State Sector Relocations in Sweden a Municipality-Level Panel Data Analysis on the Effects of Relocation on Regional Development
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State Sector Relocations in Sweden A Municipality-Level Panel Data Analysis on the Effects of Relocation on Regional Development Andreas Grennborg Author: Andreas Grennborg Supervisor: Örjan Pettersson Spring Term 2017 Master Thesis, 30 ECTS Master in Spatial Planning and Development, 120 ECTS Department of Geography and Economic History, Umeå University Abstract In this thesis, the effects that state sector relocations have on regional development in Sweden are investigated. In January 2017, a government report was released, suggesting the relocation of 10 000 state sector jobs from the capital of Stockholm to other parts of Sweden in order to enhance the preconditions for regional development in the destination localities. This thesis aims to investigate which effects that state sector relocations and state sector jobs have on regional development. Three determinants were used to find these effects: the share of state sector employees, the state sector employee growth rate and a dummy variable which denoted four separate occasions of larger relocations. Three of those relocations were executed as a compensation for military base closures. With a fixed effect panel data analysis, it was possible to investigate the effects of these three determinants and a number of control variables on two regional development variables: average income growth and net migration rate. The data used consists of panel data for the years 2006-2015 on a municipality level, with 264 included municipalities, in Sweden and derived from Statistics Sweden. The results showed that the state sector employee growth rate-variable had a positive effect on average income growth. However, the state sector relocation dummy had a negative effect on average income growth. These contradictory results, might be due to the military base closures which occurred a couple of years before the relocations, blurring the positive effects from the relocations. The state sector job-variables had no significant effect on net migration rate, and no obvious long-term effects were found as the share of state sector employees did not show any significant effects on average income growth. Keywords: State sector relocation, Regional development, New economic geography, New regionalism, Endogenous growth, Panel data ii Acknowledgements First, I would like to thank my supervisor, Örjan Pettersson, for great feedback and Lina Bjerke at the Swedish Board of Agriculture for ideas on topics. Furthermore, I want to give my appreciations to my class mates for providing a good study atmosphere. I also want to thank Elin for personal support in the struggle of writing the thesis. iii List of Contents 1 Introduction .......................................................................................................................................... 1 1.1 Aim & Research Questions ........................................................................................................ 3 1.2 Structure of the Thesis ................................................................................................................ 3 2 Theory and Background...................................................................................................................... 4 2.1 Regional Development ............................................................................................................... 4 2.2 New Regionalism ......................................................................................................................... 4 2.3 Economic Geography ................................................................................................................. 5 2.4 Regional Development and Endogenous Growth ................................................................. 6 2.5 Regional Development Policies and Critique .......................................................................... 7 2.6 Endogenous Growth in the Case of Sweden .......................................................................... 8 2.7 Cases of International Relocations .......................................................................................... 12 2.8 Cases of Swedish Relocations .................................................................................................. 13 3 Methods ............................................................................................................................................... 15 3.1 Choice of Methods .................................................................................................................... 15 3.2 Panel Data Analysis ................................................................................................................... 16 3.3 Data Sources ............................................................................................................................... 17 3.4 Dependent Variables ................................................................................................................. 18 3.5 Independent Variables .............................................................................................................. 18 3.6 Control Variables ....................................................................................................................... 20 3.7 Geographic Delimitations in the Model ................................................................................. 22 4 Results .................................................................................................................................................. 23 4.1 Descriptive Statistics ................................................................................................................. 23 4.2 Correlation Analysis .................................................................................................................. 26 4.3 Model Diagnostics ..................................................................................................................... 27 4.4 Panel Data Regression Analysis ............................................................................................... 28 5 Discussion ........................................................................................................................................... 31 5.1 Discussion of Results ................................................................................................................ 31 5.2 Discussion in Relation to Previous Investigations ................................................................ 33 5.3 Limitations .................................................................................................................................. 34 5.4 Final Conclusions ...................................................................................................................... 35 References ................................................................................................................................................... 37 Appendix ..................................................................................................................................................... 41 iv List of Figures Figure 1: Map of the included municipalities, highlighting the relocated municipalities ................. 21 Figure 2: Graph of the average values for the two dependent variables over time .......................... 24 Figure 3: The dependent variables per municipality in the years 2006-2015 ..................................... 25 Figure 4: The average growth rate of state sector employees for the four relocation municipalities ....................................................................................................................................................................... 26 List of Tables Table 1: Compilation of earlier research on regional development factors ......................................... 9 Table 2: Description of the variables used within the model .............................................................. 19 Table 3: Descriptive statistics for the municipalities in the years 2006 and 2015 ............................. 24 Table 4: Pair-wise correlation table for all variables .............................................................................. 27 Table 5: The two panel data regression models ..................................................................................... 29 Table A 1: Municipalities included in the descriptive statistics and panel data model ..................... 41 Table A 2: Panel-type summary statistics................................................................................................ 43 Table A 3: Correlation matrix for Coefficients ...................................................................................... 44 Table A 4: VIF test for an OLS with the same variables as the Fixed Effect model ....................... 45 v 1 Introduction In January 2017, a government report on how to enhance the preconditions for regional development in the rural parts of Sweden, called For Sweden’s rural areas – comprehensive policies for labor, sustainable growth and welfare, was released (Swedish Government Official Reports, 2017). The issues of unequal regional development in Sweden have been raised in different forms since the 1960s. At that time, the main problem was based on unequal access to labor, where large parts of Sweden had a shortage in labor force, while some parts had too much labor. During the 1970s, regional balance became the