = = 0.994 or 99.49% Both methods led to the similar results, reflected in Table 5.
Categories of Contributions K K (%) Budget workers 0.994 99.49% Nonbudget workers 0.823 82.35% Private firms 1.044 104.44% Self employed 1.055 105.52% Agricultural private sector 0.979 97.93% Voluntary contributors 1.240 123.41% Even with a simple comparison, even of calculation of average annual growth rate coefficient for each contributor’s categories, I came to the same conclusions:
The contributor’s number in “Private firms” increased on average 4.44% each year during the period 20072011. The contributor’s number in “Selfemployed” increased on average 5.52% each year during the period 20072011. The contributor’s number in “Voluntary contributors” increased on average 23.41% each year during the period 20072011. There isn’t the average annual growth in the other three categories (“Budget workers”, “Non budget workers” and “Agricultural private sector”).
The lack of growth in the contributor’s number in these categories, corresponding macroeconomic indicators, for the same period 20072011 (Bank of Albania, 2013). For examples, the employment rate of public sector in total employment for 2011 was 17.8%, against 18.1% in 2010 and 18.5% in 2009. Also the employment rate of agricultural private sector in total employment for 2011 was 54.6%, against 55.3% in 2010 and 55.2% in 2009.
The limited contributor’s number in the health insurance scheme, reflected in the low level of contributions for health care in Albania and its performance.
3 The lack of political decisionmaking Performance and main HIS challenges
HIS financing should respond its continuous expansion pace. Implementation of effective reforms in the three levels of health services: primary, secondary and tertiary, must be accompanied by increased contributions funding sources as well as from the State budget. But in fact, it turns out that there are not taken the necessary measures to increase the number of contributors in the scheme and as a result to increasethe revenues from them. There were ongoing discussions on the change of contributions’ rate in Albania, from the World Bank in
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20062006 as well as wellas from as from the HII'sthe HII's own ownproposals proposals3. Even3. Even in the in newthe newlaw forlaw healthfor health insurance insurance in in Albania,Albania, was leftwas againleft again the contribution the contribution rate ofrate 3. of4%, 3. 4%,with withsome some minor minor changes changes in the in basis the basis of of calculatingcalculating the contributionthe contribution4. The4. Thechanges changes aim toaim able to ablethe increasingthe increasing of financi of financing sourcesng sources for for the healththe health scheme, scheme, as well as wellas respect as respect for its for princ its principles.iples.
3.1 3.1 Problems Problems in the in collectionthe collection of health of health contributi contributions ons The Theprocess process of collecting of collecting contributions contributions for healthfor health insurance insurance by the by taxthe authorities,tax authorities, not onlynot only hadn’thadn’t reached reached the theexpectations expectations (increase (increase of the of thenumber number of contributions of contributions and and better better administrationadministration of the of process), the process), but it but has it ledhas to led v arious to various anomalies, anomalies, such such as delays as delays in data in data reportingreporting and inaccuraciesand inaccuracies of the of data. the data. It was It wasanticipated anticipated that thesethat these authorities authorities (SII and(SII GDT),and GDT), wouldwould identify identify the onlinethe online contributors contributors and theand inctheomes incomes from from health health insurance insurance contributions. contributions. In theIn first the firstyear yearof implementation of implementation of the of Law the Law(200 (2003), contributions3), contributions poured poured directly directly to the to HII. the HII. WithWith the interventionthe intervention of the of Ministrythe Ministry of Finance, of Finance, the contributionsthe contributions are noware nowcollected collected by the by the tax authorities,tax authorities, together together with withsocial social insurance insurance contributions, contributions, and thenand thenthey theyare transferred are transferred to a to a treasurytreasury account account in the in SII,the SII,which which transfers transfers in HII in partsHII parts of the of contributionsthe contributions collected, collected, after after the the calculations calculations based based on different on different contributions contributions categories. categories. Delays Delays in the in the pour pour of of contributionscontributions for health for health insurance, insurance, by authorities by authorities that administratethat administrate them, them, errors errors in calculations, in calculations, reportingreporting of inaccurate of inaccurate data data in the in bank, the bank, and and also alsothe barriersthe barriers to the to treasury the treasury structures structures delivery,delivery, have have limited limited the possibility the possibility to use to evenuse even those those few contributionsfew contributions that arethat collected. are collected.
3.2 3.2 The Thescheme scheme lacked lacked efficiency efficiency Impact Impact in the in contrithe contributons’butons’ level level in the in HISthe HIS
HealthHealth insurance insurance Schemes, Schemes, on the on Basisthe Basis of Contribut of Contributions,ions, have have about about 18 years, 18 years, that thatis is appliedapplied in Albania. in Albania. BUT BUT the problem the problem is that is that this thisscheme scheme has neverhas never functioned functioned with with a full a full efficiency.efficiency. Before Before the fall the fallof the of Communistthe Communist regime regime, the, health the health system system in Albania in Albania was was modelledmodelled on the on Sovietthe Soviet Semashko Semashko system system of universal of universal health health care carecoverage, coverage, with witha virtually a virtually exclusiveexclusive role role for the for statethe state in financing in financing and and deliv delivery. ery. Albania Albania introduced introduced social social health health insuranceinsurance in 1995, in 1995, but the but pace the pace of reform of reform of health of health financing financing has beenhas been slow slow (Nuri, (Nuri, 2002). 2002). FromFrom 1995 1995 to 2007 to 2007 HIS HIScovered covered mostly mostly the expenditurthe expenditures ofes the of pharmaceuticalsthe pharmaceuticals drugs’ drugs’ list list and salariesand salaries of general of general practitioners practitioners in primary in primary services. services. Only Only in 2007, in 2007, when when has becamehas became the the full involvementfull involvement of the of primarythe primary health health care care(PHC), (PHC), it can it becan said be saidthat thatHIS HISbegan began to function to function fully,fully, at least at least at this at levelthis level of services of services (based (based on current on current indicators indicators until until now, now, can saycan thatsay thethat the schemescheme is successful is successful in PHC). in PHC). Despite Despite the problems the problems that that accompany accompany the pharmaceutical the pharmaceutical sectorsector HII contractualHII contractual relations relations as service as service buyers buyers with withpharmaceutical pharmaceutical service service providers, providers, are are consolidated.consolidated. Even Even though though in 2009 in 2009 the publicthe public hospit hospital serviceal service legally legally passed passed under under the the administrationadministration of HIS, of HIS, reform reform in this in sectorthis sector is fai isled. fai Thisled. Thismainly mainly due todue lack to lackof political of political will, will, due todue the to strongthe strong social social impact, impact, that thatwill willaccompan accompany they fullthe implementationfull implementation of this of reform.this reform. MalfunctionMalfunction with withfull efficiencyfull efficiency of the of financialthe financial reform reform in the in healththe health system system and theand lackthe lackof of incentiveincentive mechanisms mechanisms to increase to increase the number the number of part of icipantsparticipants in the in scheme, the scheme, leads leads to an to unfair an unfair treatmenttreatment of insured of insured persons, persons, to those to those uninsured. uninsured.5 The5 The same same benefits benefits for both for both categories, categories, insuredinsured and and not notinsured insured ones, ones, do not do notstimulate stimulate the category the category of not of notinsured insured to insure to insure themselves.themselves. This Thisis a pointedis a pointed problem problem of the of publicthe public hospital hospital service, service, where where even even the coststhe costs of of treatmenttreatment are higher.are higher. For exampleFor example an uninsured an uninsured pati entpati payent apay minimal a minimal tariff, tariff, of € of21 € in 21 the in the hospitalhospital (less (less for afor visit a visitto GP), to GP), and thisand personsthis persons can profitcan profit even even the operationthe operation for free.for free.This This situationsituation adds adds costs costs for selfinsurance for selfinsurance persons persons and forand the for State the State budget. budget.
3The proposal3The proposal to increase to increase the rate the contribution rate contribution from 3.4%from 3.4%to 7% to was 7% not was taken not takeninto account. into account.
4Basis4 Basisfor calculating for calculating contributions contributions for economicall for economically inactivey inactive persons persons is: consumption is: consumption per capita per capita of the of health the health care, care, indexedindexed with thewith inflation the inflation rate, consumptionrate, consumption per ca perpita ca forpita health for health services. services.
5As health5As health expenditures expenditures are similar are similar to those to those insured insured and not and insured not insured persons, persons, health health insurance insurance does notdoes protect not protect participantparticipant in the in scheme the scheme by paying by paying a personal a personal significantly significantly percentage percentage of costs. of costs.
Avdi E,. Regional Science Inquiry Journal, Vol. V, (2), 2013, pp. 99110 105
Incomplete reforms in the financing of the health system in Albania (mainly the reform of public hospitals), are a more reason for the not fully functioning of HIS. Only after several years of operation with full efficiency of the health scheme6, we can say, if it is appropriate one for Albania, to continue or to change this scheme, based on the general taxation (Beveridge scheme is arguing today, as required by the Albanian opposition, even for pre election effects)7.
3.3 The economic factors tend to contribute negatively to a disable environment for the contribution of HIS in Albania.
Informal sector employment causes: 1. difficult to administering mandate payroll tax on employers and /or employees, 2. difficult to locating employers and collecting premiums. Based to the official data of Bank of Albania, there is an increase of informal sector employees, because of the economic crises of these years. This situation influenced the reduction of contributors. In 2011 from a total labour force of approximately 1.1 million, just 478 thousand of them contribute to the health scheme (Appendix, Table 2 and Table 6).
Following the widespread informal sector, the contribution evasion in private sector appears in two forms: less people declared themselves employed and lower wages are declared. Informal sector workers are facing two different elections: their contributions to of social and health insurance to be payee by employer, which will reduce furthermore the incomes, or not to pay insurance social and health contributions and thus they receive more cash. It is understandable that most of workers in the informal sector will choose the second option.
Low wages and salaries: 1. increase economic burden of payroll tax and lack to finance broader benefit entitlements8 and 2. decrease the opportunity to finance broader benefit entitlements.
High poverty rate increase need subsidize membership of poor households.
Inefficiently functioning provider networks: 1. aggravate access by members to providers, 2. reduce choice of providers and also the possibility of qualitybased competition among providers.
Little human resource capacities bring the disability to manage SHI and monitor and evaluate quality.
Weak administrative support is less available for banking, accounting and legal support.
The lack of government capacity to regulate is reflected to the capacity for regulating the quality and manages grievance procedures.
6 Many of countries have established the principle of universal coverage via SHI. This process took 127 years to achieve in Germany, 118 in Belgium, 79 in Austria, 72 in Luxembourg, 48 in Costa Rica and 36 in Japan.
7 Beveridgesystem: state financed system – example: Great Britain, Bismarcksystem: the system is financed by contributions to a social security or insurance system – example Germany, Semashkosystem: completely state controlled system and Marketoriented systems: example USA.
8The major of the contributors of HIS for 2011 are budget workers (29%) and workers in private firms (38%).
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3.3.13.3.1 The Themacroeconomic macroeconomic indicators indicators and andEconomic Economic Cha llengesChallenges
9 AccordingAccording to the to official the official data datafor 5 for years 5 years, Albania9, Albania has anhas annual an annual real growthreal growth of GDP of GDP in in 2011,2011, but comparedbut compared to 2007 to 2007 there there is a isdecrease a decrease of 2 .8%.of 2.8%. In 2011, In 2011, per capitaper capita income income was was€ € 2,959;2,959; the official the official unemployment unemployment rate israte 12.7% is 12.7% (alm ost(alm theost same the same level level in these in these five years)five years) and and 18.5%18.5% of the of population the population lives lives below below poverty poverty line. line.There T hereis no is increase no increase of employment of employment rate inrate in the periodthe period of five of fiveyears. years. The Thelabor labor force force report report of employment: of employment: unemployment unemployment was was(86:14). (86:14). Just Just 15.4% 15.4% of labor of labor force force works works in public in public sector, sector, or 17.8% or 17.8% of total of total employed. employed. The The employmentemployment of budget of budget workers workers has ahas little a little reduction reduction in 2011, in 2011, compared compared to the to otherthe other years. years. The Theemployers employers in the in agriculture the agriculture private private sector sector take takthee major the major part partof the of total the totalemployment employment in in Albania,Albania, 54.6% 54.6% in 2011 in 2011 (INSTAT, (INSTAT, 2011, 2011, 2013). 2013).
The Thefinancing financing of HII of stillHII stillremains remains a major a major challeng challenge. A e. country’s A country’s level level of economic of economic developmentdevelopment and itsand economic its economic structure structure influence influence how homanyw many people people can becan covered be covered and howand how rapidlyrapidly HIS HIScan expandcan expand toward toward universal universal coverage. coverage. PublicPublic expenditures expenditures for health for health in 2013 in 2013 are planed are planed only o2.56%nly 2.56% of GDP, of GDP, the lower the lower figures, figures, from from 10 2008.2008. In terms In terms of an of economic an economic recession recession, the10 ,health the health sector sector will facewill facedifficulties difficulties in reali in zationrealization with withefficiency efficiency in the in health the health reforms reforms undertaken. undertaken. My countryMy country also alsofaces faces the problem the problem with withhigh high levelslevels of unemployment, of unemployment, low wageslow wages and largeand large informa informal sectors;l sectors; the formalthe formal employment employment base base for generatingfor generating resources resources is extremely is extremely small small in rela in tion rela tion to need to need and and provides provides considerable considerable scopescope for the for avoidancethe avoidance of payment. of payment. The Thehealth health care carecontributions contributions increase increase the costthe costof labor of labor regardlessregardless of who of who pays pays them them (this (this encourages encourages employ employers toers hire to hire workers workers on temporary on temporary contracts,contracts, without without registering registering them). them). If health If health insurance insurance costs costs for employers for employers were were partly partly reducedreduced and shiftedand shifted to the to governmentthe government budget, budget, labor labor costs costs would would be proportionately be proportionately reduced reduced withoutwithout reducing reducing net wages, net wages, which which would would most most likely likely encourage encourage employers employers to create to create new new jobs.jobs. Health Health insurance insurance reform reform is thus is thusclosely closely relat edrelat toed the to issuesthe issues of labor of labor market market flexibility flexibility and and opportunities opportunities for increasedfor increased employment employment (Mihalje (Mihaljek, 2008).k, 2008). On theOn otherthe other hand, hand, the the contributioncontribution incentives incentives mechanisms mechanisms for the for active the active labor l aborforce force are overall are overall weak, weak, and theand health the health schemescheme provides provides limited limited benefits benefits (Avdi, (Avdi, 2011). 2011).
In AlbanianIn Albanian economy economy the high the high level level of the of informal the informal payments payments can can create create several several negativenegative effects effects on health on health system system performance. performance. Info rmal Informal payment payment can havecan have implications implications in in governancegovernance of a ofhealth a health system system and negativelyand negatively affect affect access, access, equity, equity, efficiency efficiency and utilizationand utilization 11 12 of healthof health care careservices. services. World World Bank Bank and11 INSTATand INSTAT have12 have accounted accounted the situation the situation of informal of informal paymentspayments in Albania. in Albania.
BasedBased on the on resultsthe results of official of official data datathere there is the is samethe same situation situation even even today. today. The Themost most patientspatients have have to pay to underpay under the table the table for health for health care carande thatand unofficialthat unofficial payments payments represent represent the the mostmost relevant relevant share share of individual of individual health health expenditur expenditure (approximetlye (approximetly 60% 60% of the of healththe health expenditures).expenditures). Regardless Regardless of the of reasonsthe reasons behind, behind, the factthe factis that is thathousehold household expenditures expenditures on on healthhealth does does not differnot differ between between insured insured and uninsureand uninsured. Thisd. Thisis a factis a factthat thatthe insurancethe insurance status status doesdoes not have not have measurable measurable effect effect on outofpocket on outofpocket spendings. spendings. If people If people notice notice that contributingthat contributing
9 Appendix,9 Appendix, Table Table6 6
10 Appendix,10 Appendix, Table Table6 6
11 The11 effective The effective coverage coverage by HII by is HII limited is limited and only and aonlybout a onethirdbout onethird of the of active the active work workforce forcemakes makes contr ibutions.contributions.
12 Data12 Datain the in Living the Living Standards Standards Measurement Measurement Survey Survey (LSMS) (LS conductedMS) conducted in Albania, in Albania, by comparing by comparing 2005 2005 2008 2008 were wereanalyzed analyzed the informal the informal payment payment and the and access the access to health to health care services,care services, in order in orderto find to outfind how out thhowe situation the situation had changedhad changed over overthis threeyear this threeyear period. period. At the At mac thero mac level,ro level, analysis analysis identified identified that in that 2005 in 2005 and 2008 and 2008 the the prevalenceprevalence of patients of patients making making informal informal payments payments in various in various health health settings settings varied varied between between about about 18% an18%d 53%, and 53%, the highestthe highest prevalence prevalence being being in the in hospital the hospital care scareetting. setting. Household Household survey survey data showdata showthat about that about only 40%only of40% the of the populationpopulation is effectively is effectively covered covered by HII, by mainlyHII, mainly concentrated concentrated in urban in urban areas areasand the and upper the upper income income quintiles, quin tiles,with with significantsignificant regional regional variations. variations.
Avdi E,. Regional Science Inquiry Journal, Vol. V, (2), 2013, pp. 99110 107 to health insurance does not prevent them from relevant health expenditures and that they have to pay practically the same amounts of money out of pocket as those citizens which are not affiliated to the HII, they will probably become more reluctant to affiliate to health insurance and insurance coverage might further decrease. Given the level of poverty in the country, one of the reasons for nonpayment of contributions, is the lack of ability to pay out a portion of the population.
3.3.2 Political challenges
Health care reform has been and will remain one of the major challenges of politics in Albania. Given the strong social impact, which accompanies its full implementation, so far no government has “dared” to undertake it fully. Full implementation of its efficiency requires a broad political consensus. Each political party will come to governing after June elections, should start comprehensive reform of the HIS, in the first year of its mandate.
There are no plans to allocate general revenue to supplement health insurance, and the current 3.4% of wage contributions (half from employer and half from employee) from contributors is insufficient to cover costs. More than half of total health care costs are said to be out of pocket payments by patients. The focus of the government isn’t on increasing enrollment to close the financing gap, but there is no analysis which suggests this will be feasible or adequate to generate needed revenues.
Should increase accountability and collaboration of the institutions responsible for the process of administration and management of contributions for HIS in Albania. In this electoral year, in Albania is turned the debate about the funding model of the health insurance scheme, at the first view with a lot of problems, defects and malfunctions. Apparently, the continuing and the possible changes of the HIS are depended to the June elections.
However dictated by the situation, I think that by policy makers should be considered a potential increase in health contributions rate, accompanied by the relevant legal changes (even is delayed). In terms of extending the health scheme and full implementation of the reform of hospital services, better functioning system will stimulate contributions to the health system decentralization, internal competition, the creation of the concept of hospital enterprise as a fundamental element for the development of hospital. In this way will stimulate not only public but also private sector, considering that part of the health system and creating the necessary space for competition and for the creation of advanced models of the health system. The reform of public hospital sector should be implemented as soon as possible. Although this reform has in fact begun in 2009, until now, the HII has done just the transfer of funds for salaries and hospital equipment.
Abnormalities are mainly related to the payment system and the provision of services for uninsured persons. Uninsured patients versus only a negligible fee, profit highcost health services, such as all types of surgeries and hospital examinations. But this way of benefit, don’t force them to pay. The differences between the contributors and beneficiaries have caused premises for a considerable fiscal evasion, which influence in the raise of contributes from the general taxation. This should be considered the reason for stimulating in an indirect way the bribes and other corruptive elements in this sector. There is a lack of responsibility from the institutions which draft the budget and accomplish budgetary policies and the lack of political consensus (Avdi, 2012).
Over all, it is important that health and finance specialists, not politicians to assess realistically how much funding for health services can be raised through HIS contributions. This must take into account incomes, levels of other deductions and taxes, the labour market structure, the acceptability of paying contributions.
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4 4 Conclusions Conclusions and andRecommendations Recommendations 4 Conclusions and Recommendations In Albania,In Albania, partly partly scheme scheme function, function, an informal an informal labor lab market,or market, lack lack of incentives of incentives for for In Albania, partly scheme function, an informal labor market, lack of incentives for participationparticipation in health in health scheme, scheme, weak weak administration administration capacity capacity for contributionsfor contributions collecting collecting and and participation in health scheme, weak administration capacity for contributions collecting and poorpoor structure, structure, regulatory regulatory and and supervisor supervisor and andall inall all in itsall funding its funding challenges, challenges, are theare mainthe main poor structure, regulatory and supervisor and all in all its funding challenges, are the main factorsfactors that thataccompanies accompanies for yearsfor years the healththe health care caresystem system and andas the as resultthe result the contributionsthe contributions factors that accompanies for years the health care system and as the result the contributions systemsystem for health for health insurance. insurance. The The main main economic economic fact or fact isor a is little a little economic economic growth growth and and a a system for health insurance. The main economic factor is a little economic growth and a problemproblem with with which which Albania Albania has alreadyhas already begun begun to fac toe. fac Ase. aAs result a result Albania Albania faces faces a greater a greater problem with which Albania has already begun to face. As a result Albania faces a greater inequityinequity in the in ability the ability to receive to receive health health care. care. inequity in the ability to receive health care. HealthHealth insurance insurance reform reform is thus is thusclosely closely related related to the to issuesthe issues of labor of labor market market flexibility flexibility and and Health insurance reform is thus closely related to the issues of labor market flexibility and opportunitiesopportunities for increased for increased employment. employment. opportunities for increased employment. The Thesuccessful successful introduction introduction and andextension extension of HIS of HISis dependent is dependent on my on country’smy country’s institutional institutional The successful introduction and extension of HIS is dependent on my country’s institutional and andorganizational organizational capacity. capacity. This This relates relates to the to ththeree th subfunctionsree subfunctions of collection, of collection, pooling pooling and and and organizational capacity. This relates to the three subfunctions of collection, pooling and purchasing,purchasing, which which are undertaken are undertaken by different by different organ organizationsizations and actors.and actors. purchasing, which are undertaken by different organizations and actors. In orderIn order to evasion to evasion of contributions of contributions expected expected path, path, immediate immediate measures measures administrative, administrative, In order to evasion of contributions expected path, immediate measures administrative, managerial,managerial, and andfinancial financial monitoring monitoring are needed.are needed. Mechanisms Mechanisms for revenuefor revenue collection collection should should managerial, and financial monitoring are needed. Mechanisms for revenue collection should be strengthened.be strengthened. Contributions Contributions for healthfor health and andsocial social insurance insurance (27.9 (27.9%), %),should should be deposited be deposited be strengthened. Contributions for health and social insurance (27.9%), should be deposited separately,separately, due todue the to differentthe different period period of benefit of benefit of each of each scheme, scheme, or the or inabilitythe inability to pay to partpay partof of separately, due to the different period of benefit of each scheme, or the inability to pay part of the socialthe social insurance insurance contribution contribution (the (thesocial social contr contribution’sibution’s rate rateis higher, is higher, 24.5%), 24.5%), or for or lackfor lack the social insurance contribution (the social contribution’s rate is higher, 24.5%), or for lack of wish,of wish, to pay. to pay. This This becomes becomes an obstacle an obstacle for thefor thepayment payment of contributions of contributions for healthfor health of wish, to pay. This becomes an obstacle for the payment of contributions for health insurance.insurance. Revenue Revenue collection collection should should be done be done by HII by becauseHII because of the of managementthe management effect. effect. Staff Staff insurance. Revenue collection should be done by HII because of the management effect. Staff shouldshould be equipped be equipped to manage to manage the collectionthe collection of cont of ributions contributions and and support support the processthe process of of should be equipped to manage the collection of contributions and support the process of identifyingidentifying entitlements. entitlements. identifying entitlements. InformalInformal payments payments are partlyare partly a reaction a reaction to the to healthe thheal careth caresystem, system, particularly particularly of the of the Informal payments are partly a reaction to the health care system, particularly of the managersmanagers of health of health care, care, the lackthe lackof financial of financial reso urcesresources and patients'and patients' response response to a tosystem a system that that managers of health care, the lack of financial resources and patients' response to a system that is unableis unable to provide to provide adequate adequate access access to basic to basic servi services. ces.In this In thissituation situation is necessary is necessary to: apply to: apply is unable to provide adequate access to basic services. In this situation is necessary to: apply copaymentcopayment differentiated differentiated according according to the to thesocial social categories categories with with different different incomes. incomes. To To copayment differentiated according to the social categories with different incomes. To stimulatestimulate participation participation in the in thehealth health scheme scheme by str byengthening strengthening protection protection mechanisms mechanisms for for stimulate participation in the health scheme by strengthening protection mechanisms for groupsgroups with with low lowincome. income. In the In circumstancesthe circumstances of a ofw idea w spreadide spread informal informal economy economy another another groups with low income. In the circumstances of a wide spread informal economy another way wayto increase to increase the numberthe number of contributors of contributors is to is tr yto totr yconvince to convince the nonthe noncontributors contributors to join to join way to increase the number of contributors is to try to convince the non contributors to join the scheme.the scheme. This This implies implies the increasethe increase of the of sharethe share of voluntary of voluntary contributors. contributors. HII shouldHII should play playa a the scheme. This implies the increase of the share of voluntary contributors. HII should play a key rolekey roleto inform to inform the populationthe population the benefits the benefits of the of scheme the scheme about. about. key role to inform the population the benefits of the scheme about. GovernmentsGovernments should should ensure ensure that that limited limited resources resources are armoree more efficiently efficiently targeted targeted to to Governments should ensure that limited resources are more efficiently targeted to ensureensure access access to basic to basic services services. Needed. Needed to strengthen to strengthen administrative administrative and technicaland technical capacity capacity by by ensure access to basic services. Needed to strengthen administrative and technical capacity by HII HII as main as main buyers buyers of the of healththe health services, services, both boththrough through the developmentthe development of information of information HII as main buyers of the health services, both through the development of information systemssystems that thatcan distributecan distribute accurate accurate time time informati information fromon from providers, providers, and throughand through the trainingthe training systems that can distribute accurate time information from providers, and through the training of personnel.of personnel. Many Many problems problems related related to the to HIS the HIS requ require aire longterm a longterm strategy strategy in the in health the health of personnel. Many problems related to the HIS require a longterm strategy in the health sectorsector reforms. reforms. sector reforms.
5 5 AppendixAppendix 5 Appendix TableTable 2 Contributor’s 2 Contributor’s number number for study, for study, in HIS in HISin Albania in Albania 20072011 20072011 Table 2 Contributor’s number for study, in HIS in Albania 20072011 CategoriesCategories of of Categories of ContributionsContributions 20072007 2008 2008 2009 2009 2010 2010 2011 2011 Contributions 2007 2008 2009 2010 2011 Budget Budget workers workers 140,994140,994 127,783 127,783 125,856 125,856 133,211 133,211 138,645 138,645 Budget workers 140,994 127,783 125,856 133,211 138,645 Nonbudget Nonbudget workers workers 47,101 47,101 29,611 29,611 25,612 25,612 21,546 21,546 21,677 21,677 Nonbudget workers 47,101 29,611 25,612 21,546 21,677 Private Private firms firms 152,580152,580 146,139 146,139 156,743 156,743 166,612 166,612 182,057 182,057 Private firms 152,580 146,139 156,743 166,612 182,057 Self Selfemployed employed 63,50263,502 58,101 58,101 61,690 61,690 63,082 63,082 78,839 78,839 Self employed 63,502 58,101 61,690 63,082 78,839 AgriculturalAgricultural private private sector sector 61,495 61,495 55,000 55,000 60,000 60,000 49,664 49,664 56,453 56,453 Agricultural private sector 61,495 55,000 60,000 49,664 56,453 Voluntary Voluntary contributors contributors 263 263 300 300 500 500 650 650 610 610 Voluntary contributors 263 300 500 650 610 TOTALTOTAL Categories Categories 465,935 465,935 416,934 416,934 430,401 430,401 434,765 434,765 478,281 478,281 TOTAL Categories 465,935 416,934 430,401 434,765 478,281 Sources:Sources: HII, HII,SII SII Sources: HII, SII Avdi E,. Regional Science Inquiry Journal, Vol. V, (2), 2013, pp. 99110 109
Table 6 Macroeconomic indicators, 2007 2011
Labor market Annual real growth of GDP at constant Per capita income Employment Unemployment Years prices (%) EURO rate (%) rate (%) 2007 5.9 2,470.5 44.7 13.2 2008 7.5 2,800.8 45.8 12.7 2009 3.3 2,746.5 41.9 13.8 2010 3.8 2,782.8 42.3 13.3 2011 3.1 2,959.7 42.1 12.7
Sources: INSTAT, Ministry of Finance, Bank of Albania
References Avdi. E. (2011). Extension of Health Care Insurance Scheme and Risk Management: The Case of Health Insurance Institute. The Fourth International Scientific Conference of the Faculty of Economy on “Economic & Social Challenges and Problems 2011 – at the Time of Global Crisis and Integration”, 910 December 2011, Tirana, Albania, pp. 209215.
Avdi, E., (2012). Impact of Economic Crisis in Health Care System in Albania. The Fourth International Conference of Albania Center for Risk on “Regional Economy and Society Facing Public Responsibility Risks”, April 7th, 2012 in Dubrovnik, Croatia, pp. 191202.
Bank of Albania (2012). Monthly Statistical Report, 12/2012.http://www.bankofalbania.gov.al
Bredenkamp, C. and M. Gragnolati (2007). “Sustainability of Health Care Financing in the Western Balkans: An Overview of Progress and Challenges”, World Bank Policy Research, Working Paper, No. 4374, October. www.worldbank.org
Dixon, A., J. Langenbrunner and E. Mossialos (2004). “Facing the Challenges of Health Care Financing”, in J. Figueras, M. McKee, J. Cain and S. Lessof (eds.), Health Systems inTransition: Learning from Experience, Geneva, WHO. www.euro.who.int
Mihaljek, D. (2008):“Health Care Financing Reforms in Central and Eastern Europe: Common Problems and PossibleApproaches”, Public Finance Workshop of Banca d’Italia.
Nuri, B. (2002): Heath care systems in transition: Albania. (Ed. E. Tragakes). Copenhagen,European Observatory on Health Care Systems, 4(6).
Preker, A.S., M. Jakab and M. Schneider (2002). “Health Financing Reforms in Central andEastern Europe and the Former Soviet Union”, in E. Mossialos, A. Dixon, J. Figueras and J.Kutzin (eds.), Funding Health Care: Options for Europe, Buckingham, Open University Press. www.euro.who.int
WHO, Regional Committee for Europe (2006). “Approaching Health Financing Policy in the WHO European Region”, paper prepared for the 56th session of the WHO Regional Committee for Europe, Copenhagen, 26 June. www.euro.who.int
WHO (2008), World Health Statistics 2008, Geneva. www.who.int
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WorldWorld Bank Bank (2006): (2006): Albania Albania Health Health Sector Sector Note. Note. Repo Report No.rt 32612AL.No. 32612AL.
AlbanianAlbanian Ministry Ministry of Finance of Finance (2011). (2011). Draft Draft Programm Programmed Budgeted Budget Document Document MediumTerm MediumTerm 2012–2014.2012–2014. http://www.minfin.gov.al http://www.minfin.gov.al
HealthHealth Insurance Insurance Institute Institute (HII) (HII) of Albania, of Albania, http:/ http://www.isksh.com.al/www.isksh.com.al
InstituteInstitute of Statistics of Statistics (INSTAT) (INSTAT) http://www.instat. http://www.instat.gov.algov.al
INSTATINSTAT (2005 (2005 and 2008):and 2008): Living Living Standards Standards Measuremen Measurement Surveyt Survey (LSMS), (LSMS), Albania. Albania.
SocialSocial Insurance Insurance Institute Institute (SII) (SII) of Albania, of Albania, http:/ http://www.issh.gov.al/www.issh.gov.al
Sahini I., Dhuci O., Regional Science Inquiry Journal, Vol. V, (2), 2013, pp. 111123 111
THE CROSSROAD OF HOUSING LOANS FINANCING CASE OF ALBANIA
Iris SHAHINI Economic University of Tirana, Accounting Department irisshahini @gmail.com
Orfea DHUCI Economic University of Tirana, Accounting Department [email protected] Abstract : The current economic crisis has highlighted that a wellfunctioning financial system is significantly important for economic growth. This study investigated factors affecting housing finance supply in Albania. Housing Finance is a major factor determining the quality and tenure of housing consumption, the overall financial portfolio of the public and the stability and effectiveness of the financial system (Diamond and Lea 1992a). Struyk and Turner (1986) and Stephens (2000 & 2002) argued that housing finance plays an important role in shaping each country’s wider housing system and the housing system takes important social and economic consequences. Then, it follows that the development of a viable housing finance system is of utmost importance in the developed economies. For a typical houseowner, the house is a major asset in his portfolio and for many household, the purchase of a house represents the largest (and often only) life long investment and a store of wealth (Goodman 1989; Sheppard 1999; Malpezzi 1999; Bundick and Sellon Jr 2007; Dickerson 2009). In societies like Albania, where social housing is not on the priority list of government, the housing affordability would have to be looked at from the point of view of individual’s ability to raise money needed to meet the cost or price of their housing needs. The first source of funding for individual is their income. This is often the cheapest source because there is no payment of extra cost in form of interest. The problem that arises in case of individuals in the emerging economies is that income levels are generally low. The low income means low disposal income which prohibits the individuals to qualify for housing loans.
mortgage lending, house market, non performing loans, retail deposits JEL classification : G01,G21, E51,R31
1. Introduction The considerably decrease in the purchase/selling transactions of real estates, as well as the decrease in credit supply of construction sector from the bank side, have not influenced in the decrease of home purchase price. In an official declaration of the chief Albanian Association of Banks, Mr.Seyhan PENCABLIGIL, it was emphasized that the real estate prices should be decreased as they are overestimated considering the financial crises of the whole economy, stimulating in such way the housing loan financing. In contrast of what happened in the other economies, especially in the United States where the housing prices decreased considerably, in Albania they stayed almost stable by having the effect that Albania is out of the reality of financial crisis. From the other side the difficulties in the collateral execution from the banks it’s a barrier to put pressure in the market price of real estates. According to the Ministry of Finance actually the banks have over 20 milliard ALL frozen in the legal process of non performing loans. In such a situation the housing loans financing is considerably decreased. As per Bank of Albania data, the outstanding of mortgage loans has decreased for 2012, especially in June and July. The most shrunken was the loan in euro currency, which at the end of 2012 decreased by 3% compared with the end of 2011. The loan in euro currency composes 66% of the mortgage loan portfolio in 2012 from 72% in 2009. The mortgage loan portfolio composes 1/5 of the total loan portfolio of the banking system in December 2012. Up to the year 2008, banks especially the Greek once, were much more aggressive in lending of housing loans mainly in foreign currency. The financial crisis lead to the deprecation of
112 Sahini I., Dhuci O., Regional Science Inquiry Journal, Vol. V, (2), 2013, pp. 111123 112 Sahini I., Dhuci O., Regional Science Inquiry Journal, Vol. V, (2), 2013, pp. 111123
Albanian currency towards EUR and Albanian banks started to orient the customers to have Albanianthe loan currency in the towardssame currency EUR and of Albaniantheir incomes banks in st oartedrder toto avoidorient thethe exchangecustomers rate to haverisk. On the loan2009 in the the loan same in eurocurrency composed of their 72% incomes of the intotal order loa nto portfolio. avoid the The exchange decrease rate in risk.loan Onfinance 2009is the argued loan byin eurothe banks composed as a necessity72% of the towards total loa then sportfolio.harp increase The indecrease nonperforming in loan finance loans. As is arguedper Albanian by the banks Association as a necessity of Banks towards the NPL the s ratioharp increase on December in nonperforming 2012 reached loans. 22.5% As from per Albanian18.8% on AssociationDecember 2011. of Banks In the thefirst NPL semester ratio of on 20 December12 the indicator 2012 reachedof lost loans 22.5% increased from to 18.8%6.58% on December from 5.7% 2011. on December In the first 2011. semester As per of 20construct12 the indicatorors, there of are lost the loans banks increased that supply to the 6.58%economy from 5.7% with on money December and the2011. decrease As per in construct selling ors,prop thereerty isare a theconsequence banks that ofsupply loan thesupply economyfrom banks with money side considering and the decrease that the inindividuals selling prop thaterty buy is an a apartmentconsequence in cash of loan are verysupply few in fromnumber. banks side From considering the other thatside thethey individuals argue that th itat is buy impossible an apartment for them in cash to decreaseare very fewthe sellingin number.price From of houses the other as all side the theyconstructions argue that of it years is impossible 20042005 for have them an to high decrease construction the selling cost not priceonly of houses due to ashigh all costthe constructions of raw materials of years but also20042005 due to thehave high an highpercentage construction of m.sq cost pertaining not onlyto due the to plot high owners cost of (almostraw materials 40% in but Tirana also due area). to Thethe high decrease percentage in house of m.sq prices pertaining seems to be to thedanger plot ownersif we have (almost in mind 40% an in Albanian Tirana area).construction The decrease industry in of house infinite prices debts. seems If the to price be of dangerapartments if we have will in decrease, mind an theAlbanian constructors construction should industry be obliged of infiniteto pay moredebts. to If their the pricesuppliers of of apartmentsfirst materials will decrease, towards the whose constructors they are should debtors. be Als obligedo banks to payfrom more the otherto their side suppliers lose from of the first lowermaterials collateral towards value whose securing they arethe loans.debtors. The Als onlyo banks decrease from in the housing other sideprice lose occurs from when the it is lowerpurchased collateral in value cash. securing The prices the loans.in Tirana The area only for decrease apartments in housing vary fromprice 380occurs euro/m.s.q when it isin the purchasedsuburb in to1,800 cash. The euro/s.q.m prices in in Tirana the center. area for Still ap theartments real estatevary from market 380 is euro/m.s.q frozen and in the the only suburbbreath to1,800 was the euro/s.q.m homeless in loan the center.subsidized Still from the realAlbani estatean Government market is frozen during and the theyears only 2011 breath2012. was the homeless loan subsidized from Albanian Government during the years 2011 2012. 2. Literature review 2. LiteratureThe Loanable review funds theory of interest rate argued that economic agents have a certain amount The ofLoanable financial funds wealth theory and of theyinterest can rate decide argued to t holdhat economic the wealth agents in the have form a certain of either amount interest of financialearning financialwealth and assets, they or can in decide cash which to hold earns the no wealth interest, in the or form a combination of either interest of the two earning(Pilbean financial 2005; assets, Buckle or & inThompson cash which 2005 earns and Wickens no interest, 2008). or aThe combination quantity of ofloanable the two funds (Pilbeanavailable 2005; is Buckle the stock & Thompsonof interest earning2005 and financia Wickensl assets 2008). and The is determined quantity of by loanable three factors: funds available1. The is amountthe stock of of savings interest – earningan individual’s financia lendowmen assets andt is may determined consist ofby securities three factors: plus human 1. Thehealth amount and of the savings present – an value individual’s of his earnings. endowmen If t thmaye individual’s consist of securities preferred plus intertemporal human healthconsumption and the present differs valuefrom his of timeprofile his earnings. of If earnin the individual’sg, his consumption preferred might intertemporal be rearranged. consumptionThis is done differs by frompurchases his timeprofile of financial of securities earning, ohisr early consumption mortgage might repayment be rearranged. (Benston and ThisSmith is done Jr 1976)by purchases of financial securities or early mortgage repayment (Benston and Smith2. Jr Switches 1976) from money holdings into saving products – There might be switches by 2. Switchesindividuals from and money business holdings from holding into saving financial product weas lth – There in the might form of be money switches to by saving individualsproducts. and business from holding financial wealth in the form of money to saving products.3. An increase in loans made by financial institution. 3. AnWith increase respect in loansto the made supply by function financial a instituti reviewon. of the literature reveals that the variables, other Withthat respect the price to the variables, supply function most often a review used to of model the literature the supply reveals of mortgage that the loans variables, include other cost of that funds,the price net variables, new savings most andoften past used loan to model commitments. the supply O nof the mortgage supply loansside, includea variety cost of ofcredit funds,channel net new models savings consider and past how loan changes commitments. in the financia On the l supply positions side, of a banksvariety (bank of credit lending channelchannel) models and considerborrowers how (balance changes sheet in channel) the financia affectl the positions availability of banks of credit (bank in an lending economy channel)(see Hall,and borrowers 2001, for (balance a succinct sheet overview). channel) Theaffe ctrole the ofavailability bank’s balance of credit sheets in an in economy shaping the (see evolutionHall, 2001, of creditfor a succinctgrowth has overview). been subject The torole deba ofte bank’s during balance the 2008 sheets recession. in shaping On one the hand, evolutionthere of is creditevidence growth that has exposition been subject to “toxic” to deba assetste during has the affected 2008 somerecession. banks’ On abilityone hand, to lend there(Puri is evidence et al., 2011). that expositionIn evaluating to “toxic”the impact assets of hasnonperforming affected some loans banks’ on the ability loan to supply lend by (Puribanks, et al., there 2011). are In studies evaluating that suggestthe impact that ofcredit nonperforming creation is impacted loans on by the both loan macroeconomic supply by banks,variables there are that studies impact that loan suggest uptake that as wellcredit as c reationinternal is structures impacted suchby both as the macroeconomic composition of a variablesbank’s that balance impact sheet loan and uptake the demand as well foras internloans.al Baum structures etal (2002) such asinvestigated the composition empirically of a the bank’slink balance between sheet bank and lendingthe demand and for macroeconomic loans. Baum etal uncerta (2002)inty investigated using annual empirically and quarterly the link U.S.bank between banklevel lending data. They and concluded macroeconomic that in uncerta the inty presence using of annual greater and macroeconomic quarterly U.S.bankuncertainty, level banks data. collectively They concluded become that more in conserv the preative,sence and of this greater concerted macroeconomic action will lead uncertainty,to a narrowing banks collectivelyof the cross–sectional become more distribution conservative, of banks’ and thisloan–to–asset concerted action(LTA) willratios. lead Calza to a etalnarrowing (2001) of using the cross–sectional the Johansen distribution methodology, of banks’ identif loan–to–assetied in their study(LTA) one ratios. cointegrating Calza etal relationship (2001) using linking the Johansenreal loans, methodology, GDP and interest identif riedates. in This their relationship study one implies cointegrating that in the relationshiplongrun linking real loans real areloans, positively GDP and related interest to real rates. GDP This and relationship negatively impliesto real thatshortterm in the and longrunlongterm real loansinterest are rates. positively The financial related tocrisis real inGDP the 2007and negatively has caused to a realslowdown shortterm in monetary and longterm interest rates. The financial crisis in the 2007 has caused a slowdown in monetary Sahini I., Dhuci O., Regional Science Inquiry Journal, Vol. V, (2), 2013, pp. 111123 113 expansion. O’Brein and Browne (1992) sited that one factor that can contribute to the slowdown in monetary transaction is a reduction in bank lending. It is understood that a slowdown in loans reflects influences on both the demand and the supply side. On the demand side a slowdown in economic activity and the subsequent loss of purchasing power by many individuals has disqualified them from being able to qualify for access to loans. This has resulted in dramatic fall in loans demanded. According to O’Brein and Browne (1992), on the supply side, the decline in credit is exacerbated by two channels on the supply side i) a deterioration in asset quality and ii) stricter attitudes of regulators, especially through more stringent capital standard.
3.1 Factors affecting Housing Finance Supply in Emerging Economies. With the magnitude of housing needs in most of the countries in the emerging economy, Buckley and Kalarickal (2004), Hassler (2005) and Merrill (2006) argued that there are requirements that emerging economies must embrace, if they are going to move forward in terms of delivering housing finance. The requirements include stable macroeconomic conditions, a legal framework for property rights, mortgage market infrastructure and funding sources to promote financial intermediation. In this paper we will discuss how the macroeconomic conditions influence in loan supply. 3.1.1 Macroeconomic conditions: Macroeconomic policies are one of the main factors affecting the Housing Finance Supply in Albania. The macroeconomic policies might be adopted to affect (decrease/increase) the nominal interest rate, or volatility of inflation, which has affected the efficiency of housing finance. A macroeconomic policy framework is one that promotes growth by keeping inflation low, the budget deficit small and the current account sustainable (Fischer 2004 p.123; Hale 2007). Considering that approximately 66 % of the mortgage portfolio is in foreign currency and the incomes of the borrowers are manly in ALL, it is very crucial not to permit the depreciation of local currency. Therefore, the financial regulatory authorities (central banks) in most emerging market economies have used policies like the cash reserve requirement and liquidity ratio as instruments of monetary control. Cash reserve requirement is the percentage of the banks cash asset to be kept in an account with the central bank. In Albania CRR is 10 percent of the bank’s total deposit liabilities. This policy is adopted to control volume of funds available for financial institutions to invest in granting loans. Therefore, any system that is supporting its housing development is contributing to the long term growth and stability of the country as well as the welfare of its people. With the recent trends in real growth rate in Albania economy put at 5.9 % in 2007, 7.5 % in 2008, 3.3 % in 2009, 3.91 % in 2010, 2.72 % in 2011 and 1.62 % in 2012. The income earned by workers are generally low, with the minimum monthly wage at All 21,000 (EUR 150) and the average monthly income for the public sector ALL 46,665 (EUR 333) and private sector ALL 38,292.2 ( EUR 274)
Graph 1: Minimum Base Pay (Euro) – Comparison with region
Source: Statistical institutions of each country
114 114 SahiniSahini I., Dhuci I., DhuciO., Regional O., Regional Science Science Inquiry Inquiry Journal, Journ Vol.al, V, Vol. (2), V, 2013, (2), pp.2013, 111123 pp. 111123
4. The4. Theoverall overall trend trend for housing for housing loans loans in our in regioour region andn andin the in worldthe world The Thetightening tightening of credit of credit standards standards has beenhas been applied applied usually usually by reducing by reducing the financing the financing amount amount and askingand asking for additional for additional collateral. collateral. Albanian Albanian bank banks haves have reported reported that thatdemand demand of customers of customers has alsohas alsodecreased decreased due todue future to future uncertainty. uncertainty. The Thesame s ametrend trend has followedhas followed also alsoduring during the year the year 2012.2012. The Thedemand demand for mortgagefor mortgage loans loans has beenhas been decrea decreased duesed todue the to longthe longrun predictionrun prediction of of financialfinancial situation situation for the for future the future from from individuals individuals. The. Thedecrease decrease in mortgage in mortgage loan loanportfolio portfolio for for 20122012 was was0.46 0.46milliard milliard all. Theall. Theoverall overall increase increase in retail in retail portfolio portfolio was was0.7 milliard0.7 milliard all during all during the yearthe year2012, 2012, the lowest the lowest in the in last the tenlast years. ten years. The Thesame same trend trend regarding regarding the creditthe credit standards standards follo followed wedin the in Europeanthe European countries countries (see (seegraph graph 2, panel2, panel 1 and 1 and2). Only2). Only after after the firstthe firstquarter quarter of 2012 of 2012 the banksthe banks started started to easing to easing the loanthe loan supplysupply criteria. criteria. GraphGraph 2: Global 2: Global trend trend of Credit of Credit Standards Standards and Loanand Loan demand demand PanelPanel 1 1 Panel Panel 2 2
In theIn United the United States, States, the rate the ofrate credit of credit growth growth has beenhas been picking picking up gradually, up gradually, and bankand bank lending lending conditionsconditions have have been been easing easing slowly slowly from from very verytight tight levels levels (Graph (Graph 3,panels 3,panels 1 and 1 2).and Together 2). Together with withlower lower market market risk spreads,risk spreads, this hasthis noticeablyhas noticeably eased eased financial financial conditions conditions in the in USA the USA and and EuroEuro area area (Graph (Graph 4). Financial 4). Financial conditions conditions tightened tightened sharply sharply toward toward the endthe endof 2011 of 2011 as the as the economiceconomic outlook outlook deteriorated deteriorated and and tensions tensions rose rose in the in eurothe euro area. area. More More recently, recently, market market confidenceconfidence has beenhas been bolstered bolstered by improved by improved growth growth prospects prospects and andstronger stronger policy policy actions. actions. RiskRisk spreads spreads have have narrowed narrowed as a asresult. a result. Financial Financial conditions conditions are expectedare expected to continue to continue easing easing as globalas global growth growth continues continues to gain to gaintraction. traction. This This process process is supported is supported by recovering by recovering house house price prices, highers, higher household household net worth, net worth, and and strongerstronger bank bank balance balance sheets sheets and andprofitability. profitability. How However,ever, many many middleincome middleincome households households continuecontinue to face to facehigh highdebt debtburdens. burdens.
GraphGraph 3: Monetary 3: Monetary Conditions Conditions and Bankand Bank Lending Lending
PanelPanel 1 1 PanelPanel 2 2
Source:Source: World World Economic Economic outlook, outlook, April April 2013 2013
Sahini I., Dhuci O., Regional Science Inquiry Journal, Vol. V, (2), 2013, pp. 111123 115
Graph 4: Financial Conditions Index
Source: World Economic outlook, April 2013
In the euro area, sustained, positive feedback between activity and credit still seems a distant prospect. Euro area credit continues to contract and lending conditions to tighten, reflecting mainly conditions in the periphery economies which includes Greece, Ireland, Italy, Portugal, and Spain, but also the poor macroeconomic outlook for the region as a whole. Companies in the core face an uncertain environment and low.
Emerging Europe
Emerging Europe experienced a sharp growth slowdown in 2012, reflecting spillovers from the euro area crisis and domestic policy tightening in the largest economies in response to new capacity constraints. The intensification of the euro area crisis took a toll on activity in emerging Europe in 2012. Exports decelerated, confidence suffered, and beleaguered western European banks decreased funding for their subsidiaries (Graph 5, panel 1,2 and 3). Compounding these effects were restrictive domestic policies—in Turkey to rein in the overheated economy and in Poland to address abovetarget inflation and a sizable fiscal deficit. As a result, growth in the region plunged from 5Ό percent in 2011 to 1½ percent in 2012. Several economies in southeastern Europe that had yet to fully emerge from the 2008– 09 crisis fell back into recession. Emerging Europe is also burdened by such crisis legacies as high nonperforming loan ratios and incomplete repair of public finances. Growth in Turkey is projected to accelerate to 3½ percent in 2013 and 3Ύ percent in 2014— helped by recovering external demand and capital flows. Poland’s growth will slow further to 1Ό percent in 2013 before picking up to 2Ό percent in 2014, on account of lackluster private consumption, fragile export demand from key trading partners in core Europe, and a further decline in EUfunded public investment. Southeastern Europe will see the most tepid recovery, reflecting to various degrees entrenched structural impediments and competitiveness problems, a continued rise in nonperforming loans, and challenging public finances. Hungary faces a difficult outlook due to high public and external debt, along with unconventional policies that have eroded confidence and investment. Overall, annual average inflation is expected to remain moderate this year in most of emerging Europe. Elevated rates are projected only for Turkey (6½ percent) and Serbia (9½ percent), largely reflecting inflation inertia. The balance of risks to the outlook is tilted to the downside, though less than in the October 2012
116 Sahini I., Dhuci O., Regional Science Inquiry Journal, Vol. V, (2), 2013, pp. 111123 116 116 Sahini I.,Sahini Dhuci I., O., Dhuci Regional O., Regional Science ScienceInquiry InquiryJournal, Journ Vol. al,V, Vol.(2), 2013,V, (2), pp. 2013, 111123 pp. 111123
Graph 5. Emerging Europe: A Gradual Recovery from 2012 Slowdown GraphGraph 5. Emerging 5. Emerging Europe: Europe: A Gradual A Gradual Recovery Recovery from 2from012 Slowdown2012 Slowdown Panel 1 Panel 2 Panel 3 Panel Panel1 1 Panel Panel2 2 Panel Panel3 3
5. Housing Market Price in Albania 5. Housing5.The Housing decline Market Marketin Pricemarket Pricein prices Albania in inAlbania Albania due to the crisis are lower than regional declines. The The declineThetable decline belowin market in illustrates market prices prices in the Albania declinein Albania due in to due marketthe to crisis the price crisisare slower forare lower somethan regionalthan of theregional declines. regional declines. The countries The table tablefollowing below below illustrates the illustrateshouse the bubble decline the in decline 2008. in market The in marketcumulative price s price for decline s some for for some of most the of regionalof the the regionalregional countries countries followingfollowing(excluding the house the Croatia) house bubble bubble is in higher 2008. in 2008.The than cumulative theThe 20%cumulative decline decline decline infor market most for ofmost price the of regional reported the regional countries for Albaniancountries (excluding(excludingresidential Croatia) properties. Croatia) is higher is The higher than house the than bubbles 20% the decline20% have decline in typi marketcally in market followed price price reported house reported forbooms Albanian for caused Albanian not residentialresidentialonly by properties. the properties.widespread The house The rise house in bubbles house bubbles prices, have havetypi butcally al typiso cally followedby the followed accession house house boomsin the booms European caused caused not Union, not only byonlywhich the by widespreadcaused the widespread a massive rise in rise floodhouse in house ofprices, EU prices,buyers but al butso in by theal sothe ac by cedingaccession the accession countries. in the in European Whilethe European in Union,Albania Union, the whichwhichhouse caused boomcaused a massive before a massive floodthe crisis floodof EU was of buyers causedEU buyers in mainly the in ac thebyceding twoacceding factors:countries. countries. While While in Albania in Albania the the househouse– boom Remittances boombefore before the of crisisthe the Albanian crisiswas caused was immigrants caused mainly mainly byliving two by abrfactors: twooad factors: who invested a large portion of their – Remittances–savings Remittances in of acquiring the of Albanian the apartments Albanian immigrants immigrants in Tirana living and living abr otheroad abr whokeyoad areas investedwho invested a large a largeportion portion of their of their savingssavings– Thein acquiring availability in acquiring apartments of apartments housing in Tirana loans in Tirana andand otherthe and nonres otherkey areas keytrictive areas risk policies of the banks, which – The–coupled availability The availability with ofrising housing of rents housing loansand prices loansand the providedand nonres the nonresantrictive excellenttrictive risk investment policies risk policies of opportunity. the of banks, the banks, which which coupledcoupledThe with touristic risingwith risingrents destinations andrents prices and and prices provided the provided capital an ex are cellentan ex thecellent investmenttwo prevailinginvestment opportunity. areasopportunity. which have lower The touristicThedecline touristic in destinations prices destinations as a and result the and of capital the the capital crisis are the inare two the the regional prevailingtwo prevailing countries. areas areas which The which key have factor have lower to lower the declinedeclinecontained in prices in decline prices as a result as in a the result of house the of crisis the prices crisis in the in in Albaniaregional the regional re countries.lates countries. to Thethe “unwillingness” key The factor key factor to the of to the containedcontaineddevelopers/constructors decline decline in the in house the to house lower prices prices offer in Albania prices, in Albania espe relatescially re lates to for the to apartments, “unwillingness” the “unwillingness” despite of the the of large the developers/constructorsdevelopers/constructorsavailable stock of apartments. to lower to lower offer This offer prices,unwillingness prices, especially espe relates cially for to apartments, forthe lack apartments, of despitedemand despite thefor apartments large the large availableavailableand stockreal estate stockof apartments. in of general. apartments. This unwillingnessThis unwillingness relates relates to the tolack the of lack demand of demand for apartments for apartments and realand estate real estate in general. in general. Table 2: Housing market price TableTable 2: Housing 2: Housing market market price price
Source: AAB report on Factual Findings Source:Source: AAB AABreport report on Factual on Factual Findings Findings
Sahini I., Dhuci O., Regional Science Inquiry Journal, Vol. V, (2), 2013, pp. 111123 117 Sahini I., Dhuci O., Regional Science Inquiry Journal, Vol. V, (2), 2013, pp. 111123 117
Table 3: Rent to purchase price Table 3: Rent to purchase price
Source: Albania Association of Banks Source: Albania Association of Banks The regional comparison of rents and purchase prices for some of the regional countries, showsThe regional that apart comparison from Crete of (Greece)rents and for purchase all the price others for regional some of countries the regional part countries, of the comparison,shows that the apart average from rent Crete levels (Greece) are more for than all the 30% ot her of the regional average countries sale prices. part With of the respectcomparison, to Crete, the given average that rent it is levels primarily are a more tour istic than destination, 30% of the the average ratio of sale rent prices. to sales With pricesrespect can tobe Crete,justified given by the that fact it that is primarily all proper aties tour areistic bought destination, for rental the purposes. ratio of Thus rent torents sales areprices kept atcan a becertain justified level by to the attract fact thattourists, all proper but theties number are bought of properties for rental ispurposes. limited Thusso sales rents pricesare keptare high. at a Albaniacertain level has the to lowestattract renttourists, to sal bue tprice the numberratio of properties is limited so sales 6. pricesFunding are ofhigh. Mortgage Albania Loans has the lowest rent to sale price ratio If 6.the Funding funding ofof Mortgagemortgage loansLoans is left primarily to the deposittaking institutions, they can onlyIf the supply funding mortgage of mortgage loans loans through is left deposit primarily mobilize to thed deposittaking which are shorttenured. institutions, they As acan consequenceonly supply of the mortgage high proportion loans through of shortterm deposit li abilities mobilize ind their which deposits, are shorttenured. they tend to lend As a shortconsequence according of to the the high commercial proportion bank of shortterm loan theory liabilities and the in real their bill deposits, doctrine. they The tend theory to lend stipulatesshort according that bank toloans the should commercial be shortterm bank loan and theory selfliquidating and the real because bill doctrine.commercial The banks theory usuallystipulates have that shortterm bank loans deposits. should According be shortterm to the and theory, selfliquidating banks should because not grantcommercial longterm banks loansusually such have as housingshortterm / realdeposits. estate According loans or to loans the theory,for financing banks should purchase not ofgrant plant longterm and machineryloans such because as housing they are / considered real estate too loans illiquid or loans(Elliot for1984; financing Ritter & purchase Silber 1986 of as plant cited and by machinerySoyibo 1996). because A large they percentageare considered of financial too illiquid institutions (Elliot 1984; in the Ritter emerging & Silber economies 1986 as arecited stillby adopting Soyibo 1996).the business A large model percentage used in of the financial era of marketmakinginstitutions in the (1970s1980s) emerging economies in the US are relyingstill adoptingon shortterm the business deposits model liabilities used to in fund the longtermera of marketmaking mortgages assets (1970s1980s) (USDHUD in 2006; the US Chorelying 2007), on which shortterm are contradictory deposits liabilities to the to tenets fund longtermof the commercial mortgages bank assets loan (USDHUD theory. This 2006; modelCho had2007), a unique which shortcomingare contradictory under to volatile the tenets inter ofest the rate commercial environment bank where loan lenders theory. are This borrowingmodel had shortterm a unique andshortcoming lending onunder longterm volatile basis inter est at highrate environment interest rates where that resultslenders in are dampenedborrowing housing shortterm finance and demand. lending on longterm basis at high interest rates that results in dampened housing finance demand.
118 Sahini I., Dhuci O., Regional Science Inquiry Journal, Vol. V, (2), 2013, pp. 111123 Sahini I., Dhuci O., Regional Science Inquiry Journal, Vol. V, (2), 2013, pp. 111123 118 118 Sahini I., Dhuci O., Regional Science Inquiry Journal, Vol. V, (2), 2013, pp. 111123
Graph 2: Deposits as per maturity Graph Graph 2: Deposits 2: Deposits 2011 as per as maturity per maturity 2012 2011 2011 2012 2012
Source: BOA Monetary policy report 2012 Source: Source: BOA BOA Monetary Monetary policy policy report report 2012 2012 A wellfunctioning primary mortgage market requires adequate funding sources and variety A ofwellfunctioning A lenders wellfunctioning in the primary primary primary mortgage market mortgage tomarket promote market requires furtherrequires adequate development. adequate funding funding Thissources sources includes and varietyand savings variety of mobilization lendersof lenders in the in and primary the simple primary market mortgagebacked market to promote to promote further debt further instru development. development.ments to This offer This includes lenders includes savings funding savings mobilizationalternativesmobilization (Roy and and simple2007). simple mortgagebacked mortgagebacked debt debt instru instrumentsments to offer to offer lenders lenders funding funding alternativesA alternatives wellfunctioning (Roy (Roy 2007). 2007). mortgage market is considered by Jaffee and Renaud (1977), Jaffee A (2008) wellfunctioningA wellfunctioning and Renaud mortgage (2008) mortgage to markethave market large is considered external is considered ben byefits Jaffee by to Jaffeethe and domiciled and Renaud Renaud national (1977), (1977), economy. Jaffee Jaffee (2008)Quigley(2008) and (2000), Renaudand Renaud Oloyede (2008) (2008) to (2007) have to have largeand large Warnockexternal external ben& Warnocefits ben efitsto kthe to(2008) domiciled the domiciled are of national the national opinion economy. economy. that in QuigleytheQuigley absence (2000), (2000), of Oloyede a wellfunctioning Oloyede (2007) (2007) and housingWarnockand Warnock finance & Warnoc & sWarnocystem,k (2008) k there (2008) are would ofare the of be opinion the inadequacies opinion that thatin of in themarketbased absencethe absence of a provision of wellfunctioning a wellfunctioning of formal housing housing, housing finance and finance s anyystem, s aystem,ttempt there there made would would to be provide inadequacies be inadequacies subsidised of of marketbasedhousingmarketbased finance provision provision in form of offormal of public formal housing, housing housing, and and and any subsi any attemptdised attempt interest made made to would provide to provide be subsidiseda shortterm subsidised housingsolution.housing finance One finance of in the form in first form of set public ofof publicempirical housing housing studies and andsubsi carried subsidised outdised interest on interesthousing would wouldfinance be a be shorttermin a emerging shortterm solution.economiessolution. One wasOneof the byof firstDengthe firstset et of setal empirical (2005). of empirical It studies is the studies firstcarried rigorouscarried out onout empirical housing on housing financeanalysis finance in on emerging thein emerging earlier economiesperformanceeconomies was wasby of Deng residentialby Deng et al et(2005). mortgage al (2005). It is market Itthe is firstthe in first rigorous China rigorous. empirical Another empirical recentanalysis analysis empirical on the on earlier the studies earlier performancecarriedperformance out was of residentiala of Lithuanian residential mortgage study mortgage using market multiple market in China c inriteria China. Another quantitative. Another recent and recent empiricalconceptual empirical studies analysis studies carriedbycarried Zavadskas out was out wasaet Lithuanian al a (2004). Lithuanian studyOthers study using include using multiple Djankov multiple criteria e ct riteriaal quantitative (2007) quantitative covering and conceptualand129 conceptualcountries analysis in analysis both bydeveloped Zavadskasby Zavadskas andet al emerging et(2004). al (2004). Others economies Others include include using Djankov Djankov new e datat al e(2007) t onal (2007)legal covering creditor covering 129 rights countries129 countries and in private both in both / developedpublicdeveloped credit and registries. andemerging emerging economies economies using using new new data data on legal on legal creditor creditor rights rights and and private private / / publicWarnockpublic credit credit andregistries. registries. Warnock (2008) used annual average data from 2001 to 2005 in many WarnockdevelopedWarnock and and and Warnock emerging Warnock (2008) economies (2008) used usedwith annual annualemphasis average average that data countries data from from 2001with 2001 stronger to 2005 to 2005 legal in many inrights, many developeddeeperdeveloped credit and emergingandinformation emerging economies system economies and with a withmoreemphasis emphasisstable that macroeconomic thatcountries countries with environment withstronger stronger legal have legal rights, deeper rights, deeperhousingdeeper credit finance credit information informationsystems. system system and aand more a more stable stable macroeconomic macroeconomic environment environment have have deeper deeper housing7. housingMethodology finance finance systems. and systems. Data 7. TheMethodology7. purposeMethodology of and this andData paper Data is to descripe the relation between the mortgage loans supply from Thebanks Thepurpose aspurpose a ofdepended this of paperthis variable paper is to is descripeand to descripethe nonperformingthe relati the relation betweenon loansbetween the and mortgage thethe mortgagedeposits loans ofloans supplyindividuals supply from from as banksundependedbanks as a asdepended a variables.depended variable Thevariable andperiod theand takennonperforming the nonperforming in considera loanstion loans andis 2007 theand deposits theup depositsto 2012 of individuals ofcorresponding individuals as as undependedwithundepended the beginin variables. variables. of theThe financial Theperiod period takencrisis. taken in The considera in data considera havetion beentionis 2007 istaken 2007 up fromto up 2012 todifferent 2012 corresponding corresponding sources as withBank withthe of begininthe Albania beginin of , Ministrythe of financialthe financial of Finance, crisis. crisis. The Albanian Thedata data haveAss ociassionhave been been taken of taken banksfrom from differentetc. Thedifferent timesources seriessources as of as BanktheseBank of dataAlbania of Albania are , onMinistry quarterly, Ministry of Finance, basis.Thereof Finance, Albanian Albanian is a gapAss ociassion ofAss empiricalociassion of banks studyof banks etc. of Theetc. housing timeThe timeseries finance series of in of theseemergingthese data data areeconomies, on are quarterly on quarterlywhich basis.There for basis.There I used isAlbania a is gap a as gap of a empirical c ofase empirical study study in this study of work. housing of housingBoth finance supply finance inand in emergingdemandemerging economies, side economies, of survey which were which for taken I forused Iinto used Albania context Albania as to a ascgease neratea cstudyase responsestudy in this in work.thisto the work. Bothresearch Both supply questionssupply and and demandin demandmy sidePhD sideofstudy, survey of butsurvey were in this were taken paper taken into I will intocontext analyse context to ge o toneratenly ge thenerate response supply response side to theof to housingresearch the research finance. questions questions The in aimmyin PhD ofmy this PhDstudy, study study, but centred inbut this in on paperthis housing paper I will Ifinance willanalyse analyse supply only othe nlyin Albania,supply the supply side therefore sideof housing of thehousing methodological finance. finance. The The aimframework ofaim this of studythis adopted study centred centredfor onthe housing supplyon housing financeside financeof housingsupply supply in fi nanceAlbania, in Albania, is twovariabletherefore therefore the linear methodologicalthe methodological Regression. frameworkIn framework the case adopted of adopted this for study, thefor supplythe various supply side independent sideof housing of housing fi varinance ablesfinance is liketwovariable is twovariable individual linear deposits linear Regression. Regression. and non In performing theIn case the case of loans, this of this study,are used study, various to variouspredict independent the independent value vari of ablesthe vari dependingables like like individual variable individual deposits which deposits andis housing and non non performingloansperforming (supply loans, ofloans, arehousing usedare used finance).to predict to predict EViews the valuethe and value of Excel the of dependingwerethe depending used forvariable data variable analysis. which which is EViews housing is housing is a loansstandardloans (supply (supply statistical of housing of housing computer finance). finance). program EViews EViews very and Excel muchand Excel were suited were used for used for regression data for dataanalysis. analysis analysis. EViews with EViews is time a is a standardseriesstandard data. statistical statisticalThe descriptive computer computer statistics program program are very used very much to much describe suited sui forted the regression forbasic regression features analysis of analysis the with data with time in this time seriesstudy.series data. data. The Thedescriptive descriptive statistics statistics are used are used to describe to describe the basic the basic features features of the of data the datain this in this study.study. Sahini I., Dhuci O., Regional Science Inquiry Journal, Vol. V, (2), 2013, pp. 111123 119
The Assessed Model The conceptualization of a model is to assist in the analysis of the relationship between housing loans (housing finance supply), being the dependent variable, and other factors that may affect it. The methodology adopted need to capture all the variables. These variables include deposits of individuals and nonperforming loans. The supply of housing finance function is therefore expressed as: Ys = f (X1 + X2) Ys – is the depended variable which represents the mortgage loans supply in Albanian banking sector. This variable will be measured by the new mortgage loans disbursed on quarterly basis X1 is the first independent variable which represents the individuals deposits in our banking g system. We expect to have positive relation between Ys and X1 considering that the increase of liquidity of the bank increases its willingness to lend X2 is the second independent variable which represents the nonperforming loans (90+ dpd). We expect in our study to have a negative relation between the Ys and X2 as the increase in nonperforming loans makes banks more cautious in lending. Using housing loans as the dependent variable, it could be deduced at a point, the effects of independent variables like the individual deposits and non performing loans The basic model is as shown below: Ys= A+ β1(X1)+ β2 (X2) The assessed model is: log(s) = 13.74 + 2.31*log(x1) 0.81*log(x2) Dependet Variable: log(s) Mortgage loans supply Independent Variable log(x1) individuals deposits log(x2) Totali i kredive me probleme β1 = 2.31 shows that when the deposits of individuals increases by 1 unit then the supply for mortgage loans will increase by 2.31 units by keeping stable the non performing loans β2 = 0.81 , shows that when the total non performing loans increases by 1 unit then the supply for mortgage loans decreases by 0.81 units by having stable the deposits of individuals. Table 4: Model Results Variable Coefficient Std. Error tStatistic Prob. C 13.74619 5.220548 2.633093 0.0181 LOG(X1) 2.318775 0.456265 5.082086 0.0001 LOG(X2) 0.812577 0.095925 8.470922 0.0000 Rsquared 0.856699 Mean dependent var 8.552315 Adjusted Rsquared 0.838786 S.D. dependent var 0.387776 Source: author calculations Pearson ProductMoment Correlation (r) The Pearson ProductMoment Correlation (r) is the most commonly applied correlation coefficient used in measuring a linear association and it is therefore adopted in this study to build the framework of the conceptual model. Pearson productmoment correlation coefficient (r) ranges from 1 to +1. The indication is that there could be a positive correlation or a negative correlation. A positive correlation exists when dependent and independent variables move in the same direction, that is, when one variable increases and other variable also increase. There is negative correlation when one variable increases and the other variable decreases. Without taken cognisance of the sign, the strength of the relationship could be observed when figures are taken in absolute term. If a correlation of zero is observed, there is no relationship between two variables. However, a perfect correlation of 1 or +1 indicates that the value of one variable can be determined by knowing the value of the other variable. In the regression context, r ² is a more meaningful measure than r, for the former tells us the proportion of variation in the dependent variable explained by the explanatory variable(s) and therefore provides an overall measure of the extent to which the variation in one variable determines the variation in the other. The coefficient (r²) ranges from 0 to +1. The r ² value of
120 120 SahiniSahini I., Dhuci I., DhuciO., Regional O., Regional Science Science Inquiry Inquiry Journal, Journ Vol.al, V, Vol. (2), V, 2013, (2), pp.2013, 111123 pp. 111123
0.85 0.85means means approximately approximately 85 percent 85 percent of the of variatio the variation in nthe in Y(s)the Y(s)is explained is explained by variation by variation in in the X1the andX1 X2.and X2.Since Since r ² at r most² at most can becan 1, be we 1, canwe scanay thatsay thatthe regressionthe regression line linefits ourfits dataour data extremelyextremely well; well; HYPOTHESISHYPOTHESIS TESTING: TESTING: The The theory theory of hypothesis of hypothesis testing testing is concerned is concerned with withdeveloping developing rules rules or procedures or procedures for for decidingdeciding whether whether to reject to reject or not or rejectnot reject the null the nullhypothesis.The hypothesis.The stated stated hypothesis hypothesis is known is known as as the nullthe nullhypothesis hypothesis and isand denoted is denoted by the by symbolthe symbol H0. H0The. Thenull nullhypothesis hypothesis is usually is usually tested tested againstagainst an alternative an alternative hypothesis hypothesis (also (also known known as ma asintained maintained hypothesis) hypothesis) denoted denoted by Ha. by Ha. ThereThere are aretwo two mutually mutually complementary complementary approaches approaches for fordevising devising such such rules, rules, namely, namely, confidenceconfidence interval interval and testand oftest significance. of significance. Both Both these these approaches approaches predicate predicate that thethat variable the variable (statistic(statistic or estimator) or estimator) under under consideration consideration has has some so me probability probability distribution distribution and and that that hypothesishypothesis testing testing involves involves making making statements statements or as orsertions assertions about about the thevalue(s) value(s) of the of the parameter(s)parameter(s) of such of such distribution. distribution. In myIn studymy study I will I willrefer refer to the to testthe oftest SIGNIFICANC of SIGNIFICANCE APPROACHE APPROACH in order in order to define to define if the if the findingfinding is statistically is statistically significant. significant. To test To testthe s theignificance significance of the of model the model we will we will rise rise the the hypothesishypothesis based based in the in Fisher the Fisher index index with withthe level the level of significance of significance α=0.05 α=0.05 and (k1),and (k1), (nk) (nk) df, df, it is oftenit is often called called the critical the critical F value. F value. If FaIf > Fa F cr> then Fcr then the hypothesis the hypothesis (H0 ) (H is0 ) rejected, is rejected, and and the assessedthe assessed model model is statistica is statistically lly significantsignificant For ourFor modelour model we postulate we postulate that :that : H0: TheH0: assesedThe assesed model model is not is statistically not statistically significan significant t Ha: TheHa: Theassesed assesed model model is statistically is statistically significant significant PerformingPerforming the calculations the calculations with with EViews EViews we reach we reach to the to conclusion the conclusion that that actual actual value value of of FisherFisher (Fa) (Fa) is 47.82 is 47.82 while while the critic the critic value value of F cr of (1,18) Fcr (1,18) is 4.4 is concluding 4.4 concluding that that the assessed the assessed modelmodel is statistically is statistically significant significant thus thusthe Hothe hypoHo hypothesisthesis is rejected. is rejected. The Themodel model state state that thatthe the supplysupply for mortgage for mortgage laons laons is depended is depended from from the nonthe nonperformingperforming loans loans and fromand from the depositsthe deposits of individualsof individuals with with95% 95% significance significance interval. interval. TestingTesting the Significancethe Significance of Regression of Regression Coefficients Coefficients: The: TheTest Test The 95%The 95% confidence confidence interval interval for t (17for tdf).(17 df). For β1weFor β1we postulate postulate that: that: Ho : Ho β1 := β1 0 = 0 ( The ( Theβ1 coefficient β1 coefficient is not is significant) not significant) Ha : Ha β1 :≠ β10 ≠ 0 (The (The β1 coefficient β1 coefficient is significant) is significant) ta = 5.08ta = 5.08 tcr = tt(α/2;n2)cr = t(α/2;n2) = t0.05;17 = t0.05;17 = 2,1098 = 2,1098 ta > ttcra >so t crthat so Hothat is Ho rejected. is rejected. We reashWe reash to the to conclusion the conclusion that thethat β1 the coefficient β1 coefficient is significant. is significant. For β2For we β2 postulate we postulate that: that: Ho : Ho β2 := β2 0 = 0 (The (The β2 coefficient β2 coefficient is not is significant) not significant) Ha : Ha β2 :≠ β20 ≠ 0 (The (The β2 coefficient β2 coefficient is significant) is significant) ta = 8.4ta = 8.4 tcr = tt(α/2;n2)cr = t(α/2;n2) = t0.05;17 = t0.05;17 = 2,1098 = 2,1098 ta > ttcra >so t crthat so Hothat is Ho rejected. is rejected. We reashWe reash to the to conclusion the conclusion that thethat β2 the coefficient β2 coefficient is significant. is significant. AutocorrelationAutocorrelation The The term term autocorrelation autocorrelation may may be defined be defined as “correla as “correlation tion between between members members of series of series of of observationsobservations ordered ordered in time in time[as in[as time in timeseries series data]. dat Ina]. the In regressionthe regression context, context, the classicalthe classical linearlinear regression regression model model assumes assumes that thatsuch such autocorre autocorrelationlation does does not existnot exist in the in disturbancesthe disturbances ui. Putui. Put simply, simply, the classicalthe classical model model assumes assumes that that the disturbance the disturbance term term relating relating to any to any observationobservation is not is influenced not influenced by the by disturbance the disturbance term terelatingrm relating to any to otherany other observation. observation. EconomicEconomic phenomena phenomena on time on timeare characterized are characterized from from a kind a kindof inertia of inertia change. change. They They are likely are likely to increaseto increase or decrease, or decrease, thus thusit seems it seems that thatthe terthems ter ofms the of seriesthe series of a ofprevious a previous period period have have lead leadto the to increase the increase of the of series the series to a laterto a laterperio period d . . Durbin–WatsonDurbin–Watson Test Test The The most most celebrated celebrated test testfor detecting for detecting serial serial corre correlationlation is that is that developed developed by statisticians by statisticians DurbinDurbin and Watson.and Watson. It is Itpopularly is popularly known known as the as Dur the bin–WatsonDurbin–Watson d statistic, d statistic, which which is defined is defined as as Sahini I., Dhuci O., Regional Science Inquiry Journal, Vol. V, (2), 2013, pp. 111123 121
In our model the d value 1.87 is around 2, which would suggest that there is no autocorrelation in such model. Heteroscedasticity Test An important assumption of the classical linear regression model is that the disturbances term ui appearing in the population regression function are homoscedastic; that is, they all have the same variance. This is the assumption of homoscedasticity, or equal (homo) spread (scedasticity), that is, equal variance. Symbolically,
The heteroscedasticity may arise more often in time series dispersion than in those of dynamic series. In case the heteroscedasticity is present in the estimator econometric models than the estimators are linear, unbiased, are not best. For such a reason the significance intervals will be wider and the actual value of t will be smaller than in the absence of heteros. This will increase the possibility that the H0 hypothesis not to be rejected even though it is not true. In our final model we will perform the test for heteroscedasticity based on White's heteroscedasticity Test.
For our model we postulate that Ho: No presence of heteroscedasticity Ha: Presence of heteroscedasticity Based of the White's heteroscedasticity Test (Annex I) the estimated model is insignificant and also the coefficients of the model considering the respective probabilities higher than 0.05. We conclude that in our model the heteroscedasticity is not present. Table 5: White test results White Heteroscedasticity Test: Fstatistic 0.083193 Probability 0.986249 Obs*Rsquared 0.441132 Probability 0.978973 Variable Coefficient Std. Error tStatistic Prob. C 29.01466 83.35506 0.348085 0.7330 LOG(X1) 4.442693 12.99781 0.341803 0.7376 (LOG(X1))^2 0.166464 0.490668 0.339259 0.7394 LOG(X2) 0.122673 0.742580 0.165198 0.8711 (LOG(X2))^2 0.005812 0.037255 0.156020 0.8782 Rsquared 0.023217 Mean dependent var 0.020414 Adjusted Rsquared 0.255863 S.D. dependent var 0.023085 S.E. of regression 0.025870 Akaike info criterion 4.250525 Sum squared resid 0.009370 Schwarz criterion 4.001988 Log likelihood 45.37998 Fstatistic 0.083193 DurbinWatson stat 2.509874 Prob(Fstatistic) 0.986249 Source: author calculations Jarque–Bera (JB) Test of Normality. The JB test of normality is an asymptotic, or largesample, test. It is also based on the OLS residuals.
where n = sample size, S = skewness coefficient, and K = kurtosis coefficient. For a normally distributed variable, S = 0 and K = 3. Therefore, the JB test of normality is a test of the joint
122 122 SahiniSahini I., Dhuci I., DhuciO., Regional O., Regional Science Science Inquiry Inquiry Journal, Journ Vol.al, V, Vol. (2), V, 2013, (2), pp.2013, 111123 pp. 111123 hypothesishypothesis that thatS and S Kand are K 0are and 0 3,and respectively. 3, respectively. In that In thatcase casethe valuethe value of the of JBthe statistic JB statistic is is expectedexpected to be to 0. be If 0.the If computedthe computed p value p value of the of JBthe statistic JB statistic in an in application an application is suff is icientlysufficiently low, low,which which will willhappen happen if the if value the value of the of statisti the statistic is veryc is verydifferent different from from 0, one 0, canone rejectcan reject the the hypothesishypothesis that thatthe residualsthe residuals are normallyare normally distribu distributed. Butted. ifBut the if pthe value p value is reasonably is reasonably high, high, whichwhich will willhappen happen if the if valuethe value of the of statisticthe statistic is close is close to zero, to zero, we do we not do rejectnot reject the normalitythe normality assumption.assumption. ApplicationApplication of the of Jarque–Bera the Jarque–Bera test testshows shows that that the JB the statisticJB statistic is about is about 0.50379, 0.50379, and andthe the probabilityprobability of obtaining of obtaining such such a statistic a statistic under under the normality the normality assumption assumption is about is about 78 %. 78 %. Therefore,Therefore, we do we not do reject not reject the hypothesis the hypothesis that thethat error the error terms terms are normally are normally distributed. distributed.
GraphGraph 2: Jarque–Bera 2: Jarque–Bera (JB) (JB)Test Testof Normality of Normality
Source: Source: author author calculations calculations
8. Conclusions8. Conclusions The Thepurpose purpose of this of studythis study is to isanalyze to analyze the housingthe housing loans loans financing financing in Albania. in Albania. The Theanalyze analyze considersconsiders two two factors factors influencing influencing the theloan loan supply, supply, the the nonperforming nonperforming loans loans and and the the individualsindividuals deposits. deposits. EmpiricallyEmpirically assessing assessing the model the model a linear a linear regression regression model model was was used. used. For Forthe considered the considered period,period, years years 20072012, 20072012, corresponding corresponding with with the thefinancial financial crises, crises, it was it was reached reached the the conclusionconclusion that thethat supply the supply for housing for housing loan loanhas ahas strong a strong positive positive relation relation with withthe individual’s the individual’s depositsdeposits and aand strong a strong negative negative relation relation with withthe no then performingnon performing loans. loans. In theIn last the lastyears, years, the supply the supply for housing for housing loans loans in Albania in Albania decreased decreased in parallel in parallel with with the the increaseincrease in the in nonthe non performing performing loans loans so the so banksthe banks suffered suffered not onlynot onlyfrom from the unpaidthe unpaid and/or and/or delayeddelayed installments installments but alsobut also from from the “opportunity the “opportunity cost” cost” of interest of interest from from the missingthe missing new new financingfinancing loans. loans. MacroeconomicMacroeconomic policies policies are one are ofone the of main the main factors factors affecting affecting the Housingthe Housing Finance Finance Supply Supply in in Albania.Albania. Considering Considering that thatapproximately approximately 66 percent 66 percent of the of mortgage the mortgage portfolio portfolio is in is foreign in foreign currencycurrency and andthe incomes the incomes of the of borrowers the borrowers being being man ly man inly ALL, in ALL, it is it very is very crucial crucial not to not to transmittransmit the depreciation the depreciation of local of local currency. currency. One Oneof the of constrainsthe constrains in mortgage in mortgage lending lending is that is Athatlbanian Albanian market market is characterized is characterized by a byhigh a high rate ofrate informal of informal buildings buildings which which either either lack lackthe pr theoper pr operdocumentation documentation and permitsand permits or obtained or obtained the properthe proper documentation documentation and permitsand permits but werebut were built built by infringing by infringing a number a number of rules of rules imposed imposed by theby current the current legislation. legislation. FurthermoreFurthermore based based on regional on regional data, data, Albania Albania has hasthe highest the highest mortgage mortgage to income to income ratio ratio comparingcomparing to other to other countries countries in the in theregion. region. This This implies implies that that in an in environment an environment of of substantiallysubstantially lower lower funding funding that that the theone one before before the thecrisis, crisis, the thedemand demand results results to be to be considerablyconsiderably lower lower than thanthe precrisis the precrisis period. period.
Sahini I., Dhuci O., Regional Science Inquiry Journal, Vol. V, (2), 2013, pp. 111123 123
9. References Bank of Albania,. Yearly report 20072012, http://www.bankofalbania.org Albanian Association of Banks, Credit to the Economy by purpose statistical data 2007 2012. http://www.aab.al Berger, Allen N. & Humphry De Young, “Problem Loans and Commercial Banks”, Journal of Banking and Finance, Vol. 21, 1997 US Housing Finance System: A Historical Survey and Lessons for Emerging Mortgage Markets, Office of Policy Development and Research, US Department of Housing And Urban Development, April 2006. Osmani. M. (2010) ,Econometry with applications, Vol1, pg .7799 Albanian Association of Banks Report on Factual Findings Vol 1, pg 24, 2013 Instat statistics http://www.instat.gov.al Bhutta, Neil. 2008. "Giving Credit where Credit is Due? The Community Reinvestment Act and Mortgage Lending in LowerIncome Neighborhoods." Board of Governors of the Federal Reserve Finance and Economics Discussion Paper 200861. Ashcraft, Adam, 2003, “New Evidence on the Lending Channel,” forthcoming at the Journal of Money, Credit and Banking. Kashyap, Anil, Raghuram G. Rajan and Jeremy Stein, 2002, “Banks as Liquidity Providers: An Explanation for the CoExistence of Lending and DepositTaking,” Journal of Finance 57(1),3373. Paravisini, Daniel, 2004, “Constrained Banks, Constrained Borrowers: The Effects of Bank Liquidity on the Availability of Credit,” MIT mimeo, November. Elena Loutskina, Philip E. Strahan 2007 “Securitization and the declining impact of bank finance on loan supply: evidence from mortgage acceptance rate Ben S. Bernanke 2011, speech on Committee on Banking, Housing, and Urban Affairs
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Mazis I., Sarlis M., Regional Science Inquiry Journal, Vol. V, (2), 2013, pp. 125144 125
A GEOPOLITICAL ANALYSIS OF THE ACTIVATION OF THE SHIITE GEOPOLITICAL FACTOR WITHIN THE SYRIAN CONFLICT GEO SYSTEM1.
Ioannis Th. MAZIS School of Economics and Political Sciences, National & Kapodistrian University of Athens, Chair of the Dpt of Turkish and Modern Asian Studies, Hellas [email protected] www.geomazis.gr
Michalis SARLIS School of Economics and Political Sciences, Dpt of Turkish and Modern Asian Studies, National & Kapodistrian University of Athens, Hellas [email protected]
Abstract
This paper presents a systemic analysis of the IranSyriaLebanon geopolitical subsystem within the frame of the Wider Middle East geocomplex and in light of the geopolitical factor of the Shiite Islamist movement. We consider that the Shiite Islamist movement, which is represented by Hezbollah in Lebanon and by proxy Shiite organizations in Iraq (Kataeb Hezbollah and Asa'ib Ahl al Haq), has been transformed, under Tehran’s management and direction, into an important power redistribution factor in the region. Turkey’s foreign policy is evaluated as unsuccessful and dangerous for the security of the state of Israel and the stability of the Middle Eastern geopolitical system, particularly in relation to Ankara’s support of radical Islamist groups operating inside Syria. Ankara’s policy is also considered as a trigger mechanism for the acceleration of secessionist and stateformation ambitions, such as in the case of the gradual autonomy of an ethnically Kurdish zone in the northeastern Syrian territory. In addition, the US Russian initiative for the destruction of the chemical arsenal of the Assad regime is evaluated as beneficial for the regional stability. Equally, we evaluate the US Iranian negotiation process as a strategically agile diplomatic maneuver from Washington’s part.
Keywords: Systems, Subsystems, Supersystem, Shiite Islamist movement, Syria, Iran, Hezbollah, Israel, Syrian Kurds, Turkey, Saudi Arabia JELClassification: F50,F51,F52
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Iran’s and Hezbollah’s strategy in Syria: a deepening regional crisis Iran’s and Hezbollah’s strategy in Syria: a deepening regional crisis A. The Geopolitical Factor A. The Geopolitical Factor The geopolitical factor of the present analysis is the Shiite Islamist movement, which The functionsgeopolitical as a factorpower ofredistribution the present factor analysis within is t thehe examined Shiite Islamist geocomplex movement, (that is which analyzed functionsin the as Systems a power described redistribution below). factor The withinredistribution the examined of power geocomplex under consideration (that is analyzed is examined in thewithin Systems the Geographicaldescribed below). Complex/System The redistribution of the of Wider power Middle under East.consideration is examined within the Geographical Complex/System of the Wider Middle East.
B. Determination of the Systemic Grades B. Determination of the Systemic Grades I. The System: Wider Middle East. I. The System: Wider Middle East. II. The Subsystems: Iran/Syria/Lebanon, TurkeySyria/Iran/Lebanon II. The Subsystems: Iran/Syria/Lebanon, TurkeySyria/Iran/Lebanon 1) The first subsystem: Iran/Syria/Lebanon, as the operator of the geopolitical factor of the 1) TheShiite first Islamist subsystem: movement. Iran/Syria/Lebanon, as the operator of the geopolitical factor of the Shiite Islamist movement. 2) The second subsystem: TurkeySyria/Iran/Lebanon, as the typical conflictual subsystem. 2) The second subsystem: TurkeySyria/Iran/Lebanon, as the typical conflictual subsystem.
III. The Acting Supersystem: III. The Acting Supersystem: The US, the UK, France, Russia and China. The EU, as a whole, is clearly influenced by the The LondonUS, the UK, Washington France, Russia ‘special and relationship’, China. The EU,which as aappears whole, as is particularly clearly influenced fragile inby thethe case Londonof the Washington Syrian crisis ‘special2. The relationship’,UN, as a supersystemic which appears factor, as particularly is functionally fragile neutralized in the case in the of theshortterm. Syrian crisis 2. The UN, as a supersystemic factor, is functionally neutralized in the shortterm. C. From a Syrian crisis to a regional crisis C. FromThe systema Syrian of crisisthe wider to a regionalMiddle East crisis has, once again, entered a period of extreme violence The andsystem high of volatility. the wider Ten Middle years East after has, the once Second again War, entered in Iraq a (2003),period ofit isextreme now Syria violence that has and highbecome volatility. the focal Ten point years which after is thesending Second geopolitica War in lIraq vibrations (2003), throughout it is now theSyria region. that has become the focalSince point March which 2011, is sending when geopolitica the first protestsl vibrations against throughout the Assad the region. regime started in southernSince Syria March together 2011, with when the the almost first immediate protests againstviolent crackdown the Assad by regime the regime’s started forces, in southernthe Syrian Syria togethercrisis has with been the gradually almost immediateacquiring addi violenttional crackdown dimensions. by theFrom regime’s one more forces, string in the Syrianthe chain crisis of has the been so calledgradually ‘Arab acquiring Spring’ addi revoltstional (T dimensions.unisia, Libya, From Egypt one more and Yemen) string in3, the the chainSyrian of crisis the sowas called initially ‘Arab transformed Spring’ revoltsinto an (Tarmunisia,ed conflict Libya, between Egypt andthe regime Yemen) forces3, the and Syrianthe crisis insurgents. was initially More specifically,transformed itinto mutated an arm intoed conflictan escalating between conflict the regime with highly forces sectarianand the insurgents.characteristics More (the specifically, Sunni majority it mutated versus into the anruli escalatingng Alawite conflict minority), with while highly radical sectarian Islamist characteristicsgroups (Syrian (the Sunni and nonSyrian majority versus that werethe ruli “imported”ng Alawite into minority), Syria via while Turkey) radical began Islamist to exert groupsincreased (Syrian military and nonSyrian and ideological that were influence “imported” among into the antiAssad Syria via Turkey) fragmented began camp. to exert increased militaryBy 2012, and ideologicalthe escalating influence Syrian amongcrisis hadthe antiAssadacquired a fragmenteddeepening regionalcamp. dimension. SyriaBy was 2012, becoming the escalating ever more Syrian –as Lebanoncrisis had had acquired in the 1970sa deepening and 1980s regional the combatdimension. zone for Syriathe was entire becoming Middle ever East. more Throughout –as Lebanon the durationhad in the of 1970s the year and 2012,1980s the the regional combat dimensionzone for of the entirethe Syrian Middle crisis East. was Throughout growing the very duration rapidly. of Withthe year Syria 2012, as athe focal regional point, dimension two competing of the Syrianregional crisis blocs was had growing crystallized: very The rapidly. proAssad With Syblocria, consisting as a focal of point, Iran, two the Lebanese competing party regionalHezbollah blocs hadand Iraq crystallized: and the antiAssad The proAssad bloc, consistingbloc, consisting of Tu rkey, of Iran, Saudi the Arabia, Lebanese Qatar party and the HezbollahUnited and Arab Iraq Emirates and the4 .antiAssad bloc, consisting of Turkey, Saudi Arabia, Qatar and the United Arab Meanwhile,Emirates4. by the middle of 2012 the international dimension of the crisis had also becomeMeanwhile, intensely by active: the middle the US, of 2012Britain the and international France supported dimension the of opposition the crisis forces,had also while becomeRussia intensely and China active: backed the US,the AssadBritain regime. and France These supported regional andthe internationalopposition forces, actors while started to Russiaprovide and China arms, backedtraining the and Assad resources regime. to their These respe regctiveional alliesand international within Syria. actors started to provide arms,By training the middle and resources of 2013, theto their conflict’s respective regional allies dime withinnsion Syria. had reached new heights. A US By official the middle made of the 2013, following the conflict’s very accurate regional note dime innsion a recent had reachedInternational new heights. Crisis GroupA US officialreport: “... madethe Syrian the following crisis had very evolved accurate and notefrom ian Syrian a recent war International with regional Crisis consequences Group is report:becoming “...the Syrian a regional crisis war had with evolved a Syrian and focus”from a5 .Syrian war with regional consequences is becoming a regional war with a Syrian focus”5. Mazis I., Sarlis M., Regional Science Inquiry Journal, Vol. V, (2), 2013, pp. 125144 127
D. The activation of the Shiite geopolitical factor: the opposition’s military advances trigger the Iranian counterattack
The period from the second half of 2012 up to the first half of 2013 has been, until presently, the most critical period of the Syrian conflict. This is mainly due to two reasons: firstly, because it was during this period of approximately 8 to 10 months, that the Syrian war went through its highest point of combat volatility, when strategically vital territory was initially lost and then retaken by the Assad regime. Secondly, because this volatility and the threat that it posed to the survival of the Assad regime triggered the reaction of the Iranian regime and led to the escalation of the military involvement of Iran and Hezbollah (Shiite geopolitical factor) inside Syria. In particular, in November 2012, the Sunni opposition forces opened new fronts in the north, centre and south of the country6. At the end of November, a series of events heightened the sense of the increasing fragility of the Assad regime: 1) A twin car bomb in a Damascus district (the mainly Christian and Druze populated Jaramana) and an attack against the Damascus International Airport7. 2) In the middle of December, the opposition forces captured the military academy in alMuslimiyah outside Aleppo8 and engaged with regime forces in the suburb of Daraya, just outside Damascus9. 3) In January 2013, the opposition forces were continuing to make serious military gains, both in the Syrian countryside and in various urban centres, such as in the northern city of Aleppo and in the suburbs around the capital Damascus. 4) By the middle of February, opposition forces were engaging with regime troops in various suburbs of Damascus, closing in on the Syrian capital. 5) On 13 February a Reuters journalist reported the following from Damascus: “The war has not yet reached the heart of the capital, but it is shredding the suburbs. In the past week, government troops backed by air power unleashed fierce barrages on the east of the city in an attempt to flush out rebel groups. Most of central Damascus is controlled by Assad's forces, who have erected checkpoints to stop bomb attacks. The insurgents have so far failed to take territory in the center”10. 6) Three weeks later, on 4 March, the Assad regime lost the city of Raqqa, the sixth most populated urban centre in Syria and the first provincial capital to fall under opposition control11. 7) In the middle of March, the opposition forces escalated their offensive against Damascus. 8) On 21 March, a car bomb exploded outside the AlIman Mosque in central Mazraa district, killing 42 people, among which the prominent Sunni cleric sheikh Mohamed Al Buti, a staunch supporter of the Assad regime12. 9) Four days later, antiregime units launched an extended mortar attack against central Damascus, hitting targets close to the central Baath offices and the TV centre in Umayyad Square13. Therefore, by the end of March 2013, the Assad regime appeared to be under extreme pressure from the opposition. It had lost critical territory around the northern city of Aleppo, the first provincial capital had been lost (Raqqa), as well as part of the strategic town of Qusair in the west close to the Lebanese border, and Damascus was under siege by opposition forces that were able to strike close to the capital centre, at the heart of the regime.
A.1. The subsystemic level: the IranSyria dipole and the activation of the subsystemic Shiite “axis of resistance”
The abovementioned military gains and territorial advances that the Syrian opposition had achieved from November 2012 to March 2013 alarmed Iran (the leading Shiite geopolitical factor). The increasing fragility of the Assad regime, which could lead to its possible collapse, was perceived by Iran as a critical threat for its foreign policy in the wider Middle East. Syria
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constitutesconstitutes a vital a vitalpart partof the of 30the year 30 yearold subsysold subsystemictemic Iran Iran– Syria – Syria Hezbollah Hezbollah geostrategic geostrategic constitutes a vital part of the 30 year old subsystemic Iran – Syria Hezbollah geostrategic alliance.alliance. A triple A triple alliance alliance to which to which Tehran, Tehran, Damasc Damascus andus southernand southern Beirut Beirut (where (where Hezbollah Hezbollah’s ’s alliance. A triple alliance to which Tehran, Damascus and southern Beirut (where Hezbollah’s HQsHQs are) are)have have given given the namethe name “axis “axis of resistance” of resistance” against against US, US,Israeli Israeli and andthe Gulfthe Gulf states’ states’ HQs are) have given the name “axis of resistance” against US, Israeli and the Gulf states’ geostrategicgeostrategic interests interests in the in Levant. the Levant. geostrategic interests in the Levant. Firstly, Firstly, Syria’s Syria’s strategic strategic importance importance within within this this“axis “axis of resistance” of resistance” is absolutely is absolutely Firstly, Syria’s strategic importance within this “axis of resistance” is absolutely centralcentral for Iran.for Iran. Syria Syria is the is solethe solestate state that thatis a isclose a close ally allyof Iran of Iranin the in region,the region, a strategic a strategic central for Iran. Syria is the sole state that is a close ally of Iran in the region, a strategic partnershippartnership that that started started in 1979 in 1979 and and one one which which is b ased is b ased not onnot religious on religious or ideological or ideological partnership that14 started14 in 1979 and one which is based not on religious or ideological foundationsfoundations14 , but , purelybut purely on geopolitical on geopolitical data dataand geostrategicand geostrategic interests. interests. The TheAssad Assad regime regime foundations , but purely on geopolitical data and geostrategic interests. The Assad regime providesprovides Iran Iranwith withvital vitalstrategic strategic depth, depth, which which gives giv Tehranes Tehran crucial crucial access access to the to geopoliticalthe geopolitical provides Iran with vital strategic depth, which gives Tehran crucial access to the geopolitical systemsystem of the of Middle the Middle East Eastand theand Eastern the Eastern Mediterra Mediterranean.nean. system of the Middle East and the Eastern Mediterranean. This This access access offers offers multiple multiple advantages advantages to Iran. to Iran. Firstly, Fir stly, it allows it allows Tehran Tehran to transfer to transfer This access offers multiple advantages to Iran. Firstly, it allows Tehran to transfer weaponsweapons and and other other logistical logistical support support to its to close its close nonstate nonstate ally, ally, the Lebanesethe Lebanese party party of of weapons and other logistical support to its close nonstate ally, the Lebanese party of HezbollahHezbollah, which, which has ahas very a very powerful powerful paramilitary paramilitary force. force. Thr ough Through Hezbollah Hezbollah in southern in southern Hezbollah, which has a very powerful paramilitary force. Through Hezbollah in southern LebanonLebanon Tehran Tehran has thehas capacity the capacity to exert to exert pressure pressure on Israel, on Israel, thus thus extracting extracting military military and and Lebanon Tehran has the capacity to exert pressure on Israel, thus extracting military and diplomaticdiplomatic leverage leverage visàvis visàvis Tel Aviv.Tel Aviv. diplomatic leverage visàvis Tel Aviv. Secondly, Secondly, Syria’s Syria’s geographical geographical position position in relatio in relation to n Iraq to Iraq (a 600kmlong (a 600kmlong common common Secondly, Syria’s geographical position in relation to Iraq (a 600kmlong common borderborder across across western western Iraq) Iraq) provided provided Iran Iran during during Saddam Saddam Hussein’s Hussein’s Baathist Baathist rule rulein Iraq in Iraq border across western Iraq) provided Iran during Saddam Hussein’s Baathist rule in Iraq with witha critical a critical pressure pressure line againstline against what what at at with a critical pressure line against what at
Map Map 1. Damascus, 1. Damascus, the Syrian the Syrian capital. capital. During During the fir thest firmonthsst months of 2013, of 2013, the opposition the opposition forces forces made made Map 1. Damascus, the Syrian capital. During the first months of 2013, the opposition forces made militarymilitary gains gains in several in several suburbs suburbs of the of capital. the capital. (Source: (Source: BBC) BBC) military gains in several suburbs of the capital. (Source: BBC)
the timethe timewas wasTehran’s Tehran’s fiercest fiercest geopolitical geopolitical competi competitor andtor enemy.and enemy. Consequently, Consequently, after after the US the US the time was Tehran’s fiercest geopolitical competitor and enemy. Consequently, after the US interventionintervention in 2003 in 2003 and theand disintegration the disintegration of the of Sunni the Sunni regime regime of Saddam of Saddam Hussein, Hussein, Syria Syria and and intervention in 2003 and the disintegration of the Sunni regime of Saddam Hussein, Syria and Iran Iranencircled encircled the new the newIraq Iraqand wereand were able ableto check to check the US the military US military operations operations in postSaddam in postSaddam Iran encircled the new Iraq and were able to check the US military operations in postSaddam MazisMazis I., Sarlis I., Sarlis M., M.,Regional Regional Science Science Inquiry Inquiry Journ Journal, Vol.al, Vol. V, (2), V, (2),2013, 2013, pp. pp.125144 125144 129129
IraqIraq and and eventually eventually to tomaintain maintain a fragilea fragile Baghdad Baghdad government government under under the the de defacto facto control control of of Tehran.Tehran. Finally, Finally, this this relatively relatively recent recent control control that that Tehra Tehran exertsn exerts on on postSaddam postSaddam Iraq, Iraq, has has givengiven Iran Iran the the unique unique opportunity opportunity to to create create its its own own geostrategic geostrategic power power nexus, nexus, a horizontal a horizontal alignmentalignment from from central central Asia Asia to tothe the Mediterranean Mediterranean co ast.coast. This This is ais continuousa continuous and and enhanced enhanced strategicstrategic alignment alignment that that has has its itsstarting starting point point in Iran,in Iran, crosses crosses through through Iraq Iraq and and Syria Syria and and ends ends in southernin southern Beirut Beirut and and Lebanon. Lebanon.
MapMap 2. The2. The northern northern city city of Aleppoof Aleppo is theis the biggest biggest urban urban centre centre in Syriain Syria with with an anofficial official population population of of 2.12.1 million million people. people. Aleppo Aleppo has has been been fiercely fiercely contes contestedted between between the the regime regime forces forces and and the the opposition. opposition. In In MarchMarch 2013, 2013, 110 110 bodies bodies were were found found on onthe the banks banks of tofhe t heAleppo Aleppo river. river. (Source: (Source: The The Guardian) Guardian)
Syria,Syria, with with its itsunique unique geopolitical geopolitical centrality centrality with within inthe the Middle Middle Eastern Eastern geosystemic geosystemic powerpower nexus, nexus, is is the the connecting connecting space space of of this this Irania Iranianinspiredninspired horizontal horizontal geostrategic geostrategic alignment.alignment. The The Assad Assad regime, regime, at theat the geographic geographic cent centre reof ofthis this alignment, alignment, provides provides a doublea double strategicstrategic depth, depth, east east to to the the Iraqi Iraqi Shiite Shiite element element (Kazali (Kazali Network Network or orAsa'ib Asa'ib Ahl Ahl AlHaq AlHaq and and 15 KataebKataeb Hezbollah Hezbollah15), west), west to theto the Lebanese Lebanese Shiite Shiite element element (Hezbollah (Hezbollah). ). TheThe heightened heightened threat, threat, in Marchin March 2013, 2013, by bythe the opposi oppositiontion forces forces against against the the viability viability of of thethe Assad Assad regime regime threatened threatened simultaneously simultaneously the the abov above e mentioned mentioned strategic strategic regional regional architecturearchitecture of of the the Iranian Iranian regime. regime. The The collapse collapse of of the the Assad Assad regime regime would would automatically automatically breakbreak the the horizontal horizontal geostrategic geostrategic power power nexus nexus that that Tehran Tehran had had gradually gradually created, created, it would it would elevateelevate Turkey’s Turkey’s regional regional role role in thein the north, north, and and it would it would allow allow the the Sunni Sunni Gulf Gulf states states to useto use the the SyrianSyrian territory territory in orderin order to performto perform a double a double geopo geopoliticallitical pivot pivot and and project project their their power power in bothin both LebanonLebanon and and Iraq, Iraq, enforcing enforcing the the local local Sunni Sunni element elements againsts against the the Shiite Shiite ones. ones. Therefore, Therefore, TehranTehran decided decided that, that, in inApril April 2013, 2013, it hadit had to toact act rapidly rapidly and and to tointervene intervene in inSyria Syria in ina morea more drasticdrastic manner manner than than it had it had up upto thatto that point. point.
A.1.1.A.1.1. Τhe Τhe Shiite Shiite geopolitical geopolitical factor’s factor’s activation activation frame: frame: Iran’s Iran’s counterattacking counterattacking strategy strategy in inSyria Syria
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Due Dueto Syria’s to Syria’s important important place place within within the abovementthe abovementionedioned Iranian Iranian geostrategic geostrategic power power nexus, nexus, TehranTehran had supported,had supported, almost almost from from the beginning the beginning of the of insurgency, the insurgency, the Assad the Assad regime. regime. It had It had sent sentto Damascus to Damascus military military advisors advisors from from its elite its eliteIranian Iranian Revolutionary Revolutionary Guards Guards Corps Corps (IRGC) (IRGC) 16 and and it had it hadprovided provided the Syrian the Syrian regime regime with with new new weap weapon systems,on systems, cheap cheap oil and oil andcredit credit. 16. Furthermore,Furthermore, Iran’s Iran’s close close ally inally Lebanon, in Lebanon, Hezbollah Hezbollah, conducted, conducted military military operations operations along along the the porousporous LebanonSyria LebanonSyria border border east east of the of Bekaa the Bekaa Valle Valley in y order in order to prevent to prevent the transfer the transfer of of fightersfighters and weaponsand weapons destined destined for the for Syrian the Syrian opposi opposition fromtion from inside inside Lebanon. Lebanon. In April In April 2013 2013 Tehran Tehran took took the decision the decision to intensif to intensify itsy direct its direct involvement involvement in the in the SyrianSyrian conflict conflict in order in order to safeguard to safeguard the continuit the continuity of y the of Assad the Assad regime regime and andof course of course its its geostrategicgeostrategic nexus. nexus. This Thiselevated elevated and moreand more direct direct intervention intervention was wasto be to coordinated be coordinated by the by the specialspecial unit unitof the of IRGSthe IRGS, the, Althe Quds Al Quds force force, and, andspearheaded spearheaded by the by paramilitary the paramilitary forces forces of of LebaneseLebanese Hezbollah. Hezbollah. The Therole roleof the of Al the Quds Al Quds force force in the in Iranian the Iranian intervention intervention in Syria in Syria is fundamenta is fundamental. Thel. The Al QudsAl Quds force force is an is elite, an elite, covert covert military military unit whichunit which operates operates in the in wider the wider Middle Middle East Eastwith withthe the missionmission of promoting of promoting the geostrategic the geostrategic aims aims of the of I theslamic Islamic Republic Republic of Iran. of Iran. It has It beenhas been characterizedcharacterized as the as Iranianthe Iranian equivalent equivalent of a ofcombin a combined Specialed Special Forces Forces and theand CIA.the CIA. General General QassemQassem Suleimani Suleimani is the is commanderthe commander of the of Althe Quds Al Quds force force. A veteran. A veteran of the of IranIraqthe IranIraq War War (19801988),(19801988), Suleimani Suleimani is one is ofone the of mostthe most powerful powerful men menin Iran. in Iran. As leaderAs leader of the of Althe Quds Al Quds forceforce he is he in is charge in charge of Iranian of Iranian policy policy in Iraq in Iraq and andSyri a, Syri whilea, while according according to a to number a number of of 17 sourcessources he is he answerable is answerable only onlyto the to Supreme the Supreme Leader Leader of Iran of IranAli Khamenei Ali Khamenei. 17. AfterAfter March March 2013 2013 and theand militarythe military setbacks setbacks of the of Athessad A ssadregime, regime, General General Suleimani Suleimani beganbegan coordinating coordinating the counterattack the counterattack of the of Syrian the Syrian regime. regime. He went He went to Damascus to Damascus and setand up set a up a commandcommand centre centre in the in Syrian the Syrian capital. capital. US journalistUS journalist Dexter Dexter Filkins Filkins reported reported recently recently that, that,“In “In DamascusDamascus he is he said is said to work to work out ofout a of heavily a heavily fortif fortified commandied command post post in a in nondescript a nondescript building,building, where where he has he installedhas installed a multinational a multinational array ar ofray officers: of officers: the heads the heads of the of Syrian the Syrian military,military, a Hezbollah a Hezbollah commander commander and aand coordinator a coordinator of Iraqi of Iraqi Shiite Shiite militias, militias, which which Suleimani Suleimani 18 mobilizedmobilized and broughtand brought to the to fight” the fight”. 18. The Thenature nature of Suleimani’s of Suleimani’s strategy strategy was bothwas bothdefensi defensive andve offensiveand offensive at the at same the same time. time. Its mainIts main objective objective was wasthe retainingthe retaining of the of vitalthe vitalterritory territory of central of central Syria, Syria, a large a large part partof land of land that extendsthat extends from from the eastern the eastern SyriaIraq SyriaIraq border border through through Damascus Damascus to the to east the eastof the of Lebanon the Lebanon SyriaSyria border border and and then then slightly slightly north north to the to Syrianthe Syrian Mediterranean Mediterranean coast. coast. This This stretch stretch of of territoryterritory constitutes constitutes the heartlandthe heartland of Syria of Syria and itand is itwhere is where the vastthe vastmajority majority of the of Alawitesthe Alawites (the (the sect sect that that the Assad the Assad family family belongs belongs to), theto), Ch theristians Christians and andthe Druze the Druze live, live, that that is the is the 19 minoritiesminorities that supportthat support the Assad the Assad regime regime against against the Sunni the Sunni opposition opposition. 19. Furthermore,Furthermore, the theretaining retaining of this of this territory territory enable enables thes thedefence defence of the of thecapital capital Damascus,Damascus, which which is the is heartthe heart and baseand baseof the of regimethe regime, while, while it connects it connects Damascus Damascus with withthe the vital vitaland predominantlyand predominantly Alawite Alawite coastal coastal towns towns of La oftakia Latakia and Tartousand Tartous (where (where Russia, Russia, a strong a strong supportersupporter of the of Assadthe Assad regime, regime, retains retains its only its onlynaval nav baseal basein the in Easternthe Eastern Mediterranean). Mediterranean). In In otherother words, words, Suleimani’s Suleimani’s plan planwas towas reinforce to reinforce the periphery the periphery of Damascus, of Damascus, to cutoff to cutoff Lebanon Lebanon and Iraqand Iraqfor the for Sunni the Sunni opposition, opposition, but to but keep to keep them them open open for the for Shiite the Shiite paramilitary paramilitary forces forces and and the Syrianthe Syrian Alawite Alawite regime regime units. units.
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Map 3. Contested areas of the Syrian conflict during the first months of 2013. (Source: Syria Needs AnalysisMap 3. Project) Contested areas of the Syrian conflict during the first months of 2013. (Source: Syria Needs Analysis Project) A.1.2. Τhe nucleus of the activation of the Shiite geopolitical factor: Hezbollah’s central A.1.2. Τhe nucleus of the activation of the Shiite geopolitical factor: Hezbollah’s central role in Iran’s strategy role in Iran’s strategy
Suleimani’s counterattacking strategy was based primarily on the upgrading of Hezbollah’s Suleimani’s counterattacking strategy was based primarily on the upgrading of Hezbollah’s military operations inside Syria and secondary on the mobilization of the Iraqi Shiite military operations inside Syria and secondary on the mobilization of the Iraqi Shiite paramilitary groups Asa'ib Ahl Al Haq and Kataeb Hezbollah. Both of these Shiite Iraqi paramilitary groups Asa'ib Ahl Al Haq and Kataeb Hezbollah. Both of these Shiite Iraqi groups were very active in numerous attacks against US and British forces in Iraq from 2004 groups were very active in numerous attacks against US and British forces in Iraq from 2004 onwards. Its fighters are trained in a number of locations in Iran and Lebanon by experienced onwards. Its fighters are trained in a number of locations in Iran and Lebanon by experienced Al Quds force and Lebanese Hezbollah commanders and then take part in military operations Al Quds force and Lebanese Hezbollah commanders and then take part in military operations inside Syria, particularly in areas around Damascus20. inside Syria, particularly in areas around Damascus20. But undoubtedly, it was the Lebanese Hezbollah’s decisive involvement that was to But undoubtedly, it was the Lebanese Hezbollah’s decisive involvement that was to spearhead Iran’s counterattack in Syria. According to a Reuters report, the leader of spearhead Iran’s counterattack in Syria. According to a Reuters report, the leader of Hezbollah, Hassan Nasrallah, travelled covertly to Tehran in April 2013, where he met with Hezbollah, Hassan Nasrallah, travelled covertly to Tehran in April 2013, where he met with the Supreme Leader of Iran, Ali Khamenei, and the commander of the Al Quds force, General the Supreme Leader of Iran, Ali Khamenei, and the commander of the Al Quds force, General Qassem Suleimani21. According to reports, it was at this meeting that it was agreed that Qassem Suleimani21. According to reports, it was at this meeting that it was agreed that Hezbollah was going to assume a much more direct and aggressive role in the Syrian crisis. Hezbollah was going to assume a much more direct and aggressive role in the Syrian crisis. Its primary – but not singular aim was to counterattack and defend the eastern flank of the Its primary – but not singular aim was to counterattack and defend the eastern flank of the Syrian territory, which was considered vital for the defence and survival of the Assad regime. Syrian territory, which was considered vital for the defence and survival of the Assad regime. This eastern flank is composed of the SyrianLebanese borders, the territory east of the capital This eastern flank is composed of the SyrianLebanese borders, the territory east of the capital
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DamascusDamascus and theand Homs the Homs province province which which lies on lies the on ro theute ro ofute the of supply the supply line linetowards towards the the SyrianSyrian Mediterranean Mediterranean coast. coast. In a televisedIn a televised speech, speech, on 29 on April 29 April 2013, 2013, given given by N byasrallah Nasrallah in Hezbollah in Hezbollah’s TV’s station TV station AlManarAlManar, the , leader the leader of the of Shiitethe Shiite party party announced announced publicly publicly that Hezbollah that Hezbollah “could “could become become moremore deeply deeply involved involved in the in Syrianthe Syrian crisis crisis” and” thatand “thatSyria “Syria had realhad realfriends friends who who would would not not 22 allowallow it to it fall to intofall into the hands the hands of America, of America, Israel Israel and and Islamic Islamic extremists extremists” . ”It22 .was It wasan an acknowledgmentacknowledgment that Hezbollahthat Hezbollah was alreadywas already operating operating in Lebanon, in Lebanon, but alsobut alsoa threa a threat that,t that,if if needed,needed, the Shiite the Shiite geostrategic geostrategic axis, axis,Hezbollah Hezbollah and Iran,and Iran,were were ready ready to defend to defend the survival the survival of of the Syrianthe Syrian regime regime more more actively. actively. Then, Then, in early in early May May2013 2013 came came a new a newspeech speech by Nasrallah, by Nasrallah, this timethis timean official an official confirmation confirmation of Hezbollah of Hezbollah’s active’s active and extensiveand extensive military military involvement involvement in in Syria,Syria, and atand the at same the same time timea statement a statement of intent of intent and aa ndclear a clear message message towards towards the powers the powers that that are opposingare opposing the Assadthe Assad regime, regime, naming naming in particular in particular the US,the IsraelUS, Israel and theand Sunnithe Sunni Islamists. Islamists. DuringDuring the same the same period, period, an unconfirmed an unconfirmed number number of Hezbollah of Hezbollah’s elite’s elitefighters fighters were were taking taking part part in militaryin military operations operations near near and andaround around the strategi the strategicallycally located located town town of Qusair of Qusair in Homs in Homs province,province, in coordination in coordination with withunits units of the of Syrian the Syrian army. army. But priorBut prior to the to active the active military military involvement involvement of Hezbollah of Hezbollah in the in strategically the strategically vital vital battlebattle of Qusair, of Qusair, its fighters its fighters were were also also involved involved in the in organization the organization of the of defense the defense of the of the SayyidaSayyida Zeynab Zeynab shrine shrine in southern in southern Damascus. Damascus. It is cItonsidered is considered one ofone the of most the most sacred sacred sites sitesfor for ShiiteShiite Muslims Muslims and itand is namedit is named after afterZeynab, Zeynab, the da theughter daughter of Imam of Imam Ali (and Ali (andfounding founding father father of Shiiteof Shiite Islam), Islam), who who is buried is buried within within the golddom the golddomed shrineed shrine in the in southern the southern suburbs suburbs of of Damascus.Damascus. According According to many to many sources, sources, a few a monthsfew months ago, aaftergo, aftertwo failedtwo failed attempts attempts by Sunni by Sunni jihadistsjihadists to destroy to destroy the shrine, the shrine, Hezbollah Hezbollah sent sent a small a small detachment detachment in order in order to protect to protect the the shrine,shrine, along along with withother other Shiites Shiites from from Iraq andIraq Syriand aSyri itself.a itself. The defenseThe defense unit thatunit nowthat nowprotects protects the Sayyidathe Sayyida Zeynab Zeynab shrine shrine has been has been name name Abu Abu alFadl alFadl alAbbas alAbbas brigade, brigade, or Kataeb or Kataeb al al 23 24 AbbasAbbas after23 afterthe son the of son Imam of Imam Ali and Ali brotherand brother of Zeynab of Zeynab. 24. BeyondBeyond the religiousthe religious significance significance of the of protectionthe protection of the of Sayyidathe Sayyida Zeynab Zeynab shrine shrine in in Damascus,Damascus, there there is another, is another, practical practical one. one.The callThe forcall its for protection its protection by the by leadership the leadership of the of the Al QudsAl Quds force force and theand leadership the leadership of Hezbollah of Hezbollah has also has beenalso beenutilized utilized as a mobilizationas a mobilization call forcall for all Shiitesall Shiites across across the Middle the Middle East East and andhas beenhas been providing providing ideological ideological legitimacy legitimacy to the to the militarymilitary involvement involvement of Lebanese, of Lebanese, Iraqi Iraqiand Iranianand Iranian Shiites Shiites fighters fighters inside inside Syrian Syrian territory. territory. In In any event,any event, Iran Iran and Hezbollah and Hezbollah, have, have used used the sectarian the sectarian card card in their in their rhetoric rhetoric in order in order to to facilitatefacilitate the mobilizationthe mobilization of the of Shiite the Shiite public public opinion opinion with with regards regards to their to their intervention intervention in in Syria.Syria. In theIn middle the middle of May of May 2013, 2013, an elite an eliteHezbollah Hezbollah unit unitalong along with with Syrian Syrian army army units, units, launchedlaunched a counterattack a counterattack in order in order to retake to retake Qusair Qusair from from the Syrian the Syrian opposition opposition forces. forces. The The towntown of Qusair, of Qusair, with with a population a population of around of around 50.000 50.000 people, people, is located is located 35 kilometers 35 kilometers southwestsouthwest of Homs, of Homs, thus thus linking linking the strategically the strategically important important route route from from Damascus Damascus to the to the 25 SyrianSyrian coast coast and Lebanonand Lebanon. The25. AssadThe Assad regime regime needs needs to control to control this route,this route, which whi connectsch connects its its base base in Damascus in Damascus with with the predominantly the predominantly Alawite Alawite Syrian Syr coastian coast and andthe Lebanese the Lebanese Shiite Shiite borderborder towns towns and villages.and villages. On the On other the other hand, hand, the S theyrian Syrian opposition opposition has been has beentrying trying for many for many monthsmonths to cut to this cut thisroute route and andisolate isolate Damascus Damascus from fromthe Syrianthe Syrian coast coast and and northeastern northeastern Lebanon.Lebanon. ( () ) Mazis I., Sarlis M., Regional Science Inquiry Journal, Vol. V, (2), 2013, pp. 125144 133
Map 4. Qusair (indicated above in red) is a strategically located town that connects the capital Damascus with Latakia, the Alawite Syrian coast, as well as northern Lebanon. (Source: The Guardian)
According to Rami Abdel Rahman, director of the Syrian Observatory for Human Rights, “it was Hezbollah that was leading the battle in AlQusair, with its elite forces”26. Furthermore, this battle brought Shiite Hezbollah in a direct confrontation with the Sunni extremist organization Jabhat alNusra27. This organization is the most powerful Islamist group among the Syrian opposition and has recently declared itself affiliated and linked with Al Qaeda28. On 5 June, after two weeks of intense urban warfare, Qusair fell under the control of Hezbollah and the Syrian army units. Hezbollah had made use of its experience in asymmetric warfare tactics and its urban warfare training and it had shifted the balance of this crucial battle in favor of the Syrian regime. According to reports, Hezbollah had used around 2.000 of its elite fighters in the battle of Qusair and had suffered between 150200 casualties. In the aftermath of the battle, Iran released an official statement, with which it congratulated “the Syrian people for their victory”29.
B.1. The systemic level: Hezbollah’s systemic aspirations in Syria
In the case of Hezbollah, its strength relies not only with the advanced arsenal that it has managed to acquire through Iran and Syria, but also with its geographical position visàvis Israel and in relation to the TehranDamascus geostrategic dipole. Therefore, the event of a regime change in Damascus would present Hezbollah with an almost existential challenge. The primary objective for Hezbollah is to sustain its asymmetric warfare capabilities against Israel. Within the frame of the Middle East geosystem, Hezbollah's primal systemic objective is to ensure for itself three fundamental geostrategic necessities: a. The preservation of the strategic depth that is provided to Hezbollah by the Assad regime, particularly in relation to the party’s ongoing confrontation with Israel. The survival of the Assad regime is absolutely vital for the continuation of the TehranDamascussouth Lebanon “resistance axis”. The Syrian territory, east and northeast of the strategically important Bekaa Valley (the birthplace and first HQ of Hezbollah in 1982), allows the Shiite organization vital ‘breathing space’. A regime change in Damascus would confine Hezbollah in a very tight territory, isolated between the Mediterranean Sea in the west (which is closely patrolled by the Israeli Navy and Air Force), the Israeli borders in the south, the Sunni Lebanese territory in the north and the new, presumably hostile, Syrian regime in the east and northeast. In such an event, Hezbollah could find itself geographically, but more importantly, geopolitically isolated. b. The maintenance of the weapons route, from Iran and Syria. Hezbollah bases its attacking capability on the advanced weapon systems that it receives from primarily Iran, but
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also Syria. This route is usually by air, from Tehran to Damascus airport and then on land, also throughSyria. This the Syrianroute is territory usually andby air,into from the BekaaTehran val toley. Damascus The May airport 2013 andIsraeli then surgical on land, strikes throughwithin the SyriaSyrian were territory aiming and to intoavert the the Bekaa acquisition valley. o Thef the May Iranian 2013 produced Israeli surgical Fateh110 strikes missiles withinby SyriaHezbollah were. aimingThese missilesto avert havethe acquisition a range of o300f the km, Iranian and Israelproduced declared, Fateh110 after themissiles airstrikes by Hezbollah. These missiles have a range of 300 km, and Israel declared, after the airstrikes (on 3 and 5 May 2013) that it will not “allow gamechanging weapons falling into the hands (on 3of and Hezbollah 5 May 2013)”. The that first it airwill strike, not “allow on 3 gamechanging May, hit a target weapons in Damascus falling into airport, the hands while the of Hezbollahsecond and”. Thebiggest first one, air strike,hit targets on 3close May, to hitthe aci targetty of Damascus, in Damascus in particular airport, while bases the of the secondelite and Republican biggest one, Guard hit targets and aclose military to the researchcity of Damascus, centre. In in comments particular madebases of by the Israeli elite governmentRepublican officials, Guard andthe Israeli a military side denied research any centre. direct involvement In comments in madethe Syrian by Israelicrisis, but governmentmade clear officials, that itthe would Israeli actside again denied in any order direct to previnvolvementent the strengtheningin the Syrian crisis, of Hezbollah but . made“ Israel” clear that, said it the would official, act again “will incontinue order toits prev policyent of the interdicting strengthening attempts of Hezbollah to strengthen. “Israel”Hezbollah,, said thebut official,will not “intercedewill continue in the itsSyrian policy civ ofil war interdicting as long as attempts Assad desists to strengthen from direct Hezbollah, but will not intercede in the30 Syrian civil war as long as Assad desists from direct or indirect attacks against Israel30 ” . or indirect attacksA few against months Israel earlier,” . in January 2013, Israel had also struck a convoy that was headingA few to months Lebanon, earlier, close in to January the Bekaa 2013, valley. Israel It whadas alaterlso struck confirmed a convoy that the that convoy was of heading to Lebanon, close to the Bekaa valley. It was later confirmed that31 the convoy of trucks was carrying SA17 antiaircraft systems destined for Hezbollah31 . These missiles are trucks was carrying SA17 antiaircraft systems destined for Hezbollah . These missiles32 are Russianmade and were transported recently by Moscow to the Assad regime32 . A former RussianmadeMossad operations and were officer transported commented recently recently by Mosco thatw “ the to theabsolute Assad top regime priority. Aof formerthe Israeli Mossadgovernment operations – and officer by extension commented the intelligencerecently that comm “the unityabsolute and thetop militarypriority –of is the the Israeliprevention governmentof a first – andstrike by weapons extension capability the intelligence that threatens community Israel’s and the population military –centers is the preventionfrom reaching of a first strike weapons capability33 that threatens Israel’s population centers from reaching the hands of Hezbollah33 ”. the hands of Indeed,Hezbollah after”. the eruption of the Syrian crisis, Israel has drafted a Syria strategy that focusesIndeed, mainly after on the the eruption prevention of the of Syrianthe strengtheni crisis, Isngrael of has Hezbollah’s drafted a arsenal.Syria strategy A strategy that that focusesconsists mainly of on a combinationthe prevention of of advanced the strengtheni intelligenceng of Hezbollah’svia satellite arsenal. and drone A strategy technology that and consistssurgical of a airstrikes. combination On of the advanced other side, intelligence Hezbollah via has satellite attempted and drone to utilize technology its clandestine and surgicaloperations airstrikes. inside On Syria the in other order side, to acquire Hezbollah more haspowerful attempted missiles to in utilize its arsenal. its clandestine In order to do operationsso, the inside Shiite Syria organization in order to has acquire had to more evade po werful the Israeli missiles aerial in its control. arsenal. According In order to to do Israeli so, thesources, Shiite Hezbollah organization has hasmanaged had to to evadeacquire the at Isleastraeli 8 aerialScudD control. missiles According (which have to Israelia range of sources, Hezbollah has managed to acquire at least 8 ScudD missiles (which34 have a range of 300 km, but are less accurate than the Fateh110 missiles) from Syria34 . 300 km, but arec. The less continuation accurate than of the Hezbollah’s Fateh110 military missiles) superiorit from Syriay inside. Lebanon. In light of the higherc. The sectarian continuation tensions of thatHezbollah’s the Syrian military crisis superiorithas spready insideacross Lebanon.the Levant In (Syria,light of Lebanon the higherand sectarian Iraq), it tensionsis imperative that thefor Syrianthe Shiite crisis Hezbollah has spread to maintainacross the its Levant military (Syria, superiority Lebanon against and Iraq),its Sunni it is adversaries imperative withinfor the Lebanon. Shiite Hezbollah Since the to sta maintainrt of the its Syrian military crisis, superiority the north against and north its Sunnieast partsadversaries of Lebanon within have Lebanon. become Since transit the stapointsrt of fo ther logistical Syrian crisis, support the northfor the and Syrian north Sunni east opposition.parts of Lebanon But it ishave the becomeever rising transit Sunni points Islamis fort logisticalJabhat alNusra support, anfor extremistthe Syrian organization Sunni opposition.connected But withit is theAlQaeda ever rising, that Sunniposes Islamisa new tchallenge Jabhat alNusra for Hezbollah, an extremist in Lebanon. organization Jabhat al connected 35with AlQaeda, that poses a new challenge for Hezbollah in Lebanon. Jabhat al Nusra35 was formed in Syria in January 2012 and it is a direct product of the ferocity of the NusraSyrian was conflict. formed Sincein Syria then, in January it has grown 2012 and speedily, it is a drawingdirect product fighters of fromthe ferocity the wider of theMiddle SyrianEast. conflict. The formation Since then, and it growth has grown of Jabhat speedily, alNusra drawing is directly fighters connected from the widerto Lebanon, Middle since East.many The formation Lebanese and Sunnis growth joined of Jabhat its ranks alNusra after theis directly eruption connected of the Syrianto Lebanon, conflict. since These manyoriginate Lebanese particularly Sunnis joined from theits ranks Palestinian after therefugee eruption camps, of as the well Syrian as the conflict. northern These city of originate particularly from the Palestinian refugee camps, as well as the northern city of 36 Tripoli, historically as well as recently, an important urban centre for Sunni Islamist groups36 . Tripoli, historicallyThe Palestinian as well as refugee recently, camp an impor of Aintant alHilweh urban centre in Sidon, for Sunni in south Islamist Lebanon, groups is also. a baseThe of aPalestinian number of refugee Sunni Islamist camp of groups Ain alHilweh (such as inthe Sidon, Abdullah in south Azzam Lebanon, Brigades is , alsothe Osbata base alAnsarof a number and of the Sunni Jund Islamist alSham groups), which (such are as believed the Abdullah to have Azzam close Brigades ties with, the Al Osbat Qaeda in alAnsar and the Jund alSham), which are37 believed to have close ties with Al Qaeda in general and Jabhat alNusra in Syria37 . According to the Lebanese daily newspaper Al generalAkhbar: and Jabhat “Jabhat alNusra alNusra in has Syria been. According attempting to to the est ablish Lebanese a base daily in newspaper the Ain alHilweh Al Akhbar: “Jabhat38 alNusra has been attempting to establish a base in the Ain alHilweh camp38 ” , while in Tripoli, in the north of Lebanon, which is already dominated by Salafi camp” , while in Tripoli, in the north of Lebanon,39 which is already dominated by Salafi groups, Jabhat alNusra has a strong presence39 . groups, JabhatThe alNusra military has operations a strong presenceof Hezbollah. inside Syria, and particularly in the battle for ΑlQusair,The military lead to operations the direct ofconfrontation Hezbollah insidebetween Syria, the Sunniand particularly fighters of inJabhat the battle alNusra for and ΑlQusair,the Shiite lead fightersto the direct of Hezbollah confrontation. After between these developments,the Sunni fighters Jabhat of Jabhat alNusra alNusra threatened and to the Shiite fighters of Hezbollah. After these developments, Jabhat alNusra40 threatened to attack Hezbollah in its base, in Dahiye, in the southern suburbs of Beirut40 . A possible regime attackchange Hezbollah in Syria, in its which base, would in Dahiye, include in thea Sunni southern Islami suburbsst element, of Beirut would. constituteA possible an regime imminent changedanger in Syria, for thewhich current would power include balance a Sunni within Islami Lebanonst element,. In would other words,constitute a new an imminent Sunni Syrian dangerregime for the would current most power probably balance attempt within to Lebanonreshape . the In i othernternal words, balance a new of power Sunni in Syrian Lebanon regime would most probably attempt to reshape the internal balance of power in Lebanon Mazis I., Sarlis M., Regional Science Inquiry Journal, Vol. V, (2), 2013, pp. 125144 135 against Hezbollah, through the advancement of the military ascending of Sunni Islamist groups such as Jabhat alNusra. C.1. The supersystemic level: repercussions of a pivotal event in Syria
On 21 August 2013 took place one of the most critical and pivotal events of the Syrian civil war: a chemical attack in the eastern Damascus suburb of Ghouta, an area that had been contested by opposition forces. The attack was launched with surface to surface missiles and the nerve agent that was utilized was sarin gas41. On 26 August, UN inspectors were allowed into Ghouta in order to inspect the area of the chemical attack.
Map 5. Locations of the chemical attacks of the 21st of August 2013. (Source: BBC). Meanwhile, a complex diplomatic procedure was taking place, since according to US President Obama’s ‘red line statement’, the use of chemical weapons by the Assad regime was subject to a military response by the US and its allies. Turkey, France and the Gulf States pressed hard on the US in order to intervene militarily against Damascus, while the British Parliament rejected David Cameron’s call for an airstrike. This particular event, the rejection of Cameron’s call for an airstrike by the British Parliament, is diplomatically very important, since it constitutes an unexpected breach on the geostrategic dipole of Washington and London on a critical issue which is related to their projection of power in the Middle East. Furthermore, it is an event that dealt a vital blow to Washington’s determination to proceed to the enforcement of the measures that President Obama had announced in the event of Damascus crossing the ‘red line’ (namely the use of chemical weapons). For a number of days, during the beginning of September, all indications were leading to an imminent airstrike by the US against the Assad regime, which, depending on its time and target extent, could even lead to the collapse of the Assad regime. On the other hand, Russia vehemently opposed the use of force against Damascus, claiming also that the chemical attack was carried out by opposition forces, with the aim of forcing the US to strike Damascus. At the same time, Iranian military sources were threatening the US with serious consequences in the event of an US strike inside Syria. During those September days, the wider Middle East was on the verge of a serious military escalation, which would, without doubt, entail critical repercussions for the whole region. After the Obama and Putin meeting in Saint Petersburg during the G20 summit (6 September 2013)42 and after John Kerry’s “gaffe’’ during a press conference (9 September 2013)43 regarding the possibility of a political solution in case the Assad regime surrendered all its chemical arsenal, the international community witnessed an impressive switch of the
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rigid US stance regarding a military intervention in Syria. Certainly, the rejection of the rigid US stance regarding a military intervention in Syria. Certainly, the rejection of the British parliament of British PM David Cameron’s proposal for military action against Syria British parliament of British PM David Cameron’s proposal for military action against Syria (29 August 2013), as well as the US current financial fragility and the absence of a legalizing (29 August 2013), as well as the US current financial fragility and the absence of a legalizing support by the UN Security Council, did play an important role in this abrupt change of the support by the UN Security Council, did play an important role in this abrupt change of the US stance. US stance. Therefore, suddenly and only a few days later and with what at the time seemed an Therefore, suddenly and only a few days later and with what at the time seemed an unexpected Uturn, the US and Russia reached, on 14 September, an agreement for the UN to unexpected Uturn, the US and Russia reached,44 on 14 September, an agreement for the UN to destroy Assad’s chemical arsenal44 . It was, primarily, the result of a very important destroy Assad’s chemical arsenal . It was, primarily, the result of a very important intervention of the Russian factor on the supersystemic level, which totally reversed the intervention of the Russian factor on the supersystemic level, which totally reversed the climate of an impending escalation of the crisis in the Middle East. An escalated crisis that climate of an impending escalation of the crisis in the Middle East. An escalated crisis that would not be confined within Syria, but it would also involve the system of the wider Middle would not be confined within Syria, but it would also involve the system of the45 wider Middle East, as well as supersystemic factors such as Russia and China45 . The USRussian East, as well as supersystemic factors such as Russia and China . The USRussian agreement was materialized on 26 September, under a UN Security Council Resolution and agreement was materialized on 26 September, under a UN Security Council46 Resolution and the beginning of the UN mission inside Syria at the beginning of October46 . the beginning of the UN mission inside Syria at the beginning of October .
Conclusions Conclusions General implications of the USRussia agreement General implications of the USRussia agreement
The USRussian agreement averted an imminent US airstrike and set in motion the The USRussian agreement averted an imminent US airstrike and set in motion the destruction of the Syrian chemical stockpile, but it also reframed the regional geopolitical destruction of the Syrian chemical stockpile, but it also reframed the regional geopolitical competition which is taking place and it has Syria as its focal point. The implications of the competition which is taking place and it has Syria as its focal point. The implications of the agreement were primarily evident inside Syria. The Assad regime had avoided the impact that agreement were primarily evident inside Syria. The Assad regime had avoided the impact that a US airstrike –whether smaller or larger in scope would have on its military and a US airstrike –whether smaller or larger in scope would have on its military and organizational capabilities and that could, eventually, threaten its viability. Furthermore, the organizational capabilities and that could, eventually, threaten its viability. Furthermore, the almost immediate agreement by the Assad regime to comply with the UN resolution and with almost immediate agreement by the Assad regime to comply with the UN resolution and with the destruction of its chemical weapons arsenal provided Damascus with a form of legitimacy the destruction of its chemical weapons arsenal provided Damascus with a form of legitimacy visàvis the western powers. visàvis the western powers.
On the other hand, the USRussia agreement dealt a heavy blow to the Syrian opposition, and On the other hand, the USRussia agreement dealt a heavy blow to the Syrian opposition, and particularly to the Syrian National Coalition and the Free Syrian Army, which had invested its particularly to the Syrian National Coalition and the Free Syrian Army, which had invested its efforts on a US military strike against the Assad regime. This lead to further fragmentation of efforts on a US military strike against the Assad regime. This lead to further fragmentation of the antiAssad forces and widened the rift between the Syrian moderate opposition forces and the antiAssad forces and widened the rift between the Syrian moderate opposition forces and the Islamist opposition forces. This was a rapid process and an almost direct repercussion of the Islamist opposition forces. This was a rapid process and an almost direct repercussion of the aversion of the US airstrikes: the crystallization of Assad’s survival in Damascus shifted the aversion of the US airstrikes: the crystallization of Assad’s survival in Damascus shifted the immediate strategic targets of the Islamist groups (the Jabhat al Nusra, the Islamic State the immediate strategic targets of the Islamist groups (the Jabhat al Nusra, the Islamic State of Iraq and Syria or ISIS among others) that operate inside Syria, which opted now not for the of Iraq and Syria or ISIS among others) that operate inside Syria, which opted now not for the militarily unrealistic removal of the Assad regime, but for their consolidation in Syrian militarily unrealistic removal of the Assad regime, but for their consolidation in Syrian territory that the Assad forces have already been pushed back from. This has often led the territory that the Assad forces have already been pushed back from. This has47 often led the Islamist groups in direct confrontation with units of the Free Syrian Army47 . Islamist groups in direct confrontation with units of the Free Syrian Army . Within this context, on 25 September 2013, most of the Islamist groups fighting Within this context, on 25 September 2013, most of the Islamist groups fighting against the Assad regime inside Syria announced their cooperation under the title Islamic against the Assad regime inside Syria announced their cooperation under the title Islamic Alliance and stated their separation from the Syrian National Coalition (based in Istanbul), as Alliance and stated their separation from the Syrian National Coalition (based in Istanbul),48 as they aimed to achieve increased military effectiveness on the battleground48 . This they aimed to achieve increased military effectiveness on the battleground . This development resulted not only in further armed confrontation between units of the Free development resulted not only in further armed confrontation between units of the Free Syrian Army and the Islamists, but it has also profited further the Assad regime, which sees its Syrian Army and the Islamists, but it has also profited further the Assad regime, which sees its enemies fragmented and weakened. At the same time, the formation of the Islamic Alliance enemies fragmented and weakened. At the same time, the formation of the Islamic Alliance strengthens President Assad’s rhetoric, which presents the Syrian war as a battle between the strengthens President Assad’s rhetoric,49 which presents the Syrian war as a battle between the regime and Islamic terrorism49 . Furthermore, these developments have lead to high numbers regime and Islamic terrorism . Furthermore, these developments have lead to high numbers of fighters of the FSA joining Islamist groups, which are more effective, more organized and of fighters of the FSA joining50 Islamist groups, which are more effective, more organized and have better funding50 . have better funding . At this point it is important to make two observations: Firstly, that this form of fighter At this point it is important to make two observations: Firstly, that this form of fighter movement (from secular to Islamist groups) indicates towards two directions: that the number movement (from secular to Islamist groups) indicates towards two directions: that the number of the Islamist members within the secular opposition groups were higher than previously of the Islamist members within the secular opposition groups were higher than previously Mazis I., Sarlis M., Regional Science Inquiry Journal, Vol. V, (2), 2013, pp. 125144 137 calculated and that the military effectiveness of the Islamist groups (as opposed to that of the secular groups) proves to be an important incentive for the growth of the manpower of the radical Islamist groups. Secondly, that the Islamist government of Turkey has facilitated, through its political help and resources, this growth of the Islamist groups against the secular ones51. Turkey’s backing of Islamist groups in Syria has alienated some of its traditional allies (such as the US) and has heightened the international pressure towards Erdogan’s government. Furthermore, this perilous strategy of facilitating the transport of fighters that are –ideologically or militarily related to Al Qaeda, ultimately run counter to what Ankara aimed for. It has added legitimacy to Assad’s claims that his regime is defending Syria against Islamic terrorism and has shifted the international agenda from Assad’s violent reaction to the growth of Al Qaeda’s influence in Syria 52. Recently (11 October 2013), the USbased Human Rights Watch organization published an extensive report on human rights violations that Islamist fighters had committed in the region of Latakia during August 2013. In the report, the organization is expressing fierce criticism for Turkey’s role regarding the presence of foreign fighters in northwestern Syria: “According to Syrian security officials, media reports, western diplomats, and direct observations by journalists and humanitarian workers who visited the area in the past, many foreign fighters operating in northern Syria gain access to Syria via Turkey, from which they also smuggle their weapons, obtain money and other supplies, and sometimes retreat to for medical treatment (…) A western diplomat told Human Rights Watch that diplomats from several EU member state missions in Ankara are very concerned about the transiting of nationals from European and other countries through Turkey to Syria”53.
The regional implications of the USRussia agreement are even more significant. The regional actors that were pressing the US towards the direction of a military strike were sidelined, primarily Turkey and Saudi Arabia. Both Ankara and Riyadh had been strong advocates for a wider military airstrike against Damascus and the removal of the Assad regime. With regards to Turkey, the USRussia agreement was the second biggest geopolitical setback after the removal of Egyptian President Mohamed Morsi earlier in the summer of 2013. In both cases Turkish Prime Minister Recep Tayyip Erdogan had invested major diplomatic and geopolitical capital. Erdogan has supported the Muslim Brotherhood in Libya, Egypt and Syria. So Ankara has pursued a Sunni and Muslim Brotherhoodorientated foreign policy in the Wider Middle East, which has, nevertheless, backfired heavily and more spectacularly in Egypt and Syria. Many Turkish political analysts have characterized Erdogan’s wider Brotherhood backing as failed risk, not only for Turkey but for the entire Eastern Mediterranean.54. Political analyst Daniel Pipes observed recently the following with regards to the Turkish foreign policy and the eastern Mediterranean security system: “Erdoğan and Foreign Minister Ahmet Davutoğlu have pursued an ambitious foreign policy of "zero problems with neighbors" which, ironically, has led instead to zero friends. Strained relations with Georgia, Armenia, Azerbaijan, Iran, Iraq, Syria, Israel, the Palestinian Authority, Saudi Arabia, Egypt and Serbia, raise the prospect of Ankara reverting to an older Turkish pattern and lashing out at Cyprus and Greece. In both cases, for instance, it could encourage disruptive refugee flows. This is where the brutal civil war underway in Syria, just 70 miles (110 km) away, enters the equation. So far, that conflict has not had a major impact on Cyprus, but the island's proximity, its minimal defense capabilities, and its membership in the European Union (meaning, an illegal immigrant setting foot on Cyprus is close to reaching Germany or France) make it exceedingly vulnerable. The 2.2 million refugees from Syria since 2011 have so far bypassed in favor of (in descending order) Lebanon, Jordan, Turkey, Egypt, and Iraq, but that could quickly change if the Alawites living closest to Cyprus take to the sea in sizeable numbers. Or if Ankara encourages Syrians to emigrate to northern Cyprus and then to sneak across the border into the republic”55.
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Map 6. July 2013 estimates of Syrian refugees show that Cyprus has so far escaped the influx. MapMap 6. July 6. July2013 2013 estimates estimates of Syrian of Syrian refugees refugees show show that Cyprusthat Cyprus has sohas far so escaped far escaped the influx. the influx.
At the moment, Turkey stands sidelined and its foreign policy in the Middle East At theAt moment, the moment, Turkey Turkey stands stands sidelined sidelined and andits fore its ign fore policyign policy in the in Middle the Middle East East seems to be in a kind of uneasy limbo. Ankara’s geopolitical orientation is out of focus and seemsseems to be to in be a inkind a kindof uneasy of uneasy limbo. limbo. Ankara’s Ankara’s geopolitical geopolitical orientation orientation is out is ofout focus of focus and and Turkey remains at odds with all the major regional actors: with Iran (over Syria), with Israel TurkeyTurkey remains remains at odds at odds with withall the all majorthe major regional regional actors: actors: with withIran Iran(over (over Syria), Syria), with withIsrael Israel (over Gaza Strip) and with Saudi Arabia (over Egypt, as Turkey supports the Egyptian (over(over Gaza Gaza Strip) Strip) and and with with Saudi Saudi Arabia Arabia (over (over Egypt Egypt, as , Turkey as Turkey supports supports the Egyptian the Egyptian Brotherhood that is an ideological and historic enemy of Riyadh). BrotherhoodBrotherhood that isthat an is ideological an ideological and historicand historic enemy ene ofmy Riyadh). of Riyadh). Furthermore,Furthermore, the the military military growth growth of of the the radical radical Sun Sunni ni Islamist Islamist groups groups which which also also Furthermore, the military growth of the radical Sunni Islamist groups which56 56 also directed their attacks against the Syrian Kurdish territory on the north and northeast of Syria 56 directeddirected their their attacks attacks against against the Syrian the Syrian Kurdish Kurdish territory territory on the on north the north and northeastand northeast of Syria of Syria led to Assad’s decision to utilize the Kurdish military reaction against the Islamist led ledto Assad’s to Assad’s decision decision to utilize to utilize the Kurdishthe Kurdish military military reaction reaction against against the theIslamist Islamist opposition groups and to cede the northern territory that is Kurdishpopulated to the oppositionopposition groups groups and and to cede to cede the thenorthern northern territor territory thaty that is Kurdishpopulated is Kurdishpopulated to the to the leadership of the PYD (Democratic Union Party), the party that is related to the PKK in leadershipleadership of the of PYD the PYD (Democratic (Democratic Union Union Party), Party), the party the party that thatis related is related to the to PKKthe PKK in in Turkey. This move has led to the rerising of future secessionist tensions in the Kurdish Turkey.Turkey. This This move move has ledhas to led the to rerising the rerising of futur of future secessioniste secessionist tensions tensions in the in Kurdish the Kurdish populated southeastern Turkey. Additionally, this de facto alliance between the Syrian regime populatedpopulated southeastern southeastern Turkey. Turkey. Additionally, Additionally, this dthise facto de facto alliance alliance between between the Syrian the Syrian regime regime and the Kurdish PYD has offered Assad a double advantage: it has created a zone that and and the Kurdish the Kurdish PYD PYD has offeredhas offered Assad Assad a double a double adva advantage:ntage: it has it createdhas created a zone a zone that that disrupts the flowing of foreign Islamist fighters entering Syria territory from Turkey, as well disruptsdisrupts the flowingthe flowing of foreign of foreign Islamist Islamist fighters fighters entering entering Syria Syria territory territory from from Turkey, Turkey, as well as well as an important military diversion visàvis Ankara’s Syrian strategy. as anas important an important military military diversion diversion visàvis visàvis Ankara Ankara’s Syrian’s Syrian strategy. strategy. During the months of October and November 2013, the Kurdish YPG (People’s DuringDuring the months the months of October of October and and November November 2013, 2013, the Kurdish the Kurdish YPG YPG (People’s (People’s Protection Units) defeated the Islamist groups in a series of clashes in northeast Syria and ProtectionProtection Units) Units) defeated defeated the Islamist the Islamist groups groups in a in series a series of clashes of clashes in northeast in northeast Syria Syria and and managedmanaged to to secure secure a largea large part part of of the the Kurdishpopul Kurdishpopulatedated northeast northeast Hasakah Hasakah province province of of 57managed57 to secure a large part of the Kurdishpopulated northeast Hasakah province of Syria . This57 increased military and subsequently political autonomy of the SyrianKurdish SyriaSyria. This. Thisincreased increased military military and andsubsequently subsequently politica political autonomyl autonomy of the of SyrianKurdish the SyrianKurdish territory in the northeast, which is a direct result of the Syrian conflict, has also wider regional territoryterritory in the in northeast, the northeast, which which is a directis a direct resul result of thet of Syrian the Syrian conflict, conflict, has alsohas alsowider wider regional regional repercussions. Firstly and in the shortterm, for the first time it creates a continuous, if only repercussions.repercussions. Firstly Firstly and inand the in shortterm,the shortterm, for thefor firstthe firsttime timeit creates it creates a continuous, a continuous, if only if only informal, territorial space, connecting the Kurdish Regional Government in northern Iraq with informal,informal, territorial territorial space, space, connecting connecting the Kurdish the Kurdish Regional Regional Government Government in northern in northern Iraq Iraqwith with the ‘autonomous’ SyrianKurdish territory. Secondly, this de facto autonomy of the Kurdish the ‘autonomous’the ‘autonomous’ SyrianKurdish SyrianKurdish territory. territory. Secondly Secondly, this, dethis facto de facto autonomy autonomy of the of Kurdishthe Kurdish populated territory and the growing synergy of the DYP with the PKK could lead to a chain populatedpopulated territory territory and theand growing the growing synergy synergy of the of DYP the DYP with withthe PKK the PKK could could lead leadto a tochain a chain reaction process, recharge the separatist tendencies of the PKK militants in Turkey, a reactionreaction process, process, recharge recharge the separatistthe separatist tendenci tendencies ofes the of PKKthe PKK militants militants in Turkey, in Turkey, a a development which could lead to a new phase of conflict and instability in the adjoining developmentdevelopment which which could could lead lead to a to new a new phase phase of conf of lict conf andlict and instability instability in the in adjoining the adjoining Kurdishpopulated territory of southeastern Turkey. KurdishpopulatedKurdishpopulated territory territory of southeastern of southeastern Turkey. Turkey. Mazis I., Sarlis M., Regional Science Inquiry Journal, Vol. V, (2), 2013, pp. 125144 139
Ankara, on the other side and in order to monitor such future tendencies, has been fostering its economic and energy relations with the Kurdish Regional Government (KRG) of Masoud Barzani in Iraq. Only recently, the KRG agreed with the Erdogan government to the construction of a second pipeline that will transfer the northern Iraqi oil through Turkey58. From the KRG’s perspective, the energy route to Turkey is absolutely vital as it provides it with the opportunity to pursue an independent energy policy from the central and Shiite dominated government of Baghdad. In that way, KRG President Barzani aims to enhance its own political and economic position in Erbil visàvis the Maliki government in Baghdad59. Additionally, Turkey has recently begun to construct a wall in its southeastern borders, with the aim of separating the Kurdishpopulated areas of Turkey from the Syrian ones. The construction of the specific wall sparked clashes between the Turkish police and Kurdish protesting against the project60. However, on 12 November, after the abovementioned military gains against the Islamist groups in the northeastern Syria, the PYD announced the formation of a transitional government in Qamishli, Syria. That was a major development and a clear move towards an announcement of the creation of an autonomous Kurdish state in northeast Syria61. In light of this development, the close relations between PKK and DYP raise the possibilities that in the future the PYD could opt to follow a confrontational stance against Ankara, instead of the energy cooperation mode that the KRG has followed, and to pursue by military means a greater Kurdistan that would contain parts of southeastern Turkey. In any event, the formation of a Syrian Kurdistan would have a different effect on some of the major powers of the region: Turkey would consider it as a serious threat. Israel, that has traditionally good relations with the Kurds, would view it as a new leverage point against Assad’s or even post Assad Syria and a strategically friendly territory visàvis Iran. For Saudi Arabia also, the USRussia agreement on the Syrian chemical arsenal was equally a major setback. Saudi Arabia had invested heavily, both in resources and in diplomatic capital, in the removal of the Assad regime in Syria, a development which would weaken Saudi Arabia’s major regional competitor, Iran. Instead, the deal agreed between Washington and Moscow not only left Riyadh isolated, but it also had a direct impact at the core of the Saudi regional strategy. Riyadh’s dissatisfaction with the USRussia agreement became most evident on 18th October 2013, when it declined its election as a member on the UN’s Security Council62.
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Map 7. The eruption of the Syrian conflict has brought again the Kurdish issue on the forefront of the Mapregional Map7. The 7.developments. eruptionThe eruption of the (Source: of Syrian the Syrian Kurdish conflict conflict Institutehas brou has o ghtbrouf Paris; againght againMichael the Kurdish the Mehrdad Kurdish issue RSCissue on the Izady, on forefront the University forefront of the of the regionalColumbia,regional developments. New developments. York, 1998) (Source: (Source: Kurdish Kurdish Institute Institute of Paris; of Paris; Michael Michael Mehrdad Mehrdad RSC RSCIzady, Izady, University University of of Columbia, Columbia, New NewYork, York, 1998) 1998) Both Turkey (which from its part had been negotiating the purchase of advanced Chinese Both missiles, Both Turkey Turkey an (which unprecedented (which from from its move part its part had from had been a been NATO negotiat negotiat member)ing theing purchase theand purchaseSaudi of Arabia advanced of advanced (its ChinesedeclineChinese of missiles, the missiles, Security an unprecedented an Council unprecedented seat moveis equally move from unp from a recedented) NATO a NATO member) havemember) beenand andSaudiexperiencing Saudi Arabia Arabia a(its rift (its declinewithdecline the of US the of over Securitythe theSecurity Syrian Council Council conflict, seat seatis but equally is also equally –andunp recedented) unpthisrecedented) counts havemostly have been for been experiencingSaudi experiencing Arabia a overrift a rift withWashington’s withthe US the overUS recent overthe Syriannegotiationsthe Syrian conflict, conflict, with but regards alsobut also–and to Ir–and thisan’s countsthisnuclear counts mostly ambitions. mostly for Saudi for Saudi Arabia Arabia over over Washington’sWashington’sThat recentis because recent negotiations thenegotiations most with important withregards regards implication to Ir an’sto Ir an’snuclear of tnuclearhe ambitions.USRussia ambitions. agreement was that it lead That to theThat is firstbecause is because direct the contact mostthe most important between important implication a US implication President of the of and USRussia the his USRussia Iranian agreement counterpart agreement was sincewasthat that it1979 leadit leadand to the to to firstdirect the first direct talks direct contact and contact negotiations between between a over US a Pr US a esident se Prt esident of issues and andhis and Iranian his particularly Iranian counterpart counterpart the Iranian since since 1979nuclear1979 and issue. andto direct toThis direct was talks a talks andmajor andnegotiations development, negotiations over an over aagi se let a ofdiplomatic se t issues of issues and maneuver andparticularly particularly from theWashington Iranian the Iranian nuclearandnuclear potentially issue. issue. This a gamechanging Thiswas wasa major a major development, one, development, which couldan agi an trle ansformagi diplomaticle diplomatic or even maneuver shiftmaneuver power from from Washingtonrelations Washington that andhave potentiallyand been potentially established a gamechanging a gamechanging since 1979. one, one,which which could could transform transform or even or even shift shiftpower power relations relations that that have have been been established established since since 1979. 1979. Iran’s regional influence has been enhanced during the last decade or so. The regional Iran’sdevelopmentsIran’s regional regional of influence the influence last decade has hasbeen have been enhanced gradually enhanced duringgive duringn Tehranthe lastthe a lastserious decade decade geopolitical or so. or The so. advantage The regional regional developmentsoverdevelopments its regional of the competitors, of last the decadelast decade particularly have have gradually graduallySaudi give Arabia ngive Tehran andn Tehran Turkey: a serious a serious geopolitical geopolitical advantage advantage over overits1. regional its One regional criticalcompetitors, competitors, development particularly particularly was Saudi the Saudi IraqArabia WarArabia and in Turkey: and 2003 Turkey:, where the US intervention 1. 1. removed One One critical the critical Sunni development development regime of was Saddam was the Iraq the Hussein. Iraq War War in Gradual 2003 in 2003, ly, where Tehran, where the grew US the intervention USits influence intervention removedwithinremoved Iraq, the Sunniwhichthe Sunni regimeis now regime governedof Saddam of Saddam by Hussein. an Hussein.Iranianor Gradual Gradualientatedly, Tehranly, government Tehran grew grew its under influence its Shiiteinfluence withinPMwithin Nouri Iraq, Iraq, alwhich Maliki which is63 now. is nowgoverned governed by an by Iranianor an Iranianorientatedientated government government under under Shiite Shiite 63 63 2. PM The NouriPM second Nouri al Maliki developmental Maliki. . was the Lebanon War in 2006, where Hezbollah managed 2. 2. toThe resist Thesecond for second 33development days development a direct was attack wasthe Lebanon the of Lebanonthe Israel War Wariin Defense 200 in6, 200 where Forces.6, where Hezbollah This Hezbollah war managed despite managed tothe resist tofact resist forthat 33 forIsrael days 33 enhanceddays a direct a direct itsattack stance attack of thediplomatic of Israelthe Israeli allyDefensei byDefense the Forces. involvement Forces. This Thiswar of warEurope despite despite in thesouth factthe Lebanonthatfact Israelthat Israel throughenhanced enhanced the its stance presence its stance diplomatic of diplomatic UNIFILally byally II the by involvement ltheed involvement to the upgradingof Europe of Europe in of in southHezbollah’ssouth Lebanon Lebanon profile through in through the the region thepresence and presence its of consequent UNIFIL of UNIFIL IImilitary II l ed and ltoed political the to theupgrading supremacy upgrading of of Hezbollah’sHezbollah’s profile profile in the in regionthe region and itsand consequent its consequent military military and politicaland political supremacy supremacy Mazis I., Sarlis M., Regional Science Inquiry Journal, Vol. V, (2), 2013, pp. 125144 141
inside Lebanon. 3. Τhe third development was the Syrian crisis. In the beginning the Syrian crisis threatened the viability of the Assad regime, a strategic ally of the Iranian regime. Nevertheless, as the Syrian conflict raged on, Syria’s battleground provided Iran with the opportunity to exercise its geopolitical advantages and to further enhance its regional influence. 4. Finally, if Tehran utilizes its geopolitical gains wisely, it could proceed into an agreement with Washington by making a number of concessions, especially with regards to its nuclear program. This could lead to a much needed stabilization in the wider region and it could ease Iran’s severe economic embargo imposed by the West. The period analyzed in the previous pages, from April 2013 to October 2013, affirmed the gradual formation, within the last ten years, of a subsystem that is defined by the ascendance of Iranian influence and the geopolitical advantage of the Shiite or Shiiterelated element in each of the states that constitute this subsystem, namely Iran itself, Iraq, central and southern Syria and most of Lebanon. It is a subsystem that cuts through the centre of the system of the wider Middle East and it is adjoined to most geopolitically unstable regional conflictual sub systems: the Syria/LebanonIsrael subsystem and the SyriaTurkey conflictual subsystem. In the case of Hezbollah, the Syrian crisis has highlighted the evolution of the organization from a proxy actor in Lebanon to a vital partner of the Assad regime and Tehran in the Levant and the spearhead of the Iranian foreign policy in the wider Middle East. Even though the relation between Shiite Islamist Hezbollah and the Alawite but secular Assad regime was always defined by common geopolitical objectives and interests (while on the contrary, with the third part of the alliance, Iran, Hezbollah has always maintained, in addition to organizational, political and military ties, deep ideological and spiritual connections), Hafez alAssad, the father of the current Syrian President, had always kept Hezbollah and its leadership at a distance. Hafez alAssad considered Hezbollah a vital yet a merely proxy force in the Lebanese arena, often very helpful as a pressure leverage against the Israelis, particularly with regards to the Golan Heights. On the other hand, when Bashar alAssad took over power after his father’s death, in June 2000, he chose to ascend Hezbollah’s status within this power relationship. This was done mostly because the new and inexperienced President needed to strengthen his leadership and legitimization against both a series of regional challenges (such as the Iraq war in 2003) and his domestic opponents. Already since 2006 (after the Second Lebanon War) analysts were commenting that Hezbollah’s status had been elevated from a mere proxy to “a partner with considerable clout and autonomy”64. Now, seven years later, Hezbollah, in close co ordination with Iran, has been called to assist to the survival of Bashar alAssad, therefore completing its role as strategic partner to the Baathist regime of Damascus. An assistance that is not based on a mutual religious or ideological agenda, but instead on a fundamental geostrategic aim that is common for Hezbollah, Damascus and Tehran: the ‘axis of resistance’ directed against Israel. Furthermore, Hezbollah’s position in Iran’s strategy within the Shiite subsystem that was described above is absolutely central: i) Firstly, because the effectiveness of Hezbollah’s asymmetric warfare, whether against the IDF (Israeli Defense Forces) or against the Sunni opposition (both in Syria but also Lebanon, let us not forget the West Beirut clashes in 2008), establish the Lebanese party and organization as a very powerful ally in the western flank of the abovementioned Shiite subsystem (namely in Lebanon and central and southern Syria). ii) Secondly, because Hezbollah is, historically, the most successful export of the Iranian revolution, it also currently operates as a mould, a formula, upon which Tehran establishes its proxy militia forces within the frame of the central part of its Shiite subsystem (in Iraq), but also parts of eastern and central Syria. Such as the paramilitary Shiite Iraqi groups of Kataeb Hezbollah (or Hezbollah Brigades) and the Asa'ib Ahl alHaq (League of the Righteous, also known as the Khazali Network). From its part, Hezbollah appears to have underestimated the importance of the super systemic interventions by Moscow and Beijing that have resulted in a favorable outcome for the IranSyria axis (especially with regards to the cancellation of the US airstrikes against the
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AssadAssad regime). regime). Hezbollah Hezbollah considers considers that itthat has it beenhas beenupgraded upgraded from from a Lebanes a Lebanese paramilitarye paramilitary forceforce into ainto regional a regional player. player. On 22 Onnd 22September,nd September, in a televisedin a televised speech speech he gave he gavein Beirut in Beirut, the , the leaderleader of Hezbollah of Hezbollah Hassan Hassan Nasrallah Nasrallah shifted shifted his rhetoric his rhetoric away away from from its “traditional its “traditional enemy”, enemy”, the statethe state of Israel, of Israel, towards towards Turkey Turkey and Saudi and Saudi Arabi Arabia: hea: mentioned he mentioned that Turkey that Turkey and Saudiand Saudi 65 ArabiaArabia have havefailed failed in Syria in Syria and calledand called them them to revi tose revi theirse theirstance stance. Additionally,65. Additionally, in an in article an article publishedpublished in pro in Hezbollah proHezbollah Lebanese Lebanese newspaper newspaper Al AkhbarAl Akhbar, its , editorinchief its editorinchief wrote wrote the the followingfollowing in an in article an article under under the title the title «Hezbollah «Hezbollah and andthe new the new Levant Levant»: “When»: “When Hezbollah Hezbollah decided,decided, openly openly and blatantly,and blatantly, to penetrate to penetrate the hea thert hea of rtthe of battle the battle against against the armed the armed groups groups in in 66 Syria,Syria, it did it so did with so withawareness awareness of its of new its rolenew” role. Nevertheless,”66. Nevertheless, at this at pointthis point it would it would be in be the in the benefitbenefit of the of wider the wider region region and andIran Iran itself itself if Tehr if an Tehr movedan moved to restrain to restrain an overconfident an overconfident HezbollahHezbollah. In that. In way,that way, Iran wouldIran would maximize maximize its chances its chances of achieving of achieving many many of its of geopolitical its geopolitical objectivesobjectives via the via diplomatic the diplomatic negotiations negotiations with with Washington Washington and Teland Aviv’s Tel Aviv’s allowance allowance particularlyparticularly with withregards regards to its to balance its balance of power of power with wSaudiith Saudi Arabia Arabia and Qatar.and Qatar. If it doesn’tIf it doesn’t do do so, thenso, thenit is possibleit is possible that thethat chance the chance for a for wider a wider regional regional peace peace settlement settlement will bewill lost be oncelost once again.again.
1 1 The present The present article articlewas submitted was submitted simultaneously simultaneously to the toEditorial the Editorial committee committee of JMSS of JMSSCentre Centre for Milit forary Milit andary Strategic and Strategic Studies.Studies. 2 2 Watt Nicholas Watt Nicholas & Hopkins & Hopkins Nick, “CameronNick, “Cameron forced forced to rule to out rule British out British attack attackon Syria on afterSyria MPsafter rejectMPs mrejectotion,” motion,” The The Guardian,Guardian, August August 29, 2013, 29, http://www.theguardian.c2013, http://www.theguardian.com/world/2013/aug/29/cameronbritishattacksyriamom/world/2013/aug/29/cameronbritishattacksyriamps ps 3 3 I. Th. Mazis, I. Th. Mazis, “L'effet “L'effet Syrien Syrienet l'analyse et l'analyse géopol géopolitique etitique géostratégique et géostratégique du Moyen du Moyen Orient Orientactuel,” actuel,” in Praktika in Praktika A' A' DiethnousDiethnous Mesanatolikou Mesanatolikou Synedriou Synedriou tou Athinisi tou Athinisi Panepistimiou, Panepistimiou, Ai Aravikai Ai Aravikai Exegerseis Exegerseis kai i Anamorfossi kai i Anamorfossis tou s tou AraboislamikouAraboislamikou Kosmou, Kosmou, eds. I. eds. Th. Mazis,I. Th. Mazis, (Dir.) a(Dir.)nd K. a NokolaouPatragas,nd K. NokolaouPatragas, (Athens: (Athens: Dept. ofDept. Modern of Modern Turkish Turkish and and ModernModern Asian Studies,Asian Studies, School School of Economomic of Economomic and Poli andtical Poli Sciences,tical Sciences, Leimon Leimon Editions, Editions, 2013), 2013),pp. 545566 pp. 545566. . 4 4 For more For information more information regarding regarding the geostrategic the geostrategic role of rQatar,ole of Qatar,Turkey, Turkey, Dubai Dubaiand Saudi and ArabiaSaudi Arabia see I. Th. see Mazis,I. Th. Mazis, “L'effet “L'effet Syrien Syrienet l'analyse et l'analyse géopolitique géopolitique et géostratégique et géostratégique du Moyen du Moyen Orient Orientactuel,” actuel,” in ibid, in pp. ibid, 545566. pp. 545566. 5 5 “Syria’s “Syria’s Metastasing Metastasing Conflicts”, Conflicts”, Middle Middle East Repo Eastrts, Repo Internationalrts, International Crisis GroupCrisis GroupNo.143, No.143, June 27, June 2013. 27, 2013. See also: See Sarlis also: Michalis,Sarlis Michalis, “Ο geopolitikos “Ο geopolitikos antiktypos antikt tisypos syriakis tis syriakis krisis stinkrisis esoteriki stin esoteriki katastasi katastasi toy Livanou/The toy Livanou/The geopoliticalgeopolitical impact impact of the Syrianof the Syriancrisis on crisis the onint ernalthe int situationernal situation of Lebanon» of Lebanon» in Praktika in Praktika A' Diethnou A' Diethnous Mesanatolikous Mesanatolikou SynedriouSynedriou tou Athinisi tou Athinisi Panepistimiou, Panepistimiou, Ai Aravikai Ai Aravikai Exegerseis Exegerseis kai i Anamorfossis kai i Anamorfossis tou Araboislamikou tou Araboislamikou Kosmou, Kos eds.mou, I. eds. I. Th. Mazis,Th. Mazis, (Dir.) and(Dir.) K. and NokolaouPatragas, K. NokolaouPatragas, (Athen (Athens: Dept.s: ofDept. Modern of Modern Turkish Turkish and Modern and Modern Asian StudiesAsian Studies, School, School of of EconomomicEconomomic and Political and Political Sciences, Sciences, Leimon Leimon Editions, Editions, 2013),pp. 2013),pp. 359373. 359373. 6 6 Sly Liz, Sly “Syrian Liz, “Syrian rebels rebelsmaking making advances,” advances,” The Wa Theshington Washington Post, November Post, November 25, 2012. 25, 2012. 7 7 Evans EvansDominic, Dominic, “Car bombs “Car bombs kill 34 killin proAssad 34 in proAssad Damascus Damascus suburb,” suburb,” Reuters, Reuters, November November 28, 2012. 28, 2012. http://www.reuters.com/article/2012/11/28/ussyriahttp://www.reuters.com/article/2012/11/28/ussyriacrisisidUSBRE8AJ1FK20121128crisisidUSBRE8AJ1FK20121128 8 8 Peter Tom, Peter “SyrianTom, “Syrian rebels rebelssay Aleppo say Aleppo may soon may be soon theirs,” be theirs,” USA Today, USA Today, December December 17, 2012. 17, 2012. http://www.usatoday.com/story/news/world/2012/12/17http://www.usatoday.com/story/news/world/2012/12/17/alepposyria/1775275//alepposyria/1775275/ 9 9 “Syria “Syriatroops troopsbattle rebelsbattle rebelsaround around Damascus,” Damascus,” AFP, December AFP, December 8, 2012. 8, 2012. 10 10 Nakhoul Nakhoul Samia, Samia, “Divided “Divided Damascus Damascus confronted confronted by allout by alloutwar,” Reuters,war,” Reuters, February February 13, 2013. 13, 2013. http://www.reuters.com/article/2013/02/13/ussyriahttp://www.reuters.com/article/2013/02/13/ussyriacrisisdamascusidUSBRE91C0UG20130213crisisdamascusidUSBRE91C0UG20130213 11 11 “Syrian “Syrian rebels rebelscapture capture northern northern Raqqa Raqqacity,” Alcity,” Jazeera, Al Jazeera, March March 5, 2013. 5, 2013. http://www.aljazeera.com/news/middleeast/2013/03/20http://www.aljazeera.com/news/middleeast/2013/03/201334151942410812.html1334151942410812.html 12 12 “Damascus “Damascus mosque mosque blast kills blast 42 kills including 42 including senior senioSyrianr Syrianimam,” imam,” Reuters, Reuters, March March 21, 2013, 21, 2013, http://www.reuters.com/article/2013/03/21/ussyriahttp://www.reuters.com/article/2013/03/21/ussyriacrisisblastidUSBRE92K0X520130321crisisblastidUSBRE92K0X520130321 13 13 Barnard Barnard Anne, Anne,“Syrian “Syrian Rebels Rebels hit central hit central Damasc Damascus withus mortar with mortar shells, shells,”The New ”The York New Times, York Times, March March25, 2013. 25, 2013. 14 14 Authors Authors note: since note: 1979 since Iran 1979 is Irana Shiite is a religShiiteious relig regime,ious regime, while Syriawhile isSyria a fiercely is a fiercely secular secular Baathist Baat regime.hist regime. 15 15 Mamouri Mamouri Ali, “The Ali, rise“The of riseCleric of ClericMilitias Militias in Iraq, in ”Al Iraq, Monitor, ”Al Monitor, July 23, July 2013, 23, 2013, http://www.almonitor.com/pulse/originals/ http://www.almonitor.com/pulse/originals/2013/07/shiiteclericmilitiasiraqfears.html2013/07/shiiteclericmilitiasiraqfears.html 16 16 Sadjadpour Sadjadpour Karim, Karim, “Iran’s “Iran’s unwavering unwavering support support to Assad’s to Assad’s Syria,” Syria,” Carnegie Carnegie Endowment Endowment for Internation for International Peace,al Peace,August August 27, 2013.27, 2013. 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17 Salomon Jay & Gorman Siobhan, “Iran’s spymaster counters US moves in the Mideast,” The Wall Street Journal, April 6, 2012. 18 Filkins Dexter, “The shadow commander,” The New Yorker, September 30, 2013. 19 Chulov Martin, “Syria’s war more complex than ever,” The Guardian, September 19, 2013. 20 Fasihi Farnaz, Solomon Jay & Dhager Sam, “Iranians dial up presence in Syria,” The Wall Street Journal, September 16, 2013. 21 Nakhoul Samia, “Hezbollah gambles all in Syria”, Reuters, September 26, 2013, http://www.reuters.com/article/2013/09/26/ussyriahezbollahspecialreportidUSBRE98P0AI20130926 22 Barnard Anne & Mourtada Hania, “Leader of Hezbollah warns it is ready to come to Syria’s aid,” The New York Times, April 30, 2013. 23 Salhy alSouadad, “Iraqi Shiites flock to Assad's side as sectarian split widens,” Reuters, June 19, 2013, http://www.reuters.com/article/2013/06/19/usiraqsyriamilitantsidUSBRE95I0ZA20130619 24 Karouny Mariam, “Shiite fighters rally to defend Damascus shrine,” Reuters, March 3, 2013, http://www.dailystar.com.lb/News/MiddleEast/2013/Mar04/208671shiitefightersrallytodefenddamascusshrine ofsayyidazeinab.ashx#axzz2lSoPw3eR Also, Ghorabi Jamal, “Damascus: Guardians of Zainab’s shrine,” AlAkhbar, March 29, 2013, http://english.alakhbar.com/node/15384 25 Aziz Jean, “The battle for Qusayr is key front in Syria war,” AlMonitor, April 22, 2013, http://www.almonitor.com/pulse/originals/2013/04/syriaconflictbombinglebanonqusayrdamascus.html 26 “Syria troops, Hezbollah advancing on Qusayr,” France 24, May 9, 2013. 27 Aziz Jean, “Jabhat alNusra and Hezbollah in first confrontation,” AlMonitor, March 8, 2013, http://www.almonitor.com/pulse/originals/2013/03/jabhatalnusrahezbollahconfrontation.html 28 “Syria’s alNusra Front part of alQaeda,” BBC, April 10, 2013, http://www.bbc.co.uk/news/worldmiddleeast 22078022 Also, “Iraqi alQaeda and Syrian group ‘merge’,” Al Jazeera, April 9, 2013, http://www.aljazeera.com/news/middleeast/2013/04/201349194856244589.html 29 Chulov Martin, “Syrian town of Qusair falls to Hezbollah in breakthrough for Assad,” The Guardian, June 5, 2013. 30 Landler Mark, “Israel hints at new strikes, warning Syria not to hit back,” The New York Times, May 15, 2013. 31 Kais Roi, “Israel hit SA17 missiles shipment,” Yedioth Ahronoth, January 30, 2013. 32 Gordon Michael & Schmitt Erik, “Russia sends more advanced missiles to aid Assad in Syria,” The New York Times, May 16, 2013. 33 Badran Tony, “Israel’s strategic clarity in Syria,” Now Lebanon, May 9, 2013, https://now.mmedia.me/lb/en/commentaryanalysis/israelsstrategicclarityinsyria 34 Katz Yaakov, “Syria increasing arms shipments to Hezbollah,” Jerusalem Post, July 16, 2011. 35 USA Dept of State, October 27, 2013, http://www.state.gov/r/pa/prs/ps/2012/12/201759.htm 36 Khasan Hilal, “Lebanon’s Islamist stronghold,” Middle East Quarterly 18 No.2, (Spring 2011): 8590. 37 Hashem Ali, “Lebanon is pivotal for Syria’s jihadists,” AlMonitor, March 12, 2013, http://www.al monitor.com/pulse/originals/2013/04/jabhatalnusralebanesejihadistsrafikhariri.html 38 “Al Nusra Front seeking a Lebanese base in Ain alHilweh,” ΑlAkhbar, February 2, 2013. 39 Aziz Jean, “Jabhat alNusra reportedly in Lebanon,” AlMonitor, December 24, 2012, http://www.al monitor.com/pulse/originals/2012/almonitor/jabhatalnusralebanon.html Also, Babak Dehghanpisheh & Suzan Haidamous, “More Lebanese Sunnis are crossing into Syria to aid rebellion officials say,” Washington Post, January 26, 2013, http://articles.washingtonpost.com/20130126/world/36559835_1_younglebanesemennusrafrontsyrian securityforces Also, Chararah Nasser, “AlQaeda seen expanding influence in Lebanon,” AlMonitor, March 15, 2013, http://www.almonitor.com/pulse/originals/2013/04/exclusivealqaedalebanondeepensroots.html 40 Luca Ana Maria, “A different type of spillover,” Now Lebanon, April 13, 2013. 41 Evans Dominic & Oweis Khaled, “Syrian gas ‘kills hundreds’,” Reuters, August 21, 2013. 42 Anishchuk Alexei, “Putin, Obama discussed Syria arms control idea last week: Kremlin,” Reuters, September 10, 2013, http://www.reuters.com/article/2013/09/10/ussyriacrisisrussiausaidUSBRE9890I020130910 43 Press Conference by John Kerry and William Hague (United Kingdom Foreign and Commonwealth Office), U.S. Department of State, Office of the Spokesperson, September 9, 2013. 44 Syria has until 30 June 2014 to destroy its chemical weapons arsenal.
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INTERPRETING OVERALL INEQUALITY IN CHINA: THE ROLES OF PHYSICAL CAPITAL, HUMAN CAPITAL AND SOCIAL CAPITAL
Yuheng LI Institute of Geographic Sciences and Natural Resources Research, Chinese Academy of Sciences 11A Datun Road, Chaoyang District, Beijing, 100101, China; [email protected]
Hans WESTLUND Department of Urban Planning and Environment, Royal Institute of Technology (KTH), Stockholm, Sweden
Abstract: This paper investigates the relationship between overall inequality in China and the contributions of physical capital, human capital and social capital. The investment in physical capital tends to enlarge overall inequality while human capital helps to reduce the inequality. Human capital appears to be more influential than physical capital in overall inequality reduction in the research period. Social capital (people’s social networks) however, does not seem to exert any impact on overall inequality in the postreform era. Possible policy implications of these results are that measures should be taken to pursue more even distributed investment of physical capital and to increase people’s education in order to reduce overall inequality in China.
Keywords: Overall inequality, Capital investment, Economic growth, China : D24, E22, E24
Acknowledgement: The written of the paper was supported by the National Natural Science Foundation of China (Grant number: 41301190)
1. Introduction Unlike the US, Japanese prefectures and European regions where convergence across regions occurs (Barro and SalaiMartin, 2003), China, however, provides a different case of which regional inequality has risen and varied in the past two decades (Khan and Riskin, 2001; Fan and Sun, 2008). The Gini coefficient in China is estimated to be 0.33 in 1980 and rose to 0.45 to 0.47 in recent years (Sisci, 2005; World Bank, 2006). Many studies have attributed Chinese regional inequality to many factors like factor endowments (Chen and Fleisher, 1996), urban biased fiscal and monetary policies (Yang and Cai, 2000), regional policy which boosted capital investment in eastern provinces and open economic zones (Wei and Fan, 2000). Basically, the variation of regional inequality in China is deep rooted in the over threedecade fast Chinese economic growth ever since 1978 (Pei, 2006; Lee, 2007). It is the uneven distribution of economic growth among different regions/provinces that lead to the regional inequality. Thus, the driving factors to the economic growth would fundamentally influence the variation of regional inequality in China. Generally, physical capital has been found to play a key role for the Chinese economy in the postreform era (Chow, 1993; Urel and Zebregs, 2009). Human capital in terms of years of education has also been found to play an important role in the economic growth. It is believed that human capital contributes to technological improvement and innovation which can help to advance the economy (Wang and Yao, 2003; Kuo and Yang, 2008). The connection between social capital and economic development has been highlighted in a large number of studies over the last 15 years (Westlund and Adam, 2010). Particularly, with the declining of the relative importance of natural endowments for regional development and the convergence trend in human capital, social capital becomes increasingly important for economic growth (Mohan and Mohan, 2002). Thus, the different roles of the three capitals in economic growth across provinces would lead to regional inequality in China. The paper aims to interpret such
146 Li Y., Westlund H., Regional Science Inquiry Journal, Vol. V, (2), 2013, pp. 145150 146 Li Y., Westlund H., Regional Science Inquiry Journal, Vol. V, (2), 2013, pp. 145150 146 Li Y., Westlund H., Regional Science Inquiry Journal, Vol. V, (2), 2013, pp. 145150 topic and provide implications for policy making to reduce regional inequality in China in the topicfuture. and provide implications for policy making to reduce regional inequality in China in the future. topic and provide implications for policy making to reduce regional inequality in China in the future.2. Data and econometric framework 2. Data and econometric framework The paper focuses on the relationship between regional inequality and physical capital, human The paper focuses on the relationship between regional inequality and physical capital, human 2. Datacapital and and econometric social capital. framework In the benchmark model, we run fixed effect regression of panel capital and social capital. In the benchmark model, we run fixed effect regression of panel The datapaper withfocuses Gini on coefficient the relationship as the between dependent regio variablnal inequalitye and the and three physical “capitals” capital, as human the main data with Gini coefficient as the dependent variable and the three “capitals” as the main capitalindependent and social variable: capital. In the benchmark model, we run fixed effect regression of panel independent variable: data with GiniInequality coefficient= α as+ theα Physical dependent + variablα Humane and + theα threeSocial “capitals”+α X as+ λ the+ ξ main it = α 0 +α 1 it +α 2 it +α 3 it +α 4 it + λ t + ξ it independentInequality variable: it 0 1Physicalit 2 Humanit 3Socialit 4 X it t it Where Inequalityit is the measure of Gini coefficient of province i at year t. Physicalit is the WhereInequalityInequalityit = αit is0 + theα1 Physicalmeasure ofit + Giniα 2 Human coefficientit +α of3Social provinceit + αi at4 X yearit + λt.t Physical+ ξit it is the investment ratio which represents physical capital, Humanit is the measure of human capital WhereinvestmentInequality ratioit is whichthe measure represents of Gini physical coefficient capital, ofHuman provinceit is i theat year measure t. Physical of humanit is thecapital of province i at year t, proxied by student enrollment rate, Socialit is measure of social capital investmentof province ratio i whichat year represents t, proxied physicalby student capital, enrollmHumanent rate,isSocial the measure is measure of human of social capital capital of province i at year t. X is a vector of control variablesit that it influence economic growth: of province i at year t. X is a vector of control variables that influence economic growth: of provinceeconomic i at openness year t, proxied (Trade), by measuredstudent enrollm by theent ratio rate, of Socialexport itand is measureimport to of GDP; social FDI capital (foreign economic openness (Trade), measured by the ratio of export and import to GDP; FDI (foreign of provincedirect investment), i at year t. measuredX is a vector by the of ratio control of utiliz variablesed FDI that to influenceGDP; governmental economic growth:expenditure direct investment), measured by the ratio of utilized FDI to GDP; governmental expenditure economic(Gov), openness measured (Trade), as the measured ratio of governmentby the ratio of budget export e andxpenditure import to to GDP; GDP; FDI state (foreign ownership (Gov), measured as the ratio of government budget expenditure to GDP; state ownership direct(Soe), investment), measured measured by the share by the of ratiostate ofowned utiliz enterpred FDIises to GDP;in total governmental industry output expenditure value. These (Soe), measured by the share of state owned enterprises in total industry output value. These (Gov),variables measured generate as the impact ratio of on government the capitals’ budget efficien expenditurecy and further to GDP; influence state ownership the economic variables generate impact on the capitals’ efficiency and further influence the economic (Soe),growth measured across by provinces the share inof China.state ownedλ is enterprthe yearises effect in total and industry ξ is an output unobserved value. Theseerror term growth across provinces in China. λit is the year effect and ξ it is an unobserved error term variablesthat varies generate across impact time and on theprovinces. capitals’it We efficien collectcy d ata and for further 29 provincesit influence in China the economic from 1981 to that varies1 across time and provinces. We collect data for 29 provinces in China from 1981 to growth2010 across. Almost provinces all the in data China. are λfromit is Nationalthe year effectBureau and of Sξtatisticsit is an (NBS).unobserved Table error 1 reports term the 20101. Almost all the data are from National Bureau of Statistics (NBS). Table 1 reports the that variesdescriptive across statistics time and for provinces. the main variables.We collect data for 29 provinces in China from 1981 to descriptive1 statistics for the main variables. 2010 . Almost all the data are Table1.from National Statistics Bureau of variables of Statistics in the (NBS).study Table 1 reports the descriptive statistics for the mainTable1. variables. Statistics of variables in the study Variable Obs Mean Std.Dev Min Max Variable Obs Mean Std.Dev Min Max Inequality Table1. 870 Statistics 2.431 of variables 0.809 in the study 0.261 4.759 VariableInequalityPhysical Obs 870 Mean 2.4310.435 Std.Dev 0.8090.124 Min 0.2610.153 Max 4.7590.982 InequalityPhysicalHuman 870 870 870 2.431 0.435 0.007 0.809 0.1240.008 0.261 0.0004 0.153 4.759 0.982 0.064 PhysicalHumanSocial 870 870 609 0.435 0.007 1.37 0.124 0.0080.625 0.153 0.0004 0.42 0.982 0.0644.210 HumanSocialGov 870 609866 0.007 0.144 1.37 0.008 0.6250.063 0.0004 0.048 0.42 0.064 4.2100.548 SocialGovSoe 609 866 870 1.37 0.144 0.606 0.625 0.063 0.198 0.42 0.048 0.107 4.210 0.548 0.938 GovTrade Soe 866 870 860 0.144 0.606 0.239 0.063 0.198 0.347 0.048 0.107 0.006 0.548 0.938 2.203 Trade 860 0.239 0.347 0.006 2.203 Soe FDI 870 870 0.606 0.024 0.198 0.033 0.107 0.000005 0.938 0.243 TradeFDI 860 870 0.239 0.024 0.347 0.033 0.006 0.000005 2.203 0.243 There are no statistics of Gini coefficients at provincial level in China. Then, we need to find FDI 870 0.024 0.033 0.000005 0.243 Therea suitable are noproxy statistics for Gini of Ginicoefficient. coefficients Yang at(1999) provincial argues level that in increases China. Then,in urbanrural we need incometo find a suitable proxy for Gini coefficient. Yang (1999) argues that increases in urbanrural income Theredifferentials are no statistics have ofbeen Gini the coefficients main driving at proforcevincial behi levelnd the in risingChina. overall Then, weinequality need to in find China. differentials have been the main driving force behind the rising overall inequality in China. a suitableAccording proxy to for World Gini Bankcoefficient. (1997), Yang the urbanrural (1999) argues inc omethat increasesgap is responsible in urbanrural for a thirdincome of total According to World Bank (1997), the urbanrural income gap is responsible for a third of total differentialsChina’s haveinequality been inthe 1995 main and driving a half force of the behi increand these inrising inequality overall since inequality 1985. inThus, China. we use China’s inequality in 1995 and a half of the increase in inequality since 1985. Thus, we use Accordingurbanrural to World income Bank differential (1997), the to urbanrural proxy Gini inccoeffomeicient gap inis responsibleeach province. for aFollowing third of total Putnam urbanrural income differential to proxy Gini coefficient in each province. Following Putnam China’s(2000), inequality social in capital 1995 and has a half two of main the increa aspects:se in struct inequalityural socialsince 1985. capital Thus, (networks we use and (2000), social capital has two main aspects: structural social capital (networks and urbanruralassociations) income and differential cognitive to social proxy capitalGini coeff (attitudicientes in and each norms province. of behavior, Following shared Putnam values, associations) and cognitive social capital (attitudes and norms of behavior, shared values, (2000),reciprocity social capitaland trust). has Thus, two mainthe measure aspects: of struct socialural capital social consists capital of (networks testing the and public reciprocity and trust). Thus, the measure of social capital consists of testing the public associations)participation, and social cognitive connections, social capital general (attitud trust esan d and social norms norms of (Knack behavior, and shared Keefer, values, 1997). In participation, social connections, general trust and social norms (Knack and Keefer, 1997). In reciprocitythis study, and the trust). measure Thus, of social the measure capital covers of social the capitalperiod 19902010. consists of We testing only themeasure public social this study, the measure of social capital covers the period 19902010. We only measure social participation,capital at socialthe principal connections, level ingeneral China trust in terms and socialof the normsnumber (Knack of associations and Keefer, for 1997).every 10,000In capital at the principal level in China in terms of the number of associations for every 10,000 this study,people the to measure represent of thesocial structural capital covers capital th ofe period social 19902010. networks and We public only measure participation. social The people to represent the structural capital of social networks and public participation. The capitalassociation at the principal is a reciprocal level in Chinaorganization in terms constitute of the numberd by people of associations of common for characteristics every 10,000 and association is a reciprocal organization constituted by people of common characteristics and peoplenonprofit to represent and nongovernmental the structural capital are its of fundamental social networks features. and Since public there participation. is no available The data nonprofit and nongovernmental are its fundamental features. Since there is no available data associationon provincial is a reciprocal trust in theorganization research period, constitute we dhave by peopleno measure of common of cognitive characteristics social capital and and on provincial trust in the research period, we have no measure of cognitive social capital and nonprofittherefore and only nongovernmental examine the role are of its structural fundamental socia features.l capital inSince China. there is no available data therefore only examine the role of structural social capital in China. on provincial3. Results trust and in interpretation the research period, we have no measure of cognitive social capital and 3. Results and interpretation therefore3.1 The only Benchmark examine the Model role of structural social capital in China. 3.1 The Benchmark Model 3. Results and interpretation 3.1 The 1 Benchmark Model 1 We do not include Chongqing and Tibet due to data availability. Taiwan, Hong Kong and Macau are not We included do not includeeither. Chongqing and Tibet due to data availability. Taiwan, Hong Kong and Macau are not included either. 1 We do not include Chongqing and Tibet due to data availability. Taiwan, Hong Kong and Macau are not included either. Li Y., Westlund H., Regional Science Inquiry Journal, Vol. V, (2), 2013, pp. 145150 Li Y., Westlund H., Regional Science Inquiry Journal, Vol. V, (2), 2013, pp. 145150 147 147
As resultsAs results in Table in Table 2 shows, 2 shows, the estimated the estimated coeffici coefficient ofent Physical of Physical is positive is positive and significant and significant at at 1 percent1 percent level. level. Keeping Keeping other other things things unchanged, unchanged, a one a percentageone percentage point point increase increase in Physical in Physical will resultwill result in a 0.732in a 0.732 percentage percentage point point increase increase in Gini in Ginicoefficient. coefficient. Human Human contributes contributes to the to the decreasedecrease of Gini of Ginicoefficient. coefficient. Keeping Keeping other other things things unchanged, unchanged, a one a percentage one percentage point point increase increase in Humanin Human will willresult result in a in 1.291 a 1.291 percentage percentage point point decrease decrease in Gini in Gini coefficient. coefficient. Social Social is, is, however,however, found found insignificant insignificant in the in full the sample full sample regression. regression. Further Further regression regression shows shows that boththat both PhysicalPhysical and Human and Human are significant are significant in the in three the three subperiods. subperiods. Besides, Besides, the coefficients the coefficients of of HumanHuman have havebeen beenlarger larger than thanthat ofthat Physical of Physical, indicating, indicating the more the more influential influential role ofrole human of human capitalcapital in the in reduction the reduction of Gini of Gini coefficient coefficient in Chi in na. Chi Socialna. Social capital capital still still presents presents no no significancesignificance in the in three the three periods. periods. TableTable 2. Full 2. sampleFull sample and subperiod and subperiod regression regression DependentDependent Variable Variable Full SampleFull Sample Regression Regression 1980s1980s 1990s 1990s 2000s 2000s InequalityInequality 1 1 2 2 3 3 4 4 5 5 6 6 0.333**0.333** 0.245** 0.245** 0.732*** 0.732*** 0.548** 0.548** 1.081*** 1.081*** 0.076*** 0.076*** PhysicalPhysical (0.144)(0.144) (0.145) (0.145) (0.158) (0.158) (0.267) (0.267) (0.276) (0.276) (0.012) (0.012) 11.507*** 11.507*** 1.291** 1.291** 9.62*** 9.62*** 5.437** 5.437** 1.358*** 1.358*** HumanHuman (3.427) (3.427) (0.514) (0.514) (3.453) (3.453) (2.151) (2.151) (0.433) (0.433) 0.038 0.038 0.094 0.094 0.045 0.045 SocialSocial (0.035) (0.035) (0.061) (0.061) (0.036) (0.036) 1.011***1.011*** 0.775** 0.775** 0.329 0.329 2.229*** 2.229*** 3.301*** 3.301*** 0.149 0.149 Gov Gov (0.353)(0.353) (0.358) (0.358) (0.425) (0.425) (0.598) (0.598) (1.033) (1.033) (0.135) (0.135) 1.052***1.052*** 1.083*** 1.083*** 0.219 0.219 0.011 0.011 1.319*** 1.319*** 0.106 0.106 Soe Soe (0.0143)(0.0143) (0.143) (0.143) (0.144) (0.144) (0.256) (0.256) (0.271) (0.271) (0.157) (0.157) 0.0570.057 0.138** 0.138** 0.052 0.052 0.129* 0.129* 0.054 0.054 0.061 0.061 TradeTrade (0.052)(0.052) (0.057) (0.057) (0.066) (0.066) (0.113) (0.113) (0.091) (0.091) (0.096) (0.096) 0.3520.352 0.246 0.246 1.743 1.743 1.721 1.721 2.003*** 2.003*** 0.373 0.373 FDI FDI (0.516)(0.516) (0.514) (0.514) (3.532) (3.532) (2.199) (2.199) (0.72) (0.72) (0.856) (0.856) EstimationEstimation Method Method FE FE FE FE FE FE FE FE FE FE FE FE YearSpecificYearSpecific YES YES YES YES YES YES YES YES YES YES YES YES EffectEffect Pro. Num.Pro. Num. 29 29 29 29 29 29 29 29 29 29 29 29 ObservationsObservations 856 856 856 856 609 609 276 276 290 290 290 290 2 R2 R 0.4030.403 0.427 0.427 0.214 0.214 0.306 0.306 0.048 0.048 0.002 0.002 Note:Note: Standard Standard errors errors are reported are reported in parentheses. in parentheses. The The symbols symbols *, **, *, and **, ***and ***indicate indicate statisticalstatistical significance significance at 10 atpercent, 10 percent, 5 percent 5 percent and 1 a ndpercent 1 percent levels, levels, respectively. respectively.
3.2 Robustness3.2 Robustness check check 3.2.13.2.1 Mediumterm Mediumterm determinants determinants The paperThe paper constructs constructs a panel a panel that containsthat contains nonoverlapping nonoverlapping fiveyear fiveyear averages averages of the of data the fordata for each each province. province. By taking By taking such such measure, measure, we are we able are ableto reduce to reduce shortterm shortterm variations variations and and identifyidentify the mediumterm the mediumterm determinants determinants of Gini of Ginicoeff coefficient.icient. As Table As Table 3 shows, 3 shows, the estimated the estimated coefficientcoefficient of Physical of Physical is positive is positive and significant and significant at 5 atpercent 5 percent level level while whi Humanle Human presents presents negativenegative significance significance at 10 at percent 10 percent level levelin the in fu thell samplefull sample regression. regression. Then, Then, both bothPhysical Physical and Humanand Human start startto be to significant be significant since since 1990s. 1990s. The estimatedThe estimated coefficient coefficient of Human of Human has been has been largerlarger than thanthat ofthat Physical of Physical in the in subperiods. the subperiods. Social Social, however,, however, presents presents no significance no significance in in the wholethe whole and sub and studysub study periods. periods. These These findings findings are in ar highe in highaccordance accordance with withresults results in Table in Table 2. 2.
148 Li Y., Westlund H., Regional Science Inquiry Journal, Vol. V, (2), 2013, pp. 145150 148 Li Y., Westlund H., Regional Science Inquiry Journal, Vol. V, (2), 2013, pp. 145150
148 Li Y., Westlund H., Regional Science Inquiry Journal, Vol. V, (2), 2013, pp. 145150 Table 3. Robustness check: Five year average Dependent Variable Table 3.Full Robustness Sample Regression check: Five year average1980s 1990s 2000s Dependent Variable Full Sample Regression Inequality 1 2 3 1980s4 1990s 5 2000s 6 Table 3. Robustness check: Five year average Inequality 0.708*1 1.241***2 0.701** 3 1.7814 2.519** 5 0.085** 6 DependentPhysical Variable Full Sample Regression 1980s 1990s 2000s (0.401)0.708* 1.241*** (0.347) 0.701** (0.416) 1.781 (1.42) 2.519** (0.885) 0.085** (0.048) PhysicalInequality 2 3 (0.401) 1 (0.347) 1.18* 1.282* (0.416) 3.775 (1.42)4 17.48** (0.885) 5 (0.048) 0.69* 6 Human 0.708* 1.241*** 1.18* 1.282* 0.701** 3.775 1.781 17.48** 2.519** 0.69*0.085** HumanPhysical (0.845) (0.854) (84.48) (6.737) (0.37) (0.401) (0.845) (0.347) (0.854) 0.105 (0.416) (84.48) (1.42) (6.737) 0.129(0.885) (0.37) 0.059(0.048) Social 1.18* 0.105 1.282* 3.775 17.48** 0.129 0.059 0.69* SocialHuman (0.072) (0.194) (0.088) 1.338* 1.079(0.845) (0.072) 1.088(0.854) 1.957(84.48) 5.522* (0.194) (6.737) (0.088) 1.532 (0.37) Gov 0.105 0.129 0.059 Social (0.802)1.338* (0.821) 1.079 (0.823) 1.088 (1.526) 1.957 5.522* (4.695) (1.448) 1.532 Gov (0.072) (0.194) (0.088) 1.189***(0.802) (0.821) 0.605 1.272*** (0.823) (1.526) 0.587 (4.695) 0.852 (1.448) 0.074 Soe 1.338* 1.079 1.088 1.957 5.522* 1.532 Gov 1.189***(0.346) (0.406) 0.605 1.272*** (0.348) (0.789) 0.587 (0.786) 0.852 (0.359) 0.074 Soe (0.802) (0.821) (0.823) (1.526) (4.695) (1.448) (0.346)0.15 (0.406) 0.251 (0.348) 0.281 (0.789) 0.231 (0.786) 0.491 (0.359) 0.463 Trade 1.189***0.15 0.251 0.605 1.272*** 0.281 0.231 0.587 0.491 0.852 0.463 0.074 TradeSoe (0.142) (0.159) (0.182) (0.45) (0.679) (0.386) (0.142)(0.346)1.62 (0.159) 1.506 (0.406) (0.182) 1.298 (0.348) 1.408 (0.45) (0.789) (0.679) 1.427(0.786) (0.386) 2.777(0.359) FDI 1.620.15 1.506 0.251 1.298 0.281 1.408 0.231 1.427 0.491 2.777 0.463 TradeFDI (1.345) (1.343) (1.403) (11.5) (3.247) (3.609) Estimation Method (1.345)(0.142) FE (1.343) (0.159) FE (1.403) (0.182) FE (11.5) (0.45) FE (3.247) (0.679) FE (3.609) (0.386) FE 1.62 1.506 1.298 1.408 1.427 2.777 EstimationYearSpecificFDI Method FE FE FE FE FE FE YearSpecific (1.345)YES (1.343) YES (1.403) YES YES (11.5) (3.247) YES (3.609) YES Effect YES YES YES YES YES YES EstimationPro.Effect Num. Method 29 FE 29 FE 29 FE 29 FE 29 FE 29 FE YearSpecificPro. Num. 29 29 29 29 29 29 Observations 174YES 174 YES 172 YES YES56 YES58 YES58 ObservationsEffectR2 0.404 174 0.429 174 0.426 172 0.066 56 0.1 58 0.082 58 Pro. 2Num. 29 29 29 29 29 29 Note: StandardR errors are0.404 reported in 0.429 parentheses. 0.426The symbols 0.066 *, **, and *** 0.1 indicate 0.082 Note:Observations Standard errors are reported174 in parentheses. 174 The 172 symbols *, 56 **, and *** 58 indicate 58 statistical significance2 at 10 percent, 5 percent and 1 percent levels, respectively. statistical significanceR at 100.404 percent, 5 percent 0.429 and 1 percent 0.426 levels, respectively. 0.066 0.1 0.082 3.2.2 Note: Endogeneity Standard errors problem are reported in parentheses. The symbols *, **, and *** indicate To3.2.2statistical deal Endogeneity with significance the problem potential at 10 percent, endogeneity 5 percent problem, and 1 percent we employ levels, a respectively. generalizedmethodsof momentsTo deal with(GMM) the panel potential estimator endogeneity for dynamic problem, model. we We employ estimate a generalizedmethodsofthe model by using the laggedmoments3.2.2 Endogeneity values (GMM) in levels panel problem of estimator all explanatory for dynamic variable model.s. Generally, We estimate both Physicalthe model and by Human using theare significantlaggedTo deal values with at 1in the percentlevels potential of level all explanatory endogeneity in the whole variable problem, and subs. Generally, we research employ both periods. a Physical generalizedmethodsof As Tableand Human 4 shows, are physicalsignificantmoments capital (GMM) at 1 contributes percent panel levelestimator to the in increase the for whole dynamic of Gin and imodel. subcoefficient research We estimatewhile periods. human the As modelcapital Table byleads 4using shows, to thethe physicaldecreaselagged values capital of Gini in contributes levels coefficient. of allto theexplanatory The increase estimated ofvariable Gin coeffici coefficients. Generally,ient of whileHuman both human Physicalis larger capital and than leads Human that to the are of Physicaldecreasesignificant in of the at Gini 1whole percent coefficient. research level Theperiod. in the estimated Social whole however, and coeffic subient only research of presents Human periods. negativeis larger As Tablesignificance than 4 that shows, ofin Physicalthephysical 1990s. incapital The the resultswhole contributes ofresearch endogeneity to theperiod. increase check Social ofare however,Gin alsio coefficient in line only with presents while the results human negative in capital Table significance leads 2. to thein thedecrease 1990s. ofThe Gini results coefficient. of endogeneity The estimatedcheck are als coeffico in lineient with of Human the results is largerin Table than 2. that of Physical in the whole research period. Social however, only presents negative significance in the 1990s. The results of endogeneityTable 4. Robustness check are check: also in Endogeneity line with the results in Table 2. Table 4. Robustness check: Endogeneity Dependent Variable Full Sample Regression 1980s 1990s 2000s DependentInequality Variable 1 Full Sample 2 Regression 3 1980s 4 1990s 5 2000s 6 Table 4. Robustness check: Endogeneity Inequality 0.476***1 0.436*** 2 0.788*** 3 0.071*** 4 0.721*** 5 0.38 69*** DependentInequality Variable1 Full Sample Regression 1980s 1990s 2000s 0.476***(0.017) 0.436*** (0.016) 0.788*** (0.024) 0.071*** (0.021) 0.721*** (0.058) 0.38 (0.083)9*** Inequality1 Inequality 0.833***(0.017)1 0.666*** (0.016) 2 0.446*** (0.024) 3 0.864*** (0.021) 4 0.586** (0.058) 5 1.858** (0.083) 6 * Physical 0.833***0.476*** 0.666*** 0.436*** 0.446*** 0.788*** 0.864*** 0.071*** 0.586** 0.721*** 1.858** 0.389**** InequalityPhysical 1 (0.125) (0.119) (0.099) (0.307) (0.295) (0.318) (0.125)(0.017) 2.522*** (0.119) (0.016) 10.448*** (0.099) (0.024) 13.9*** (0.307) (0.021) 7.855*** (0.295) (0.058) 8.089*** (0.318) (0.083) Human 0.833*** 2.522*** 0.666*** 10.448*** 0.446*** 13.9*** 0.864*** 7.855*** 0.586** 8.089*** 1.858*** HumanPhysical (0.192) (1.676) (4.622) (2.271) (2.637) (0.125) (0.192) (0.119) 0.053*** (1.676) (0.099) (4.622) (0.307) 0.25*** (2.271) (0.295) (2.637) 0.011 (0.318) Social 2.522*** 0.053*** 10.448*** 13.9*** 0.25*** 7.855*** 8.089*** 0.011 SocialHuman (0.018) (0.051) (0.039) 1.022*** 0.303 (0.192) 1.025*** (0.018) (1.676) 0.527 (4.622) (0.051)2.46** (2.271) (0.039) 0.417 (2.637) Gov 1.022*** 0.303 1.025*** 0.053*** 0.527 0.25***2.46** 0.417 0.011 SocialGov (0.261) (0.268) (0.229) (0.633) (1.039) (0.475) (0.261)0.086 0.507*** (0.268) 0.672*** (0.229) (0.018) 2.249*** (0.633) 0.894*** (1.039) (0.051) (0.475) 0.258 (0.039) Soe 1.022***0.086 0.507*** 0.303 0.672*** 1.025*** 2.249*** 0.527 0.894*** 2.46** 0.258 0.417 SoeGov (0.098) (0.103) (0.085) (0.33) (0.188) (0.199) 0.296***(0.098)(0.261) (0.103) 0.027(0.268) (0.085) (0.229) 0.02 (0.33)0.147 (0.633) (0.188) 0.086 (1.039) (0.199) 0.094(0.475) Trade 0.296***0.086 0.507*** 0.027 0.672*** 0.02 2.249*** 0.147 0.894*** 0.086 0.094 0.258 TradeSoe (0.055) (0.056) (0.047) (0.21) (0.091) (0.081) 1.891***(0.055)(0.098) 3.221*** (0.056) (0.103) 1.099*** (0.047) (0.085) 0.413 (0.21) (0.33) 2.326*** (0.091) (0.188) (0.081) 0.376(0.199) FDI 1.891***0.296*** 3.221*** 0.027 1.099*** 0.02 0.413 0.147 2.326*** 0.086 0.376 0.094 TradeFDI (0.401) (0.395) (0.332) (2.5) (0.786) (0.903) (0.401)(0.055) (0.395) (0.056) (0.332) (0.047) (2.5) (0.21) (0.786) (0.091) (0.903) (0.081) 1.891*** 3.221*** 1.099*** 0.413 2.326*** 0.376 FDI (0.401) (0.395) (0.332) (2.5) (0.786) (0.903) Li Y., Westlund H., Regional Science Inquiry Journal, Vol. V, (2), 2013, pp. 145150 Li Y., Westlund H., Regional Science Inquiry Journal, Vol. V, (2), 2013, pp. 145150 149 149
EstimationEstimation Method Method GMM GMM GMM GMM GMM GMM GMM GMM GMM GMM GMM GMM YearSpecificYearSpecific YES YES YES YES YES YES YES YES YES YES YES YES EffectEffect Pro. Num.Pro. Num. 29 29 29 29 29 29 29 29 29 29 29 29 ObservationsObservations 798 798 798 798 551 551 218 218 232 232 224 224 Note:Note: Standard Standard errors errors are reported are reported in parentheses. in parentheses. The symbolsThe symbols *, **, *, and **, *** and indicate *** indicate statisticalstatistical significance significance at 10 atpercent, 10 percent, 5 percent 5 percent and 1 a percentnd 1 percent levels, levels, respectively. respectively.
4. Concluding4. Concluding remarks remarks The paperThe paper provides provides robust robust evidence evidence of the of roles the rolesof physical of physical capital, capital, human human capital capital and social and social capitalcapital in the in changing the changing overall overall inequality inequality in the in p theostreform postreform China. China. The investmentThe investment of of physicalphysical capital capital which which plays plays an important an important role in role advancing in advancing Chinese Chinese economy economy for decades for decades actuallyactually contributes contributes to the to increase the increase of overall of overall inequality. inequality. Human Human capital capital which which helps helpsto reduce to reduce overalloverall inequality, inequality, has also has appearedalso appeared to be to more be more influential influential than thanphysical physical capital capital in the in the researchresearch period. period. ThereThere are no are findings no findings showing showing either either positive positive or ne gative or negative significance significance of social of social capital capital to to overalloverall inequality inequality in China. in China. Although Although Li and Li Westlu and Westlund (2013)nd (2013) finds findspositive positive contribution contribution of of socialsocial capital capital (people’s (people’s social social networks) networks) to Chines to Chinese economice economic growth growth in the in 2000s, the 2000s, we think we think such such economic economic role rolewould would finally finally transform transform into peointoples’s peoples’s collaboration collaboration in collecting in collecting investmentinvestment and other and other supports supports in economic in economic activitie activities. Sinces. Since people’s people’s social social connections connections in in termsterms of their of their economic economic activities activities normally normally confine confine within within certain certain area or area region, or region, thus its thus its economiceconomic contribution contribution across across regions regions would would present present no big no difference. big difference. The implicationsThe implications for policy for policy making making lie in liemore in moreeven evendistributed distributed physical physical capital capital investment, investment, especiallyespecially in the in less the developedless developed provinces, provinces, and the and continuous the continuous investment investment in people’s in people’s educationeducation which which may generatemay generate lasting lasting effect effect on econ onomic econ omicgrowth. growth. These These measures measures can help can tohelp to reducereduce the overall the overall inequality inequality in China in China in the in long the run.long run.
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Constantin D.L., Iosif A.E., Profiroiu A.G., Grosu R.M., Regional Science Inquiry Journal, Vol. V, (2), 2013, pp.151162 151
THE SERVICES OF GENERAL INTEREST IN ROMANIA: INSIGHTS INTO LEGAL AND INSTITUTIONAL ISSUES AT NATIONAL AND TERRITORIAL LEVEL
DanielaLuminiţa CONSTANTIN (corresponding author) Professor, Department of Administration and Public Management, The Faculty of Administration and Public Management, The Bucharest University of Economic Studies, Romania Tel: 004 021 319 19 01, Email: [email protected]
Alina Elena IOSIF Assistant Professor, Department of Business, Consumer Sciences and Quality Management, The Faculty of Commerce, The Bucharest University of Economic Studies, Romania Tel: 004 021 319 19 01, Email: [email protected]
Alina Georgiana PROFIROIU Associate Professor, Department of Administration and Public Management, The Faculty of Administration and Public Management, The Bucharest University of Economic Studies, Romania Tel: 004 021 319 19 01, Email: [email protected]
Raluca Mariana GROSU Assistant Professor, Department of Business, Consumer Sciences and Quality Management, The Faculty of Commerce, The Bucharest University of Economic Studies, Romania Tel: 004 021 319 19 01, Email: [email protected]
Abstract This paper addresses the legal and institutional issues generated by the organising and the provision of services of general interest (SGI) in Romania, with a special emphasis on the territorial distribution of competences and the derived responsibilities. It takes into consideration the classification of competences associated to local authorities as a result of the decentralisation process, which are divided into exclusive, shared and delegated ones. A series of drawbacks, inconsistencies are revealed followed by reflections on the solutions adopted by the authorities in favour of economic liberalisation and sustainable development of the local communities. The cooperation between the public authorities and the business sector is particularly addressed in this respect. In methodological terms, several interviews were conducted both among the general informants, namely academic representatives, policy makers, etc. and the representatives of the services providers, such as practitioners or public administrators involved in delivering SGI. The former category of interview respondents has generated ideas of a national coverage area, while the latter type of interviewees has presented their perspective on certain localities in Romania, but with wide applicability to other similar areas. The interviewees’ opinions have been mainly focused on the state and the future challenges on SGI in Romania.
Keywords: services of general interest, competences, local administrative units, local development, public – private cooperation
JEL Classification: R10
Introductory remarks
Although there is no universally accepted definition on the constitutive elements of general interest services (SGI) and general economic interest services (SGEI) in the European Union, at the beginning of January 2004 the European Parliament adopted a resolution intended to clarify their content. At the very beginning of this resolution, it is specified that the state has a
152 Constantin D.L., Iosif A.E., Profiroiu A.G., Grosu R.M., Regional Science Inquiry Journal, Vol. V, (2), 2013, pp151162 152 Constantin D.L., Iosif A.E., Profiroiu A.G., Grosu R.M., Regional Science Inquiry Journal, Vol. V, (2), 2013, pp151162 152 Constantin D.L., Iosif A.E., Profiroiu A.G., Grosu R.M., Regional Science Inquiry Journal, Vol. V, (2), 2013, pp151162 major part in producing and providing SGI: ‘Public undertakings, public services and services majorof general part in interest producing are and structures providing on SGI: which ‘Public the pub undertakings,lic authority public has services a dominant and services power.’ majorof(Fulmini, part general in producing [1]) interest and are providing structures SGI: on which‘Public theundertakings, public authority public services has a dominant and services power.’ of general(Fulmini,The same interest [1]) document are structures provides definitionson which thefor pubinternallic authority SGI and has SGEI a concepts. dominant The power.’ primary (Fulmini,Theconcept same[1]) refers document to public provides services definitions for utilities for like internal gas, SGIwater, and electricity, SGEI concepts. transp ortation,The primary post The andconcept same telecommunication. document refers to provides public services These definitions servicesfor utilitiesfor internal are like provided SGIgas, andwater, by SGEI stateelectricity, concepts. controlled transp The companiesortation, primary post or conceptandcompanies refers telecommunication. tothat public are entirely services These owned for utilities services by state like (mail, are gas, provided e lectricitywater, byelectricity, production state controlled transp and gasortation, production) companies post or and bycompanies telecommunication. private entitiesthat are thatentirely These have owned state services concession by state are (mail, provided (wat eerlectricity providers,by state production electricity controlled and distribution, companiesgas production) etc.) or or companiesbyoperating private that licenses entitiesare entirely (telecommunicationthat ownedhave state by stateconcession (mail,and transport e(watlectricityer ation).providers, production electricity and gas distribution, production) etc.)or or by privateoperating entities licenses that (telecommunicationhave state concession and (wat transporter providers,ation). electricity distribution, etc.) or operating The secondarylicenses (telecommunication concept of SGEI and refers transport to publication). interest services that include services providedThe secondary by public concept authorities of SGEI (or entities refers delegat to publiced by inte these)rest under services certain that conditions. include services These The providedconditions secondary by refer conceptpublic to authorities elements of SGEI like:(or refers entities universal to publicdelegat access inteed by (forrest these) all services population, under that certain include without conditions. services considering These providedprofitabilityconditions by public refer – e.g.authorities to post elements services); (or entities like: reasonable universal delegat ed accesspri byces these) (for(e.g. allunderenergy population, certain field); conditions. withoutsame quality considering These for all conditionsprofitabilityproviders refer (e.g. to– e.g. elements telecommunication post services); like: universal reasonable field). access All pri these (forces considered,all(e.g. population, energy threefield); without categories same considering quality of services for all profitabilitycanproviders be distinguished, – (e.g.e.g. post telecommunication services); namely: reasonable field). pri Allces these (e.g. considered,energy field); three same categories quality offor servicesall providerscan services be (e.g. distinguished, that telecommunication are not namely: provided field). by market All these rules: considered, compulsory three education, categories emergency of services medical can beservices, services distinguished, social that areprotection; namely: not provided by market rules: compulsory education, emergency medical servicesservices, state thatobligations: social are not protection; providedjustice and by public market security; rules: caompulsorynd education, emergency medical services, stategeneral social obligations: economic protection; justice interest and services public security;(SGEI): electrand icity, telecommunication, post, water and statesewerage, generalobligations: economicwaste, justice etc. interest and public services security; (SGEI): and electricity, telecommunication, post, water and generalsewerage, economic waste, interest etc. services (SGEI): electricity, telecommunication, post, water and sewerage, A different waste, manner etc. in classifying SGI, which has represented a starting point in our research, Atakes different into consideration manner in classifying their fundaments: SGI, which economic has re presentedSGI and social a starting SGI. point in our research, A differenttakesEconomic into manner consideration (investment in classifying their based) fundaments:SGI, which SGI hasincludeeconomic represented public SGI and a starting tran socialsportation, SGI.point in our postal research, services, takesEconomictelecommunication, into consideration (investment theirICT, fundaments: electricity, based) SGI gas economic and include water. SGI public and social tran SGI.sportation, postal services, Economictelecommunication,Social (consumption (investment ICT, based) electricity, SGI SGI refer gas include and to education, water. public health, transportation, child care, postal social services, care, social telecommunication,Socialhousing (consumption and labour ICT, market electricity, based) services. SGI gas refer and water. to education, health, child care, social care, social Socialhousing (consumption and labour based) market SGI services. refer to education, health, child care, social care, social housing This and paper labour proposes market a services.discussion on the issues generated by the organising and the provision Thisof SGI paper in proposes Romania, a discussion which is on a the relevant issues casegene rated study by c onsideringthe organising the and gradual the provision market This ofliberalisationpaper SGI proposes in Romania, since a discussion 1990 which and theon is thespecific a issues relevant issues gene case ratedit has study byentailed the corganisingonsidering in legal and and the institutional the gradual provision marketterms. of SGIAlso,liberalisation in based Romania, onsince the 1990 which transformations and is the a specific relevant of the issues case territori i studyt hasal entailed structures considering in inlegal line the and with gradual institutional the EUmarket general terms. liberalisationAlso,framework based since for on 1990 the regional transformationsand the policy specific implementation, issues of the i territorit has entailed al it structures places in legal a particularin and line institutional with emphasis the EU terms. general on the Also,frameworkterritorial based on distribution the for transformations regional of competences policy of implementation, the and territori the deral ived structures it responsibilities. places in a line particular with the emphasis EU general on the frameworkterritorial for distribution regional policyof competences implementation, and the der it ived places responsibilities. a particular emphasis on the territorial Consequently, distribution the of paper competences begins with and an the insight derived into responsibilities. Romania’s territorial structures in order to Consequently,understand the thecharacteristics paper begins of with the territorialan insight dintoistribution Romania’s of competences territorial structures for the SGI, in order with to a Consequently,understandparticular the the emphasis paper characteristics begins on with the of anthe capabilities insight territorial into dofRomania’sistribution various territorialoflevels competences regardingstructures for thein the order SGI, decision towith a understandparticularimplementation the characteristics emphasis in administrative on of thethe territorial capabilitiesterms. Then, distribution ofthe o variousptions of competences forlevels SGI management regarding for the SGI, theare with examined decision a particularimplementationas resulted emphasis from in onadministrative the the existing capabilities terms. legislation Then, of variousthe and options corre levelssponding for SGI regarding management institutional the are decision framework. examined implementationasFurthermore, resulted in from methodologicaladministrative the existing terms. issues legislation Then, regarding the o and ptions the corre in forterviews spondingSGI management conducted institutional amongare examined framework. Romanian as resultedFurthermore,specialists from are methodologicalexposed. the existing Finally, legislation issues the specialists’ regarding and correopinion the inspondingterviews on the institutionalstate conducted and perspectives among framework. Romanian of SGI Furthermore,inspecialists Romania methodological are are exposed. discussed, Finally, issuesrevealing the regarding specialists’a series the of invalopinionterviewsuable onideas conductedthe onstate the and evolution among perspectives Romanian of this of sector SGI specialistswithinin Romania arethe exposed.European are discussed, Finally, framework. revealing the specialists’ a series opinion of valuable on the ideas state on and the perspectives evolution of of this SGI sector in Romania within the are European discussed, framework. revealing a series of valuable ideas on the evolution of this sector within the European framework. Territorial distribution of competences for services of general interest Territorial distribution of competences for services of general interest Territorial Romania’s distribution administrativeterritorial of competences for structure service comps of risesgeneral one interest regional level – the counties, namedRomania’s ‘judete’, administrativeterritorial corresponding to NUTS3 structure level compof therises EUROSAT one regional (there level are 41 – counties the counties, plus Romania’snamedBucharest ‘judete’, administrativeterritorial municipality) corresponding and one to structurelocal NUTS3 level level comp (cities risesof, thetowns, one EUROSAT regionalcommunes). (there level Also, are – the 41according counties,counties to plus the namedBucharestRegional ‘judete’, Developmentmunicipality) corresponding and Law to one NUTS3 no. local 151/1998 levellevel of(cities (updatedthe ,EUROSAT towns, as communes). Regional (there are Development Also, 41 counties according Lawplus to no.the BucharestRegional315/2004) municipality) Development [2] eight and development one Law local no. level regions 151/1998 (cities have ,(updated towns, been communes). created as Regional and Also, intended Development according to serve to Law the as ‘the no. Regional315/2004)framework Development [2]for eightconceiving, Law development no. implementing 151/1998 regions (updatedand have evaluati been as ng cRreated egionalregional and Developmentdevelopment intended to policy Lawserve no.as well ‘the 315/2004)frameworkas for collecting [2] eightfor conceiving, developmentthe statistical implementing regionsdata correspondin have and been evaluatig ctoreated ngthe regional NUTS and intended 2 development level toof servethe policyEUROSTAT’ as ‘the as well framework(Lawas for no. collectingfor 151/1998conceiving, the [2] statistical implementing and Law data no. correspondin and315/2004 evaluati [3])gng to. regionalEach the NUTSregion development 2comprises level of policy thebetween EUROSTAT’ as well 4 and 7 as forcounties(Law collecting no. (excepting151/1998 the statistical [2] Bucharest and data Law correspondin no. Ilfov 315/2004 region).g to [3]) Thethe. Each NUTSeight region regions2 level comprises of ‘are the not EUROSTAT’ between administrative 4 and 7 (Lawterritorialcounties no. 151/1998 (excepting units [2] and and do Bucharest Law not haveno. 315/2004 judicial Ilfov region). personal[3]). Each Theity’ regioneight (Law regions no.comprises 151/ ‘are 1998 between not [2] administrative and4 and Law 7 no. countiesterritorial (excepting units and Bucharest do not have Ilfov judicial region). personal The eightity’ (Law regions no. ‘are 151/ not 1998 administrative [2] and Law no. territorial units and do not have judicial personality’ (Law no. 151/ 1998 [2] and Law no. Constantin D.L., Iosif A.E., Profiroiu A.G., Grosu R.M., Regional Science Inquiry Journal, Vol. V, (2), 2013, pp.151162 153
315/2004 [3]). More recently, for statistical analysis purposes Romania is also present in EUROSTAT territorial scheme with four macroregions corresponding to the NUTS 1 level (each of them comprises two development regions).
Hence, the counties (NUTS 3) are the only administrative units at regional level. At local level there are 320 urban centres (of which 103 municipalities) and 2854 communes. They are also administrative units. From the LAU perspective, the LAU 1 level in Romania is the same as NUTS 3, that is counties while the LAU 2 level is represented by the 3174 localities (municipalities (big cities), towns and communes).
In the described construction, only the counties and the localities have local administration competencies, whereas the development regions cannot be used as structures capable to implement the government’s decisions in their territories. The current programming period has revealed a series of cases when the development regions were not able to promote larger scale, intercounty projects because they do not have judicial power, while the counties do have and, at the same time, counties may have divergent political interests.
Before 1990, in Romania the SGI were entirely provided by the public authorities. Afterwards, the market was gradually liberalized and the SGI captured the attention of private operators. Nowadays, the business sector is involved next to the public authorities in offering services of general interest of high quality in order to obtain the citizens’ satisfaction. The cooperation between the public authorities and the business sector in Romania is more developed in the area of services of general interest that prove to be profitable, such as waste service and public transport, rather than services that need high investments in infrastructure, such as electricity, gas and water supply service. One convenient way for providing services of general interest refers to a combination between the public authorities and private sector resources, by creating companies with mixed capital. The contractual form available in Romania for these new formed companies, with public – private capital, is the publicprivate partnership, stipulated by Law no. 178/2010 of Public – Private Partnership [4].
As regards the territorial distribution of competences for the services of general interest, they are divided between counties LAU 1 (the same as NUTS 3) and localities (municipalities, towns and communes) – LAU 2. As previously mentioned, the development regions are not administrative units and, consequently, do not have competences in the administration of the services of general interest1. The Law no. 195/2006 of Decentralization [5] provides a clear classification of the competences attributed to the local authorities at locality – LAU 2 and county – LAU 1 level. The competences are divided into three categories, namely exclusive competence, shared competence, and delegated authority, as shown in Table 1.
Table 1: SGI competence type by LAU level Type of County (LAU 1) Municipalities, towns and communes competence (LAU 2) Exclusive Administration of local airports Administration of the public and Administration of the county private domain of the commune or public and private domain city Administration of the cultural Administration of the road institutions of county interest infrastructure of local interest Administration of the public Administration of cultural health units of county interest institutions of local interest Primary and specialized social Administration of public health units
1 At present there are serious political debates with regard to reorganising and transforming the development regions into administrative units, determined by the need to make them more powerful in relation to the counties.
154 Constantin D.L., Iosif A.E., Profiroiu A.G., Grosu R.M., Regional Science Inquiry Journal, Vol. V, (2), 2013, pp151162 154 Constantin D.L., Iosif A.E., Profiroiu A.G., Grosu R.M., Regional Science Inquiry Journal, Vol. V, (2), 2013, pp151162 154 Constantin D.L., Iosifservices A.E., Profiroiu for victims A.G., Grosu of R.M., domestic Regional Scienceof Inquiry Journal, local Vol. V, (2), 2013, pp151162 interest servicesviolence for victims of domestic of Planning local and urbanism interest violence Specialized social services for the Planning Water and urbanism supply serviceselderly for victims of domestic of Sewage local and wastewater interest treatment violence Specialized social services for the Planning Water and urbanism supply elderly Other competences established by Sewage and Public wastewater treatment lighting Specializedlaw social services for the Water supplyWaste elderly Other competences established by Sewage and wastewater Public treatment lighting law Social services with primaryWaste Other competences established by character Public for child protection lighting and the law Social services withWaste primary characterelderly for child protection and the Social Social services services with with primary primary and characterelderly for child protection and the specialized Social services character with for primary victims and of elderlydomestic violence Socialspecialized services character with primary for victims and of domestic Local public passenger transportviolence specialized Other character competences for victims established of by domestic Local public passengerviolence transport law Other competences established by Shared with Administration of the road Local Thermal public power passenger supply produced transport in a Otherlaw competences established by centralShared with infrastructure Administration of county of the interest road centralized Thermal power supply producedsystem in a authorities Special educationlaw Social and youth housing Sharedcentral with Administrationinfrastructure of of county the road interest Thermal centralized power supply produced insystem a authorities Medical Special and social care education services Preuniversity Social and education, youth excepting housing central infrastructurededicated of to persons county interestwith social centralized the special system education authorities Medical Special and social education care services Social Preuniversity and youth education, housing excepting dedicatedproblems to persons with social the Public special order and education safety Medical Primary and social and specialized care services social Preuniversity Social aid education, for people excepting in need dedicatedproblems to persons with social the Public special order education and safety services Primary for and specialized child protection social Prevention Social aid and for management people in of need the problems Specialized social services for emergency Public order situations and at local safety level Primaryservices and for specialized child social protection Social Prevention aid for and people management in need of the people Specialized with social services disabilities for emergency Medicalsocial situations services at local addressed level services Community for child public protection services for Prevention to persons and management with social of problems the Specializedpeople social with services disabilities for emergency Medicalsocial situations services at local addressed level inhabitants’ Community public servicesaccount for to Social persons services with social with problems primary people Other competences with disabilities established by Medicalsocialcharacter for peopleservices with addressed disabilities Communityinhabitants’ public services account for to persons Social with services social with problems primary law Other competences established by character Community for people public with services disabilities for inhabitants’ account Socialinhabitants’ services with primaryaccount Otherlaw competences established by character Community for people public with disabilities services for inhabitants’ Administration of road transportaccount law Communityinfrastructure public of local services interest for at inhabitants’ Administration of roadaccount transport infrastructurecommune of local interestlevel at Administration Other competences of road established transport by infrastructurecommune of local interest atlevel law. Other competences established by Shared with N/A commune Provision of services oflevel public Otherlaw. competences established by countyShared with N/A utilities Provision through of regional services operators of public authorities law. Sharedcounty with N/A Provisionutilities through of services regional of operators public Delegated by N/A Payment of allowances and benefits countyauthorities utilities through regional operators state for adults and children with authoritiesDelegated by N/A Payment of allowances and benefits disabilities. Delegatedstate by N/A Paymentfor adultsof allowances and and children benefits with Source: authors’ processing based on Law no. 195/22 Maydisabilities. 2006 of decentralization [5] state for adults and children with Source: authors’ processing based on Law no. 195/22disabilities. May 200 6 of decentralization [5]
Source:A bird’s authors’ eye processingview on legal based and on institutional Law no. 195/22 issues May relating 2006 of to decentralization SGI in Romania [5]
A bird’s eye view on legal and institutional issues relating to SGI in Romania Compared to the EU approach, the Romanian legislation does not define the terms of ‘public A bird’s eye view on legal and institutional issues relating to SGI in Romania interest’Compared or to ‘general the EU interest’.approach, There the Romanian is just a delegislatifinitionon of does ‘legitimate not define public the terms interest’ of ‘public which can be found in the Law no. 554/2004 of Administrative Litigation [6] and stipulates that the Comparedinterest’ to orthe ‘general EU approach, interest’. the ThereRomanian is just legislati a definitionon does of not ‘legitimate define the public terms interest’ of ‘public which legitimatecan be found public in the interest Law no.is ‘the 554/2004 interest of which Administrat envisagesive Litigationthe power [6]of lawand andstipulates constitutional that the interest’democracy, or ‘general the guaranteeinterest’. Thereof the rights,is just libertiesa definition and offundamental ‘legitimate duties public of interest’ citizens, which satisfying can belegitimate found in public the Law interest no. 554/2004 is ‘the interest of Administrat which envisagesive Litigation the power [6] and of lawstipulates and constitutional that the thedemocracy, community the guaranteeneeds, the of implementation the rights, liberties of the and publ fundamentalic authorities’ duties competences’ of citizens, satisfying(Law no. legitimate554/2004, public art. interest 2 par. l,is [6]). ‘the interest which envisages the power of law and constitutional democracy,the community the guarantee needs, of the the implementation rights, liberties ofand the fundamental public authorities’ duties of competences’ citizens, satisfying (Law no. There554/2004, is not art. a 2uniform par. l, [6]).definition of the public service concept either. The national legislation the communityutilizes both needs, a functional the implementation and an organic of approach the publ icof authorities’this concept competences’ and many times (Law the no.term of 554/2004,There art.is not 2 par. a uniform l, [6]). definition of the public service concept either. The national legislation ‘publicutilizes interestboth a functional service’ is and employed an organic without approach makin ofg clearthis concept its content. and many times the term of There is not a uniform definition of the public service concept either. The national legislation utilizes‘public both interest a functional service’ and is an employed organic approachwithout makin of thisg clearconcept its content.and many times the term of The term of ‘public service’ is defined by the same law as ‘the activity organized/authorized ‘publicby interesta public service’ authority is inemployed order to withoutsatisfy amakin legitimg clearate public its content. interest’ (Law no. 554/2004, art. 2 The term of ‘public service’ is defined by the same law as ‘the activity organized/authorized The byterm a publicof ‘public authority service’ in orderis defined to satisfy by the a legitimsame lawate publicas ‘the interest’ activity (Laworganized/authorized no. 554/2004, art. 2 by a public authority in order to satisfy a legitimate public interest’ (Law no. 554/2004, art. 2 Constantin D.L., Iosif A.E., Profiroiu A.G., Grosu R.M., Regional Science Inquiry Journal, Vol. V, (2), 2013, pp.151162 155 par. k, [6]). Further on, the Law no. 178/2010 of PublicPrivate Partnership [4] defines the ‘public service’ as ‘the totality of actions and activities which ensure the satisfying of the utility needs and the general/local public interest needs of various collectivities’ (Law no. 178/2010, art. 4 par. c, [4]). In this respect it is necessary that the proposed definition ensure a correct understanding of the concept, in accordance with the European level tendencies. A basic option at the EU level is that of the functional defining of the general interest services, comprising market and non market services, which are classified by the public authorities as being of general interest and subject to obligations specific to public services.
In 2006 the Law no. 51/2006 of Communitarian Services of Public Utilities [7] was issued in order to ensure the basis of the regulatory framework for the services of general interest in Romania2. This law specifies the authorities that impose the regulation of services of public utilities and their working principles. The National Authority for Regulating Community Services on Public Utilities (Autoritatea Nationala de Reglementare pentru Serviciile Comunitare de Utilitati Publice ANRSC) is the regulatory authority for the following services of general interest: water supply, waste and sewerage, heat generation, transmission, distribution and supply in a centralized system, apart from heat energy produced in cogeneration, waste, sanitation of localities, public lighting, public and private management of administrativeterritorial units and local public transport, under powers conferred by special law. This public institution of national interest has judicial personality and is subordinated to the Ministry of Administration and Interior of Romania. For the natural gas and electricity services there is a similar regulatory body, named the National Agency for Energy Regulation (Agentia Nationala de Reglementare in domeniul Energiei ANRE). The activities of regulating and monitoring the services of transport are done by the Romanian Road Authority (Autoritatea Rutiera Romana ARR), a public institution that is subordinated to the Ministry of Transports and Infrastructure (Ministerul Transporturilor si Infrastructurii).
According to the Law no. 51/2006 of Communitarian Services of Public Utilities [7] the two types of management of public services in Romania are represented by the direct management and indirect management. Furthermore, the direct management is achieved through its own structures of local authorities, such as: specialty compartments; public services or special directions without judicial personality, organized within the City Council's own device; and public services or special directions with judicial personality, organized under the Local Council, with its own heritage, etc.
Another section of this law refers to the delegated management which means ‘the way in which local authorities [...] transfer to one or more operators all duties and responsibilities on the supply / provision of public utilities, and also the management and exploitation of related systems of public utilities, under a contract called contract of management delegation’ (Law no. 51/2006, art. 30 par. 1, [7]). In the case of delegated management of public utilities services, the operators can take the following form: commercial companies as suppliers of services, set up by local authorities with the capital owned by the administrative territorial units; commercial companies as suppliers of public utilities services resulted from the administrative reorganization of the autonomous of local or county interest or of the public services subordinated to the local authorities, whose capital is owned in whole or in part, as owner / coowner, by the administrative territorial units; and commercial companies as suppliers of public utilities services with private or mixed capital.
2 Found in the Romanian legislation as services of public utilities.
156 Constantin D.L., Iosif A.E., Profiroiu A.G., Grosu R.M., Regional Science Inquiry Journal, Vol. V, (2), 2013, pp151162 156 Constantin D.L., Iosif A.E., Profiroiu A.G., Grosu R.M., Regional Science Inquiry Journal, Vol. V, (2), 2013, pp151162 156 Constantin D.L., Iosif A.E., Profiroiu A.G., Grosu R.M., Regional Science Inquiry Journal, Vol. V, (2), 2013, pp151162 The management delegation agreement may take the form of concession contract or public privateThe management partnership delegation contract. agreement may take the form of concession contract or public The private management partnership delegation contract. agreement may take the form of concession contract or public private According partnership to the contract. same law, the public utilities services are managed directly or by delegation. AAccording certain method to the same is selected law, the by public the decision utilities ofser locvicesal councils,are managed county directly councils, or by the delegation. General AccordingCouncilA certain to ofthe method Bucharest same islaw, selected Municipality the public by the utilities or decision Community services of loc are Deveal managedcouncils,lopment directlycounty Association councils,or by delegation.based the onGeneral some particular criteria, such as the nature and condition of service, present interest, etc. Legal A certainCouncil method of Bucharest is selected Municipality by the decision or Community of local councils, Development county Association councils, the based General on some Councilrelationsparticular of Bucharest between criteria, Municipality local such authorities as the or nature Community and andoperators conditi Deve oonf lopmentpublic of service, utilities Association present are regulated based interest, on as etc.some follows: Legal particularrelationsdirect criteria,management between such local by as the theauthorities decision nature andofand contracting conditioperatorson ou ofof t service,publicand delegated utilities present managementare interest, regulated etc. by as Legal decisions follows: relationsdirectand contractsbetween management (includinglocal byauthorities the concession) decision and ofoperators by contracting which o thef public ouservicet and utilities delegatedmanagement are regulatedmanagement is delegated. as follows:by decisions directand management contracts (including by the decision concession) of contracting by which ou thet and service delegated management management is delegated. by decisions In order to deepen this overall review, the specialists’ opinion on the state and perspectives of and contracts (including concession) by which the service management is delegated. InSGI order in Romania to deepen has this been overall investigated. review, theThe special next sectists’ions opinion discuss on thethe researchstate and methodology perspectives asof In orderwellSGI to inas deepen Romaniathe results this has ofoverall beenthis inquiry. investigated.review, the special The nextists’ sect opinionions discusson the statethe research and perspectives methodology of as SGI wellin Romania as the results has been of thisinvestigated. inquiry. The next sections discuss the research methodology as well as the results of this inquiry. Research methodology Research methodology For a better understanding of the situation of SGI in Romania and their potential evolution Research methodology Forover a time better the understanding interview was ofproposed the situation as the ofmost SGI su initable Romania instrument and theirin the potential project’s evolution research overcontext. time The the adoptedinterview technique was proposed has been as the the most indept suitableh interview, instrument since in itthe includes project’s guidelines research For a better understanding of the situation of SGI3 in Romania and their potential evolution context.that make The it applicableadopted technique to different has contexts been the. Theindept interviewsh interview, have since been itdirected includes to guidelinestwo main over time the interview was proposed as the most3 suitable instrument in the project’s research context.thatcategories Themake adopted it of applicable respondents, technique to different ashas follows: been contexts the the indept general. Theh interviewsinterview, informants, sincehave namely beenit includes directed keyusers, guidelines to two academic main representatives, policy makers and the3 representatives of the services providers, such as that makecategories it applicable of respondents, to different as follows:contexts the. The general interviews informants, have been namely directed keyusers, to two main academic categoriespractitionersrepresentatives, of respondents, or policy publicadministrators as makers follows: and the the generalinvolved representati informants, in vesSGI of delivery. namely the services keyusers, In this providers, way, academic both such the as representatives,beneficiariespractitioners policy and or publicadministratorsthe makers policy andmakers/providers the representati involved wereves in enabled ofSGI the delivery. servicesto express In providers, their this view way, such on both SGI as thein beneficiariesRomania. The and opinions the policy and ideas makers/providers of both types wereof re spondentsenabled to have express a national their viewspreading, on SGI even in practitioners or publicadministrators involved in SGI delivery. In this way, 4 both the beneficiariesthoughRomania. some and The ofthe opinions them policy are andmakers/providers mainly ideas focused of both ontypes were the ofNorthenabled respondentsEast to Regionexpress have ofatheir nationalRomania view spreading, on. SGI in even 4 Romania.though The some opinions of them and are ideas mainly of both focused types on of the re spondentsNorthEast have Region a national of Romania spreading,. even though The some issues of thatthem were are mainlydiscussed focused along onthe the interviews NorthEast addressed Region theof Romaniafollowing4. research foci: The the issuesway SGI that are were provided discussed in the along region/state; the interviews addressed the following research foci: The issues the the way that major SGI were are providers discussed provided of along in SGI the the region/state; (local interviews authorities, addressed private the following companies, research public foci: – private the partnershipsway the SGI major are etc.); provided providers in ofthe SGIregion/state; (local authorities, private companies, public – private the plans and programmes related to SGI; thepartnerships major providers etc.); of SGI (local authorities, private companies, public – private partnerships the planscriteria etc.); and used programmes for assessing related SGI toin SGI;the region /state; the plans the criteriafinancing and programmes used of forSGI assessing (governmentrelated toSGI SGI; infunding, the region local/state; government funds, payment of users etc.); the andcriteria the financing used for of assessing SGI (government SGI in the funding, region/state; local government funds, payment of users etc.); theand financingthe main futureof SGI challenges (government of SGI. funding, local government funds, payment of users etc.); and the main future challenges of SGI. the Twentymain future interviews challenges were of applied SGI. in January May 2012 among persons having an endorsed Twentyopinion oninterviews SGI at the were national applied and in territorial January leve Mayl in 201 Romania.2 among Two persons interviewees having an represented endorsed Twentyopinionthe interviews academia on SGI andwere at the policyapplied national makers’ in andJanuary territorial opinion, May leve while 201l in2 theamongRomania. others persons Two came intervieweeshaving from an the endorsedlocal represented public opinionadministrationthe on academia SGI at the and national local policy service and makers’ territorial providers. opinion, leve l whilein Romania. the others Two cameinterviewees from therepresented local public the academiaadministrationThus, Ioan and Radu and policy is local an makers’ importantservice opinion,providers. academia while representa the otherstive cameas his from main the research local expertise public is administrationThus,focused Ioan on and Radu SGI. local is He service an isimportant aproviders. former academia president representa of thetive Nat asional his mainRegulatory research Authority expertise for is Communitarian Services of Public Utilities in Romania, the current president of the National Thus,focused Ioan Radu on SGI. is an Heimportant is a former academia president representa oftive the as Nat hisional main Regulatory research expertise Authority is for focusedCommunitarianAssociation on SGI. of HeTechnicians, Services is a formerof PublicExperts president Utilities and Researchers in of Roman the Nat ia,forional the Public current Regulatory Services president of Authority General of the National Interest for CommunitarianAssociationand councillor Servicesof Technicians, in the of domainPublic Experts Utilities of public and in ResearchersRoman services,ia, the ec foronomics current Public presidentand Services management ofof theGeneral National within Interest the AssociationandMunicipality councillor of Technicians, of inBucharest. the domainExperts ofand public Researchers services, for ec Publiconomics Services and managementof General Interest within the and MunicipalityAnca councillor Cador in of is the Bucharest. the domain manager of of public the Direction services, ofec onomics market monitoring and management and field within consultancy the within The National Authority for Regulating Community Services on Public Utilities in MunicipalityAnca Cador of Bucharest. is the manager of the Direction of market monitoring and field consultancy AncawithinRomania Cador The is(ANRSC). the National manager Moreover, Authority of the she forDirection expressed Regulating of her marke Commun opiniot monitoringn fromity Services the andposition onfield Publicof consultancy policy Utilities maker. in withinRomania The National (ANRSC). Authority Moreover, for she Regulating expressed Commun her opinioityn Servicesfrom the onposition Public of Utilitiespolicy maker. in 3 Romania The (ANRSC). indepth interview Moreover, was she created expressed by the her SeGI opinio teamn membersfrom the ofposition the Institute of policy of Geography maker. and 3Spatial Economy of the Polish Academy of Sciences as one of the institutional partner within our The indepth interview was created by the SeGI team members of the Institute of Geography and 3 Spatialproject. Economy The responses of the to Polish the interviewsAcademy of conducted Sciences in as Romaniaone of the by institutional the Bucharest partner University within our of The indepth interview was created by the SeGI team members of the Institute of Geography and project.Economic The Studies’ responses research to team the interviewswithin the SeGI conducted project in may Romania be accessed by the upon Bucharest request. University of Spatial4 This Economy region ofwas the the Polish subject Academy of the particular of Sciences case a studys one of of SeGI the institutional project corresponding partner within to Romanian our project.Economic The responses Studies’ research to the interviewsteam within conducted the SeGI proin ject Romania may be byaccessed the Bucharest upon request. University of 4partner. This region was the subject of the particular case study of SeGI project corresponding to Romanian Economic Studies’ research team within the SeGI project may be accessed upon request. 4 Thispartner. region was the subject of the particular case study of SeGI project corresponding to Romanian partner. Constantin D.L., Iosif A.E., Profiroiu A.G., Grosu R.M., Regional Science Inquiry Journal, Vol. V, (2), 2013, pp.151162 157
Additionally, 8 interviews were carried out in Suceava county and 10 interviews in Vaslui county, at both municipality/town and commune level.
Results
Interviewees’ perceptions on the state of SGI at national and territorial level in Romania
One of the interviewees belonging to the academia and policymakers category specified that up to date most of the regulations for SGI have been developed and approved in order to harmonize the Romanian legislation with the acquis communautaire. In this respect, competences for all parts involved in the implementation, monitoring and control of the legislation compliance were established. In the future, based on the support of the central and local public administration authorities, it is expected that the quality of the SGI will increase and, implicitly, the citizens’ quality of life, accompanied by the elimination of social exclusion and isolation. This could lead to the provision of services of general interest in a performing and nondiscriminatory manner.
Law no. 51/2006 of Communitarian Services of Public Utilities [7], with further improvements and additions, establishes a uniform legal and institutional framework, with objectives, competences, functions and tools required for the creation, organization, management, financing, operation, monitoring and control of regulated supply/provision of SGI. It also entrusts the ANRSC with responsibilities and competences in the position of regulator, monitoring and controlling authority in this domain. Starting from this law that represents the legal framework of the SGI in Romania, for each public service specific laws have been developed and adopted, except for the law of public and private administration of the territorial administrative units whose project was rejected. Also, the ‘National strategy for accelerating the development of communitarian services of public utilities’ was developed and approved by the Government Decision no. 246/2006 [8]. It lays the foundations of the multiannual plan for the development of these services.
An issue of a great interest refers to the financing of the capital expenditures for achieving the public investment objectives of the territorial administrative units with regard to the public utilities systems. It is ensured from the following sources: own funds of the operators and / or local budget funds; bank loans, which can be guaranteed by administrativeterritorial units, the Romanian state or other entities specialised in the provision of bank guarantees; grants obtained through bilateral or multilateral arrangements; special funds set up under the special taxes, established at the local public administration authorities level; funds transferred from the state budget, as participation in cofinancing investment programmes accomplished with external financing; participation of private capital in publicprivate partnership contracts such as ‘buildoperatetransfer’ and its variations, according to the law; funds provided by users.
When it comes to the operators' revenues, both users’ own financial resources and local budget funds can be implied. Thus, the operators' revenues are collected from the users via prices or rates the amounts representing the value of the supplied / provided services and, where appropriate, from the local budget allocations. In the latter case, the following principles have to be observed: ensuring the financial autonomy of the operator; ensuring the economic profitability and efficiency; ensuring an equal treatment of the public utilities services in relation to other SGI; full recovery of the costs relating to the provided services by the operators.
As far as the financing forms of SGI are concerned, most interviewees have mentioned that almost all of them are encountered in Romania, namely funds from contributors, governmental funding, local governmental funds, payment of user and various combinations. In a hierarchical order based on the interviewees’ answers, the users’ payments occupy the first position.
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158 Constantin D.L., Iosif A.E., Profiroiu A.G., Grosu R.M., Regional Science Inquiry Journal, Vol. V, (2), 2013, pp151162
In all Romanian regions the practice of establishing the prices of SGI is the same. The prices are established in accordance with the necessary expenses for the functioning of SGI, adding In alla Romanianminimum shareregions for the development. practice of establishinThe price grecommen the pricesdations of SGI areis the sent same. to the The ANRSC prices for are establishedapproval. After in accordance the approval with is the obtained, necessary the ex Localpenses Council, for the asfunctioning deliberative of SGI,authority adding of the a minimumlocal public share administration, for development. approves The theprice tariffs recommen by decisions.dations are sent to the ANRSC for approval. After the approval is obtained, the Local Council, as deliberative authority of the localStarting public administration, from the calculation approves the methodology tariffs by decisions. establish ed by the competent regulatory authorities, prices and tariffs for services of public utilities are based on the production and Startingoperating from costs, the on calculation the maintenance methodology and repairs establish costs, edon the by payment the competent relating to regulatory immobilized authorities,capital inprices tangible and tariffs and intangible for services assets, of pub on lic the utilities environmental are based costs, on the on production the financial and costs operatingassociated costs, with on theloans, maintenance on the costs and arising repairs from costs, th one contract the payment of delegation, relating to and immobilized also include a capitalquota in tangible for creating and intangible sources of assets, development on the e andnvironmental modernization costs, of on the the systemsfinancial of costs public associatedutilities, with and, loans, finally, on the a profit costs sharearising is from added. th e A contract general ofrecommendation delegation, and formulatedalso include by a the quotainterviewees for creating for sourcesthe local of public development administration and moder authoritiesnization is put of a the stronger systems emphasis of public on the utilities,development and, finally, and modernization a profit share isissues added. when A generalestablish recommendationing the prices and formulated tariffs. By by covering, the intervieweesmost of thefor times,the local only public the costsadministration implied byau thorities SGI, the is risk put woulda stronger be the emphasis lack of on funds the for developmentfurther development and modernization of SGI. issues when establishing the prices and tariffs. By covering, most of the times, only the costs implied by SGI, the risk would be the lack of funds for furtherMost development interviewees of providedSGI. positive answers when asked about the legally defined criteria for quality, accessibility, affordability of SGI. Additionally, in a very large proportion, the Mostinterviewees interviewees agreed provided with positive the fact answers that the when category asked of aboutusers thethat legally have difficulties defined criteria in accessing for quality,the SGI accessibility, is made of affordability lowincome of families SGI. Addit or unemployeionally, ind. a The very main large barriers proportion, identified the as intervieweeshindering agreed the access with the to servicesfact that arethe ofcategory economic of users and that social have nature. difficulties More in specifically, accessing the the interviewees SGI is made specified of lowincome as barriers families the lack or of unemploye infrastructure,d. The the main limited barriers material identified resources as and hinderingthe lack the of accessfinancial to resources services areof the of citizens. economic and social nature. More specifically, the interviewees specified as barriers the lack of infrastructure, the limited material resources and the lackThe ofevaluation financial of resources the quality of theand citizens. the provision of SGI could be conducted by using the annual assessment reports and the laws in force. The interviewees pointed out that the national The legislationevaluation specifiesof the quality the necessary and the provision procedures of SGIfor eachcould type be conductedof service byand using the way the annualof solving assessmentthe users’ reports complaints. and the They laws also in force. mentioned The inter thatviewees several pointed indicators out for that assessing the national the SGI legislationquality specifies have been the developed, necessary procedures being included for each in the type methodology of service and of the way national of solving plan. The the evaluation users’ complaints. of the quality They of also services mentioned provided that by sev theeral local indicators public sector for assessingis in most theof the SGI cases qualityconducted have been internally, developed, based being on operating included regulation in the methodologys of each service. of the Annually national the plan. evaluation The evaluationof the SGIof the is qualitymade by of local services administration provided by on the the local occasion public of sector the Local is in mostCouncil of themeetings. cases In conductedaddition, internally, an external based evaluation on operating of SGI regulation is mades of by each the service. citizens Annually benefiting the from evaluation them. The of theCourt SGI ofis made Auditors, by local the ANRSC,administration the central on the andoccasion local of public the Local administration Council meetings. are among In the addition,controlling an external bodies evaluation of the accessibility of SGI is made and by afforda the citizensbility ofbenefiting SGIs, enumerated from them. The by the Courtinterviewees. of Auditors, the ANRSC, the central and local public administration are among the controlling bodies of the accessibility and affordability of SGIs, enumerated by the interviewees.Going further, the analysis of the NorthEast Region’s particular case (NUTS 2 level) has revealed the following distribution of responsibilities between SGI operators: Going the further, local the public analysis authorities of the are NorthEast responsible Regio forn’s local particular public case administration, (NUTS 2 level) water has supply revealedservice, the following sewage, sanitation,distribution localof responsibili road infrastructties betweenure, socialSGI operators: assistance, library, cultural thecentres, local publiceducation authorities only the are infrastructure; responsible for local public administration, water supply service, state sewage, is in charge sanitation, with education, local road health infrastruct and railwayure, transport; social assistance, and library, cultural centres, private education companies only theoperate infrastructure; in health, local road transport, postal services, electric energy, stateand is telecommunications.in charge with education, health and railway transport; and private companies operate in health, local road transport, postal services, electric energy, and Attelecommunications. a lower level (NUTS 3), evidence for Vaslui county, as part of the NorthEast Region, has been provided: At a lowerThe water level supply(NUTS service 3), evidence is mainly for ensuredVaslui coun by thety, localas part public of the administration NorthEast Region, authorities has but beenis provided: not usually provided to all villages included in a commune. However, the expanding of this Theservice water issupply specified service in isthe mainly local ensuredstrategies, by benefthe localiting public from administrationgovernmental support.authorities There but are is notonly usually a few provided private operators to all villages that are included encouraged in a commune. to provide However, this service the in expanding the envisaged of this area. service The is electricityspecified indistribution the local strategies,is ensured benefby EOniting M fromoldova, governmental which is private support. company There holdingare onlythe a few monopoly private inoperators the domain. that are encouraged to provide this service in the envisaged area. The Theelectricity education distribution at the local is ensuredlevel contains by EOn prescho Moldova,ol, primary which education,is private companygymnasium holding and high the monopolyschool coordinated in the domain. at the county level by the Education Inspectorate. The education at the local level contains preschool, primary education, gymnasium and high school coordinated at the county level by the Education Inspectorate. Constantin D.L., Iosif A.E., Profiroiu A.G., Grosu R.M., Regional Science Inquiry Journal, Vol. V, (2), 2013, pp.151162 159
Telecommunications are provided by all main private companies in Romania. The road transport is provided by private companies whereas for railway transport the support comes from the Romanian national company of railways.
The main suppliers of public utilities services and their status heavily depend on the type of provided service, and the territorial and administrative characteristics of the locality in which the service is provided. Among the investigated cases there are situations of natural monopoly. As specified by Law no. 51/2006 [7], in the domain of public utilities services it is defined as the market situation particular to some services of public utilities that, on a bounded area, can be supplied / provided only by a single operator. At the same time, any agreements which lead to the growth of the monopoly of services of public utilities, to the restriction, prevention or distortion of competition on the market of services of public utilities as well as association agreements or any concerted practices between operators are forbidden, regardless the manner of organization, ownership or method of management.
The government ensures the accomplishment of the state general policy in the domain of public utilities services, according to the Programme of Governance and to the objectives of the National Plan of Economic and Social Development, by implementing a series of actions aiming at supporting the local public administration authorities to develop the service infrastructure and to improve the provision of the SGI. In relation to emphasizing this statement, the vast majority of interviewees pointed out that there are strategy plans or programmes that regulate SGI. Some of the interviewees specified that these kind of plans or programmes can be found at both local and national level.
Interviewees’ perceptions on the perspectives of SGI at national and territorial level
The interviewees have expressed a series of opinions on the driving forces that influence SGI at national and territorial levels and the future concerns on SGI. When asked about future concerns on the services of general interest, Ioan Radu mentioned two different directions: on one hand the service privatization and, on the other hand, the privatization of the service management. The latter direction means to delegate through a public private partnership the management of a certain service with clear obligations for the concessionaire regarding the capacity of holding up the necessary investments in time and ensuring the quality by accomplishing the indicator levels stipulated in contract. Within the contract that is signed between the local administration and the service operator is stipulated the name of the authority in charge with the contract monitoring. The interviewee has indicated as example the investment programme of Apa Nova, called ‘Bucur’. This programme is specified in the additional contract no. 6 at the concession contract between the local authorities of Bucharest and Apa Nova. As the Mayor stated on his BlogSpot, this Programme started in 2011 and implies an investment of 60 million dollars from Apa Nova to the city of Bucharest during the following years. Based on this programme, there are in progress of execution 53 streets, summing up 20,000 km public network of water supply and 14,600 public network of sewage. The newest technical asset will be the construction of two interception channels that will diminish the risk of flows in the city centre of Bucharest in case of extreme weather phenomena. Even if the intention of the authorities is to maintain the current tariff levels, it is very possible to cover the return on investment from the updated tariffs applied to the citizens as well. As regards the authority in charge with the monitoring of the water supply quality in respect to the performance indicators5 in Bucharest, its name is the Municipal Authority of Regulation in Public Services. Moreover, other examples may be identified in energy, health, social assistance as private houses for the elderly. In addition, another action that is still a challenge for Romania regards the unique counter6 which deals
5 Such as a certain level of the concentration of sand in water; a new treatment plant for Bucharest at Glina. 6 Called ‘ghiseul unic’.
160 Constantin D.L., Iosif A.E., Profiroiu A.G., Grosu R.M., Regional Science Inquiry Journal, Vol. V, (2), 2013, pp151162 160 Constantin D.L., Iosif A.E., Profiroiu A.G., Grosu R.M., Regional Science Inquiry Journal, Vol. V, (2), 2013, pp151162 with the customers complains about the service. As the National Authority of Consumers with Protection the customers stipulated, complains these aboutcomplaints the service. have to As be thesolved National by each Authority local public of Consumers administration Protectionauthority stipulated, through thesethe unique complaints counter. have to be solved by each local public administration authority through the unique counter. When it came to the future directions of the SGI in Romania the interviewee pointed out a Whenseries it came of targets, to the suchfuture as: directions of the SGI in Romania the interviewee pointed out a series of the targets, acceleration such as: of the decentralization policy, so as to place the services under the theadministration acceleration of of the the local decentralization authorities; policy, so as to place the services under the administration involving of the the non local governmentalauthorities; organizations in providing SGI, mainly for those services involvingthat have the a nonsocial governmental character; organizations in providing SGI, mainly for those services observing the principles of sustainable development with regard to energy, sanitation, that have a social character; 7 observingenvironment the principlesand others of; sustainable development with regard to energy, sanitation, environment political and will others for 7; the modernization of SGI and for the promotion of the public – private politicalpartnership; will for the modernization of SGI and for the promotion of the public – private a coherent management8 that should be adopted by the local public administration; partnership; 9 a coherent selecting management the most competent8 that should employees be adopted and by develo the localping public managerial adminis competencestration; ; and selecting the involvement the most competent of the civil employees society inand providing developing quality managerial SGI through competences the interaction9; and between the centralinvolvement administration of the civil – local society administration in providing and quality civil SGI society. through the interaction between central administration – local administration and civil society. A final issue discussed with Ioan Radu envisaged the challenges that SGI have to face. The A finalfollowing issue discussed challenges with have Ioan been Radu revealed envisaged by the th intee challengesrviewee: that SGI have to face. The following Identification challenges of have new been sources revealed of energy. by the interviewee: Identification Romania’s of obligationnew sources to moveof energy. towards an efficient waste management. Romania’s The obligation obligation of totaking move into towards account an efficientthe role ofwaste the civilmanagement. society in assuring the provision of TheSGI, obligation mainly of social taking services. into account the role of the civil society in assuring the provision of SGI, mainly As Romania social services.has to implement the standards imposed by of the European Union regarding As variousRomania SGI, has the to attractionimplement of the foreign standards investments imposed is bythe ofmain the solution European in thisUnion case. regarding various Promoting SGI, the attraction professional of foreign competence investments by developing is the main an solution educational in this system case. that encourages Promotingspecialization professional in a certain competence SGI (e.g. by assistants, developing nurses, an educational etc.). system that encourages specialization A higher in interest a certain for SGI collecting (e.g. assistants, financial n resoururses,ces etc.). from external sources, also from different A higherprogrammes interest thatfor collecting are developed financial by resour a certainces from European external country sources, and also having from different Romania as programmesbeneficiary. that are developed by a certain European country and having Romania as beneficiary. Another principal interviewee, Anca Cador mentioned that SGI are in the middle of the Anotherdebates principal and represent interviewee, the main Anca question Cador mentioned of the role that assumed SGI are by thein the public middle authorities of the in a debatesmarket and economy: represent the on one main hand, question they of have the to role monitor assumed the byproper the publicfunctioning authorities of the in market, a marketand, economy: on the other on onehand, hand, to guarantee they have the to general monitor in tteresthe proper by satisfying functioning the ofprimary the market, necessities and, ofon thethe citizensother hand, and to preservation guarantee the of general the public interest good bys whensatisfying the marketthe primary fails necessities to do so. How of thepublic citizens authorities and preservation fulfil their of obligations the public to good citis zens when is the subject market to fails a constant to do so. evolution How by publicresponding authorities to economic, fulfil their technological obligations toand citi socialzens ap is proaches. subject to a constant evolution by respondingIn the to particular economic, case technological of Romania, and certain social SGIapproaches. are still provided by public authorities. In In therecent particular years, casethey ofhave Romania, entrusted certain more SGIfrequently are still the provided provision by of public these authorities. SGI to public In and recentprivate years, enterprises they have orentrusted to partnerships more frequently between thethe publicprovision and ofprivate these sectors. SGI to publicFurther and on, the privatepublic enterprises administration or to partnerships is more focused between on definingthe public public and privateobjectives sectors. and monitoring,Further on, assuringthe publicthe administration regulation framework is more focusedand where on defining appropriate, public funding objectives those and services. monitoring, This evolution assuring does the regulationnot determine framework public and authorities where appropriate, to give f unding up their those rservices.esponsibility This evolution to guarantee does the not accomplishment determine public of the authorities objectives to of give general up interes their t. r esponsibility Through relevant to guarantee regulations, the public accomplishmentauthorities must of thebe able objectives to determine of general national interes andt. local Through policies relevant on services regulations, of general public interest authoritiesand to mustmonitor be abletheir to implementation. determine national and local policies on services of general interest and toFinally, monitor Anca their Cador implementation. stated that the SGI have an extraordinary impact on the environment. On Finally,the Ancaone hand, Cador SGI stated represent that the a majorSGI have pollutant, an ext raordinaryand on the impactother hand, on the substantially environment. participate On the oneto thehand, limitation SGI represent of the a pollutionmajor pollutant, degree and (e.g. on was thete other water hand, treatment, substantially collection participate and waste to the limitation of the pollution degree (e.g. waste water treatment, collection and waste 7 One example refers to producing approximately 30% of energy by alternative sources, which is a 7 European target that Romania had to accomplish by the beginning of 2011. One8 example refers to producing approximately 30% of energy by alternative sources, which is a European By targetapplying that the Romania Emergency had to Ordinance accomplish no. by 109/2011 the beginning regarding of 2011.the obligation for public enterprises to 8 implement the principles of corporate governance [9]. By applying9 the Emergency Ordinance no. 109/2011 regarding the obligation for public enterprises to implementThe constraint the principles that ofappears corporate in the governance case of Romania [9]. and makes this issues very difficult to implement is 9The thatconstraint the salaries that appears are very in low the andcase very of Romania skilled per andsons makes are notthis attracted issues very to enter difficult in public to implement administr isation. that the salaries are very low and very skilled persons are not attracted to enter in public administration. Constantin D.L., Iosif A.E., Profiroiu A.G., Grosu R.M., Regional Science Inquiry Journal, Vol. V, (2), 2013, pp.151162 161 disposal). Obeying the environmental requirements throughout the entire life cycle of the SGI infrastructure (buildoperationmaintenancedemolition) becomes extremely important in the framework of sustainable development concept, as in the context of universality principle corresponding to services of general interest (Balalalia (Iosif), Petrariu and Bumbac, [10]).
When applied at territorial level, the interviews highlighted the main challenges that are associated to SGI in the near future, such as: liberalization, quality, cost/efficiency; the increase of demand for services; financing and the limitation of funds for the development of SGI; attracting European funds through different projects; developing systems of renewable energy; competition; bureaucracy; decentralization; equitable relationship between providers and users; and observing European legislation.
Summing up the interviewees’ opinions collected at territorial level, the main issues that have to be considered by the SGI strategies and policies refer to: bureaucracy and the legislative fluctuation; competition, quality and cost/ output ratio; observing the European norms; developing systems of renewable energy; technology development; regionalization; economic crisis and financial instability; an even higher lack of financial resources; political influence and corruption; decentralization of SGI; and competition, quality of services and better prices.
Concluding remarks
The legal framework created in Romania after 1990 for the SGI reflects the option for market liberalisation, applied in a differentiated way depending on the characteristics of various services. Obviously, the private sector is much more interested in the profitable services rather than in those requiring a high amount of preliminary investments in infrastructure. For meeting the citizens’ needs in a higher degree the involvement of the private operators is recommended not only independently but also in a public private capital based cooperation, as supported by the publicprivate partnership law.
Changes in the territorial structures institutional framework are also recommended so as to ensure a better distribution of competences for the SGI, considering that at present the development regions are not administrative units and, consequently, do not have competences in the administration of the services of general interest.
Apart from the general issues regarding the administrativeterritorial structure of Romania and general aspects corresponding to SGI in Romania, this research has provided a qualitative analysis of the SGI in Romania in accordance with the territorial distribution of competences and the derived responsibilities. Regulations corresponding to SGI, the financing forms, the mechanism of establishing the SGI prices, the evaluation of the quality and the provision of SGI, the programmes and plans associated to SGI represent the main subjects discussed along the applied interviews related to the state of SGI in Romania.
162 162Constantin Constantin D.L., D.L.,Iosif A.E.,Iosif A.E.,Profiroiu Profiroiu A.G., A.G., Grosu Grosu R.M., R.M., Regional Regional Science Science Inquiry Inquiry Journal, Journal, Vol. V,Vol. (2) V,, 2013, (2), 2013, pp151162 pp151162
WhenWhen asked asked about about the futurethe future of SGI of SGI in the in region/the region/ country country most most of interviewees of interviewees tried tried to give to give ratherrather optimistic optimistic answers answers and and hopes hopes in good in good evoluti evolutions.ons. The The future future optimistic optimistic directions directions envisageenvisage the the development development of SGI of SGI in accordance in accordance with with the the European European policies policies so as so to as to consolidateconsolidate the theeconomic economic and andsocial social cohesion. cohesion. Howev However, pessimisticer, pessimistic answers answers have have been been also also providedprovided and and they they are are mostly mostly related related to the to the uncerta uncertaintyinty on the on the market market and and the the financial financial constraints.constraints.
AcknowledgementsAcknowledgements
TheThe paper paper is based is based on theon the research research conducted conducted under under the the auspices auspices of the of the ESPON ESPON project project ‘Indicators‘Indicators and and perspectives perspectives for for services services of genera of general interestl interest in territorial in territorial cohesion cohesion and and developmentdevelopment – SeGI’ – SeGI’ (PS (PS 116, 116, No.094/2011), No.094/2011), in whic in which Theh The Bucharest Bucharest Academy Academy of of EconomicEconomic Studies Studies is one is one of the of the partners partners involved. involved. The T contenthe content of this of this paper paper does does not not necessarilynecessarily reflect reflect the the opinion opinion of ofthe the ESPON ESPON Monito Monitoringring Committee. Committee. The The authors authors acknowledgeacknowledge the thesupport support offered offered by the by theRoyal Royal Instit Institute ute of Technology of Technology in Stockholm in Stockholm – the – the LeadLead Partner Partner of our of our project project and and by the by the Institute Institute of Geography of Geography and and Spatial Spatial Organization Organization – – PolishPolish Academy Academy of Sciences, of Sciences, Warsaw, Warsaw, the partnerthe partner in charge in charge with with interview interview guide guide elaboration. elaboration. SpecialSpecial thanks thanks also also go goto all to all interviewees interviewees who who made made it possible it possible to accomplish to accomplish this this investigationinvestigation for thefor Romanianthe Romanian case case study. study.
ReferencesReferences
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Myttenaere B., Regional Science Inquiry Journal, Vol. V, (2), 2013, pp. 163176 163 Myttenaere B., Regional Science Inquiry Journal, Vol. V, (2), 2013, pp. 163176 163
LOCAL ACTORS AND LEADERSHIP IN RURAL DESTINATIONS: EXPLORINGLOCAL ACTORS THE ANDROLE LEADERSHIP OF GASTRONOMIC IN RURAL CONFRATERNITIES DESTINATIONS: EXPLORING THE ROLE OF GASTRONOMIC CONFRATERNITIES Bernard De MYTTENAERE Institute of EnvironmentalBernard De Management MYTTENAERE and Regional Planning Institute of Environmentalthe Free University Management of Brussels. and Regional Planning the [email protected] University of Brussels. [email protected]
Abstract AbstractBy means of an exploratory and comparative study focusing on the three rural destinations in ByWallonia means (Chimay,of an exploratory Orval and and Rochefort), comparative we study have fo putcusing forward on the reflections three rural on destinations the role and in Walloniainfluence (Chimay, of gastronomic Orval and confraternities, Rochefort), we both have as put actors forward in local reflections economic on the and role tourist and influencedevelopment of and gastronomic in terms of confraternities, their leadership both capaci asty. a Byctors means in localof this economic exploratory and research, tourist developmentwe are not seeking and in termsto analyse of their the leadership effectiveness capaci or ty.economic By means performance of this exploratory generated research, by the weactivities are not of seekingthe gastronomic to analyse confraternities, the effectiveness but rather or economic to show theperformance opportunities generated they offer by thefor activitieslocal actors of the to gastronomic form and gain confraternities, access to such but rather networ toks. show After the having opportunities identified they the offer many for localreasons actors and advantages to form and to gainlocal accessactors toof joining such networ a gastronomicks. After confraternity, having identified we will the manytry to reasonsunderstand and whyadvantages some of to them local doactors not seemof joining to be a intergastronomicested in localconfraternity, actors, whereas we will otherstry to understanddraw attract whymembers some of of the them local do economic, not seem politic to be al inter andested social in elites.local actors, whereas others draw attract members of the local economic, political and social elites. Keywords: Wallonia, Trappist monks, tourist promotion, beer, local development Keywords: Wallonia, Trappist monks, tourist promotion, beer, local development JEL classification : R12, L25, L26 JEL classification : R12, L25, L26 Introduction IntroductionAccording to several analysts, the main components of the current trends in rural tourism are Accordingto be linked to to several the concept analysts, of authenticitythe main components that tourists of associatethe current notably trends within rural tradition, tourism local are toculture, be linked contact to the with concept nature of and authenticity enthusiasm that for to disuristscovering associate new notably forms ofwith heritage, tradition, notably local culture,including contact gastronomic with nature heritage and and enthusiasm local products. for dis coveringA number new of studiesforms offocusing heritage, on notablytourist includingdemand show gastronomic that the consumptionheritage and oflocal local products. products A innumber the course of studies of holiday focusing stays on partially tourist demandfulfils the show quest that for the authenticity consumption by ofcertain local touri productssts. Other in the scholars course ofemphasise holiday staysthe important partially fulfilsrole played the quest by for the authenticity consumption by ofcertain local touri agrifoodsts. Other products scholars in emphasise the tourist the experience, important particularlyrole played by by its the influence consumption on the of positive local impre agrifoodssions pr oducts tourists in take the away tourist from experience, their visit particularly(Bessis, 1995; by Bessière, its influence 1998; on Van the Westering, positive impre 1999;ssions Fields, tourists 2000; takePoulain, away 2000; from Du their Rand visit et (Bessis,al., 2003; 1995; Assouly, Bessière, 2004; 1998; Espeitx Van Bernat, Westering, 2004; 1999; Tellst Fields,rom et 2000; al., 2005; Poulain, Tregear 2000; et Du al. Rand, 2007; et al.Henderson,, 2003; Assouly, 2009 ; 2004; kim et Espeitx al., 2009; Bernat, Sims, 2004; 2009; Tellst Barreyrom et and al. , Teil,2005; 2011; Tregear Bertella et al.,, 2011;2007; Grasseni,Henderson, 2011). 2009 ; kim et al., 2009; Sims, 2009; Barrey and Teil, 2011; Bertella, 2011; Grasseni,This phenomenon 2011). has encouraged many public and private actors to turn to tourism in the Thishope phenomenonof reinvigorating has local encouraged development. many public In fact, and in thepriv pastate actors 30 years, to turn several to tourism projects in were the hopeset up of toreinvigorating develop tourism local indevelopment. such a way In that fact, it in con thetributes past 30 to years, policies several and projects strategies were of setdevelopment up to develop in a rural tourism area. inThe such particular a way positio that itn occupied contributes by totourism policies is due and to strategiesthe fact that of developmentthis sector is inconsidered a rural area. capable The particularof participating positio nin occupied crosssectoral by tourism development is due to patterns the fact that thisfavour sector the is local considered economy capable as well of participating as the protection in crosssectoral of heritage development and the strengthening patterns that of favourregional the identities. local economy The role as thus well attributed as the protection to, or even of heritage imposed and on, the tourism strengthening is part of of a politicalregional identities.and economic The context role thus of attributed changing to, rural or sp evenaces imposed that are on, seeking tourism new is partforms of of a politicaldevelopment and oreconomic alternatives context to aof declining changing agricult rural spuralaces economy. that are seekingThis paradigm, new forms which of developmentconsists in considering or alternatives tourism to as a a declining strategic axis agricult of uraldevelopment, economy. is Thisa recurring paradigm, rhetoric which in consistsregions thatin considering have been tourism left vulnerable as a strategic by the axis decli ofne development, of an agrarian is a economy. recurring Since rhetoric these in regionstourism that strategies have been are fully left vulnerable part of territorial by the declicompetitionne of an between agrarian cities economy. or between Since these rural tourismcommunities, strategies they are regularly fully part look of to territorial tourism, which competition is thus between perceived cities by many or between private rural and publiccommunities, sector economic they regularly players look as the to hope tourism, for thes whiche regions. is thus perceived by many private and publicAmong sector the studieseconomic conducted players as on the local hope agrifood for thes e produ regions.cts (LAPs), some have to do with Amongagriculture the and studies their value conducted for tourism. on local Emphasis agrifood is produplaced,cts for (LAPs), instance, some on the have role to of dotourism with agriculturein participating and their in rural value development, for tourism. Emphasis thus stressi isng placed, the specific for instance, challenges on the torole rural of tourism spaces insuch participating as landscape in management rural development, and agricultural thus stressi diverng sification the specific (Kneafsey challenges and to Ilbery, rural spaces2001; suchPecqueur, as landscape 2001; Parrottmanagement et al. ,and 2002 agricultural ; Meler diver and sification Cerovic, 2003;(Kneafsey Renting and etIlbery, al., 2001; 2003; Pecqueur, 2001; Parrott et al., 2002 ; Meler and Cerovic, 2003; Renting et al., 2003;
164 Myttenaere B., Regional Science Inquiry Journal, Vol. V, (2), 2013, pp. 163176 164 Myttenaere B., Regional Science Inquiry Journal, Vol. V, (2), 2013, pp. 163176 Vandecandelaere and Touzard, 2005 ; Bossuet et al., n.d.; Boucher and RequierDesjardins, Vandecandelaeren.d.; Corigliano, and 2000;Touzard, Pecqueur, 2005 ; Bossuet 2001; Vandecandel et al., n.d.;aere Boucher & Touzard, and RequierDesjardins, 2005; Hirzack et al., n.d.; 2005; Corigliano, Roux 2000;et al., Pecqueur, 2006; Tregear 2001; et Vandecandel al., 2007; Muchnikaere & Touzard, et al., 2008; 2005; Scheffer Hirzack andet al. Piriou,, 2005;2009; Roux Green et al. and, 2006; Dougherty, Tregear 2009; et al. HeraultFourner, 2007; Muchnik et etal. al., 2009;, 2008; Deverre Scheffer and andLamine, Piriou, 2010). 2009;In Green these andsense, Dougherty, the touristic 2009; valorization HeraultFourner of LAPs et al.makes, 2009; it possible Deverre toand diversify Lamine, the 2010). range of In thesewhat sense, a region the touristic has to valorization offer and to of strengthenLAPs makes the it topossibleurist appeal to diversify of certain the range destinations of what(Bessière, a region 1998; has toBoyne offer et andal., 2000; to strengthen Fields, 2000; the toIlberyurist and appeal Kneafsey, of certain 2000; destinationsScarpato, 2000; (Bessière,Hjalager, 1998; 2002 Boyne ; Betry, et al. 2003;, 2000; Meler Fields, and 2000; Cerovic, Ilbery 20 and03; Kneafsey,Kivela and 2000; Crotts, Sc 2006;arpato, Everett 2000; and Hjalager,Aitchison, 2002 ; 2008; Betry, Kivela 2003; Meler and Crotts, and Cerovic, 2009; Sims,2003; 201Kivela0; Deand Myttenaere,Crotts, 2006; 2011). Everett From and this Aitchison,perspective, 2008; the Kivela valorization and Crotts, of food 2009; resources Sims, can 201 0;turn De these Myttenaere, products 2011).into local From emblems this at perspective,the service the valorization of regional of communication food resources andcan turn marketing these products strategies. into But local even emblems beyond at this the servicepromotional of regional function, communication these emblematic and resources marketing can strategies.also serve as But a source even beyondof local identity, this promotionalreinforcing function, people’s these sense emblematic of belonging resources to their can tealsorritory serve (Bessière, as a source 1998; of localShortridge, identity, 2003; reinforcingEverett people’sand Aitchison, sense 2008;of belonging Green and to theirDougherty, territory 2009; (Bessière, Barthe 1998;et al., Shortridge,2010; Bertella, 2003; 2011). EverettThe and subject Aitchison, of “food 2008; tourism”Green and has Dougherty, to date 2 received009; Barthe little et attentional., 2010; fromBertella, social 2011). science The researchers, subject of “food since tourismtourism” and has gastronomy to date received have onlylittle gradually attention come from social to be regarded science as researchers,subjects sinceof proper tourism academic and gastronomystudy (Hjalager have and only Ric graduallyhards, 2000; come Santich, to be 2004; regarded Csergo as and subjectsLemasson, of proper 2008). academic In the study last (Hjalager decade, however,and Richards, there 2000; has beenSantich, substantial 2004; Csergo growth and in the Lemasson,number 2008). of publications In the last addressing decade, however, this topic, there inclu hasding been for instance substantial analyses growth of in the the logic numberbehind of publicationsthe tendency addressingof private or this public topic, actors inclu inding the forfield instance of tourism analyses to organise of the into logic groups behindin the order tendency to develop of private agricultural or public productsactors in the that field coul ofd tourism lend greater to organise dynamism into groups to local in orderdevelopment to develop (Bossuet agricultural et al., n.d.; products Boucher that and coul RequierDesjardins,d lend greater dynamism n.d.; Corig toliano, local 2000; developmentPecqueur, (Bossuet 2001; Vandecandelaere et al., n.d.; Boucher and Touzard, and RequierDesjardins, 2005; Hirzack et al. n.d.;, 2005; Corig Rouxliano, et 2000;al., 2006; Pecqueur,Tregear 2001; et al. Vandecandelaere, 2007; Muchnik and et al. Touzard,, 2008; 2005;Scheffer Hirzack and Piriou, et al., 2005;2009; RouxGreen et and al. ,Doughe 2006; rty, Tregear2009; et HeraultFourneral., 2007; Muchnik et al. et, al.2009;, 2008; Deverre Scheffer and Lamine,and Piriou, 2010). 2009; Green and Dougherty, 2009;While HeraultFourner much research et al. , into 2009; tourism Deverre studies and Lamine, examining 2010). strategic networks concentrates on Whileformal much actors research and structures, into tourism a very studies limited examining number strategicof research networks projects concentratesspecifically concern on formalthe actors role and of informalstructures, structures a very limited and associationsnumber of research of volunteers projects involved specifically in concern actions and the rolestrategies of informal for tourist structures development. and associations Associations of su volunteersch as gastronomic involved confraternities in actions and have strategiesrarely for been tourist examined development. and hence Associations their roles such and as gastronomic influences confraternities have largely remainedhave rarelyundocumented. been examined Yet and the campaignshence their conducted roles and by infl gastrouencesnomic have confraternities largely remained can have undocumented.considerable Yet impact, the notably campaigns by projecting conducted local by im gastroagesnomic and identities, confraternities on regional can marketing have considerableand the development impact, notably of tourism. by projecting The research local im weages ha andve carried identities, out indicateson regional that marketing under certain and theconditions, development they canof tourism. also play The an researchimportant we part ha vein carriedthe dynamics out indicates of tourism that underdevelopment certain and conditions,thus demonstrate they can also a territorial play an leadershipimportant partthat inough thet notdynamics to be neglected. of tourism development and thus Thisdemonstrate article considers a territorial the leadership question ofthat the ough relationt not shipsto be betweenneglected. tourism development in rural This areasarticle and considers the creation the question or reinforcement of the relation of theships pote betweenntial for tourism local leadership development of gastronomicin rural areasconfraternities and the creation involved or reinforcement in the commodification of the potential of for local local agrifood leadership products of gastronomic in Wallonia confraternities(Belgium). involvedLike many in other the rural commodification areas in Europe, of localWallonia agrifood has seen products an increase in Wallonia in tourism (Belgium).related Like projects many that other are rural centred areas on in promotingEurope, W allonia local agrifood has seen productsan increase (LAPs), in tourism including relatedabbey projects beers. that Their are production, centred on marketing promoting and loca promotl agrifoodion to products tourists (LAPs), by public including and private abbeyactors beers. appear Their to production, be opening marketingup new opportunities and promot ionfor developing to tourists byor upgrading public and the private range of actorslocal appear items to on be offer opening to tourists. up new opportunities for developing or upgrading the range of localThis items research on offer is to intended tourists. to determine the scope of action of the gastronomic confraternities This andresearch their roleis intended in local toleadership determine in thethe scopedomain of of action tourism of thedevelopment gastronomic projects confraternities in rural areas. and theirWe aim role to in examine local leadership the role ofin thosethe domain players of involve tourismd developmentin such campaigns, projects the in conditions rural areas. under We aimwhich to examinethese are therolled role out, of thoseas well players as the involve resourced sin and such methods campaigns, used. the More conditions generally, under the aim whichof thesethis paper are rolled is to out,understand as well howas the and resource under swhat and methodsconditions used. gastronomic More generally, confraternities the aim will of thisbecome paper resourcesis to understand at the service how and of undertourism what strategi conditionses and projectsgastronomic in rural confraternities areas. will becomeWe resourceswill look atclosely the service at the ofanalysis tourism of strategi variouses sit anduations projects where in rural campaigns areas. and strategies are We willbeing look developed closely atfor the promoting analysis ofLAPs various for tourismsituations purp whereoses, campaigns concentrating and strategiesmore specifically are beingon developed the analysis for of promoting three abbey LAPs beers for (Orval, tourism Chimay purposes, and Rochefort)concentrating of themore Walloon specifically Region of on theBelgium. analysis of three abbey beers (Orval, Chimay and Rochefort) of the Walloon Region of Belgium.We will first review the types of activities and tourism campaigns in which the confraternities We willinvest first their review energies the types locally. of activities Next, we and will to urism analys campaignse the rituals in which of enthronement the confraternities of the new investmembers their energies of these locally. associations, Next, we in order will analys to discovere the rituals how they of enthronementparticipate in of stimulating the new the membersimagination of these of associations,tourists and in in constructing order to discover individ howual, collective they participate and territorial in stimulating identities. the imaginationBeyond of the tourists challenges and in linked constructing to marketing individ bothual, collective products and and territorialtheir territory, identities. we will show Beyondwhy the the challenges events organised linked to by marketing these confraternities both products play and a roletheir in territory, the production we will ofshow images, why the events organised by these confraternities play a role in the production of images, Myttenaere B., Regional Science Inquiry Journal, Vol. V, (2), 2013, pp. 163176 165 symbols and focal points for identity, thereby contributing not only to the appeal of the region but also to the creation or reinforcement of the potential for leadership of the actors involved in these carefully staged events. The task will therefore be to analyse the symbolic and socio political functions of the rituals of enthronement. We will show that the territorial leadership enjoyed by certain confraternities is strengthened by the creation of veritable networks both within and outside the often significant economic and political powers. Beyond the structure and operation of the confraternity itself, the objective is to gain an understanding of its social and economic function within its environment. In the first instance, we will illustrate this potential power by presenting and analysing major elements that characterise the range of influence of the confraternities. Next, we will observe the varying degrees of intensity of the power and influence they wield within the various territories under study, and to explain the conditions necessary to render that power effective. While certain confraternities enjoy the support of public and private actors and gain access to resources that generate tourism development projects, their ability to mobilise these resources differs. Finally, the hypotheses regarding the dynamics observed will be sketched out on the one hand from the perspective of the various sociocultural contexts, and on the other hand in light of the role played by the other actors involved in producing abbey beers, namely, the monks, whose attitude to tourism is, as we shall see, somewhat unusual.
Method The approach we have taken in order to fulfil these objectives is to proceed via an empirical analysis of a qualitative nature (Kaufmann, 1996; Decrop, 1999; Finn et al., 2000; Miles and Huberman, 2003; Hannam and Knox, 2005; Paille and Mucchielli, 2008) based in particular on theories of territorial socioeconomic and of economic sociology (Granovetter, 1985; Massey, 1995; Colletis et al., 1999; Gilly and Torre, 2000; Granovetter, 2000; Pecqueur and Zimmermann, 2004; Gilly and Lung, 2004). This research is based on a heterogeneous body of qualitative data (texts, narratives, images), gathered through semistructured interviews and field observations. The interviews (around thirty people questioned across three regions) were conducted principally with officeholders in the gastronomic confraternities as well as with the main actors in the tourist institutions of the regions in question. These interviews, of variable length (between half an hour and an hour and a half), conducted between 2010 and 2012, were designed to obtain information about perceptions, representations and practices of the local actors concerned by the tourist promotion of LAPs. These data were supplemented by a review of the regional press, of documents on the history of the regional economy, as well as of the narrative and iconographic details collected during the public enthronement rituals of the gastronomic confraternities. These qualitative data taken together were subjected to a thematic analysis using the qualitative analytical software ‘Nvivo’. Presentation of the territories and resources The analysis here focuses on the valorisation among tourists of the Trappist beers of Chimay Orval and Rochefort, three Cistercian abbeys located in the Walloon towns of the same names. These Trappist beers are local agrifood products that have several features in common: they are the same type of product (beer), their producers share a common identity (Trappist Cistercian monks), and they have the same legal status (resources belonging to private actors) and are produced using the same methods and approaches, and finally, they bear the name of the territory where they are produced. However, the sociocultural, economic and tourist contexts from which they emerged are different. Chimay is a rural commune located in the south of the province of Hainaut, with a population of around 10,000 and covering an area of nearly 200 km². The economy of the Chimay area, and more generally that of the ‘Boot’ of Hainaut, has historically been very closely linked to the iron and steel industry, as a result of which it faced serious socioeconomic difficulties starting in the 1970s, when the old heavy industry sector began to decline. Tourism plays a secondary role in the economy of this region, linked mainly to the tertiary public sector and agrifood industries. Orval is a rural commune in the South of the province of Luxembourg (South of Wallonia) situated in the agro geographical area of the Gaume, which is the most southern region of
166 166 MyttenaereMyttenaere B., Regional B., Regional Science Science Inquiry Inquiry Journal, Journal, Vol. V, Vo (2),l. V, 2013, (2), pp.2013, 163176 pp. 163176
Wallonia,Wallonia, covering covering an area an area of nearly of nearly 750 750 km² km² with with some s ome 45 000 45 000 inhabitants. inhabitants. Economy Economy of of GaumeGaume is mainly is mainly based based on silviculture, on silviculture, agriculture agriculture and, and,to a lesserto a lesser extent, extent, tourism. tourism. RochefortRochefort is a isrural a rural commune commune in the in provincethe province of Nam of Namur, withur, withsome some 12,000 12,000 inhabitants inhabitants and and coveringcovering an area an areaof 165 of km².165 km². Since Since the second the second half halfof the of 20 theth century,20th century, Rochefort Rochefort has enjoyedhas enjoyed considerableconsiderable tourist tourist flows. flows. The Thegrottoes grottoes of Han, of Han, a major a major attraction attraction that thatdraws draws over over350,000 350,000 visitorsvisitors annually, annually, began began to be to developed be developed as a astouri a tourist destinationst destination in the in beginningthe beginning of the of 19theth 19th century,century, and stilland constitutesstill constitutes one ofone the of major the major tourist tou sitesrist sitesof the of region the region and isand among is among the most the most frequentedfrequented in Wallonia. in Wallonia. Tourism Tourism is one is ofone the of chiefthe chief economic economic resources resources for thisfor destination,this destination, alongsidealongside forestry, forestry, the extraction the extraction of rock of rockand otheand rothe materialsr materials from from the nearby the nearby quarries, quarries, and theand the agrifoodagrifood industry. industry. GastronomicGastronomic confraternities confraternities are localare local associations associations comprising comprising persons persons who whoparticipate participate in the in the valorizationvalorization of LAPs, of LAPs, their their members members designated designated thro ugh thro ugh a series a series of enthronement of enthronement rituals. rituals. “The“The gastronomic gastronomic confraternities, confraternities, in a in spirit a spirit of fr ofiendship friendship and and fraternity, fraternity, share share a common a common desiredesire to rediscover to rediscover their their roots roots while while helping helping to p rotectto protect their their region. region. They They have have assumed assumed the the task taskof “nurturing of “nurturing their their attachment attachment to their to their territ territory andory itsand riches, its riches, and helpingand helping to promote to promote it” it” (Delairesse(Delairesse and Elsdorf,and Elsdorf, 2006, 2006, p.4). p.4). TheseThese associations associations may maybe involved be involved in events in events and acandtivities activities for touristsfor tourists that thatare intendedare intended to to promotepromote local local agrifood agrifood products, products, such such as local as local fest ivals, festivals, food food markets, markets, and and other other events events featuringfeaturing products products and emphasisingand emphasising their their importance importance locally. locally. AmongAmong such such public public events, events, the ritualsthe rituals of enthroning of enthroning new newmembers members are spectaclesare spectacles that appealthat appeal to tourists,to tourists, thus thusparticipating participating in marketing in marketing not onnotly onthely products the products but alsobut alsothe territory the territory itself. itself. It It is clearis clear that thethat sociocultural, the sociocultural, political political and ideandntity identity stakes stakes involved involved are high. are high.
The The ritual ritual enthronement enthronement of new of new members members of gastronom of gastronomic confraternities:ic confraternities: between between territorialterritorial marketing, marketing, identity identity construction construction and andregional regional elites elites strategies strategies The The ritual ritual enthronement enthronement practised practised by the by three the three gast ronomic gastronomic confraternities confraternities studied studied share share a a commoncommon foundation: foundation: a staging a staging that that regulates regulates down down to the to finest the finest detail detail the positions the positions and and distancesdistances that arethat aare spatial a spatial translation translation of a ofpree a preexistingxisting or temporary or temporary hierarchy; hierarchy; codes codes (verbal (verbal and and musical); musical); rhetorical rhetorical forms; forms; and andthe visual the visual styl es styl ofes the of principal the principal actors actors (posture, (posture, facial facial expressions,expressions, clothing, clothing, jewellery, jewellery, ornaments, ornaments, etc.). etc.). We We offer offer an analysis an analysis and and overall overall interpretationinterpretation of the of three the three case casestudies. studies. ThroughThrough the enthronement the enthronement of new of new members, members, the gastro the gastronomicnomic confraternities confraternities designate designate the the peoplepeople who who will will attend attend the various the various gastronomic gastronomic even events organisedts organised beyond beyond the regional the regional and and nationalnational boundaries, boundaries, thus thushelping helping to promote to promote the pr theoducts products they theyrepresent, represent, in this in casethis caseTrappist Trappist beers,beers, outside outside their their local local territory. territory. In spite In spite of their of t heirconvivial convivial nature, nature, the enthronements the enthronements follow follow a precisea precise and andearnest earnest ritual. ritual. Accompanied Accompanied by grandi by grandiose music,ose music, the Grand the Grand Master Master and andthe the membersmembers make make their their ceremonial ceremonial entrance, entrance, dressed dressed in gowns in gowns of thick of thick scarlet scarlet cloth cloth on which on which rest therest chainsthe chains and medalsand medals bearing bearing the coatthe coatof arms of arms of the of association.the association. Once Once mounted mounted on a on a stagestage facing facing the public,the public, the Grandthe Grand Master Master inaugurat inaugurates thees ceremony.the ceremony. If the If openingthe opening speech speech is is the placethe place to recall to recall the missionthe mission of the of confraternitthe confraternity andy theand prestigethe prestige of the of Trappistthe Trappist beers, beers, it it also also serves serves as an as occasion an occasion for presenting for presenting the vario the various qualitiesus qualities and andmerits merits of the of candidate the candidate members.members. This Thisceremony ceremony is crucial, is crucial, since since it emphasi it emphasises theses seriousnessthe seriousness of the of eventthe event and theand the exclusiveexclusive and and selective selective nature nature of the of enthronement.the enthronement. The The confraternities confraternities only only enthrone enthrone a a limitedlimited number number of members of members per year,per year, a strategy a strategy that servesthat serves to enhance to enhance their their legitimacy legitimacy and toand to emphasiseemphasise how howrare rarean honour an honour it is itto isreceive to receive this designation.this designation. After After the wordsthe words of praise, of praise, the the futurefuture member member is subjected is subjected to a totaste a taste test intest order in order to evaluate to evaluate his skill his skillin testing in testing the Trappistthe Trappist productsproducts being being promoted. promoted. Only Only after after that, that, donning donning a cape a cape that that attests attests to his to hisfuture future membership,membership, is he is invited he invited by the by Grandthe Grand Master Master to ta toke tatheke oaththe oathof homage of homage and fealtyand fealty to the to the noblenoble cause cause of the of confraternity. the confraternity. In thisIn this type type of visual of visual spectacle, spectacle, none none of the of appea the appearancesrances are left are toleft chance: to chance: the elaborate the elaborate garments,garments, the gilded the gilded medals, medals, the coats the coats of arms, of arms, the Gothic the Gothic script script on the on diploma the diploma and aand sort a ofsort of authenticatingauthenticating decorum decorum are marshalledare marshalled to gain to gainrecog recognitionnition for the for heritagethe heritage aspect aspect of Trappist of Trappist beers.beers. The Thetone toneof voice, of voice, verbal verbal rhetoric, rhetoric, the appethe appearancearance of the of protagonists,the protagonists, the lightingthe lighting and and accompanyingaccompanying music music all play all play a decisive a decisive role role in cons in constructingtructing the event, the event, impressing impressing on it on a it a distinctivedistinctive style style that that cannot cannot but but affect affect the the way way the th spectatorse spectators receive receive the the message message (Bromberger,(Bromberger, 1990; 1990; Abdelmalek Abdelmalek and Chauvigne,and Chauvigne, 2001; 2001; De Myttenaere, De Myttenaere, 2011). 2011).
Myttenaere B., Regional Science Inquiry Journal, Vol. V, (2), 2013, pp. 163176 167
Territorial marketing actions The staging of these events, and all their constituent elements, are intended to evoke the historical depth of the products as well as of their producers (the Trappist monks); the effect is to emphasise the uniqueness of the products and to bear witness to the longstanding tradition of these beers. The aim of the enthronements is to promote the local product and give collective expression to the excellence of the region by stressing the noble and prestigious nature of the product and distinguishing these Trappist beers from other beers. These visual events thus serve in a sense to encapsulate the image that a geographical or social group wishes to project to its own members or the outside world. The gastronomic confraternities studied are concerned not so much to participate in improving the quality of the beer as to enhance quality at a symbolic level and create difference by reinforcing a certain image. This image conforms to the renewed notion of quality behind the production and valorization of monastic beers. By communicating these messages abundantly at the traditional, cultural and social levels, such discourses rely upon strategies of differentiation within a context of beerbrewing and tourism that is particularly competitive. The aim is thus first and foremost to create a world of gastronomic meaning that seeks to move away from the image of industrial production that is seen as inauthentic because it is regarded as the opposite of traditional artisanal production. Therefore in the ritual enthronements, those officiating emphasise the historical depth underlying the product by underscoring the continuity between the product, the history of the monks, and the confraternities. As long as the producer is a monk, the mythic dimension of the monastic milieu offers a narrative of spatiotemporal origins whose historical and cultural richness plays a key role in the symbolic and economic dimensions of the product. What is at play is a sort of transfer of authenticity and of the sacred, brought about notably by rituals of a Christian inspiration that participate in the traditional cultural image associated with both the product and its producers (De Myttenaere, 2013). As manufacturers, the monks are unusual in that they are not supposed, according to the Rule of St Benedict which they follow, to promote consumption, and thus should not resort to commercial strategies that are the stock in trade of capitalist society. By highlighting this traditional image, associated with the monastic world and conveyed in part by the confraternity, the monks appear to remain above any marketing approach. This discreet use of advertising by the monks should be understood in the light of the history and weight of “religion in western societies and the taboos that surround it, notably when it comes to commerce” (Lugrin and Molla, 2008, p.170).
Construction and political use of identity symbols What values are expressed by the rituals and festivities of the confraternities and what social significance should we assign to these events? Of the rituals, we can say that they participate first of all in consecrating a local legitimation of LAPs. The confraternities disseminate cultural models, and the method they use to promote the territory participate in the “heritagization” of Trappist beers. The ritual enthronements are, in other words, not merely commercial activities guided by marketing strategies. Rather, they are moments laden with sociocultural meaning and emotion for both actors and spectators. If the problem of economic attractiveness and tourism development plays an important part in this process, it can also be seen to have a role in terms of the construction of identity and of social representations. By putting forward local specificities and particularisms, the aim is to produce promotional discourses and images that help create a sense of belonging to a community and a territory. The link between the product and the territory is all the more direct given that these beers carry the name of the place where they are brewed. In this sense, the Trappist beers, with their added value for tourism, become not only territorial emblems but also serve as symbols, identity markers that enable local people to share a common interpretation of their area. On the other hand, the enthronement rituals as public events participate in and reinforce the visibility of the actors who take part in them, and render visible the boundary between those who have a right to appear “in full honours” and those who do not. The same is true within the group itself. One can frequently identify within the gastronomic confraternities a number
168 Myttenaere B., Regional Science Inquiry Journal, Vol. V, (2), 2013, pp. 163176 168 Myttenaere B., Regional Science Inquiry Journal, Vol. V, (2), 2013, pp. 163176 of actors who occupy privileged places in the social hierarchy, within domains as diverse as politics, economics or the media, at both local and regional levels. Seen from this perspective, of actors who occupy privileged places in the social hierarchy, within domains as diverse as the participants’ appearance and the decorum surrounding the proceedings are all ingredients politics, economics or the media, at both local and regional levels. Seen from this perspective, conceived as supporting the values they seek to celebrate, as well as political messages they the participants’ appearance and the decorum surrounding the proceedings are all ingredients wish to transmit. By taking part in these local festivities, displaying their attachment to their conceived as supporting the values they seek to celebrate, as well as political messages they local territory in order to render it attractive to tourists, and demonstrating their ability to wish to transmit. By taking part in these local festivities, displaying their attachment to their incarnate sociocultural emblems with strong powers of association and hence to arouse local territory in order to render it attractive to tourists, and demonstrating their ability to collective emotion, local actors place themselves in the limelight to ensure their public incarnate sociocultural emblems with strong powers of association and hence to arouse visibility. These actors present themselves as representing that which is constitutive of local collective emotion, local actors place themselves in the limelight to ensure their public identity, hoping thereby to win over the adherence of the local population and to enjoy a visibility. These actors present themselves as representing that which is constitutive of local renown that can establish or confirm their sociopolitical or economic authority locally. These identity, hoping thereby to win over the adherence of the local population and to enjoy a factors can thus contribute to constructing legitimacy and thereby to gain a form of power. In renown that can establish or confirm their sociopolitical or economic authority locally. These this sense, the rituals of enthronement are inscribed within economic and sociopolitical factors can thus contribute to constructing legitimacy and thereby to gain a form of power. In strategies. Seen from this angle, the promotion of territorial identities is not an end in itself, this sense, the rituals of enthronement are inscribed within economic and sociopolitical but is instrumentalized for political or economic trajectories and for the purposes of local strategies. Seen from this angle, the promotion of territorial identities is not an end in itself, development. Commitment to civil society contributes to accumulating moral capital that but is instrumentalized for political or economic trajectories and for the purposes of local appears to be a prerequisite to gaining status as a local notable. Given that our societies value development. Commitment to civil society contributes to accumulating moral capital that the spectacular, appearance in public does not merely crown fame that has already been appears to be a prerequisite to gaining status as a local notable. Given that our societies value achieved, serving as a way station or culmination of a “cursus honorum”, but can in fact be the spectacular, appearance in public does not merely crown fame that has already been the starting point for a recognition among actors who are only beginning to try to establish achieved, serving as a way station or culmination of a “cursus honorum”, but can in fact be their power (Bourdieu, 1982; Bromberger, 1990; Abdelmalek and Chauvigne, 2001; laferté, the starting point for a recognition among actors who are only beginning to try to establish 2008). These observations are in line with those whose research on the local development their power (Bourdieu, 1982; Bromberger, 1990; Abdelmalek and Chauvigne, 2001; laferté, (notably in France) shows that new forms of territorial leadership and new modes of action by 2008). These observations are in line with those whose research on the local development local politicians in the face of the practical reality of decentralisation are constructed by (notably in France) shows that new forms of territorial leadership and new modes of action by means of promoting local resources mobilised around projects of identity formation and local local politicians in the face of the practical reality of decentralisation are constructed by development (Garcia and Genieys, 2005; Koebel, 2000) means of promoting local resources mobilised around projects of identity formation and local Places of mediation between regional actors from a variety of socioprofessional backgrounds development (Garcia and Genieys, 2005; Koebel, 2000) Finally, by virtue of the bonds of sociability thus formed and their many ramifications, the Places of mediation between regional actors from a variety of socioprofessional backgrounds confraternities facilitate relationships among local and regional actors and in this sense Finally, by virtue of the bonds of sociability thus formed and their many ramifications, the constitute veritable places of mediation between actors from a variety of different socio confraternities facilitate relationships among local and regional actors and in this sense professional backgrounds. In this sense, the network of local associations, such as constitute veritable places of mediation between actors from a variety of different socio gastronomic confraternities, can also serve to mediate between the public authorities and professional backgrounds. In this sense, the network of local associations, such as segments of the (real or potential) electorate and thus constitutes a space for acquiring or gastronomic confraternities, can also serve to mediate between the public authorities and maintaining local power. segments of the (real or potential) electorate and thus constitutes a space for acquiring or By virtue of their multiple roots in local socioeconomic and political life and of the range of maintaining local power. responsibilities covered by their members, the structures of these associations, often made up By virtue of their multiple roots in local socioeconomic and political life and of the range of of the local elite, further reinforce their influence and can thus serve as crucial elements in responsibilities covered by their members, the structures of these associations, often made up making up local leadership and in facilitating local competitiveness and development. of the local elite, further reinforce their influence and can thus serve as crucial elements in In fact, authors who discuss the coordination of the economy of proximity and analyse making up local leadership and in facilitating local competitiveness and development. collective action, focusing notably on localised industrial districts and local production In fact, authors who discuss the coordination of the economy of proximity and analyse systems, stress the importance of networks of confidence and cooperation among territorial collective action, focusing notably on localised industrial districts and local production actors when it comes to the economic success of projects involving local competitiveness and systems, stress the importance of networks of confidence and cooperation among territorial development. This research shows that the areas where we see a close proximity between actors when it comes to the economic success of projects involving local competitiveness and actors with differing socioprofessional backgrounds but shared values are the areas marked development. This research shows that the areas where we see a close proximity between by a more pronounced culture of cooperation, facilitating the circulation of information actors with differing socioprofessional backgrounds but shared values are the areas marked among local networks and favouring access to socioeconomic, cultural and financial resources by a more pronounced culture of cooperation, facilitating the circulation of information (Marshall, 1919; Bagnasco, 1977; Becattini, 1990, 2003; Cooke and Piccaluga, 2006; Bouba among local networks and favouring access to socioeconomic, cultural and financial resources Olga and Grossetti, 2008; Courlet, 2008). (Marshall, 1919; Bagnasco, 1977; Becattini, 1990, 2003; Cooke and Piccaluga, 2006; Bouba Gastronomic confraternities of the Trappist beer : different implications for the political, Olga and Grossetti, 2008; Courlet, 2008). tourist and social spheres Gastronomic confraternities of the Trappist beer : different implications for the political, As we have seen, the confraternities are institutions made up of actors who may be involved tourist and social spheres in numerous aspects of the social, economic and political life of their local community, but As we have seen, the confraternities are institutions made up of actors who may be involved not all of these local actors are able to penetrate the networks to which these associations in numerous aspects of the social, economic and political life of their local community, but grant access. Becoming a member of a confraternity requires a selection process that leaves not all of these local actors are able to penetrate the networks to which these associations nothing to chance. Depending on the confraternity, the selection privileges local actors who grant access. Becoming a member of a confraternity requires a selection process that leaves already enjoy a certain legitimacy, social visibility and media appeal. For this reason, not all nothing to chance. Depending on the confraternity, the selection privileges local actors who local actors have the same capacity to play a part in producing the symbols and markers of the already enjoy a certain legitimacy, social visibility and media appeal. For this reason, not all local territory and identity, and as a result, to enjoy the social prestige that such processes can local actors have the same capacity to play a part in producing the symbols and markers of the local territory and identity, and as a result, to enjoy the social prestige that such processes can MyttenaereMyttenaere B., Regional B., Regional Science Science Inquiry Inquiry Journal, Journal, Vol. V, Vo (2),l. V, 2013, (2), 2013,pp. 163176 pp. 163176 169 169 generate.generate. Moreover, Moreover, each each confraternity confraternity has ahas differ a different wayent wayof acting of acting locally, locally, not allnot of all them of them enjoyingenjoying the same the same field field of influence. of influence. AlthoughAlthough our analysesour analyses tell ustell more us more about about the toolsthe tools and andmodes modes of constructing of constructing visibility visibility and and gaininggaining the recognitionthe recognition of local of local elites elites than thanabout about the precisethe precise effects effects these these can have,can have, our caseour case studiesstudies do reveal do reveal important important contrasts contrasts among among differe different areasnt areas when when it comes it comes to the to role the role and and influenceinfluence of the of gastronomicthe gastronomic confraternities. confraternities. While While some some confraternities confraternities enjoy enjoy the supportthe support of of publicpublic and andprivate private actors actors and andhave have access access to resour to resources thatces thatgenerate generate tourist tourist development, development, not not all ofall them of them have have this this possibility. possibility. These These contrasts contrasts can can be observed be observed through through a series a series of of indicatorsindicators set out set inout the in table the table below. below.
TABLETABLE I: Various I: Various indications indications of the of local the local influence influence of gastronomic of gastronomic confraternities confraternities
Level Levelof of IntensityIntensity of of SocioSocio involvementinvolvement of of Place Placeof of attendanceattendance at at professionalprofessional LogisticalLogistical – –Logistical Logistical – – the the enthronemententhronement the the ConfraternitiesConfraternities Food Foodresources resources affiliationsaffiliations of of economiceconomic economiceconomic confraternityconfraternity in in of theof new the newenthronement enthronement being beingpromoted promoted the membersthe members of of supportsupport by local by localsupport support by the by the the localthe local membersmembers of the of of the new of members new members the the authoritiesauthorities Trappist Trappist monks monks tourismtourism and and confraternityconfraternity of theof the confraternitiesconfraternities culturalcultural confraternityconfraternity campaignscampaigns
TrappistTrappist beer beer MajorMajor ImportantImportant At theAt abbey the abbey of Between of Between 450 450Significant Significant Significant Significant The The from fromOrval Orval involvement involvement positions positions in the in theOrval Orval and 500and people 500 people financial financial and andfinancial financial and and confraternityconfraternity of of cultural,cultural, logisticallogistical logisticallogistical the Sossonsthe Sossons d’Orvauxd’Orvaux politicalpolitical and and contributioncontribution contribution contribution (Orval)(Orval) sociosocio economiceconomic sectorssectors of their of their regionregion
TrappistTrappist beer beer MajorMajor ImportantImportant At theAt castle the castle of Between of Between 450 450Significant Significant Significant Significant JuradeJurade and cheesand chees from frominvolvement involvement positions positions in the in the the Princes the Princes of and of 500and people 500 people support support by byfinancial financial and and PrincièrePrincière ChimayChimay cultural,cultural, ChimayChimay publicpublic actors actors logistical logistical (Chimay)(Chimay) politicalpolitical and and responsibleresponsible for contributionfor contribution sociosocio tourismtourism economiceconomic sectorssectors of their of their regionregion The The confraternityconfraternity of of the Grusallethe Grusalle Trappist Trappist beer beer LittleLittle MajorityMajority of ofIn theIn back the backBetween Between 30 30No supportNo support No supportNo support and ofand the of thefrom fromRochefort Rochefort involvement involvement local localrestaurant restaurant room roomof a of anda 50and people 50 people TrappistTrappist beer of beer of RochefortRochefort ownersowners and andrestaurant restaurant in in shopkeepersshopkeepers Rochefort Rochefort
The The ‘Jurade ‘Jurade Princière’ Princière’ (Chimay) (Chimay) : a : confraternity a confraternity that that is very is very involved involved in tourist in tourist projectsprojects The Thelocal local confraternity confraternity in Chimay, in Chimay, known known as the as ‘Jutherade ‘Ju radePrincière’ Princière’ (princely (princely order order of sworn of sworn members),members), counts counts several several hundred hundred members members with with a var aying varying degree degree of involvement: of involvement: there there are are permanentpermanent members members and othersand others who whoare just are enthronedjust enthroned for a for day, a day,the positionthe position of whom of whom differs differs dependingdepending on the on level the level of responsibility of responsibility they they hold holdwithin within the association the association and and the extent the extent of of theirtheir participation participation in the in collectivethe collective activities activities that th areat necessaryare necessary for thefor maintenancethe maintenance and and smoothsmooth operation operation of the of theconfraternity confraternity (preparing (preparing the thfestivities,e festivities, organising organising the theactivity, activity, participatingparticipating in the in General the General Assemblies, Assemblies, keeping keeping the treasury’s the treasury’s accounts, accounts, etc.). etc.). The TheJurade Jurade Princière Princière is not is onlynot only very very active active in org inanising organising and and carrying carrying out campaignsout campaigns and and eventsevents that thatserve serve as a asmagnet a magnet for touristsfor tourists in the in ptherincipality principality of Chimay, of Chimay, but alsobut alsoin managing in managing and andcollecting collecting the fundsthe funds needed needed for holdingfor holding these these events. events. This This confraternity confraternity was wasfounded founded in in 19861986 on the on 500 the th 500 anniversaryth anniversary of the of Principalitythe Principality of Chimay, of Chimay, at the at initiative the initiative of the of formerthe former directordirector of events of events policy policy at the at Chimaythe Chimay brewery brewery and andof local of local actors actors that thatinclude include members members of of the familythe family of the of princesthe princes of Chimay. of Chimay. The The origin origin of the of Juradethe Jurade Princière Princière should should thus thus be be understoodunderstood from from the perspectivethe perspective of the of commercialthe commercial strategies strategies of the of Chimaythe Chimay brewery, brewery, carried carried forwardforward by local by local actors; actors; this thisexplains explains why whythis thisconfraternity confraternity promotes promotes only only the Trappistthe Trappist beer, beer, and and secondarily secondarily Chimay Chimay cheese. cheese. Among Among the events the events and and activities activities in which in which the association the association
170 Myttenaere B., Regional Science Inquiry Journal, Vol. V, (2), 2013, pp. 163176 170 Myttenaere B., Regional Science Inquiry Journal, Vol. V, (2), 2013, pp. 163176 170 Myttenaere B., Regional Science Inquiry Journal, Vol. V, (2), 2013, pp. 163176 takes an active part, some are more specifically aimed at local people, and in such cases the profitstakes an generated active part, are distributedsome are more to charitable specifically org anisationsaimed at localor invested people, in and educational in such casesprojects. the takesprofitsThe an activepresent generated part, head some areof thedistributed are gastronomic more tospecifically charitable confraternity ai orgmedanisations atis thelocal Prince orpeople, invested of andChimay, in in educational such and cases the projects.majority the profitsofThe generated its present members headare distributed areof the professionally gastronomic to charitable involvedconfraternity organisations to varyi is theorng invested Prince degrees of in inChimay, educational the social, and projects.the cultural majority or The politicalofpresent its members headlife ofof Chimaythe are gastronomic professionally and hold confraternity (or involved held) importa tois the varyint Prince positions:ng degrees of Chimay, heads in theof and tourist social, the majority and cultural cultural or of itspoliticalassociations members life (Tourist areof Chimay professionally Office, and libraries,hold involved (or held)cultural to importa varyi centres),ngnt degreespositions: sports clubs, in heads the members social,of tourist of cultural theand Chamber cultural or politicalofassociations commerce, life of Chimay (Tourist heads andof Office, the hold local libraries, (or social held) cultural welfareimporta coffintentres), positions:ce, firefighters, sports heads clubs, etc.of members tourist It would and of seem thecultural Chamber that just associationsaboutof commerce, every (Tourist local heads Office, association of the libraries, local is represented social cultural welfare centres), within offi ce,itssports ranks.firefighters, clubs, members etc. It wouldof the seemChamber that just of commerce,Theabout enthronement every heads local of association theceremonies local social is andrepresented welfare other events offi withince, that firefighters, its m ranks.ark its calendar etc. It would take seemplace thatat the just castle aboutofThe every Chimay, enthronement local indicating association ceremonies a closeis represented proximity and other within toevents the its prin that ranks.cely mark family its calendar that is especially take place valued at the bycastle the The localofenthronement Chimay, inhabitants. indicating ceremonies The a festivities close and proximity other surrounding events to thethat theprin m arkenthronementscely its family calendar that aretakeis especially promotedplace at the valued via castle the by local the of Chimay,andlocal regional inhabitants. indicating press a The andclose festivitiesthrough proximity the surrounding touristto the prinorganisa cely the enthronementsfamilytions, thus that attestingis especially are promoted to a valueddesire via onby the the local part localofand inhabitants. the regional confraternity press The festivitiesand to throughlend these surrounding the events tourist a theorganisa tourist enthronements dimension.tions, thus are attestingThe promoted closing to a banquetsdesire via the on local ofthe these part and regionalceremoniesof the confraternity press have and athrough to large lend attendance,the these tourist events organisa with a tourist moretions, dimension. than thus 500attesting guestsThe toclosing a annually desire banquets on – the that partof is, these the of themaximumceremonies confraternity number have to aoflend largepeople these attendance, that events the banquetinga tourist with more dimension. hall than can accommodate.500 The guests closing annually banquetsLike the – confraternityof that these is, the ceremoniesofmaximum the Sossons have number a d’Orvaux large of people attendance, at that Orval, the with thebanqueting persons more than hall enthr 500conedan accommodate. guests are selected annually Like for – their the that confraternity renown is, the and maximummembershipof the number Sossons in of d’Orvauxpolitical people thatand at the Orval,economic banqueting the circles.persons hall Itc enthran sh accommodate.ouldoned also are be selected emphasised Like forthe theirconfraternity that renown the Jurade and of thePrincièremembership Sossons receives d’Orvaux in political logistical at Orval,and support economic the personsand circles.sponsorsh enthr Itoned ipsh ouldfrom are also the selected Groupe be emphasised for Chimay their renown asthat well the andas Jurade from membershiplocalPrincière actors in receives politicalresponsible logistical and for economic tourism. support circles.and sponsorsh It shouldip fromalso thebe emphasisedGroupe Chimay that asthe well Jurade as from Princièrelocal receivesactors responsible logistical supportfor tourism. and sponsorsh ip from the Groupe Chimay as well as from localThe actors Sossons responsible d’Orvaux: for tourism. a gastronomic confraternity that is very involved in the local networkThe Sossons of associations d’Orvaux: a gastronomic confraternity that is very involved in the local The Thenetwork Sossons confraternity of d’Orvaux: associations of a the gastronomic ‘Sossons d'Orvaux’ confraternity compris thates is more very than involved a hundred in the local local and networkregionalThe of confraternity associations actors who of come the ‘Sossons together around d'Orvaux’ the touris compristic esvalorization more than of a the hundred Trappist local beer and of The Orval.regional confraternity This actors confraternity of who the come ‘Sossons togetheris involved d'Orvaux’ around in organising compristhe tourisestic moreevents valorization than and a festivities hundredof the Trappist with local a and beer tourist of regionaldimensionOrval. actors This who and confraternity participatescome together is in involved around regional the in events organisingtouris tic of valorization si gnificance events and of for festivitiesthe the Trappist agricultural with beer a of tourist sector Orval.(marketsdimension This confraternityof andlocal participates products is involved and in farmers’ regional in organising markets). events ofT events he si gnificanceconfraternity and festivities for is thealso with agriculturalparticularly a tourist sectoractive dimensionin(markets philanthropic and of participateslocal actionsproducts in and and regional projects.farmers’ events markets). For ofinstance si gnificanceThe, confraternity it participates for the is agricultural inalso preparing particularly sector meals active in (marketssheltersin philanthropic of localfor the products homeless actions and andandfarmers’ financially projects. markets). For supports instanceThe confraternity several, it participates local is charities also inparticularly preparingsuch as centresactive meals for in in philanthropicwomenshelters whofor the actionsare homeless victims and ofand projects. domestic financially For violence, instance supports for, it several per participatessons local suffering charities in preparing from such addictions as meals centres in or for sheltersindigentwomen for the whoelderly homeless are persons.victims and ofThefinancially domestic philanthropic supportsviolence, activit several fories per whichlocalsons charities sufferingthe confraternity such from as addictions centresundertakes for or arefor womenregularlyindigent who are elderlythe victimssubject persons. of mediadomestic The philanthropiccoverage violence, and for activitare permeniessonstioned which suffering in the its confraternity website, from addictions thereby undertakes reinforcing or for are indigenttheregularly reputationelderly the persons. subject and legitimacy ofThe media philanthropic of coverage this organisation activitand areies men whosewhichtioned mandatethe in confraternity its website,extends fartherebyundertakes beyond reinforcing thoseare of regularlypromotingthe reputation the subject the andlocal of legitimacy mediaTrappist coverage beer. of this and organisation are mentioned whose in mandate its website, extends thereby far beyondreinforcing those of the reputationLikepromoting the and Chimaythe legitimacylocal confraternity,Trappist of this beer. organisation the members whose of mandate the Sossons extends d’Orvaux far beyond hold those important of promotingpositionsLike thethe inlocal Chimay the Trappist cultural, confraternity, beer. political and the socioecon members omic of the sectors Sossons of their d’Orvaux region. hold In this important regard, Likepositionswe the may Chimay mention in the confraternity,cultural, for instance political that the andthe members currentsocioecon ofhead theomic o f Sthe ossonssectors confraternity of d’Orvaux their region.is hold also theIn important this director regard, of positionsthewe mayTourist in themention Officecultural, for (Maison politicalinstance du andthat Tourisme), socioeconthe current whichomic head is sectors otfhe the principal confraternityof their public region. is structure alsoIn this the regard, responsibledirector of we mayforthe organisingTouristmention Office for and instance promoting(Maison that du tourismthe Tourisme), current on a head regionalwhich of isthe scale. the confraternity principal public is also structure the director responsible of the TouristThefor organising enthronements Office (Maisonand promoting conducted du Tourisme), tourism by the Orval onwhich a regional confratern is the scale.principality take public place instructure the abbey responsible of Orval and for organisingdrawThe enthronements a large and audience, promoting conducted particularly tourism by onthe fora Orval regional the annualconfratern scale. banquets. ity take This place attests in the to abbey a close of Orvalproximity and The betweendrawenthronements a large the region’s audience, conducted population particularly by the andOrval for the confraternthe abbey, annual confity banquets.irmed take place by Thisthe in testimony theattests abbey to by aof close theOrval head proximity and of the drawlocalbetween a large confraternity: theaudience, region’s particularly“Whether population someone for and the the annual is abbey, politicall banquets. confyirmed on theThis by left theattests or testimony the to righta close byis alltheproximity thehead same of the to betweenus,local political the confraternity: region’s conflicts population “Whether and differences and someone the abbey, of is opinion politicall confirmed arey on leftby the theat left home.testimony or theWhat rightby binds the is headall us theis of first samethe and to foremostus, political Orval conflicts and theand Gaumedifferences region of 1opinion .” While are theleft enthronementsat home. What andbinds other us is festivities first and local confraternity: “Whether someone is politicall1 y on the left or the right is all the same to us, politicalconnectedforemost conflicts Orvalto the andandconfraternity thedifferences Gaume are of regionpublic, opinion .”the are While clos lefting theat banquets home. enthronements What are strictlybinds and usreserved otheris first festivities forand local foremostconnectedactors Orval (members to and the theconfraternity of theGaume confraternity region are public,1 .” and While the a fewclos the ing gues enthronements banquetsts). These are are strictly and occasions other reserved festivities intended for local to connectedfavouractors to (membersconvivial the confraternity exchange: of the confraternity are “it public,is an opportunity the and clos a ing few to banquets guessee ts).friends are These fromstrictly are the occasionsreserved region andfor intended localto have toa nicefavour time convivial together exchange: sitting down “it is with an opportunity a good Orval to seebeer” friends2. Given from this the testimony, region and one to haveof the a actors (members of the confraternity and a few guests). These2 are occasions intended to favourniceessential convivial time aspects together exchange: of sittingthe banquets“it downis an opportunityarewith the a chancegood to Orval seeto form friends beer” and .from renewGiven the bondsthis region testimony, between and to actorshaveone ofa from the nice theessentialtime political, together aspects economic,sitting of the down banquets media with areanda good the other chance Orval local tob eer” circform2les. andGiven of renew the this region, bondstestimony, between gathered one actorsof around the from an essentialelementthe political,aspects that of makes economic, the banquets sense media to are them the and chance all: other Orval to local form beer. circ and Tleshe renew meal of the bonds contributes region, between gathered to actors developing around from and an the political,maintainingelement that economic, the makes internal sense media bonds to and themamong other all: the local Orval elite circ beer.of lesthe TGaume, ofhe the meal region,and contributes thus gathered it could to developing aroundbe said that an andthe elementconfraternitymaintaining that makes the of internal sense the Sossons to bonds them d'Orvaulxamong all: Orval the achieveselite beer. of T the he the mealGaume, objective contributes and ofthus maintaining itto could developing be said local andthat social the maintainingbonds.confraternity the internal of the bonds Sossons among d'Orvaulx the elite achievesof the Gaume, the objective and thus ofit could maintaining be said that local the social confraternitybonds. of the Sossons d'Orvaulx achieves the objective of maintaining local social bonds. 1 Interview realized with the Grand Master of the Sossons d’Orvaux confraternity, Orval, April 2012. 21 InterviewIbidem. realized with the Grand Master of the Sossons d’Orvaux confraternity, Orval, April 2012. 2 1 Ibidem. Interview realized with the Grand Master of the Sossons d’Orvaux confraternity, Orval, April 2012. 2 Ibidem. Myttenaere B., Regional Science Inquiry Journal, Vol. V, (2), 2013, pp. 163176 171
The confraternity of the Grusalle and of the Trappist beer of Rochefort has a low level of involvement in local tourist or charitable activities Contrary to what we have observed for the territories of Chimay and Orval, the local confraternity of Rochefort has a very low level of involvement in the valorization of LAPs to tourists, and does not take part in any local project of a social or charitable nature. The activities they engage in are limited to their presence at a small number of local events, but they are neither their initiators nor directly involved in their organisation. Like the two other confraternities, this one holds an annual “Chapter” at which new members are enthroned. Although the enthronements are advertised by the tourist organisations in Rochefort and via the confraternity’s website, the banquet held on the occasion involves less than fifty people, made up largely by local restaurant owners and shopkeepers. However, the confraternity of the Grusalle has no existence outside its own circles, and in this regard differs radically from those of Chimay and Orval. How are we to understand and interpret these differences among the confraternities? Why are the gastronomic confraternities of Orval and Chimay important local institutions in terms of their territorial leadership, while that of Rochefort seems to play only a minor role in the dynamics of tourism development? To seek to answer this question, we believe it is important to bear several factors in mind: the economic weight of the resource being promoted in a socioeconomic context that is specific to each territory and the social legitimacy of the associations’ members of appear to be decisive. Certainly these interpretations can only be regarded as hypotheses that require further research to confirm, nuance or disprove.
On the socioeconomic and cultural importance of Trappist monks and beers Our observations of the territories under study here suggest that the influence of confraternities and the local leadership which they engender should, in our view, be interpreted from the perspective of the socioeconomic and cultural importance of the Trappist monks and their food products. It seems that where the monks as producers carry considerable economic weight, the confraternities are seen as strategic networks by certain local actors who therefore seek to join them because of the many economic, political and sociocultural opportunities they are likely to offer.
In Chimay, thanks to the significant economic growth of the abbey, owing notably to the commercial success of its Trappist products, the Groupe Chimay (a limited company owned by the monks) is one of the principal job providers of the region, and its turnover places it among the top 100 enterprises in Wallonia. The Groupe Chimay is made up of some ten subsidiaries active at local levels in the agrifood, tourism and cultural sectors as well as in sustainable development. The monks control nearly all the principal sectors that provide jobs in this region. The Groupe Chimay has set up a museum space, the Espace Chimay, dedicated to the history of the Trappist monks and their production methods, as well as a restaurant, the Auberge du Poteaupré, that serves and sells monastic products; these are the two main tourist attractions included on most organized tours of the region.
As in Orval so in Chimay, the monastery and the interpretation centre devoted to its Trappist products, the Atelier Frère Abraham, are the principal tourist attractions of the region. The majority of tourist flows to this region are concentrated on the abbey site, which hosts numerous services (interpretation centre, guided tours of the ruins of the medieval abbey, signposted walks, accommodation, etc.). Not only do Orval abbey, its products and activities occupy a significant place in tourism and the economy of the region, but the Trappist products are also regarded by numerous local actors as cultural objects and markers. Many of those interviewed in the course of this field study expressed a sincere attachment to these products, as is evident from the testimony of a local restaurant keeper: “a good Gaume resident absolutely must drink Orval beer – someone who does not appreciate Orval is someone who is not really one of us”. In both Orval and Chimay, the processions that mark the opening of the festivities for the enthronement of new members of their respective gastronomic confraternities move along the streets with great pomp and ceremony, thus underscoring the
172 Myttenaere B., Regional Science Inquiry Journal, Vol. V, (2), 2013, pp. 163176 172 Myttenaere B., Regional Science Inquiry Journal, Vol. V, (2), 2013, pp. 163176 public and demonstrative intent of the organisers. In Chimay, the procession starts at the publicvillage and church demonstrative and ends intent at the of castle the organisers. of Chimay, In wh Chimay,ile the one the processionin Orval ends starts at the at theabbey, villagewhere church the enthronementsand ends at the are castle held. of The Chimay, choice wh of ilethe these emblematicone in Orval locations ends at isthe significant abbey, in whereitself, the enthronements inasmuch as the are castle held. andThe princelychoice of family these emblematicas well as thelocations abbey is and significant its monks in are itself,linked, inasmuch in the as thecollective castle and memory princely of thefamily local as wellpopul asations, the abbey to the and spatial its monks stability are and linked,permanence in the collectiveof the group, memory two dimensions of the local that populHalbwaations,chs considers to the spatial central stabilityto the process and of permanenceconstructing of the individualgroup, two anddimensions collective that Halbwa identitieschs (considersHalbwachs central 1994). to the By process using of these constructingemblematic individual places, the and local collective actors stress identities not only ( Halbwachsthe religious 1994).dimension By and using nobility these of the emblematicTrappist places, products, the butlocal also actors their stress roots notin the only terr theitory religious and their dimension links to identityand nobility in the of two the rural Trappistareas products, where the but Catholic also their francophone roots in the party territory has, andeve rtheir since links the nineteenthto identity incentury, the two occupied rural a areascentral where place the Catholic in the political francophone landscape. party Whilehas, eve ther sinceheritage the dimensionnineteenth associatedcentury, occupied with Trappist a centralproducts place inmeans the political that the landscape.gastronomic While confraternities the heritage and dimension the monks associated help create with or Trappist reinforce a productssense means of belonging that the andgastronomic impact onconfraternities the territorial and em theblems monks and help points create of reference or reinforce for alocal senseidentity, of belonging it should and nevertheless impact on thebe noted territorial that emtheblems confraternities and points are of only reference one possible for local outlet identity,for the it shouldexpression nevertheless of identity be formation, noted that asthe the confraternities actors often haveare onlya number one possible of other outlet means of for theexhibiting, expression expressing of identity and formation, constructing as thetheir ac identtors oftenities. haveThe placea number of Trappist of other products means ofin the exhibiting,production expressing of social and and constructing local identity their differs ident amoities.ng The our placethree caseof Trappist studies. products in the production of social and local identity differs among our three case studies. Unlike the dynamics observed in the Chimay and Orval regions, the Trappist monks and their Unlikeproducts the dynamics in Rochefort observed play in a thesecondary Chimay socioeconom and Orval regions,ic role, the from Trappist the point monks of andview their of both productsthe agrifood in Rochefort sector play and aof secondary tourism. Althoughsocioeconom the icTr appistrole, from products the point are presentof view among of both other the agrifoodfood items sector in the and communication of tourism. Although strategies the of theTrappist local touristproducts industry, are present they neverthelessamong other play foodonly items a in secondary the communication role in the strategies strategies of andthe local campaig touristns industry, of local development.they nevertheless Contrary play to onlyChimay a secondary and Orval, role inRochefort’s the strategies local and marketing campaig stratns egies of local do development.not rely on the Contrary valorization to of Chimayconcepts and Orval,such as Rochefort’s authenticity, local products marketing of the strat locaegiesl terroir do notor villagerely on social the valorization life, all aspects of of conceptscollective such asimagination authenticity, generally products associated of the loca withl terroir rural orareas. village The social tourist life, appeal all aspects of Rochefort of collectiveand the imagination resultant influx generally of visitors associated derive with essenti ruralally areas. from Thethe keytourist attractions appeal ofsuch Rochefort as the caves and theand resultantgrottoes influxthat are of the visitors legacy derive of karstic essenti phenomeally fromna, the as keywell attractions as kayaking such on asthe the Lesse caves River and grottoes– an important that are economicthe legacy resourceof karstic for phenome tourismna, in as Wal welllonia as kayaking (De Myttenaere on the Lesse and River d’Ieteren, – an2009). important The influence economic of resource the Trappist for tourismabbey and in its Wal foodlonia products (De Myttenaere on the economy and d’Ieteren, of Rochefort 2009).is lessThe importantinfluence ofbecause the Trappist the monks abbey do and not its take food par productst in the oneconomic the economy dynamics, of Rochefort not wishing is lessto importantget involved because in the thetourist monks sector. do notVisits take to par thet abbeyin the economicare not in dynamics,fact allowed, not nor wishing is there a to getmonastery involved storein the or tourist museum sector. dedicated Visits to thitse productsabbey are. In not a contextin fact allowed,where the nor monks is there stay a out monasteryof local store economic or museum activities, dedicated we canto its observe products that. In t hea context confraternity where isthe composed monks stay largely out of of localmembers economic of the activities,artistic and we creative can observe layers of that soci theety, confraternity and thus does is not composed constitute, largely in the of eyes membersof the of elites, the artistic a strategic and creative network layers that offersof soci society,oeconomic and thus does or notpolitical constitute, opportunities. in the eyes Given of thethat elites, elites a wishstrategic to arouse network and that maintain offers beliefsocioeconomic in their legitimacy or political (Bourdieu, opportunities. 1982), Given they tend that toelites belong wish to to the arouse local confraternityand maintain onlybelief if inthe t heirlatter legitimacy is seen to (Bourdieu,be influential. 1982), they tend to belong to the local confraternity only if the latter is seen to be influential.
Discussion and conclusion DiscussionBy means and ofconclusion a comparative study focusing on the three areas of Chimay, Orval and By Rochefort, means of a we comparative have put forward study focusing reflections on the on thethree r ole areas and of influence Chimay, of Orval gastronomic and Rochefort,confraternities, we have both put as forwardactors in reflectionslocal economic on theand rtouristole and development influence and of gastronomicin terms of their confraternities,leadership both capacity. as actors These in local associations, economic throughand tourist th eirdevelopment participation and in terms promoting of their local leadershipproducts, capacity. organise These events associations, with a focus through on tourism their and participation thus contribute in promoting to diversifying local the products,range organise of products events on with offer a in focus this on sector tourism within and th thuseir territories contribute and to diversifying to enhancing the their rangeattractiveness. of products Among on offer their in this activities, sector the within ritual th eirenthronement territories and of their to enhancing new members their are attractiveness.important events Among in theirfor the activities, social life the of ritual their arenthronementeas, and thus ofconstitute their new a key members aspect of are their importantraison events d’être. in The for socialthe social bonds life they of their forge ar eas, give and rise thus to networksconstitute that a key facilitate aspect connectionsof their raisonamong d’être. local The actors, social bondswhether they of forge the public give ris ore privat to networkse sector, that and facilitate members connections of the local amongpopulation, local actors, and create whether resources of the for public local leadersh or privatip.e The sector, relations and membersformed or ofreinforced the local in the population,course and of suchcreate festivities resources thusfor local have leadersh a longtermip. The imrelationspact beyond formed simplyor reinforced the commercial in the coursepromotion of such of festivities local heritage thus food have products. a longterm impact beyond simply the commercial promotionIn spite of oflocal their heritage appearance, food products. which might suggest a superficial and anachronistic staging In spiteaimed of at their an audience appearance, of outside which mightconsumers, suggest the aenth superficialronement and ceremonies anachronistic carry staging a meaning aimedand at participate an audience in strategies of outside that consumers, are important the enth in ronementthemselves. ceremonies These activities carry aare meaning reinforced and byparticipate the toponymic in strategies dimension that are important of the product in themselves. being proThesemoted activities and aare thick reinforced collective by theconsciousness toponymic and dimension history that of are the indispensable product being for their pro motedeffectiveness. and a thick collective consciousness and history that are indispensable for their effectiveness. Myttenaere B., Regional Science Inquiry Journal, Vol. V, (2), 2013, pp. 163176 173
The Trappist products studied here are economic resources around which questions of cultural and identity issues can coalesce. It is for this reason that gaining entry into the networks created by the gastronomic confraternities has a significance that far exceeds the benefits for marketing and tourist development. Emphasising their sociocultural, historical and geographical attributes therefore builds a bridge towards the spheres of political and economic power, since it is within the confraternities that local actors can appropriate the symbolic and identity markers represented by these LAPs. Once they have incorporated these into their image, they can use these points of reference to reinforce their legitimacy, in other words, their charisma as local leaders. If the actors make their choices depending on the context of action and from among many possible sources of local identity, the importance of public enthronement rituals for acquiring or reinforcing social authority varies according to the local situation, and functions in accordance with a ‘dialectal’ dynamic and logic. Those enthroned who enjoy renown or legitimacy thanks to their position in the socioeconomic, political or media spheres raise the cachet of the confraternity, and the confraternity in turn helps to further enhance the standing of the newly enthroned, as a result of the prestige enjoyed by the product being promoted, namely Trappist beer, a prestige that is proportionate to that of the members of the confraternity. The dynamic and generative capacity of gastronomic confraternities can be perceived only by taking account of the socioeconomic context in which they operate, contexts that contribute to building or reinforcing their territorial leadership. In this way, far from being limited to short periods of time or a narrow spaces, they are capable of acting on a fairly large scale and of integrating “society”, “history” and “politics” into their scope of action. We do not consider that membership in gastronomic confraternities can be reduced to a quest for power and strategic positioning in political, sociocultural and economic domains, even though the role played by these aspects should not be neglected. The specificity of the commitment and mobilisation of local elites in the gastronomic confraternities lies in the convergence of a number of different motives: connection to a territory, protection of particular or general interests, social ties, all of which are intrinsically linked to the construction or reinforcement of social status. The relationships into which actors within a territory enter, and their capacity for joint organisation by means of networks, are the result a complex, dynamic process that involves multiple sociocultural, political or institutional factors. Legitimacy, authority and local leadership appear, in our case studies, to be influenced by the attitude and behaviour of the Trappist monks towards tourism. Although affected by the entrepreneurial atmosphere in the territories analysed, the degree of their power, their involvement in local socioeconomic institutions and their economic behaviour must be interpreted in terms that go beyond the purely local context. These actors have motives and interests of their own, and should be understood in relation to the particular relationships they maintain with the economy in the light of their religious identity (De Myttenaere, 2013). Finally, if as seems most likely, the socioeconomic and cultural weight of the Trappist monks and their food products exert an influence on the confraternities and of territorial leaders within the areas studied, we nevertheless cannot claim, at this exploratory stage of our research, to have developed a model of the role and influence of these variables on local leaders and on tourist development and dynamics. Other case studies focusing on different territories are indispensable in order to nuance the validity of the interpretations offered here.
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Announcements, Conferences, News
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RSA Conference Europe 2013 “Where the world talks security”
Conference Overview1
The RSA conference Europe “Where the world talks security” took place in Amsterdam in October 2931, 2013 at Amsterdam RAI. The participation of field experts was decisive for the understanding of substantial issues in security sector in the program committee (ISC, Information Security Forum, FireEye, ABN Amro Bank, UBS, The Centre for Strategic Cyberspace and Security Science, Qualys, Microsoft, RSA, Cassidian Cybersecurity GmbH, Daimler, Sophos Ltd., Oracle, Telekom Innovation Laboratories, IOActive, Pixidust Ltd. IKEA). Security policy analysis and technology development have been nowadays much discussed and simultaneously muchpromising. It is not only a question for academics and researchers but also for practitioners. The changing economies necessitate a rapidly progressing security technology and organizational patterns. The objectives of the conference was to discuss multifaceted security issues, as follows: − Application and Data Security (design, development, implementation and operation of packaged and custom developed applications, mitigation of threats via the web and cloud computing infrastructures, privacy, regulations and big data trends) − Governance, Risk & Compliance (quantifying and managing risk, compliancerelated standards such as PCI, Sarbanes Oxley etc, communicating and enforcing policies and standards in the enterprise) − Hackers & Threats (underground economy, advanced threats, new classes of vulnerabilities, exploitation techniques, reverse engineering, live demos and code dissection) − Human Element (insider threats, social networking, social engineering, incl. spam, phishing, pharming, etc. as well as security awareness) − Mobile Security (employeeowned devices/BYOD programs, smartphone/tablet security and consumerization trends) − Security Architecture (deployment of securityenabled technologies, emerging technologies, network and endpoint security, identity and access management, IDS/IPS and physical security, network monitoring, firewalls, new threats to networks, information on DoS and DDoS attacks, enterprise rights management, forensics, as well as vulnerability assessments and penetration testing, cloud computing security and the security aspects of virtualization) − Security Trends (emerging technology, legislation, regulation and business trends and the impact on the security industry and strategic planning, government policy and legislation and the impact on the European community, changes in the IT security ecosystem, professional development) Keynote speakers, open sessions, seminars and group discussions have produced insightful results.
1 Conference overview by Nikolaos Hasanagas, Aristotle University of Thessaloniki, Greece
180 180 RegionalRegional Science Science Inquiry Inquiry Journal, Journal, Vol. V, Vol. (2), V, 2013 (2), 2013
5th5th Conference Conference of Administrationof Administration Scientists Scientists «Reorganizing«Reorganizing Administration Administration and andState State in postmemo in postmemorandumrandum era» era» ConferenceConference Overview Overview1 1 The The5th Conference5th Conference of Administration of Administration Scientists Scientists «Re organizing«Reorganizing Administration Administration and and StateState in postmemorandum in postmemorandum era» era» took took place place in Univers in University ofity Thrace, of Thrace, Komotini Komotini campus campus in in NovemberNovember 2830, 2830, 2013. 2013. It has It beenhas been jointly jointly organize organized byd the by Law the Law School School of University of University of of ThraceThrace and theand Hellenicthe Hellenic Institute Institute of Administration of Administration Scientists. Scientists. It has It alsohas alsobeen been supported supported by by KomotiniKomotini Municipality Municipality and andthe Eastern the Eastern MacedoniaTra MacedoniaTrace Prefecture.ce Prefecture. The The participants participants have have beenbeen originated originated by many by many institutions, institutions, such such as Unive as University rsity of Thrace, of Thrace, University University of Athens, of Athens, NationalNational Public Public Administration Administration Centre, Centre, Centre Centre of In ofternational International and Europeanand European Economic Economic Law, Law, and otherand other designated designated academic academic and researchand research institut institutions.ions. The Theconference conference covered covered a wide a wide array array of currentof current policy policy issues, issues, such such as: as:
• Public• Public Administration Administration • Management• Management Of Public Of Public Programs Programs • Implementation• Implementation of Government of Government Policy Policy • Government• Government Decision Decision Making, Making, • Employment• Employment in the in Public the Public Service Service • Analysis• Analysis of Policies of Policies and and the the Inputs Inputs • Management• Management And And Policies Policies of ofthe the NecessaryNecessary to Produce to Produce Alternative Alternative Policies Policies GovernmentGovernment • Organization• Organization of Government of Government Policies Policies and and ProgrammesProgrammes
1 1 Dr. Dr. Dr. Aikaterini Dr. Aikaterini Kokkinou, Kokkinou, University University of the ofAege thean Aege an
RSARSA Conference Conference Asia Asia Pacific Pacific 2013 2013 “Where“Where the worldthe world talks talks security” security” ConferenceConference Overview Overview1 1 The The RSA RSA conference conference Asia Asia Pacific Pacific “Where “Where the world the world talks ta security”lks security” took took place place in in SingaporeSingapore in June in June 56, 56, 2013 2013 at Marine at Marine Bay Bay Sands, Sands, Singapore. Singapore. It is It remarkable is remarkable that that the the programprogram content content has beenhas been selected selected by a bycommittee a committee composed composed of company of company and governmentaland governmental representativesrepresentatives (SAP, (SAP, Aujas, Aujas, Thales Thales Australia, Australia, Akam Akamai Technologies,ai Technologies, EMC, EMC, PwC, PwC, ISC, ISC, MinistryMinistry of Home of Home Affairs Affairs of Singapore, of Singapore, Singapore Singapore Po lice Po lice Department, Department, Singapore Singapore CryptographyCryptography and Securityand Security Department Department Institute Institute for Infocomm for Infocomm Research). Research). Security Security policy policy and meansand means are quite are quite challenging challenging issue is notsue onlynot onlyfor policy for policy makers makers and and researchersresearchers but but also also for filedfor filed experts, experts, practitione practitioners andrs and stakeholders. stakeholders. It is It of is utmost of utmost importanceimportance not only not only for governmental for governmental actors actors but als buto als foro entrepreneurs, for entrepreneurs, NGOs NGOs and andprivate private persons.persons. The Thechanging changing economies economies necessitate necessitate a rapid a rapidly progressingly progressing security security technology technology and and organizationalorganizational patterns. patterns. The objectivesThe objectives of the of conference the conference was towas discuss to discuss multifaceted multifaceted security security issues, issues, as follows: as follows:
CloudCloud & Virtualization & Virtualization Security Security Data Data& Application & Application Security Security (security(security architecture architecture in the in cloud, the cloud, (design,(design, development, development, implementation implementation and and governance,governance, risks, risks, migration migration issues, issues, identity identity operationoperation of packaged of packaged and customdeveloped and customdeveloped managementmanagement and case and studies)case studies) applications,applications, mitigation mitigation of threats of threats via the via web the web CybercrimeCybercrime & Law & LawEnforcement Enforcement and cloudand cloud computing computing infrastructures) infrastructures) (digital(digital forensics forensics techniques, techniques, legal, legal, education education MobileMobile Security Security and socialand social issues issues underlying underlying cybercrime cybercrime (managing(managing employeeowned employeeowned devices/BYOD devices/BYOD policies,policies, Privacy Privacy against against Forensics, Forensics, cyber cyber programs,programs, smartphone/tablet smartphone/tablet security security and and bullying,bullying, harassment, harassment, organised organised crime, crime, consumerizationconsumerization trends) trends) detectiondetection and prevention and prevention etc) etc) SecuritySecurity Infrastructure Infrastructure (network(network and endpoint and endpoint security, security, IDS/IPS IDS/IPS and and physicalphysical security) security)
InsightfulInsightful approaches approaches and resultsand results have have been been achieve achieved ond the on aforementionedthe aforementioned topics topics through through keynotekeynote presentations presentations made made by industry by industry leaders leaders and aand great a great variety variety of sessions. of sessions.
1 1 Conference Conference overview overview by Nikolaos by Nikolaos Hasanagas, Hasanagas, Aristotl Aristotle Universitye University of Thessaloniki, of Thessaloniki, Greece Greece
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Academic Profiles
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Regional Science Inquiry Journal, Vol. V, (2), 2013 183 Regional Science Inquiry Journal, Vol. V, (2), 2013 183
Dr. Anne Margarian is a senior researcher in the field of the economy of rural Dr. Anne Margarian is a senior researcher in the field of the economy of rural areas in Braunschweig Area, Germany. Her special interest is in industry and firm areas in Braunschweig Area, Germany. Her special interest is in industry and firm structures of rural areas and in the coordination of economic activity (in space). She structures of rural areas and in the coordination of economic activity (in space). She uses statistical analyses as well as casestudies and causal models. Another special uses statistical analyses as well as casestudies and causal models. Another special emphasis in her work is in policy assessment. emphasis in her work is in policy assessment. In the short time at the CAU ( Christian Albrecht University Kiel) she conducted In the short time at the CAU ( Christian Albrecht University Kiel) she conducted smaller statistical analyses in the context of a project on the tabbaco markets in smaller statistical analyses in the context of a project on the tabbaco markets in Malawi, she wrote a project proposal concerning the relevance of specific food Malawi, she wrote a project proposal concerning the relevance of specific food industries of Switzerland and she started to write a concept for an analysis of the industries of Switzerland and she started to write a concept for an analysis of the implementation and institutional realization of the German farm investment aid. As implementation and institutional realization of the German farm investment aid. As an evaluator at Institute for farm economics, she was engaged in the assessment of an evaluator at Institute for farm economics, she was engaged in the assessment of the German programs for the development of rural areas. In her team they focused the German programs for the development of rural areas. In her team they focused on the evaluation of the farm investment aid. Her personal emphasis was on the on the evaluation of the farm investment aid. Her personal emphasis was on the analysis of agricultural structures and their potential affectedness by interventions. analysis of agricultural structures and their potential affectedness by interventions.
Her most recent publications include (Working papers Articles) Her most recent publications include (Working papers Articles)
1. Margarian, Anne (2013) 1. Margarian, Anne (2013) A constructive critique of the endogenous development approach in the A constructive critique of the endogenous development approach in the European support of rural areas. European support of rural areas. Growth and change, Band 44, Heft 1, Seiten 129, englisch Growth and change, Band 44, Heft 1, Seiten 129, englisch ISSN: 00174815 ISSN: 00174815 2. Margarian, Anne (2013) 2. Margarian, Anne (2013) Der ländliche Strukturwandel in Europa: eine Herausforderung für Politik Der ländliche Strukturwandel in Europa: eine Herausforderung für Politik und Wissenschaft. und Wissenschaft. LandBerichte, Band 16, Heft 1, Seiten 5671, deutsch LandBerichte, Band 16, Heft 1, Seiten 5671, deutsch ISSN: 18682545 ISSN: 18682545 3. Margarian, Anne (2012) 3. Margarian, Anne (2012) Employment development policy in European regions: the role of Employment development policy in European regions: the role of agriculture. agriculture. EuroChoices , Band 11, Heft 3, Seiten 2021, englisch EuroChoices , Band 11, Heft 3, Seiten 2021, englisch ISSN: 14780917 ISSN: 14780917 4. Margarian, Anne (2011) 4. Margarian, Anne (2011) Gewinnentwicklung und Betriebsaufgabe in der Landwirtschaft: Gewinnentwicklung und Betriebsaufgabe in der Landwirtschaft: Angebotseffekte, Nachfrageeffekte und regionale Heterogenität. Angebotseffekte, Nachfrageeffekte und regionale Heterogenität. Schriften der Gesellschaft für Wirtschafts und Sozialwissenschaften des Schriften der Gesellschaft für Wirtschafts und Sozialwissenschaften des Landbaues, Band 46, Seiten 291304, deutsch Landbaues, Band 46, Seiten 291304, deutsch 5. Margarian, Anne; Küpper, Patrick (2011) 5. Margarian, Anne; Küpper, Patrick (2011) Identifizierung peripherer Regionen mit strukturellen und wirtschaftlichen Identifizierung peripherer Regionen mit strukturellen und wirtschaftlichen Problemen in Deutschland. Problemen in Deutschland. Berichte über Landwirtschaft, Band 89, Heft 2, Seiten 218231, deutsch Berichte über Landwirtschaft, Band 89, Heft 2, Seiten 218231, deutsch ISSN: 00059080 ISSN: 00059080 6. Margarian, Anne (2010) 6. Margarian, Anne (2010) Coordination and differentiation of strategies: the impact on farm growth Coordination and differentiation of strategies: the impact on farm growth of stategic interaction on rental market for land [online]. of stategic interaction on rental market for land [online]. German journal of agricultural economics, Band 59, Heft 3, Seiten 202216, German journal of agricultural economics, Band 59, Heft 3, Seiten 202216, englisch, zu finden in
By Antonia P. Obaidou, Aristotle University of Thessaloniki, Greece By Antonia P. Obaidou, Aristotle University of Thessaloniki, Greece
184 Regional Science Inquiry Journal, Vol. V, (2), 2013
184 Regional Science Inquiry Journal, Vol. V, (2), 2013
Daniela Luminita Constantin is Full Professor of Regional Economics at the Academy of Economic Studies of Bucharest and the Director of the Research Centre for
Macroeconomic and Regional Forecasting of this university. She’s also President of the Daniela Luminita Constantin is Full Professor of Regional Economics at the Romanian Regional Science Association, Member of the Evaluation Committee of Academy of Economic Studies of Bucharest and the Director of the Research Centre for Romania’s Regional Operational Programme cofunded by the EU, Reviewer for Macroeconomic and Regional Forecasting of this university. She’s also President of the International Journal of Services Technology and Management, Inderscience, Journal of Romanian Regional Science Association, Member of the Evaluation Committee of Economic and Social Geography Tijdschrift voor economische en sociale geografie Romania’s Regional Operational Programme cofunded by the EU, Reviewer for (TESG), WileyBlackwell and Editor for International Journal of Environmental International Journal of Services Technology and Management, Inderscience, Journal of Technology and Management. Economic and Social Geography Tijdschrift voor economische en sociale geografie Her main scientific interest concentrates on regional policies, regional convergence and (TESG), WileyBlackwell and Editor for International Journal of Environmental competitiveness, EU structural assistance, migration, SMEs and entrepreneurship, Technology and Management. environmental issues and human security. She carried out numerous research stages Her main scientific interest concentrates on regional policies, regional convergence and abroad as Fulbright, DAAD and PhareTempus scholar. competitiveness, EU structural assistance, migration, SMEs and entrepreneurship, Daniela Constantin has authored or coauthored a large number of books and an article environmental issues and human security. She carried out numerous research stages published in Romania and abroad and has participated in various national and abroad as Fulbright, DAAD and PhareTempus scholar. international research project teams. Daniela Constantin has authored or coauthored a large number of books and an article Her most recent publications include: published in Romania and abroad and has participated in various national and Working papers international research project teams.
Her most recent publications include: 1. Daniela L. CONSTANTIN & Raluca Mariana Petrescu & Claudiu Working papers HERTELIU & Alina IOSIF & Alina PROFIROIU, 2012. "The Services of
General Interest in Romania: Legal and Institutional Aspects at National 1. Daniela L. CONSTANTIN & Raluca Mariana Petrescu & Claudiu and Territorial Level,"ERSA conference papers ersa12p926, European HERTELIU & Alina IOSIF & Alina PROFIROIU, 2012. "The Services of Regional Science Association. General Interest in Romania: Legal and Institutional Aspects at National 2. Eduarda Marques da Costa & Pedro Palma & Daniel Rauhut & Alois Humer and Territorial Level,"ERSA conference papers ersa12p926, European & Daniela Constantin & Xabier Velasco, 2012. "Indicators of Services of Regional Science Association. General Interest in EU regional context: between the need to measure 2. Eduarda Marques da Costa & Pedro Palma & Daniel Rauhut & Alois Humer and the lacking of their meaning," ERSA conference papers ersa12p1114, & Daniela Constantin & Xabier Velasco, 2012. "Indicators of Services of European Regional Science Association. General Interest in EU regional context: between the need to measure 3. Daniela L. CONSTANTIN, 2012. "Middle Of The Road: Romania’S and the lacking of their meaning," ERSA conference papers ersa12p1114, Regional Policy In The Current Eu Programming Period," ERSA European Regional Science Association. conference papers ersa12p920, European Regional Science Association. 3. Daniela L. CONSTANTIN, 2012. "Middle Of The Road: Romania’S 4. Daniela L. Constantin & Constanta Bodea & Carmen B. Pauna & Zizi Regional Policy In The Current Eu Programming Period," ERSA Goschin & Mariana Dragusin & Ion Stancu, 2011. "The Question Of conference papers ersa12p920, European Regional Science Association. Clusters In Less Developed Areas. Empirical Evidence From 4. Daniela L. Constantin & Constanta Bodea & Carmen B. Pauna & Zizi Romania ã„ôS Eastern Regions," ERSA conference Goschin & Mariana Dragusin & Ion Stancu, 2011. "The Question Of papers ersa10p1157, European Regional Science Association. Clusters In Less Developed Areas. Empirical Evidence From 5. Anca Dachin & Daniela Constantin & Zizi Goschin & Constantin Mitrut & Romania ã„ôS Eastern Regions," ERSA conference Bogdan Ileanu, 2011. "The Capacity Of Urban Centres To Contribute To papers ersa10p1157, European Regional Science Association. The Rural Development In Romania. An Inquiry From R&D And 5. Anca Dachin & Daniela Constantin & Zizi Goschin & Constantin Mitrut & Innovation Perspective," ERSA conference papers ersa10p1236, European Bogdan Ileanu, 2011. "The Capacity Of Urban Centres To Contribute To Regional Science Association. The Rural Development In Romania. An Inquiry From R&D And Articles: Innovation Perspective," ERSA conference papers ersa10p1236, European 1. Raluca Mariana Grosu & Daniela Luminita Constantin, 2013. "The Regional Science Association. International Migration in the EU. A Descriptive Analysis Focused on Articles: Romania," Acta Universitatis Danubius. OEconomica, Danubius University 1. Raluca Mariana Grosu & Daniela Luminita Constantin, 2013. "The of Galati, issue 9(4), pages 306318, August. International Migration in the EU. A Descriptive Analysis Focused on 2. DanielaLuminita Constantin, 2013. "Romania’s Regional Policy between Romania," Acta Universitatis Danubius. OEconomica, Danubius University the Current Realities and the Challenges of the 20142020 Programme of Galati, issue 9(4), pages 306318, August. Period," Acta Universitatis Danubius. OEconomica, Danubius University of 2. DanielaLuminita Constantin, 2013. "Romania’s Regional Policy between Galati, issue 9(4), pages 281291, August. the Current Realities and the Challenges of the 20142020 Programme 3. Daniela Luminiţa Constantin & Mariana Drăguin & Raluca Mariana Petrescu Period," Acta Universitatis Danubius. OEconomica, Danubius University of & Alina Elena Iosif, 2012. "The Effective Management of Municipal Real Galati, issue 9(4), pages 281291, August. Property. The Question of Services for the Business Use of Real 3. Daniela Luminiţa Constantin & Mariana Drăguin & Raluca Mariana Petrescu Property," The AMFITEATRU ECONOMIC journal, Academy of Economic & Alina Elena Iosif, 2012. "The Effective Management of Municipal Real Studies Bucharest, Romania, vol. 14(Special N), pages 738754, November. Property. The Question of Services for the Business Use of Real 4. DanielaLuminita CONSTANTIN, 2012. "The Regional State Aid Schemes Property," The AMFITEATRU ECONOMIC journal, Academy of Economic As A Support To Sustainable Urban Development," REVISTA Studies Bucharest, Romania, vol. 14(Special N), pages 738754, November. ADMINISTRATIE SI MANAGEMENT PUBLIC, Faculty of Administration 4. DanielaLuminita CONSTANTIN, 2012. "The Regional State Aid Schemes and Public Management, Academy of Economic Studies, Bucharest, As A Support To Sustainable Urban Development," REVISTA Romania, vol. 2012(8), pages 126132, June. ADMINISTRATIE SI MANAGEMENT PUBLIC, Faculty of Administration 5. Lorena BĂTĂGAN & Daniela Luminiţa CONSTANTIN, 2012. "The and Public Management, Academy of Economic Studies, Bucharest, readiness of employees for the future society. Case study," Theoretical and Romania, vol. 2012(8), pages 126132, June. Applied Economics, Asociatia Generala a Economistilor din Romania 5. Lorena BĂTĂGAN & Daniela Luminiţa CONSTANTIN, 2012. "The AGER, vol. 0(10(575)), pages 93104, October. readiness of employees for the future society. Case study," Theoretical and
Applied Economics, Asociatia Generala a Economistilor din Romania By Antonia P. Obaidou, Aristotle University of Thessaloniki, Greece AGER, vol. 0(10(575)), pages 93104, October.
By Antonia P. Obaidou, Aristotle University of Thessaloniki, Greece
Regional Science Inquiry Journal, Vol. V, (2), 2013 185
Book Reviews
186 Regional Science Inquiry Journal, Vol. V, (2), 2013
Regional Science Inquiry Journal, Vol. V, (2), 2013 187
Regional Science Inquiry Journal, Vol. V, (2), 2013 187
Quantile Regression for Spatial Data McMillen, Daniel P.
Series: Springer Briefs in Regional Science, 2013 Quantile Regression for Spatial Data ISBN:McMillen, 9783642318153 Daniel P.
The authorSeries: points Springer out the Briefs difference in Regional of quantile Science regression, 2013 analysis from conventional regression models regarding distribution issues. QuantileISBN: 9783642318153regression is not focused on how the expected value of the dependent variable responds to a changeThe in author an explanatory points out variable the difference but is extended of quantile to possible regression changesanalysis for the from entire conventional distribution regressionof the dependen modelst variable. regard ing However,distribution the issues. use of Quantile quantile regression regression is in not the foc analusedysis on ofhow spatialthe expecteddata is disseminated value of the enough. dependent The objective variable of respon this bookds to a is tochange make inquantile an explanatory regression variable procedures but ismore extended accessible to possible for researcherschanges forworking the entire with distributionspatial data sets.of the The dependen emphasist variable. is on interpretationHowever, theof quantile use of regression quantile regression results. in the analysis of McMillenspatial data lays is disseminatedemphasis onenough. graphical The objective interpretation of this ofbook quantileis to make regression quantile results, regression presents procedures spatial more estim acceatorsssible and for parametricresearchers as working well as with nonparametric spatial data approaches.sets. The emp Hehasis also is on presentsinterpretation a series ofof quantilehypothetical regression and real results. examples , aiming at makingMcMillen the quantile lays regressionemphasis on analysis graphical more interpretation accessible for of researchers.quantile regressionThe book can results, be interesting presents for spatial expert estims relatedators to and Spatialparametric Econometrics, as well Regional as nonparametric Economics approaches. and Statis tics He inalso general.presents a series of hypothetical and real examples, aiming at making the quantile regression analysis more accessible for Bookresearchers. Review by The Nikolaos book Hasanaga,can be interesting Aristotle forUnivers expertitys ofrelated to
ThessalonikiSpatial Econometrics, Regional Economics and Statistics in general.
Book Review by Nikolaos Hasanaga, Aristotle University of Thessaloniki
188 Regional Science Inquiry Journal, Vol. V, (2), 2013
188 Regional Science Inquiry Journal, Vol. V, (2), 2013
Modeling of LandUse and Ecological Dynamics
Edited by Dan Czamanski, Itzhak Benenson, Dan Malkinson
Springer Cities and Nature, 2014 Modeling of ISBN:LandUse 9783642401985 and Ecological Dynamics
EditedThis bookby Dan presents Czamanski, insightful Itzhak approaches Benenson, through Dan Malk variousinson models of landuse dynamics, integrated approach to urban and rural andSpringer open space Cities dynamics and Nature, as well2014 as landscape phenomena. ISBN: 9783642401985 The analysis is empirically illustrated. It emphasizes the self Thisorganizing book presents character insightful of the landscape approaches phenomena through va andrious the modelsimpacts of of landuse human dynamics, activities. integrated The interaction approach to betwee urbann andurbanization rural and and open nature, space an especially dynamics the as conseque well as nces landsc ofape city phenomena.expansion to agricultural and natural landscapes are discussed.
TheStateoftheart analysis is empirically modelling illustrated. approaches It emphasi to landusezes the issues self are organizingpresented character at different of spatialthe landscape resolutions phenomena and temp andoral the time impactsscales. The of second human part activities. is dedicated The to case interaction studies of betwee the effectsn urbanizationand Impacts and of nature, the emergingan especially urbanagriculture the consequences open of city space expansion to agricultural and natural landscapes are discussed. patterns are explored through the examination of urbanrural Stateoftheartopen space patterns. modelling This approaches book can be to interesting landuse i fssuesor experts are presented at different spatial resolutions and temporal time related to Ecology, Geography, Agriculture, Forestry, Nature scales.Conservation, The second Rural part is Development, dedicated to case Regional studies of Science the effects and and Impacts of the emerging urbanagriculture open space Theoretical Computer Science. patterns are explored through the examination of urbanrural open space patterns. This book can be interesting for experts
related to Ecology, Geography, Agriculture, Forestry, Nature
Conservation, Rural Development, Regional Science and Theoretical Computer Science. Book review by Nikolaos Hasanagas, Aristotle University of Thessaloniki
Book review by Nikolaos Hasanagas, Aristotle University of Thessaloniki