INFORMATION TO USERS

This material was produced from a microfilm copy of the original document. While the most advanced technological means to photograph and reproduce this document have been used, the quality is heavily dependent upon the quality of the original submitted.

The following explanation of techniques is provided to help you understand markings or patterns which may appear on this reproduction.

1.The sign or "target" for pages apparently lacking from the document photographed is "Missing Page(s)". If it was possible to obtain the missing page(s) or section, they are spliced into the film along with adjacent pages. This may have necessitated cutting thru an image and duplicating adjacent pages to insure you complete continuity.

2. When an image on the film is obliterated with a large round black mark, it is an indication that the photographer suspected that the copy may have moved during exposure and thus cause a blurred image. You will find a good image of the page in the adjacent frame.

3. When a map, drawing or chart, etc., was part of the material being photographed the photographer followed a definite method in "sectioning" the material. It is customary to begin photoing at the upper left hand corner of a large sheet and to continue photoing from left to right in equal sections with a small overlap. If necessary, sectioning is continued again — beginning below the first row and continuing on until complete.

4. The majority of users indicate that the textual content is of greatest value, however, a somewhat higher quality reproduction could be made from "photographs" if essential to the understanding of the dissertation. Silver prints of "photographs" may be ordered at additional charge by writing the Order Department, giving the catalog number, title, author and specific pages you wish reproduced.

5. PLEASE NOTE: Some pages may have indistinct print. Filmed as received.

Xerox University Microfilms 300 North Zeeb Road Ann Arbor, Michigan 48106 76- 24,557 BERENTSEN, William Harry, 1947- REGIONAL POLICY AND REGIONAL INEQUALITIES IN AUSTRIA: THE IMPACT OF POLICY UPON THE ACHIEVEMENT OF PLANNING GOALS. The Ohio State University, Ph.D., 1976 Urban and Regional Planning

Xerox University M icrofilm s, Ann Arbor, Michigan48ioe REGIONAL POLICY AND REGIONAL INEQUALITIES IN AUSTRIA:

The Impact of Policy upon the Achievement of Planning Goals

DISSERTATION

Presented in Partial Fulfillment of the Requirements for

The Degree Doctor of Philosophy in the Graduate

School of The Ohio State University

By

William Harry Berentsen, A.B., M.A.

* * * * *

The Ohio State University 1976

Reading Committee: Approved By:

Dr. George J. Demko, Adviser Dr. S.E. Brown Dr. Howard L. Gauthier ACKNOWLEDGEMENTS

The study resulting in this publication was made under a fellowship granted by the Social Science Research Council and the American Council of Learned Societies. How­ ever, the conclusion, opinions, and other statements in this publication are those of the aurhor and not necessarily those of the Councils.

I would also like to make a personal acknowledgement to the

Social Science Research Council and the American Council of Learned

Societies for their financial support and their efficient and

friendly administration of my fellowship. I would, further, like

to thank the Department of Geography at The Ohio State University, which gave me the opportunity to complete my dissertation by employing me as a teaching associate during 1975-1976.

My adviser, Dr. George Demko, has been extremely helpful to me throughout my education at Ohio State, and I very much appreciate his help on this dissertation. No student could ever hope to work with a more concerned adviser, and I am very grateful for his friendship and influence on my education and life.

I would also like to thank the other members of my committee,

Drs. S.E. Brown, Warren Eason, and Howard Gauthier, who have all contributed significantly to my graduate education. I especially

li appreciate their comments on this dissertation, and, in particular,

Dr. Gauthier’s help with developing a methodology for the study.

I am also indebted to Dr. Walter Stohr, Hochschule fUr Welthandel

in Vienna without whom X could not ha\ ; completed my work in Austria.

Dr. StOhr acted as an adviser for me in Vienna and helped me become

oriented in the city. I am very appreciative of his help and friendship.

I was also assisted and befriended by all of the members of Dr.

StUhr’s Institute — Ewald Brunner, Hildegard Kaufmann, Herwig Palme,

Uwe Schubert, and Anna Maria Skarke - and- I- want to thank them for

making our lives in Vienna so pleasant.

Two other special friends also helped me complete my work and

better introduce my wife and me to life in Vienna. I want to thank

Dr. Helmut Jeglitsch and Dr. Felix Jlilg for their assistance and

their part in our pleasant year in Vienna.

I would also like to thank Drs. Hansen, MacKinnon, and Swain

of the International Institute f°r Applied Systems Analysis (I.I.A.S.A.),

who all made helpful comments about my preliminary work. Several

other people in Austria were also very helpful in assisting and

guiding me, and I would particularly like to thank Drs. Kohlbacher

(OROK), Matzner (Technische Hochschule) , PrombiJk (Stadt Wien), and

Sauberer (Oesterreichische Institut flir Raumplanung). A great many

other people in Austria helped me; and although there is not space

to recognize them all, I want to acknowledge their assistance and

thank them for it.

My wife and I were also fortunate enough to receive considerable benefit from the excellent Fulbright Commission Program in Austria;

ill our special thanks to Dr. Porhansl and his fellow workers in Vienna.

We also benefitted from the experiences of Dr. Andrew Burghardt, who also completed his dissertation on an Austrian topic and who was helpful in providing a historical perspective on my work.

Finally, the completion of my degree would not have been possible without the help and encouragement of my wife, Mele, who willingly accompanied me to every corner of Central Europe and accepted all the long hours and inconveniences.

iv VITA

July 8 , 1947 .... Born - Wenatchee, Washington

1969 ...... A.B., Dartmouth College, Hanover, New Hampshire

1970-1972...... Teaching Assistant, Department of Geography, The Ohio State University, Columbus, Ohio

1972 ...... M.A., The Ohio State University, Columbus, Ohio

1972-1974...... Teaching Associate, Department of Geography, The Ohio State University, Columbus, Ohio

1974-197 5 ...... Dissertation grant from the Social Science Research Council and American Council of Learned Societies in Vienna, Austria

1975-197 6 ...... Teaching Associate, Department of Geography, The Ohio State University, Columbus, Ohio

FIELDS OF STUDY

"Major Field: Geography

Studies in Regional Economic Development. .Professors George Demko and Howard Gauthier

Studies In Transportation. Professor Howard Gauthier

Studies in Eastern Europe and the Soviet Union. Professors S.E. Brown, George Demko, Warren Eason

v TABLE OF CONTENTS

Page ACKNOWLEDGEMENTS...... ±1

VITA ...... v

LIST OF TABLES ...... viil

LIST OF FIGURES AND M A P S ...... ix

Chapter

I. INTRODUCTION ...... 1

II. LITERATURE REVIEW ...... 4

Forces Affecting the Creation and Dissolution of Regional Inequalities ...... 5 The Need for Regional Planning...... 11 Two Regional Planning Strategies 14 • Regional Policy Experience...... 24

III. REGIONAL GOALS AND REGIONAL POLICY MEASURES IN AUSTRIA ...... 29

Introduction...... 2 9- . The Goals of Regional Planning...... 31 The Regional Planning Strategy ...... 33 Regional Policy Measures ...... 36 Conclusions ...... 61

IV. DATA AND METHODOLOGY...... 64

Regional Units ...... 64. Data Sources ...... 68 Methodology ...... 69

V. REGIONAL CHANGE AND REGIONAL INEQUALITY IN AUSTRIA ...... 78

Income Inequality ...... 81 Unemployment...... 91 Other Indications of Changing Regional Inequality...... 93 Net Migration ...... 100

VI. EVALUATION OF AUSTRIAN REGIONAL PLANNING.... 108

Introduction 10® ‘ Goal Conflicts in Austrian Regional Planning . 108 Policy Impact Analysis ...... Ill

vi TABLE OF CONTENTS

Page VII. SUMMARY AND CONCLUSIONS...... 158

LIST OF R E F E R E N C E S ...... 164

FOOTNOTES ...... 177 .

vii LIST OF TABLES

Page

Table 1 provincial Income 1971 (Austrian Shillings) . . . 88

Table 2 Provincial Income Inequality ...... 89

Table 3 District Income ...... 90

Table 4 Intra-Provincial Income Inequality ...... 91

Table 5 Average Annual Provincial Unemployment (Province of Residence ) ...... * ...... 92

Table 6 Factor Loadings ...... 99

Table 7 Oblique Factor Analysis: Factor Scores ...... 99

Table 8 Aid as a % of Total Provincial Industrial Investment, 1966-1970 ...... 120

Table 9 Aid/industrial worker ...... 122

Table 10 Gains from Redistributed Taxes as a Percentage of Municipal and Provincial Budgets, 1970 . . . 126

Table 11 Gains from Redistributed Taxes as a Percentage of Municipal and Provincial Investment in Construction ...... 127

Table 12 Simultaneous Equation Regression Results .... 134

Table 13 Direct and Indirect Effects upon Changes In Living Standards (DLIV) from Path Analysis. . . 136'

Table 14 Direct and Indirect Effects upon Changes in Living Standards (DLIV) from Path Analysis . . 137

Table 15 Regression Results of the District Analysis . . 146

Table 16 Effects of Independent Variables Upon Changing Relative Incomes ...... 153

viii LIST OF FIGURES

Page

Figure 1 A Hypothesized Temporal Evolution of Regional Inequalities ...... , 6

Figure 2 Summary Results of Regression Analysis . . . . , 140

LIST OF MAPS

Map 1 Austrian Trade with Central Europe ...... 82

Map 2 Sectoral Structure of the Economies of Austrian Districts ...... 83

Map 3 Net Domestic Product/Worker, 1971 ...... 85

Map 4 Change In Net Domestic Product/Worker, 1961-1971. 86

Map 5 Change in Industrial Employment, 1961-1971 . . . 87

Map 6 Unemployment, 1961...... 94

Map 7 Unemployment, 1971...... 95

Map 8 Infant Morality, 1970-1973 ...... 96

Map 9 Infant Morality Increases for 1970-1973 in Comparison to 1965-1969 ...... 98

Map 10 Population Decline in Austrian Districts . . . . 101

Map 11 Net Migration, 1951-1961 ...... 103

Map 12 Net Migration, 1961-1971 ...... 104

Map 13 "Wind" Vectors in Austria ...... 106

ix CHAPTER 1

\

INTRODUCTION

The purpose of this research is to analyze the impact of Austrian regional development policy upon the achievement of two major planning goals, the lessening of regional income inequalities and the reduction of out-migration from rural regions in Austria. The research has been undertaken to fill a relative void in the regional policy literature, which, lacks studies.that investigate the impact of policy upon goal realization in the developed world. Such investigations are needed to evaluate programs that have been initiated in many nations of the developed world, in order to ascertain their effectiveness and to help planners in the selection of optimal policy measures. At a more general level the investigation of the effectiveness of regional development policies also provides a better understanding of the nature of complex regional economic relationships and the potential for policy to influence changes in these relationships.

Austria has been chosen as a case study; because regional policy has a relatively long history in Austria, and the nation also faces regional problems which are similar to problems in the rest of the industrialized world. Some of Austria's regional problems are also somewhat unique due to its geographical location in Europe. Still, i

2

Austria's attempts to resolve these particular problems should serve

as an instructive example for other nations which lie between antag­

onistic political and economic systems (e.g. the German Federal Re­

public) .

The methodology exployed to evaluate policy effectiveness must

necessarily be one that allows for the simultaneous consideration of

the numerous interlocking forces shaping a regional socio-economic

system. This study will employ a methodology which has not been used

extensively in geography but one which seems particularly well suited

for the investigation of problems with interrelated sets of variables,

which represent the aforementioned forces shaping regional socio­

economic systems. These sets of variables can be handled in a simul­

taneous equations and path analysis framework. A discussion of this

methodology will be presented in Chapter 4. The results from the

application of the techniques will be utilized 1 ) to evaluate the

success of Austrian regional policy in achieving the stated goals

and 2 ) to recommend potentially useful modifications in the present

planning strategy.

Chapter 2 will present a review of the literature relating to

the causes of regional inequalities and the Importance of regional

planning for identifying regional goals and implementing a planning

strategy to achieve the goals. Two types of policy alternatives are

considered at both the theoretical and empirical levels. One of these

planning strategies, decentralized concentration, has been adopted

in Austria. The policy goals and measures chosen to implement this

strategy will be outlined in Chapter 3. Much of that chapter will present a description of tax legislation and investment measures

which have been taken to attempt to achieve the planning goals.

In Chapter 5 there will be an Investigation of trends in Austrian

regional inequalities In an attempt to ascertain whether the planning

goals are, in fact, being achieved. The methodology applied includes

the use of factor analysis and information statistics in order to

assess changing levels of regional well-being. Chapter 6 will then

present the major analytical findings of the study, results of the

investigation of the importance of regional policy in the achievement

of the planning goals. These results derive from the application of

the simultaneous equation and path analysis methodologies and provide

insights into the Austrian policy experience at both the provincial

and district (county) scales.

The study will conclude in Chapter 7 with a summary of the

analytical results and an evaluation of the effectiveness of the

policy measures which have been adopted in Austria. This will

include a consideration of possible alterations in the Austrian planning strategy which might produce better results vis-a-vis the planning goals without alienating important political power groups

involved in the planning process. CHAPTER 2

LITERATURE REVIEW

The existence and persistence of regional Inequalities have long

been recognized as a fact common to all nations at all levels of

development (Williamson, 1965, p.3). A large number of regional

scientists have investigated the causes of these inequalities in

attempts to identify processes which affect the origins and solutions

of these regional problems. The following review outlines the processes which have been identified in these investigations. The review then outlines the arguments of regional scientists, who maintain that regional problems should be handled by the initiation of regional planning programs. The most important regional planning strategies are considered; first the theoretical underpinnings of each are outlined and second, there is a review of the small existing body of literature which deals with over-all assessments of regional policy programs in the developed world. The review will allow the reader to place Austrian problems within the context of more gen­ eralized problems encountered elsewhere and to compare the Austrian planning strategy and policy experience with those of other nations.

A Forces Affecting the Creation and Dissolution of Regional Inequalities

Myrdal contends that one cause of regional inequality, the

concentration of economic activities in a few regions, may result

from an original advantage (for example, accessibility to a resource)

but is, in any event, self-sustaining. Strong agglomeration forces

set into action and may prevent peripheral regions from overcoming

their original disadvantage (Myrdal, 1957). The agglomeration forces

may include economies of scale related to an ever self-propelling

local market, the continued creation of a more skilled labor pool,

the concentration of auxiliary business services resulting from

economies of scale, and the clustering of publicly financed social

overhead capital (Hansen, 1968, p.14).

Williamson argues that these and other forces will tend to

polarize the spatial incidence of growth and development during

the early stages of national development. This results in inc­

reasing regional inequalities over some indefinite period, as sug-

' gested in Figure 1. Williamson believes that this period of in­

creasing inequality will continue as long as a nation’s economy

is poorly integrated. This includes a poor Integration of regional

and' factor markets which works to the disadvantage of the peripheral

region (Williamson, 1965, p.7). 6

regional / X^

inequalities / X ^

time

Figure 1 A Hypothesized Temporal Evolution of Regional Inequalities

Friedmann and Hirschmann also maintain that there may be con­

siderable persistence in levels of regional inequality. Friedmann

notes that marginal returns to scale may not diminish rapidly

enough in the established industrial areas to create important

alternative investment opportunities in lagging, or peripheral,

regions. He further argues that if fast growing industries are

located in the more economically advanced regions, capital will

tend to accumulate there, perpetuating existing agglomerative ad­

vantages. The relatively low investment levels in the lagging

regions is also likely to remain low as long as investors, generally

inhabitants of the advanced region or "center," have a negative

perception of the periphery. This perception may unduly bias the

investor against properly assessing investment opportunities in

the periphery. Although the perception may be erroneous, its

existence means continued emphasis on Investment in the center

(Friedmann, 1966, pp.14-15). Hirschmann calls these factors forces

of polarization and adds that they may also include the beneficial

effects of selective in-migration and preferential trade legislation

originating from economic-political power concentration in the center (Hirschmann, 1958, p.188). Hilhorst is especially concerned with the effect of this con­

centration of political and economic power, which has profound

effects upon the diffusion of information. He argues that the

"benefits of new innovations most often benefit the center and that

t h e center is further advantaged by being the domicile of decision­

makers. These decision-makers are influenced not only by their

perception of the periphery vis-a-vis the center but by their

political affinity to the center. Hilhorst argues that primate

cities, like perhaps Vienna in the past, have developed as a result

o f this self-perpetuating process of growth, information avail­

ability, and decision-making (Hilhorst, 1971, p.XII).

Hilhorstfs arguments actually refer to a special case of a more

general situation outlined by Allan Pred. Pred contends that many

important decisions are made by large business organizations and

t h a t the decisions' implementations result in the diffusion of

n e w business techniques or innovations through a complexly inter-

m e s h e d set of business and urban hierarchies. In keeping with the

arguments of Hilhorst, Pred maintains that "in a great many cir­

cumstances there is coincidence between the metropolitan area where

organizational headquarters are located and the metropolitan area w h e r e implementation occurs" (Pred, 1975, p.256). Thus, in a highly polarized urban structure (i.e., the existence of something similar

t o a primate city), Pred's contentions suggest that growth may be spatially constrained, resulting in the creation and persistence o f regional inequalities (Pred, 1975, pp.252-268). Theoretical! notions exist, however, which suggest that economic variations between regions should stabilize or decline as factor flows in the direction of highest marginal returns reverse trends of factor and growth concentration. For example, "neoclassical general equilibrium theory predicts that in a situation characterized by inter-regional differentials in real wages, labor will migrate from the low-wage to the high-wage regions until real wages are equalized" (Richardson, 1969, p.295). In fact, though, the neo­ classical model does not necessarily imply that regional variations will decline. First, the original neo-classical model was postulated upon several rigorous assumptions including full employment, homo­ genous labor, constant returns to scale, perfect competition, and migration in response to wage differentials alone (Richardson, 1969, p.295). Clearly, these assumptions are not consistent with reality, and the previous arguments suggest that it is the existence of these factors which contribute to persistent regional inequalities. Sub­ sequent attempts to modify the limiting assumptions of the neo­ classical model have yet to develop an operational alternative to the earlier version. It must also be noted that neo-classicists themselves maintain that an application of their model to regions may not be appropriate, since the full employment assumption applies to the national economy and some regional unemployment levels may differ significantly from zero (Gauthier, 1976).

A second reason why the neo-classical model does not necessarily support a contention that regional inequalities will decline as the result of market forces is that the model only contends that an equilibrium will be attained. In fact, an equilibrium position may

be reached at which there are considerable variations in regional

living standards as the result of regional variations in the sectorial

structure of economic activities, thus, wages for peripheral regions

may climb to meet those of more developed regions in the industries

represented in the periphery. However, if the industry in the per­

iphery is predominantly low-wage, as it quite likely, the periphery will have an income average below the national average (Gauthier,

1976).

Even if factor flows do begin to react to marginal returns in

the periphery, these flows may not produce growth impulses which are as powerful as the growth impulses created by factor flows to

the center and by agents of growth within the center itself. This implication can be supported by a logic derived from Hufbauer's ideas concerning the "international product cycle." Hufbauer suggests that highly developed nations are innovators which originally face little competition in the production of goods which they develop and place on the market. Later lesser developed nations "Imitate" the In­ novator1 s technology, but in the meantime the innovator has developed a new good and the cycle begins anew (Hufbauer, 1965).

Hufbauer applied his ideas within an international context, but they also seem readily applicable to the intra-national case.

In this case the center is the innovator and the periphery Is the eventual imitator. In fact, however, there is good reason to believe that "imitation" is an improper way to describe this process of the diffusion of production. More likely, the innovator develops 10 new products which compete for limited supplies of factor Inputs; and older products, which may require large inputs of factors of production which are relatively scarce in developed regions (labor, for example), may as a result be produced in lesser developed regions.

In this situation there is a factor flow of capital investment toward lesser developed regions in response to marginal returns. Note, however, that this investment may not have the expansive effects of investment elsewhere, since the product may itself be in a phase of declining marginal consumption and the productive activity may, therefore, not create a dynamic impulse in the economy of the lesser developed region. That is, although the activity may generate employment and income increases, there may be no or few inter­ industrial linkages fostered by the activity. This may be partic­ ularly true with regard to the local service sector, a potentially large source of new employment growth. New jobs in this sector may not materialize locally, since the service linkages for the industry may likely already be firmly established with suppliers from a dominant metropolis. This is probably all the more true when the new activity is a branch operation of an organization with headquarters elsewhere.

Further, due to the product’s demand structure, production may be quickly curtailed in times of economic distress. This latter effect may well characterize many productive activities in lesser developed or peripheral regions owing to corporate interests in first protecting its most valuable labor assets at main plants during recessions. These main plants are generally located in 11

the major metropolitan regions, where the recovery of labor talent would be most difficult during ensuing periods of economic expansion

(Mastalyer, 1976).

Thus, although industry and/or other economic activities may

decentralize, there is no guarantee that this alone will cause a reduction in regional inequalities. This is, further, not a con­

tradiction of neo-classical equilibrium analysis but represents a situation in which an eventual economic equilibrium may be achieved without altering the basic disadvantageous position of the periphery.

The Need For Regional Planning

There are many regional planners who believe that a clearly defined regional policy is necessary in order to fundamentally change this uneven relationship between developed and lagging regions.

Thus, Friedmann emphasizes the focus on "the attainment of objectives for territorially organized—or spatia1-sub-systems of national societies" (Friedmann, 1972). He further argues this policy must tie together the national factor markets: "regional development must be designed to deal with the diverse problems of development regions as a comprehensive system of interdependencies" and that a

"failure to tie peripheral regions into a national system may even­ tually retard the rate of progress of which the country as a whole is capable" (Friedmann, 1966, pp.45-55). In other words, Friedmann believes that an era of divergence, caused by the forces outlined above, can be terminated by effective regional planning. He feels 12 that planning can help a nation enter a period of lessening regional inequalities, i.e. an era of convergence represented by the down­ ward sloping portion of Williamson1s regional inequalities curve

(see Figure 1).

Several Austrian researchers argue that regional policy is particularly important in national planning when social and pri­ vate costs are not the same. This may be true where continued growth in one region is responding to and resulting in private profit but where such development causes losses for society as a whole or neglects more socially profitable alternatives elsewhere.

The difference between social and private costs and benefits are the result of externalities (Scitovsky, 1954). For Austria and many other nations, for example, the concentration of the labor force in large metropolitan areas results in a negative externality.

Although this, perhaps, creates a profit for private enterprise,

Austrian officials contend that it is costly to society. Their argument is that it overloads urban infrastructure while under utilizing and jeopardizing the maintenance of rural infrastructure

(Nussbeumer, 1969, pp.9—10). Planners often, thus, recommend that government take actions to encourage a better assessment of the true costs and benefits of, for example, migration.

This may also mean that steps should be taken to encourage actions which create positive externalities for society as a whole.

Government investments in infrastructure and subsidies for the provision of some services in the private sector may, for example, produce important benefits which cannot be internalized in the

private sector. This is borne out by public investment in trans­

portation networks which provide many benefits, some of which (i.e.

the externalities) cannot be redeemed by tolls or freight charges

(Nowotny, n.d. p.18). In this case, an improvement in regional,

and perhaps national, accessibility represents an important positive

externality of such an investment in transportation. Hirschmann and

others argue that investment in infrastructure (social overhead

capital) produces many such positive externalities which are im­

portant permissive factors for the development of directly productive

activities (Hirschmann, 1968; Nowotny, n.d. pp.20—21; Mera, 1974,

p.7; Hansen, 1968, pp.252-253).

In general, then, regional planning may be necessary in order

to blunt the processes which contribute to increased regional in­

equality and in order to provide an infrastructural base which will

permit the emergence of an era of inequality decline. Regional

planning efforts in the past have adopted various types of planning

strategies, two of which are of particular interest here. One of

these is a strategy which has a well-developed theoretical base and has attracted considerable attention in the recent literature - the

growth pole-growth center strategy. The other, decentralized con­

centration, has a less well-developed basis in theory, but a strong appeal in nations vhere goals and/or political realities call for

"concentration" of regional policy at lower levels in the urban hierarchy. 14

Two Regional Planning Strategies

An Important type of regional policy designed to promote the efficient use of society's and a region's resources is the growth pole - growth center policy. This policy is one in which govern­ ments attempt to affect the sectorial-spatial structure of the economy in order to attain national social and economic goals.

Notably, the growth pole - growth center concept is based on the attempt to establish a basis for true economic expansion and evol­ ution and is not merely intended to concentrate existing growth into a few centers at the expense of others. This concept is derived from concepts originally proposed for pure economic space by Perroux but later related to geographic space by Boudeville.

Perroux's arguments emphasize "the set of relations which exist between the firm and, on the one hand, the suppliers of input

(raw materials, labor, power, capital) and, on the other hand, the buyers of the output (both intermediate and final)" and the pole as a place "from which centrifugal forces emanate and to which centripetal forces are attracted "(Perroux, 1950, pp.94-97). Boude­ ville identifies a growth center as a region, generally a city, where regional growth is concentrating owing to external and scale econ­ omies in production. Growth centers contain within them firms which are large and are characterized by high productivity and a growing share of the market. These firms come to dominate others in the sense that they are a large market for and/or a large supplier to other firms. In the former case, where a firm is a large market for another, a backward linkage exists. Where one firm is a major sup­ plier of another, a forward linkage exists. Perroux and Boudeville reason that it is these linkages which communicate growth impulses

throughout an economy. For example, increasing productivity may result in lower prices aiding firms tied to forward linkage firms, and larger output induced by such price reductions will move the economy toward even greater integration (Perroux, 1950, Perroux,

1955, pp.307-320; Boudeville, 1968). Thomas notes that "the spatial dimensions of interindustry linkages appears to be critically im­ portant if effective governmental economic planning is to be under­ taken when the goal is the maximization of regional or national per capita income" (Thomas, 1972, p.93) .

The firms promoting interlinkage, so-called leading or propul­ sive firms, create growth throughout the economic system, hastened by increased innovation and dynamism in the growth center, which becomes a magnet for labor, capital, and entrepreneurial talent.

However, it is also presumed that growth will diffuse from the growth center, thereby aiding general regional development. It is for this reason that regional development planners have often adopted policies which would aid in the creation of such a growth center. They count on so-called "trickle-down" or "spread" effects to improve the economic situation in lagging regions (Myrdal, 1957; Hirschmann,

1958). These effects include the expansion of the latter's market by greater contact with the "modem" techniques and innovations imported from the modem sector, and easing of population pressure in the lagging regions as migration streams develop. Hansen, Winnick, 16

and Berry emphasize the positive aspects of migration and commuting,

especially because they may result in a more rational use of resources

and they may be a more efficient way of realizing prosperity for people rather than just places (Berry, 1970; Hansen, 1972, p. 103;

Winnick, 1966, p.282). Lasuen emphasized the importance of the dif­ fusion of innovation and notes the positive role which large corpor­ ations can play in this regard. He is especially optimistic about the opportunities for the diffusion of growth impulses faster and to more places as the result of sub-contracting within the corpor­ ation (Lasuen, 1969, pp.146-147). These ideas are very consistent with the importance attached to interindustry linkage by. Perroux and Boudeville and potentially operational within a regional devel­ opment plan which embodies policy relating to business structures.

In fact, however, there is little evidence yet that a growth center will diffuse growth spatially. The evidence that has been found derives more from the interpretation of static patterns than from:the workings of the actual dynamic process. Berry has found evidence that technology will diffuse from a growth center, evidence which emerges from his study of the diffusion of television (Berry,

1972) and the investigations of the influences of U.S. urban areas upon surrounding regions. In the latter study, his urban "traverses"

Indicated that economic growth and well-being does generally decline with. distance from large urban centers (Berry, 1973, pp.122-148), but these results do not shed any light on the nature of the processes

Involved. And, Berry*s use of a consumer good, television, in another of his studies provides less insight into the diffusion 17

of technology than would a study of the diffusion of a new good

or process which embodies new industrial—commercial technology.

The latter is much more relevant to regional economic growth and

is, unfortunately, also more difficult to investigate. Malecki has

investigated the diffusion of innovations within banking systems

in Ohio with particular emphasis on behavioral parameters (Malecki,

1975) , but much work remains to be done in investigating the nature

of the actual processes of the diffusion of important technological

innovations.

Pred has suggested an interesting framework in which to study

these processes which influence the interregional diffusion of tech­

nology. He contends, like Lasuen, that the structure of industry

is very important to the nature of the spatial pattern of the dif­

fusion of innovations and growth impulses. He argues that there

exists a corporate hierarchy which co-exists within the urban hier­ archy and that the diffusion of growth impulses is influenced by

the interaction of biases from both hierarchies as well as by the effect of space (i.e. distance) (Pred, 1974, pp.62-64). Perhaps the best evidence supporting this contention comes from a study by

Jeffrey. His investigation of unemployment rate changes in U.S. cities found evidence of the temporal coincidence of unemployment cycles within both regional groups of cities and cities with sim­ ilar sectorial structures (Jeffrey, 1970), These results tend to ver­ ify pred’s assertions, but, again, considerably more research, is needed to illuminate the processes involved in regional growth., and specifically, the relationship of growth centers to the spatial-temporal diffusion of that growth. 18

In spite of the limited empirical investigation of growth cen­

ters, there has already been considerable discussion about what

size a city must be to generate significant growth impulses. Many writers contend that growth cneter policies should emphasize medium-

size cities, since these cities avoid the diseconomies of scale of

large cities and yet staisfy the infrastructural requirements of most

industrial and commercial activities. Hansen points out that many big cities are beginning to show some diseconomies of scale, and that though money properly invested might alleviate their problems, medlum-size cities may present better, alternative investments. He believes many medium-size cities may have "sufficient" conditions for growth, Illu­ strated by "spurts" in population growth by many cities with populations of 150,000 to 200,000 (Hansen, 1971, pp. 77-84; Clark, 1945). Hope­ fully, these smaller cities also reach the threshold population at which the diffusion of innovations from larger centers becomes more frequent

(Pedersen, 1970, pp. 219-220).

Mera, however, Is not convinced that large cities have in fact encountered diseconomies of scale. He maintains that Japan has bene- fitted from industrial concentration and that a decentralization of industry and social overhead capital would be costly to future growth in Japan. Mera, thus, argues that policies favoring the dispersion of economic activities may aid the achievement of a goal to lessen reg­ ional inequalities but not the achievement of maximal growth of G.N.P.

(Mera, 1970, pp. 16-28). Thus, any growth center policy seeking to achieve both goals simultaneously miist emphasize the importance of the 19

parsimonious selection of growth centers and must be based on the exist­

ence or non-existence of a truly propulsive industry within the econ­

omies of the cities under consideration (Hermansen, 1972, p. 29).

The second type of regional planning strategy to be considered here,

decentralized concentration, proposed policy measures which do not sat­

isfy the parsimonious selection criteria considered above and, yet, do

attempt to foster both regional growth and income convergence. This

type of strategy is not uncommon where there are a number of contradict­

ory regional policy goals and where planning authority is highly frag­ mented. In such cases political realities often result in a much great­ er spatial dispersion of available regional development funds, so that

the benefits envisioned from growth pole policies cannot really be real­ ized (Klaasen and Drewe, 1973, p. 16). These funds, often direct monies from tax transfer payments or indirect monies from lessened tax burdens, are frequently used to improve local infrastructure in order to attempt to achieve goals of halting population losses in rural areas by attract­ ing industry. It is hoped that investment in local infrastructure will affect the locational choice of industry, causing new industry to set­ tle in areas other than the major population centers. In spite of the recognition of the dangers of over-dispersion, the size of centers con­ templated as investment centers are no where near the size of Hansen’s medium-sized cities; they are more often small towns or large villages

(Bundeskanzleramt, 1969, p. 137; Bylund, 1969, p. 200; Holzman, 1971, p. 125; Nowotny, n.d., p. 54; Mueller, 1965, p. 20; Niederoesterreichi- schen Landesregierung (N.O.), 1969, p. XIII; Oesterreichisches Institut fuer Raumplanung (OIR), 1968; Stummer, 1969, p. 19). 20

The arguments regarding this development strategy rely on theo­

retical notions regarding the growth effects of concentration but

emphasize the importance of decentralization in order to avoid dis­

economies of over-concentration (Organization for Economic Co-operat­

ion and Development (OECD), 1974, pp. 37-38). This strategy also

emphasizes the need to organize unused local resources to spur growth

(MacKinnan and Robertson, 1969, pp. 40-41), which will be further in­

tensified by multiplier effects. This strategy of development, how-

t ever, has very little in common with growth center strategies and im­

plications to the contrary entirely disregard the importance of absolute

size inherent in the arguments of not,only growth pole - growth center

theorists but also those advocating the role of the medium-size city.

In fact, decentralized concentration has little-theoretical basis, and

the strategy is often used as a rationalization for political patronage

to rural areas and in lieu of greater central direction in planning.

Both of these factors, of course, result in disjointed policies bene-

fitting a large number of localities.

The industrial location policies of decentralized concentration do, though, seem to have close ties to export base theory (North, 1955), but that theory has also been beset with serious criticism. Attempts to spur local growth by establishing export oriented Industrial and commercial activities in lagging regions does not account for important considerations of national demand, which is assumed to be exogenous to the growth model and presumed to be no impediment t° development (Rich­ ardson, 1969, pp. 254, 337). This assumption, however, Is unrealistic, 21

particularly given the probable income elasticities of a lagging reg­

ion's industrial products. Further, Blumenfeld points out that empha­

sis of the export sector underplays the important role of the service

sector as a long-run determinant of economic expansion (Blumenfeld,

1955, p. 21).

In general, policies like decentralized concentration have been

questioned for their lack of a theoretical base and because of their

emphasis on "place" and not "people" prosperity (Winnick, 1966, pp. 280-

.281). That is, dispersed aid may help improve standards of living for

people at their current residence, but an alternative approach might be

more efficient in that it might encourage population mobility, some con­

centration of economic activities, and greater improvements in living

standards. Decentralized concentration places a relatively high pri­

ority on improving living standards within the context of existing

spatial distributions of the population, but there is no guarantee that

these population distributions should not or will not change.

Thus, a particularly interesting and important part of the decen­

tralized concentration growth policy is the role of labor mobility,

both migration and commuting, which is especially relevant to the

Austrian case. A decentralized concentration strategy often attempts

to combat demographic and economic over-concentration by aiding smaller

cities in capturing commuters and migrants who might otherwise migrate

to the large metropolitan centers (Lentsch, 1973, p.11). The concern

is most generally with problems created by selective out-migration in

peripheral regions. The loss of young, talented people often results

from poor economic opportunity in peripheral regions owing to the 22

failure of adequate investment to provide jobs with wages competitive

to those in metropolitan regions. The investment may not be forth­

coming due to incorrect perceptions of the periphery on the part of

investors (Friedmann, 1966), but the result is a selective migratory

flow of labor in the direction of more developed regions. Hirschmann

and Myrdal both believe that this migratory flow may, because of its

selective nature, worsen regional inequalities. The lesser developed

region is further disadvantaged by the impact of out-migration upon

firms providing goods and services for the local market. A popula­

tion loss lessens market potential and, thus, threatens jobs based on

the local market (Parr, 1966, pp. 149-159).

Many researchers, however, argue that the best way to achieve

higher incomes, maintain some semblance of personal locational choice,

and still maintain consistency within a regional growth policy is to

allow or actually encourage labor mobility (Gober-Meyers, 1975, p. 149;

Groenman, 1969, p. 31; Winnick, 1966, p. 281). Such a policy, for ex­

ample, would emphasize the potential of medium-sized cities located near peripheral regions, although, not necessarily located in these

regions (Hansen, 1968, p. 276).

This would seem to be consistent with empirical research which has indicated the spatial coincidence of fastest economic growth and

larger urban places (Berry, 1972, pp. 122-148). It is also consistent with. Alonso, Winnick, and HooverTs arguments which emphasize the impor­

tance of creating prosperity for people and not attempting to achieve an

Illusory goal of prosperity for places (Alonso, 1971; Winnick, 1966;

Hoover, 1969). However, the results of empirical investigations of the 23

relationship between migration and economic growth are not conclusive.

Some studies find that income growth is fastest in net out-migration regions (Berry 1973, p. 155) and others find that regions benefittlng from selective in-migration experience most rapid growth (Gober-Meyers,

1975, pp. 110-115). This seeming incongruity is perhaps the result of the manifestations of geographical scale (Gober-Meyers, 1975, p. 150).

It should be noted, however, that apparent income increases in out­ migration regions may actually only represent an average increase in income per capita owing to out-migration of poorer people. This would tend to raise average incomes in origin regions and depress average in­ comes at destinations in spite of the fact that individuals have exper­ ienced no income change whatsoever. The real income changes that require investigation are the incomes of individuals, whose incomes are simul­ taneously influenced by any number of other variables besides migration.

It is recognition of this latter point that has prompted a more recent view that migration is both cause and effect of development

(Schwind, 1971, p. 7), within the context of a complex relationship between many interdependent variables. In fact, several researchers now believe that the impact of migration upon a region may vary depend­ ing upon the specific situation, that "Migration may act as a disequil­ ibrium force under certain conditions and as a factor contributing to greater income equality under other circumstances" (Gober-Meyers, 1975, p. 31; Okun and Richardson, 1961). Schwind feels that, in any event,

* * the impact of migration upon income conbergence is much less important than stronger equilibrating forces (Schwind, 1971, p. 116). Generally 24

the strongest such force is structural economic change In a region as

evidenced by sectorial employment shifts (Stein, 1964, pp. 19, 206-208).

These changes themselves often cause migration, especially rural to

urban movement during incipient stages of industrialization in a region.

At present, then, a composite view suggests that the effects of

migration upon regional changes must be assessed coincidently with other

forces contributing to and resulting from regional change. This approach

is both theoretically pleasing and methodologically feasible and has

received considerable attention in recent migration literature (Gober-

Meyers, 1975; Greenwood, 1973; Willis, 1974). Finally, this approach also

carries with it a strong policy implication. It suggests that levels of population and migration should be considered to be instrumental policy variables and not goals unto themselves (Willis, 1974, p. 46). If mi­ gration levels are chosen as policy goals, as they are in Austria, attempts

to achieve this particular goal will put very strict constraints upon the potential for change in the other instrumental variables which are important determinants of regional income growth. Thus, the array of potential policy actions available to achieve regional income convergence may be seriously limited, and the result may be a failure to achieve any meaningful regional change as the consequence of policy.

Regional Policy Experience

Unfortunately there has been little investigation of the successes or failures of the regional development policies which have been pursued in many parts of the world. The studies that have been carried out are 25

almost uniformly characterized by a qualitative evaluation of policy

and not by a more rigorous analysis of data. Of course, this is per­ haps largely due to data deficiencies and/or the short time spans of many regional policy actions.

There is especially little literature relating to policy exper­ ience with growth pole — growth center approaches to planning. This is due to the fact that most nations have not adopted policies which can be identified as growth center policies. However, there is evi­ dence from France that attempts to decentralize growth from the Paris region have been somewhat successful. This evaluation comes from an investigation of French policy prior to the selection of the metropoles d'equilibre but still refers to a situation where there was real con­ cern for the problems of over-dispersion of aid (Hansen, 1968, p. 69).

On the other hand, the construction of new industrial towns in the Ger­ man Democratic Republic has not proven to be entirely successful. Growth effects have been largely local in nature and there are serious problems with regard to efficiency (Sinnhuber, 1965), a problem which has also appeared at the large, new Slovakian steel mill in Kosice. The paucity of empirical research on growth center policies, however, does not allow any kind of general statement regarding the potential of this planning strategy.

More evidence is available on policy experiences with strategies which have been in reality, if not by plan, characterized by loosely co-ordinated programs dispersing aid to a wide range of localities.

Regional policies in the U.S. and Canada are, for example, policies 26 which, are akin, to decentralized concentration and the results have not been, promising. Hansen argues that the'.development effort in Appalachia has been hurt by too much dispersion of aid, which resulted from sev­ eral states’ attempts to block the adoption of a true growth center policy (Hansen, 1971, pp. 51-62). Similarly, Copes and Steed report that in Newfoundland a poorly devised industrial location strategy resulted in dispersed industrial growth and lost potential agglomera­ tion economies. "The results, not surprisingly, were discouraging"

(Copes and Steed, 1975, p. 99).

In Poland a policy for "equality in location of productive forces" quickly raised the problem of "co-ordination of the principle of equal­ ity with the principle of efficiency" (Winiarski, 1969, pp. 293-395).

This experience is consistent with experiences in several other cen­ trally planned economies like the German Democratic Republic and, again, emphasizes the need for planning authorities to consider the people versus place prosperity issue.

Rodgers has investigated industrial development, regional policy, and migration in Italy and found that although Industrial subsidies did help create some industrial employment, the planning goals were not achieved. The living standard gap between the North and the South actually widened during the 1950’s and 1960’s and migration patterns continued to respond to influences originating outside of the Mezzo- g i o m o development region. These disappointing results are apparently partly the result of the lack of an enforced "locational design" in the

Industrialization program (Rodgers, 1970). 27 Great Britain and Belguim have also not enjoyed much success in

their regional planning efforts. In Britain efforts to decentralize

business activities from London have hot led to an advantage for de­

velopment regions, in spite of relatively strict building controls and

subsidies to development regions (European Free Trade Association, n.d.,

pp. 133-134; MacLennan and Robertson, 1969, pp. 42-44). In Belguim a

dispersed, poorly co-ordinated, poorly funded regional policy has not

lessened regional inequalities and, in fact, may have aided wealthier

regions more than poorer regions (Ruehmann, 1968, pp. 84-85; Davin,

1969, pp. 133-135).

Finally, in the German Federal Republic, where regional policy

efforts have been similar to Austrian efforts, Boeventer feels that the

lack of serious regional problems is due to the workings of the free

market and not due to successes of regional development planning (Boe—

venter, 1969, pp. 171, 195). This evaluation does, however, point out

the fact that the impact of regional policy may be beneficial to region­

al development but that beneficial influences may also be overwhelmed

by stronger free market forces. Thus, policy can possibly retard forces which arepworking to increase regional inequalities without actually

resulting in inequality declines. This has possibly been the case in

Italy, for example. In the German case, Boeventer is arguing that

policy is only one relatively weak force among many stronger forces which, combined, have resulted in relatively few regional problems in

the Federal Republic. Clearly, then, regional policy must be evaluated within the context of policy1s potential for causing changes in regional 28 structures, given the prevailing set of free market forces and the absolute level of investment in regional development programs.

In conclusion, regional development policy experience suggests that decentralized concentration may or may not be beneficial to the reduction of regional inequalities and is probably, in any event, not a major influence upon changing regional socio-ecomomic structures.

However, this planning strategy is also not necessarily an expensive or high risk alternative for nations which are characterized by diverse economic and political power bases. The adoption of this strategy might, then, produce satisfactory results while minimizing political risks and dissensions, results which may be more important in reality than maxi­ mal declines in regional inequalities. The Austrian regional planning experience should be examined with these considerations in mind. Chapter 3

REGIONAL GOALS AND REGIONAL POLICY MEASURES IN AUSTRIA

Introduction

The selection of regional policy goals in Austria has taken place within the context of a prevailing philosophy which maintains that re­ gional policy should emphasize personal freedom of choice, equality in social and economic opportunities (Stoehr, 1964)., and personal economic security. This philosophy is also reflected in the Austrian political framework in which regional policy is implemented. This political framework is a federal system and the rights of independent action on the part of provinces (Laender) and municipalities are recognized and, indeed, exercized.

These rights are assured by legislation and by the national consti­ tution. Importantly, the authority of the national government, the

Bund, to enact regional policy is somewhat circumscribed by a 1954 court decision which argued that "regional planning . . . is not a special, separate administrative matter, but, from the point of view of constitu­ tional law, a complex concept comprising all activities serving the purposes of provident planning in the various spheres of administrat­ ion . . . Thus both the Federal Government and the Laender may engage in activities relevant to regional planning, but each of these author­ ities may do so only in those fields which, under the division of re­ sponsibilities provided for by the Federal Constitution, fall within

29 its cognisance" (OECD, 1974, p. 64).. The Bund is further constrained in its authority to make regional policy by the important and consis­ tent Impact that provincial political power bases have upon decisions made by the Bund within its sphere of potential action. The Bund's authority to act on regional policy is, thus, constrained by both legal and political factors. The provinces are, in turn, also checked in their actions by legal and political powers of the municipalities, which clamor for an equal voice in planning at the provincial and national levels. The municipalities emphasize the importance of co-ordinating their very extensive investment programs with provincial and national regional policy (Oesterreichische Raumordnungskonferenz, 1975, p. 428).

This co-ordination has only recently been legislatively required in most provinces and is beginning by way of a co-operative effort at the national level via OROK (the Austrian Regional Planning Commission), which will be discussed later (Rill, 1975, p. 80).

There is no question about the existence or problematical nature of this "high degree of dispersion of regional planning responsibili­ ties" (OECD, 1974, p. 65). The dispersion of planning authority has also spawned the creation of separate and often contradictory, regional planning goals by different regions and levels of government. The Bund has long had implicit goals, recently made more explicit by direct state­ ments from OROK and the Austrian Chancellor. However, the provinces and provincial interest groups have also explicitly defined goals which are often contradictory to both national goals and the planning goals of other provinces. 31

The Goals of Regional Planning

The Bund has shown consistent concern for attaining a goal of

lessening regional Income inequalities. This has been implicit in a

number of institutional and legislative acts taken by the Bund since

World War II and has been made more explicit in recent years. For ex­

ample, in 1970 the Austrian Chancellor "emphasized the importance of an

active regional planning policy aimed at creating the spatial pre­ requisites for attaining equal earning and living conditions for the population in all the residential areas of the country" (OECD, 1974, p. 36). The ministries and 0R0K have also made frequent reference to

the Importance of the achievement of this goal (OIR, 1973a, p. 6 ; 0R0K,

1975, p. 11). The attainment of equal earning and living conditions, however, has generally been interpreted as an attempt to lessen region­ al Income inequalities and not an attempt to achieve actual equality.

A second major regional planning goal of the Bund is to reduce or halt-net out-migration from many rural regions in Austria (OROK, 1975, p. 165; Bundeskanzleramt, 1969, p. 17; OIR, 1973a, p. 6 ). This goal has gained more backing in recent years, particularly from provinces experiencing continued net out-migration. The main rationale for this goal has been to stop downward spirals in local economic conditions re­ sulting from massive, often selective, out-migration, which lessens the quality of the labor forces and the size of the local market. Proponents have also noted the importance to national defense of maintaining suit­ able population densities in border areas (Bundeskanzleramt, 1975a, p. 108; Bundeskanzleramt, 1973, p. 65) as well as the importance of

halting the de-population of many alpine regions in order to protect

agricultural cultivation and its benefits to tourism in alpine regions

(Bundeskanzleramt, 1973, p. 61). Alpine farms create visual contrast

and human interest in mountain regions. The demise of small mountain

communities and the alpine farms would detract considerably from the

character of the mountain regions and potentially cause a loss of tour­

ism to nations where the mountain traditions have been maintained.

A third goal, regional full employment, is apparent from actions

of all governmental bodies and from social expectations concerning

economic security. This goal is consitent with a goal of regional

income convergence and, according to one Austrian source, is a goal

which is more lively, to be., fulfilled than that of actual income equal­

ity (Trauner, 1969, p. 20).

Regional planning goals of the provinces generally emphasize in­

creased industrialization and the reduction of out-migration and out-

commuting from many parts of the provinces. The latter goal is partic­

ularly important to the provinces strongly affected by the attraction

of employment opportunities in the German Federal Republic, Switzerland, or Vienna itself. These latter regions have and do receive large num­ bers of in-migrants and commuters from adjacent Austrian provinces. The provinces are, again, concerned with the loss of labor, with the decline in local market potentials, and often with the threat of de-population in alpine regions.

Several of the provinces have also expressed the desire to lessen 33

intra-provincial income inequalities, which are in some cases quite

substantial. In fact, each province or group of provinces has its

particular problem for which unique goals are established. Notably,

Vienna has as its goal an increase in in-migration and in-commuting, in

direct opposition to the provinces which form its migrant and commuter

hinterland (mainly Lower Austria and Burgenland) (OIR, 1973b, p. 5-12).

Thus, although the provincial goals are generally similar to na­ tional goals, there are some real and potential conflicts. First, there

Is no guarantee that programs which could be devised to achieve the na­ tional goal would satisfy all of the provinces. ^h^-s due to the fact

that provincial goals relate to a subnational, i.e. smaller area, and national programs might not be consistent with goal achievement at the provincial scale. Second, there are also cases where the goals of various provinces are in direct conflict, as noted above. And, third, it may not be possible to achieve all three major national planning goals at once; they may be to some extent incompatible. A more de­ tailed examination of these issues will follow in a later section of the paper.

The Regional Planning Strategy

The planning strategy adopted in Austria is decentralized concen­ tration, a planning concept that some Austrians themselves admit .to having little or no theoretical underpinning (Seidl, 1969, p. 65;

Butschek, n.d., p. 44). The rationale for this strategy, noted in

Chapter 2, is that smaller central places should be aided in order to 34 intensify local multiplier effects and reduce a d v e r s e effects of over­ concentration (OECD, 1974, pp. 37-38). It h a s b e e n suggested by one

Austrian regional scientist that this strategy w a s adopted so that

Austrian regional policy might attempt tQ. lessen, urban-rural inequal­ ities by discouraging the development of " o n e - s i d e d " urban concentrat­ ions, which are considered by many to be un p r o d u c t i v e . These people also feel that urban concentration has a l r e a d y proce e d e d too far in

Austria, over-taxing existing urban infrastructures and under-utilizing infrastructure in rural and small urban c o m m u n i t i e s (Nussbaumer, 1969, p. 8; Seidl, 1969, p. 64; Seidl et. al. 1966) . T h i s conviction has grown in popularity in recent years, and a t t e m p t s at "discouraging in­ ternal migration, in order to counteract o v e r — concentration and to pre­ vent nationally undesireable de-population" h a v e b e e n initiated (OECD,

1974, p. 38). Decentralized concentration, a c c o r d i n g to some, is well suited to achieve this population goal by s t i m u l a t i n g rural centers which might act as catchments for migrants (Beirat f u e r Wirtschafts - und

Sozialfragen, 1972, p. 62). This, further, w o u l d m a k e use of the exist­ ent infrastructure in these centers in order t o a v o i d costly additional

Infrasturctural investments required by c o n t i n u e d i n —migration to large metropolitan regions. (Nussbaumer, 1969, pp. 9 — 10).

Xt should be noted, however, that there h a s n o t been universal agreement about stemming migratory flows i n A u s t r i a . There are several

Austrian regional scientists who believe t h a t t h e s e population movements are necessary to achieve the major economic p l a n n i n g goal, the lessen­ ing of regional income inequalities (Loederer a n d Nowotny, 1969, p. 59; 35

Stoehr, 1964, p. 125)'. However, the.theoretical arguments and, no doubt, political conviction of those particularly concerned with

stemming out-migration have prevailed.

Two other notable characteristics of the Austrian planning strat­ egy has been its emphasis on the importance of improved infrastructure and the conviction that industrial subsidies should be restricted to assistance at the founding of industrial enterprises and not to con­ tinued aid for an indefinite period thereafter. With regard to infra­ structure, it has been argued that such Investment is the most important regional industrial policy measure available (Holzmann, 1970, p. 125) and that it is, in general, of "eminent importance" (Pachucki n.d., p.9).

Infrastructural investments create" jobs in the short-term and, in the long-term, improve a region*s locational advantage by improving its attractiveness to industrial and commercial activities (Boekemann, 1975;

Matzner, 1969, pp. 15-16).

With regard to the duration of Industrial subsidies, it should be noted that although there have been many people who have aruged that this aid should not last indefinitely (Bundeskanzleramt, 1969, p. 137;

Stoehr, 1964, p. 125), there is no guarantee that this will not occur.

Finally, it can be argued that decentralized concentration as a planning strategy in Austria has to some extent been chosen by default.

That Is, the existence of a goal to reduce net out-migration from many regions has necessarily shaped the strategy employed to achieve the other goal, regional income convergence. The latter need not have been and, perhaps, should not have been pursued hy the dispersion of resources 36

to many small central places. However, the achievement of the popu­

lation goal necessitated this strategy alternative and has had a very

great Influence on the creation of measures to implement regional

policy.

Regional Policy Measures

1. Identifying Problem Regions In Austria

In order to ascertain where regional policy measures should be

applied, the Austrians have defined what are to be considered problem

regions in need of assistance. They now identify six such types of regions. Two of the most important regional types are 1) the regions on the so-called "dead borders" (regions along the Czech, Hungarian, or

Yugoslav frontier) and 2) other agricultural regions lacking in Indus­ try. These regions, especially the former, have received attention from

Austrian regional planners since independence in 1955. More recently there has also been considerable attention given to regions with 3) structural problems in industry as well as to 4) depressed mining re­ gions. These areas are generally those with aging iron, steel, and related industries. Finally, 5) alpine agricultural regions and 6 ) urban areas have also been mentioned as problem or potential problem regions (Bundes­ kanzleramt, 1969, p. 15). Some urban areas are suffering from over-taxed infrastructure while the existing infrastructure of de-populating al­ pine regions is under—utilized. And, the continuation of public services in mountain areas is threatened by the decline of population below thresh— hold levels which are necessary to provide such services. Policy measures have been devised' to ameliorate the problems of

all of these regional types, and this is another major reason why there

has been such a geographic dispersal of Austrian regional planning ef­

forts and monies. Any Austrian region can conceivably be included in

at least one of these six regional types. Attempts to delimit more

precisely or rank order the problem regions have been frustrated by the

lack of provincial co-operation (OIR, 1973b, p. 1). This reflects the

provinces' desires to have as many areas as possible designated as "prob­

lem regions". It also reflects provincial reluctance to make the dif­

ficult economic and political choices which are inherent in defining what is and what is not a problem region. Thus, for example, officials

in Vorarlberg, one of the wealthier provinces, have argued that much of

the populated region of that small province is in one way or another a

"problem" region (OIR, 1973, pp. 41-42).

Still, institutions and legislation enacting regional policy have, during certain time periods, more narrowly defined "development reg­ ions" for the purpose of that institution or legislation. These re - gions are most generally the rural, agricultural regions along Austria's eastern borders. However, there are exceptions to this general rule and

"problem" regions as defined by each respective policy measure will be identified below.

2. Regional Policy Measures Taken by the Bund

The Bund has instituted regional policy by way of regional in­ dustrial and infrastructural measures. The former is generally carried out via investment institutions and tax legislation causing the redis­ tribution of the tax burden. However, the Bund has also been involved 38

in some important co-operative programs with the provinces. All of

these regional planning efforts will be described below. A more care­

ful analysis of the impact of regional policy upon goal achievement

will follow in a later chapter.

a. regional industrial policy measures

Perhaps the most explicit regional industrial policy measure

taken by the Bund was the establishment of the Kommunalkredit A.G.,

an industrial investment institution founded in 1958 by way of encourage­

ment from the Bund and funded largely from the publicly owned banks and

federal investment institutions. This investment corporation is over­

seen by an advisory board comprised of representatives from several

ministries and from the national leagues of cities and communities.

The purpose of the Kommunalkredit A.G. (hereafter K.K.A.G.) is to create

industrial employment in "development" regions (Oesterreichische Komm­

unalkredit A.G. (OKKAG), n.d. , pp. 9-10). This was at one point en­

couraged in order to lessen income inequalities within Austria so that

the nation could hopefully withstand expected pressures toward income

divergence upon Austria's entry into E.E.C. (OKKAG, 1962, p. 6 ). Al­

though Austria was not allowed entry into the Common Market, the

K.K.A.G.'s goal to reduce income inequalities is, of course, still

in line with national planning goals. Investment funds are loaned at

low Interest for long terms to municipalities which in turn loan them

to industrial enterprises. It is estimated that the investment funds provide a benefit to the investor of approximately 5% of the loan size

* (Wiener Instltut fuer Standortberatung, 1975, p. 57). The investment funds are distributed for projects which will improve the economic 39

structure of regions and particularly if they attract migrants and

commuters to the employment site (Schramke, 1974). Application

must be made for these funds by municipalities, so their distribution

is not only dependent upon need but upon a municipality*s ability

to attract a prospective investor and upon local initiative. During

the period 1959-1966 most of these ''subsidized” investment funds

went to rural eastern Austria; thereafter, however, the aid was

distributed to regions with poorly diversified economies, so that

after 1967 all provinces received at least periodic investment

from the K.K.A.G. Still, the emphasis remains in eastern Austria,

where the poorest province, Burgenland, has been the largest rela­

tive recipient. It received about 9% of all of its industrial invest­

ment by way of the K.K.A.G. during the period 1966—1972 (OIR, 1973a,

p. 71).

Another public investment fund, the E.R.P. (European Recovery

Program) Fund, has been according to some people, however, the central instrument in the Bund's regional industrial policy (OIR,

1973a, p. 15). It provides more funds than the K.K.A.G., accounting for about 5% of all industrial investment in Austria during 1966-

1970. The E.R.P. Fund was established in 1948 and after 1955 was especially concerned with re-establishing investment incentives in eastern Austria, previously Soviet occupied territory. Though the fund's first explicit regional program began In fiscal year 1972/

1973, the E.R.P. has played a role in regional policy by way of its regional distribution of investment funds. The Fund's purpose has been to create Industrial jobs, especially in regions with structural 40

problems (notably mining regions) and where there were large labor

reserves, i.e., high unemployment. Investment funds are loaned at

a rate of 5% interest for 5-10 years and can comprise up to 70% of

a firmfs investment cost, though shortage of funds has recently

made this less likely. In 1966 a special program was instituted

for coal mining regions, resulting from large mine closures in

Burgenland and Carinthia. This program provides loans for up to

15 years to create alternative employment opportunities. The terms

of the loans are liberal; they include 5 years free of redemption

and 5 years at 1% interest (OECD, 1975, pp.53-54; John, 1974). It is

estimated that regular E.R.P. aid benefits firms to the extent of

about 5% of loan size, and for the coal region program that figure

Is about 20% (Wiener Institut fuer Standortberatung, 1975, p.72).

Legislative action has also been taken by the Bund to improve

\ the locational advantage of regions bordering on Czechoslovakia,

Hungary, and Yugoslavia. This has been in the form of an income

tax reduction, via Increased depreciation allowances for commer­

cial and industrial enterprises. Between 1967 and 1974 firms in

these border regions were allowed a 20% (later 15%) higher depre­

ciation rate on mobile assets than allowed in the rest of Austria.

After 1974 the rate for all of Austria was equalized when all re­

gions were allowed the higher rate enjoyed by these border regions.

It is nearly impossible to adjudge the impact of this law, but it

certainly must have been felt by way of increased investment in the border regions. This was probably particularly true in Burgenland where the entire province benefitted from the income tax reduction 41

(R.ep. Oesterreich, 1967c, pp.1574,1616).

Another legislative measure favoring many poorer regions was a reduction in the transport tax levied on goods transported by motor vehicle over 65 kilometers. The exemption was in force during

1967-1972 and was extended to many poorer, rural regions for cargoes destined for the provincial capital and points directly enroute

(Rep. Oesterreich, 1967b). The measure’s purpose was to Improve the locational advantage of these less accessible regions. Though rela­ tively modest.in most cases, the savings in Burgenland can, for example, be estimated at a value equal to about 1-2% of total annual industrial investment . The exemption ended with this long distance transport tax was eliminated by the institution of a value added tax in 1973 (Berger, 1975; Foerster, 1975).

The Bund has also, of course, had a large influence on various sectors of the economy. In at least two cases this sectorial involve­ ment most strongly benefitted particular types of poorer regions.

A mining promotion act of 1967 provided special funds for investment and increased employment compensation for mining regions, particu­ larly hard pressed regions in Styria (OIR, 1973a, pp.49-52). Also, the Bund gave subsidies of from 1000 to 2000 schillings (about

$6Q to $120) to about 35,000 mountain farmers during the early 1970's

COROK, 1975, p.91). The purpose of the latter measure was to increase farmer's incomes and maintain settlement in alpine regions (Bundes- kanzleramt, 1975a).

The most important sectorial impact of the Bund upon the econ­ omy is, however, probably by way of the nationalized industries. These national concerns are concentrated in the heavy industrial sectors and have their regional concentrations in Upper Austria, especially at Linz, and in Styria. These enterprises account for something more than 20% of all national industrial employment and production and in Styria and Upper Austria employ about 10% of all employed persons (OECD, 1974, p.61). The nationalized industries affect regional policy and changes in the regional economic structure in several ways. Although the regional distribution of employment in the nationalized industries remains concentrated in a few areas, there have been some jobs created in peripheral regions as a result of production shifts away from metropolitan centers like Vienna.

Jobs have also been created in this manner on the Upper Austrian-

Bavarian border, where there have been attempts to lessen German influence on the Austrian labor market. The nationalized industries have also been involved in an important co-operative attempt to di­ versify the economic base in a stagnating industrial region in Styria

Aichfeld-Murboden. This project will be discussed in a later section

After independence in 1955, the nationalized industries also played an important role in revitalizing the economy of eastern

Austria by shifting internal investment funds from western (formerly

American-Britlsh occupied) to eastern (formerly Soviet occupied)

Austria. This aid was intended to ameliorate an east-west income differential that is still noticeable today (Fatscha, 1975, pp.126- 43

Finally, the nationalized industries have grown rapidly in

the Linz area contributing to the very rapid economic change there.

Employment, income, and migration changes in this region indicate

that Linz is perhaps the most rapidly growing center in Austria.

The successes of the nationalized industries in Linz have played

a very important role in this development, particularly in the

creation of inter-industrial linkages (Gatscha, 1975, pp.126-130).

Regions near Linz have shown spectacular declines in net out-migration,

apparently owing to increased commuting and new local employment

related to growth in Linz. Additionally, regional Income inequali­

ties in Upper Austria have declined considerably since 1961. Thus,

there is reason to believe that the successes of nationalized indus­

try in Upper Austria have had important effects upon the realization

of national and provincial planning goals in that province.

The Federal Ministry of Social Affairs (Bundesministerium fuer

soziale Verwaltung) has also played an important role in regional

policy. The Ministry has 1) provided potential industrial investors with Information regarding site selection and 2) made available

funds for the protection of endangered jobs and' retraining of

unemployed workers. The industrial information service was estab­

lished in 1956 in response to high levels of unemployment in many Austrian regions. During its first 10 years it served over 200

firms, which created a total of 16,000 new jobs (Bundesministerium fuer soziale Verwaltung, 1966). The Ministry also financed training for thousands of workers in order to assure their employability; this aid was extended to nearly 73,000 workers in the period 1965- 44

1972. Aid to over 5,000 workers who were temporarily unemployed due to plant renovation was also extended during this period (Bundes- ministerium fuer soziale Verwaltung, 1966-1972). These types of aid increased sharply in the early 1970's under new labor legislation which also provided funds for 1) credits and subsidies to enterprises which created new jobs or which were threatened with closure and for 2) proper winter clothing for workers who might otherwise have been threatened with seasonal unemployment (OIR, 1973a, pp. 18-27).

During the period November 1969 to April 1972 these latter types of additional aid amounted to about $15 million and were largely con­ centrated in areas of high unemployment and/or high out-migration

(OECD, 1975, pp.43-44).

At this point it should’be clear, then, that the Bund has at- tampted to implement regional industrial policy measures which would encourage additional industrial employment, especially in regions f suffering from high levels of unemployment and resultant net out­ migration, The Bund's attempts to promote personal economic security have, of course, also implied attempts to raise income levels and, % thereby, reduce regional income inequalities.

b. regional infrastructural policy measures

The greatest influence that the Bund has had upon infrastruc­ tural development in the poorer provinces derives from the manner in which federally collected taxes are redistributed. These taxes are redistributed by way of the Finanzausgleichgesetz (Financial 45

Adjustment Law or simply F.A.G.), which has existed throughout the postwar period. Most taxes are not redistributed according to.re­

gional revenue collection, but, rather, are dispersed according to population size. This clearly is a distinct advantage for regions with below average income.

Through 1972 the wine, wage, and sales taxes were distributed to provinces largely according to population. The distribution of petroleum tax revenues was somewhat more complicated. Seventy-five percent of this tax was distributed to provinces according to a formula incorporating population and areal size, extent of the highway network, and receipts from auto license and commercial taxes.

The remaining 25% was then allocated to Lower Austria, Styria, and

Burgenland according to their respective shares of the first 75%.

Further tax redistribution was achieved by dividing among provinces and municipalities all Vienna tax revenues exceeding 33% of re- distributed taxes. This was also done for one-half of the tax reven­ ues in cases when Vienna's share fell between 30.5% and 33%. (Those latter terms have been altered somewhat in favor of Vienna in the most recent F.A.G.)(Republik Oesterreich, 1972, 1967a, and 1959).

Finally, provinces with per capita tax incomes below the national average receive from federal funds the difference between the national average and their’ per capita tax revenues in accordance with the

Kppfquotenausgleich (per capita tax adjustment). In 1970 this amounted for example, to a benefit of $6 million for Lower Austria (Verbin- dungsstelle der Bundeslaender, 1972). Division of funds to the municipalities from federally collected taxes has been conducted essentially as described above with two important differences. First, the population of municipalities is weighted; municipalities with populations greater than 50,000 are weighted by 2 1/3 while those w i t h populations less than or equal to 1000 are weighted 11/6, wi t h several graduations in between.

This weighting system is designed to recognize the greater infra­ structural and service requirements of larger municipalities. Its

t institution resulted in a rapid decline in the number of municipal­ ities. This was caused by the consolidation of many, often small, municipalities into larger units w hich might potentially receive appreciably more tax revenues from the Bund. This process has resulted in the disappearance of some 2000 small municipalities and in sub­ sequent cost reductions In the provision of administrative and pub­ lic services. The second difference between provincial and munici­ pal tax revenues distribution is that municipalities which have tax revenues below the provincial average receive 30% of the difference between what Is then referred to as "financial need'* and "financial strength". This latter municipal tax feature has some similarities to the Kopfquotenausgleich, which applies to provinces (Foerster,

1975; Republic Oesterreich 1972 and 1967a).

This rather elaborate tax redistribution system has provided and continues to provide substantial benefit for poorer provinces and municipalities. The apparent benefits are, however, greater than the real benefits, since, for example, some taxes are collected at the company headquarters and not at the production site. In such, cases the tax 'redistribution only re-establishes equitable tax revenues per employee. Still, there is no question that many regions have benefitted from the redistributive effects of the tax system.

Burgenland, for example, receives more federal taxes back than are collected there, while the average return to Austrian provinces is less than 60%. In fact, in 1970 these "extra" federal tax returns to

Burgenland comprised more than 30% of total income for the provincial and municipal governments within that province. The absolute size of this redistributive tax benefit significantly exceeded the amount of all public construction investment in Burgenland in 1970 (Bundesminis­ terium fuer Finanzen; Verbindungsstelle der Bundeslaender,1972). The

F.A.G. has almost certainly helped increase investment in infrastruc­ ture in all poorer parts of Austria by increasing the fiscal base of the provinces and municipalities, which account for about 2/3 of all pub­ lic investment in Austria (Matzner, 1969).

Since 1959 the F.A.G. has also provided special subsidies for

"entwicklungsbeduerftige Gebiete", or regions in need of development.

The funds available have been modest in size but specifically intended for poorer regions. Originally the subsidies were given to regions which had municipal tax revenues 50% below the national average and/or regions with unemployment levels 25% above the national average (Repub- lik Oesterreich, 1959). The 1967 F.A.G., however, required only that % tax revenues, unemployment levels, and geographic location be taken into account Otepublik- Oesterreich, 1967a). And, the 1973 F.A.G. attempted to avoid continues political disagreement about subisdy 48

levels by providing about $300,000 to Burgenland and dividing another

$2 million among all provinces depending upon population and areal

size (Republik Oesterreich, 1972). At present, the provinces themselves

decide what constitutes a development region and do not always make it

easy to determine where the funds are spent (Stipschitsch, 1975). How­

ever, information from provincial officials and accounts for Burgenland,

Styria, and Lower Austria, indicate that most funds have been used to

improve infrastructure and to promote industry, agriculture, and tour­

ism (Land Niederoesterreich, 1961-1967; Land Steirmark, 1960-1968;

Stipschitsch, 1975).

The Bund, of course,- has also been directly involved in infrastruc­ tural investment itself. Unfortunately detailed data on the Bund's in-

frasturctural investments are not avlalable. However, there have been

some regional policy considerations in the Bund's highway and railroad

investment policies. Until the late 1960*s highways were built out of

dire necessity in response to existing traffic conditions. Exceptions

to this rule, though, did exist. The Vienna-Linz-Salzburg autobahn, begun by Hitler was completed after World. War IX in order to link

Austria to free Europe. A national highway was built the length of

Burgenland to improve accessibility within the province and to the national highway system. This road was meant as a substitute for a

rail line which served the same purpose in the old province of West

Hungary, now divided (along with the rail line) between Austria and

Hungary. And, in Carinthia provincial and national efforts have

succeeded, in providing a well integrated road network advantageous 49

to tourism (Jessl, 1975; Hadn, 1975).

Mora recently, due to increased funds for construction and elimi­

nation of the backlog of repair and other necessary improvements, the

Bund has begun planning highways to improve regional accessibility.

The best examples include new highways improving accessibility to

Vienna, especially a new highway between the Vienna Basin and the Wald- viertel, a rural, low income region on the Czech-Lower Austrian border.

There are also several projects, newly completed, in construction or planning, to connect northern with southern Austria across and under the main ridge of the eastern Alps. These new roads will improve the accessibility of Carinthia and Styria, which are seriously disadvan­ taged by their poor access to E.E.C. markets. . Finally, it is notable that Vienna has received substantial subsidies from the Bund in order to help the city construct its subway system. This aid is in addition to large public transit aid provided the capital according to the 1973

F.A.G. (Jessl, 1975; Hadn, 1975).

Railroad operations have been less affected by regional policy than have highway construction activities. The national railroads form the vast majority of the network and must by law operate according to efficient, economic pronciples. However, in order to close a branch line the railway must submit an economic-demographic impact report, which could result in a federal subsidy to keep the line open. The subsidy would be intended to maintain a line which is deemed important to maintain economic and demographic vitality in the region. The other most notable regional policy action taken by the Austrian National

Railways in the postwar period was the construction of a line in the 50

1950's connecting Klagenfurt and Graz. These provincial captials had previously only been linked by a line traversing Yugoslav territory

(Petzmann, 1975).

Transport policy may begin to become more active in regional plan­ ning following the establishment of the Ministry of Transportation in

1973. It has been suggested that this ministry adopt as one of its goals an improvement in the accessibility of Austria to the E.E.C. and as another the integration of Austria's peripheral regions into the national transport network (Jaeger, 1973).

The Bund is also concerned with an expansion of the university system, especially in provinces other than Vienna. It is felt that * such expansion represents an important investment in human resources and can provide economic and demographic stimulii for growth in pro­ vincial centers (Kehlbacker, 1974). Vienna, however, had the fastest growth in the number of university students during the 1960's and remains the undisputed center of higher education in Austria. Linz and Salzburg also experienced relatively rapid growth in their uni­ versity enrollments during this period and a small college was recent­ ly founded in Klagenfurt. There will be growth during the 1970's in these and other provincial centers, but Vienna is presently scheduled to again receive the greatest investment in higher education (Bundes- mlnisterium fuer Wissenschaft und Forschung, 1972, and 1973).

3. Federal - Provincial Co-operative Programs for Regional Policy

There are several joint federal—provincial activities which have affected or implemented regional policy in Austria. An Important 51

body, the Austrian Conference on Regional Planning (hereafter OROK),

was recently created to co-ordinate regional planning at all govern­

mental levels. OROK consists of the Chancellor, the Secretary of

State, the Provincial Governors and representatives from the munici­

palities, the ministries, and the chambers of labor and business

(the latter non-voting members). It is supported by a permanent secre­

tariat and subsidiary committees made up of regional planners (OECD,

1974, p. 65). Since decisions must be unanimous, progress has been

slow toward the goals of 1) establishing a regional planning concept

for all of Austria and 2) co-ordinating regional policy measures taken

by the Bund, the provinces, and the municipalities (Beirat fuer Wirt-

% schafts- und Sozialfragen, 1972, p. 38). However, the Conference has

agreed upon a list of national goals or priorities which more or less

embody the 3 major national planning goals discussed earlier. The

Conference has also begun to serve as an important publisher of books,

articles, proceedings, and legislative information relating to regional policy. OROK has also been involved in the co-operative investigation and consideration of policy alternatives for several types of prob­ lem regions. Among other things, it has undertaken or sponsored work related to the border regions, both the "dead” border regions in the east and the western border areas under strong influence from other nations. Notably, OROK has sponsored work through the Austrian Insti­ tute for Regional planning, a private research group which has been active in local and national planning in Austria since the mid—1950's.

This institute has been an Influential advisory body and has published relating to regional planning for more than 20 years.^ 52

The most publicized and ambitious co-operative regional planning

effort in Austria has been the Aichfeld-Murboden Program, a planning

project undertaken by the Bund, Styria, and local municipalities in a

declining mining and industrial region around Judenhurg, Styria. Na­

tionalized Industry accounts for 55% of all jobs in this region and

existing high wages, especially in mining, have discouraged some in-

i dustrles from locating here despite available labor (OIR, 1969,

pp. II-III). All three levels of government have co-operated in what was intended as a showcase regional planning project, the purpose of which was to improve infrastructure, attract industry, and co-ordinate

financial assistance. New industry was to be attracted by way of ex-

\ panded credit from the E.R.P. as well as credit from provincial and local sources. Infrastructure was to be improved by the construction of 750 new apartments, funded largely by the Bund, by the establish­ ment of several new business and technical schools, and by the improve­ ment of roads and natural gas pipelines to the area (Wagner, 1975a, pp. 77-82). By June 1975 the area had benefitted from an increase in

1800 jobs, the construction of about 200 new apartments, and the im­ minent completion of more apartments, schools, and transport projects

(Vfagner, 1975b). Still, high unemployment persists in spite of heavy investment and the project has been labeled by one Viennese newspaper as the "problem child" rather than the "showplace" of Austrian region­ al planning (Die Fresse, 1975). However, the area's problems may well have been worse in the absence of the project?

A third co-operative program which involves the Bund is the E.R.P.

"Sofortprogramm" or Immediate Program for the Eastern Border Regions. The program began Initially in Lower Austria in 1970 with about $7 million annually scheduled for Industrial credit, the largest part

coming from the E.R.P. with smaller inputs from the Bund and the pro­ vincial government. The Bund and Lower Austria, however, also committed

themselves to increased infrastructural investment in the border regions, especially for schools, roads and water systems. There was also a commitment for increased aid to agriculture and tourism (OROK, 1975, pp. 21-24). The program has been extended to other provinces bordering on the socialist states of Eastern Europe. The goal of the entire border region program is to halt out-migration from these areas by creating the incentives and infrastructure needed to attract higher wage jobs in stable industries. The industrial credits are loaned at

1% interest, and, therefore, impjart a very large benefit on the invest­ or. Between 1973 and 1975 the program is credited with creating 2200 new jobs in diverse industries (Republik Oesterreich, 1967bl Bundes- kanzleramt, 1975a). Also, the program's priority has been such that it has not been subject to credit reductions which were instituted for other programs at the national level for a time in order to combat inflation (Kohlbacher, 1974).

4. Provincial Regional Planning Measures

Until recently there were few explicit provincial regional policy measures. Now all of the provinces have taken actions related to regional policy, but quite often the attempt is to implement regional policy by interpretation of existing economic legislation. Oily Lower

Austria has a large number of explicitly defined policy measures. 54

a . Lower Aus t r ia

Recent Lower Austrian regional planning efforts represent, without

question, the most active role a province has ever taken in regional

planning. Since 1969 Lower Austria has passed a series of legisla­

tive measures designed to lessen regional income disparities and size

out-migration from many rural areas (OIR, 1973b, p. 6). The strategy

adopted has, again, been "decentralized concentration", with an empha­

sis on increased industrialization and improved infrastructure.

The first action taken was in 1971 by the passage of a law for

creation, improvement, and security of specified locations for indust­

rial and commercial enterprises producing goods for non-local markets.

The law affects all of Lower Austria but most benefits the eastern border regions. The measure*s purposes are to improve the economic situation in these border areas by creating jobs and to attain "opti­ mal" economic growth for Lower Austria as a whole. There are two fi­ nancial measures incorporated into the law. First, enterprises creat­

ing 10 or more new jobs in the border regions can receive subsidies

to help pay for investment in equipment. For investment in any one

of the designated "development locales" (Ausbauorte) or in the lead­

ing center of a lower level administration unit (Gerichtsbezirk), an

enterprise receives a subsidy of approximately $1150 per newly created job. For investment in other places with populations greater than

10Q0 the figure is about $800 and in all remaining places $575 per new job. These subsidies can also be made to firms investing outside of

the border regions. Decisions in these cases are made on an individual 55 basis by the province. The second financial measure makes available

interest subsidies for investment credits. This :subsidy amounts to between 2 % and 4% depending upon the central place rank and location of the community involved. In all, some 700 places are eligible for aid under the financial provisions of this law, about 200 of which are located in the more advantaged border areas (Land Niederoesterreich,

1971b).

Another legislative action taken in 1971 was the passage of a law for the improvement of municipal structures in Lower Austria. This law changed municipal boundaries, leading to the reduction in the number and an increase in the size of the provinceTs municipalities. The pur­ pose of the measure was to create units which were large enough to provide necessary administrative services. Another incentive for this I action was, of course, the potential tax benefits accruing to larger municipalities under the conditions of the F.A.G. (Land Niereroester- reich, 1971a).

In 1973 a law creating a Central Place Regional Planning Program was passed. The goals of this legislation are the improvement of central place services, improvement of accessibility to those ser­ vices, and the encouragement of non-agricultural employment. The leg­ islation particularly applies to border regions and to central places which, given their central place rank, are deficient in the provision of certain urban services. The legislation calls for the provision of central place services where they are lacking and assistance to public and private services where they are endangered. It also calls for home construction assistance to assure "minimum" central place population 56 levels and aid to improve accessibility to the central places, in­ cluding the provision of public transport where possible. Finally,

the law empowers the province to provide special credit assurances and interest subsidies for businesses in the border municipalities. The law affects all of Lower Austria but most benefits the border areas and a group of about 150 larger central places (Land Nlederoesterreich,

1974b).

A fourth legislative measure, the Border Region Planning Program passed in 1974, proposes to improve infrastructure in the regions along the Czech and Hungarian borders. It empowers the province to extend subsidies to municipalities in these regions for infrastructural in­ vestment. The province is to provide these funds according to a dis­ tribution system which favors municipalities with lower than average tax revenues and those larger central places designated in the Central

Place Regional Planning Program (Land Niederoesterreich, 1973).

The widely dispersed aid given by Lower Austria as a result of all of -these policy measures reflects the provincefs conviction that a more concentrated investment program would lead to continued de-pop- ulatlon of many regions (OIR, 1972, Lower Austrian section p. 8).

It is felt that the policy of decentralized concentration will help to maintain local population bases and assure threshold levels for many services, the provision of which will, in turn, further lessen the likelihood of out-migration. And, the strengthened central places are intended to serve as catchments for migrants who might otherwise go to large metropolitan areas within or outside of the province. This is 57

considered to be all the more important for the border regions which

In. many cases have been cut off from parts of their functional eco­ nomic regions across international borders. Consequently they have suffered considerable out-migration because of a re-orientation of their economic "relationships to larger, more dominant urban centers

(Land Niederoesterreich, 1974a).

b. Burgenland, Carinthia, and Styria

These lower income provinces are particularly concerned with less­ ening the impact of out-migration and often emphasize industrial job creation to provide improved economic opportunity for the unemployed who might otherwise out-migrate. Burgenland is also concerned with % heavy out-commuting (OIR, 1968, p. XXII) and has been aided in the search for industry by an Association for the Advancement of Industry in Burgenland, later renamed B.I.B.A.G. (Burgenlaendische Industrie- und Betriebsansiedlungs Ges. M.B.H.). B.I.B.A.G. has assumed that more industry would slow outward labor mobility and has been active in co-ordinating provincial and federal efforts to provide credits, subsidies, and information to prospective investors. Their efforts have been especially vigorous in areas of high unemployment. B.I.B.A.G. has been instrumental in the rapid increase in industrial employment, estimating that it has served firms which have eventually created

10,000 jobs In Burgenland (B.I.B.A.G., n.d.; Verein zur Foerderung der

Burgenlaendischen Wirtschaft, n.d.). 58

The provincial government in Burgenland has, like Lower Austria,

reacted to the population provision in the F.A.G. by encouraging

smaller municipalities to join together.• These efforts have bene—

fitted Burgenland*s municipalities with an estimated 15% increase in

redistributed taxes. The provincial government has also generally

emphasized the need to concentrate industrial growth and has attempted

to affect this by way of its sectorial industrial credit policies

(Szorger, 1975 and n.d.).

Carinthia and Styria have also implemented regional policies in

attempts to lessen out-migration. Styria offers some aid to poorer

municipalities for improving infrastructure (OROK, 1975, p. 332) and

has been active in the aforementioned Aichfeld-Murboden project.

Carinthia has attempted to direct aid to regions' with low rates of job

creation and with high rates of out-migration and out-commuting. The

aid is generally provided through existing legislation for economic

assistance to businesses. It is claimed that these efforts have created and helped maintain nearly 9000 jobs in some of the poorer parts of

Carinthia during the past several years (OROK, 1975, p. 236).

c. Upper Austria, Salzburg, Tirol, and Vorarlberg

These medium and higher income provinces all have at least one provincial goal in common, the reduction of influence from the Ger­ man Federal Republic and/or Switzerland on their labor markets. A particular problem has been rapidly' increased commuting from-border regions of these provinces across the international borders. The Bund 59

and the provinces became especially concerned with this problem

beginning with the construction boom in Munich prior to the 1972

Olympics, but the problem pre-dated the Olympics and has persisted

into the mid-1970fs. These mountainous provinces are also all con­

cerned with alpine habitation and have in some cases taken overt

action to impede depopulation in the mountains.

Tirol, in fact, favors the erection of an "economic border wall"

to combat the attraction of Bavaria for Austrian labor. To achieve

this goal and the goal of halting depopulation in the mountains,

Tirol has been providing modest subsidies for certain development re­

gions and areas threatened with depopulation. Tirol has been active

in the latter regard since at least 1962 and provides farmers differ­

ential agricultural aid based on the difficulty of the farming con­

ditions in each particular region (OROK, 1974, pp. 37-38; Land Tirol,

1975). This agricultural aid is intended to lessen out-migration from

alpine regions and to maintain cultivation in these regions, in part

to enhance scenic contrast for the benefit of tourism.

Vorarlberg and Salzburg have been particularly concerned with

infrastructure and its relationship to migration. Salzburg has been

attempting to improve housing and transport facilities in order to

produce a positive effect on the economic and social forces of de­ velopment in the border regions (OROK, 1974, p. 36). Vorarlberg has al­

so provided extra aid to low income and mountain municipalities for

infrastructural investment in order to lessen out-migration from such

areas (for example, see: Land Vorarlberg, 1970). Mountain areas in

... / 60

Vorarlberg have additionally benefitted from.funds provided by the

Bund for regions in need of development and from aid provided by the

province for small businesses. The latter provincial program provides

a 4% interest subsidy on loans up to $60,000 for business construction

or expansion (Land Vorarlberg, 1975). Alpine farmers receive the

same "difficult conditions" aid received by farmers in Tirol and may also receive up to $20 per he’ad for stock kept in mountain pastures.

The aid is, again, intended to help agriculture and tourism.

Upper Austria is not only concerned with out-migration and out- commuting to Bavaria but with rather large intra-provincial income differentials (OIR, 1973b). The province wants to encourage a geo­ graphic dispersion of industrial employment via a strategy of de­ centralized concentration. Provincial officials feel that their economic and population goals will most likely be achieved by the growth of central places, which will serve as migrant and commuter centers (OIR, 1972, pp. 7-11). Relevant legislation in Upper Austria includes laws which provide modest, special aid to border regions and

Interest subsidies in. specified development regions-(OROK, 1974).

d . Vienna

Vienna is an entirely urban province and, as such, its internal spatial socio-economic variations fall below the scale considered here.

Vienna*s growth policies, however, do affect several neighboring pro­ vinces, particularly Lower Austria, which encircles it, and Burgenland.

Vienna*s population goals, for example, stand in direct opposition to 61

other provinces’ goals in eastern Austria (OIR, 1973b, p. 12). The

city’s rather old age structure has caused severe labor problems and

It actively encourages in-migration. The city has attempted to solve

migrants* biggest single problem upon entry into Vienna - locating

housing. There are programs to do this for Austrians and for the

substantial stream of foreign workers coming into the city. However,

the housing market is still somewhat tight in Vienna. This is also

true for the availability of industrial land, another shortage which

the city is attempting to ease. However, Vienna’s efforts to en­

courage industry within the city meet considerable competition from

Lower Austria which welcomes industry to Vienna’s suburbs, which are

located in Lower Austria (Proniboek, 1975).

The economic and social goal conflicts existing between Vienna

and Lower Austria are but one example of a larger set of such conflicts i existing at the provincial and national levels. In this case, how­

ever, hesitant co-operation is emerging, at least at one level - the mutual planning of public transport in the Vienna metropolitan area.

Conclusions

In general the provincial and national planning goals and strat­ egies are similar. The most apparent similarity in the choice of goals

is the desire of the national government and most of the provinces to lessen the mobility of Austrian labor. This is in response to depopu­

lation and downward economic spirals in many Austrian regions. How­ ever, there are conflicts with regard to this and other goals, and 62

their resolution is not enhanced by the un-co-ordinated nature of national and provincial planning programs. OROK is attempting to encourage more co-operation in planning at all levels, but progress has been slow toward the adoption of a truly national planning strat­ egy.

The type of planning strategies now employed at the national and provincial levels is generally decentralized concentration. This strat­ egy is potentially compatible with the achievement of the three n a ­

tional and most important provincial planning goals. It: ls also po­ litically realistic, although the political process could endanger the success of the strategy's application by causing too much dispersion of available funds. Unfortunately, as evidenced by the preceding descriptions of policy measures, this is a real and pressing problem.

The policy measures applied in Austria at the national and pro­ vincial levels are also quite similar. Measures to aid industry gen­ erally provide incentives for investment by making industrial credits easier and less expensive to obtain. There are various types of meas­ ures which are designed to improve Infrastructure, the most Important of which are the various tax redistribution programs. These provide a much stronger fiscal base for the municipalities, which are the most important investors in public infrastructure in Austria. Other steps to improve the. infrastructure of lower income regions are often taken by utilizing existing legislation to channel extra funds to these areas.

The impact of these policy measures upon the socio-economic structure of Austrian regions is not easy to ascertain. Several of the provincial programs are quite new', and their Impact may not yet

be visible. It is also difficult to .get hard and fast data for many

programs. This is sometimes due to the fact that the programs have

only recently begun or sometimes because policy measures are inex­

tricably tied up in more general, sectoral economic policy. In other

cases the data are simply not available for public scrutiny. However,

data>are available for some policy measures and these data will be used

in analyses to follow. The next chapter will outline some of the techniques" "to be used in these analyses, followed by a chapter outlin­ ing trends in regional inequalities in Austria. Then, in Chapter 6, an analysis of the impact of some of the policy measures described in this chapter will be presented. \

Chapter 4

DATA AND METHODOLOGY

The purpose of this chapter is to describe the methodological

techniques employed in the analyses and to comment on the data uti­

lized in them. The chapter will make clear the reasons for the use

of particular data and techniques and there will be a discussion of

problems related to their usage. This should provide a fuller under­

standing of the problem and avoids lengthy footnotes in the text of

the analysis chapters which follow.

Regional Units

The correct choice of the proper regional units for consideration

is an Important prerequisite to meaningful analysis. First, it is

important for a study of the type undertaken here that functional

socio-economic regional units be chosen in order to successfully iden­

tify economic relationships within the national economy. Unfortunately

data are generally collected by political unit and it is not al­

ways easy to aggregate or disaggregate the data into meaningful func*~ tional units.

As elsewhere, data are collected by political unit in Austria at

the provincial, district (county), and "Gemeinde" (community or munic-

^ ipality) levels. There are 9 provinces, 97.districts, and (in 1976)

about 2500 municipalities. The municipal data would be very useful

64 65

in constructing functional units, but not all data are available at this.level and the sheer number of observations makes data handling cumbersome. The problem is made all the more intractable by chang­ ing municipal borders which make data comparability from one census to another a very difficult problem.

Fortunately data collected at the distirct level does generally reflect functional economic units. This results from the fact that district "seats" are generally the highest order central places in the districts. And, the district often includes an area which is in­ tegrated economically and socially owing to the concentration of eco­ nomic activities and public services at or on the district seat. A map of districts in Austria is not radically different from a map of functional central place regions (Bobek, 1961). Many of the dis­ crepancies occur because several towns and cities have been given separate district status from their hinterland. In order to re­ solve this problem the data were generally aggregated into 82 dis­ tricts in order to produce a truer economic unit. This has been done throughout the analysis but has not been employed for all of the maps.

Maps 11 and 12 employ all 97 districts so that the rural-urban nature of net migration can be shown most vividly. Another exception is that although Wien Umgebung (suburban Vienna) and Moedling are joined with

Vienna for purposes of analysis, they are always mapped separately in order to show some detail in the socio-economic patterns around

Austria*s most important metropolis.

When district data were not available, data were collected at the provincial level. Again, these units in most cases form reasonably

good functional units and are not inordinately large; they have pop­

ulations ranging from 275,000 to 1,600,000. An indication of the func­

tional nature of provincial units is the fact that with the exception

of Lower Austria, Burgenland, and Vienna, all provinces have the great­

est migratory interaction with their respective provincial capital.

This is not true for Lower Austria and Burgenland which are oriented

toward Vienna. This results from the fact that Lower Austria has no

capital (its provincial offices are in Vienna) and Burgenland's cap­

ital is a very small town near Vienna.

In many respects these latter two provinces are part of a large

economic region in eastern Austria dominated by Vienna. However, there

are some significant differences in levels of socio-economic well-being within this region and an aggregation of these three provinces would

hide the variations between Vienna, the wealthiest, and Burgenland, the

poorest province. And, in at least one sense some parts of Burgenland

and Lower Austria only belong to the Viennese economic region by default.

Parts of both provinces ij o w have little or no contact across the eastern borders into Hungary and Czechoslovakia, something which has resulted

from the Cold War and has seriously disrupted the economic units of Cen­

tral Europe. For example, parts of Lower Austria might now be oriented

to Brno and Bratislava, Czechoslovakia and Budapest were it not for the unsettled political relationships in Central Europe. Similarly, parts

of Burgenland would probably be somewhat oriented to Budapest, Sopron,

and Szombathely in Hungary and less toward Vienna. It is in this sense,

then, that parts of Lower Austria and Burgenland belong to the Viennese 67

region by "default"; these regions are at the "tails" of Vienna1s met­

ropolitan influence. Some parts of eastern Austria, thus, should not

be Included in a functional unit with Vienna. Unfortunately, the t boundaries of the functional units in eastern Austria do not run along

provincial borders. However, in order to resolve the latter problem and

to alleviate the related problem of aggregation noted earlier, analysis

at the provincial level has been carried out using the 9 provinces as

observations; Vienna, Burgenland, and Lower Austria are, thus, all con­

sidered seperately.

A second consideration in the choice of regional units relates to the

effect of scale upon the results of any analysis. Thus, for example and

as noted earlier, functional economic units are needed here to properly

evaluate the impact of Austrian regional planning upon the changing

socio-economic structures in the nation. The most interesting investi­

gation of this impact would be at lower level functional units, i.e.

districts, but the unavailability of the necessary policy data at that

scale make such a study impossible. The use of provinces for this in­

vestigation results in a rather small, though satisfactory, data base.

On the other hand, a good Investigation of migration must be carried out using smaller scale units and that has been possible here.

The regional units employed for the analyses, then, are provinces and districts. The choice of these units was in some cases dictated t by data availability, but in all cases the units are adequate for the investigations of the relationship between regional policy and chang­ ing regional structures in Austria. 68

Data Sources

Data for Austrian regions are generally satisfactory. For this

investigation they are derived most frequently from the censuses of

1951, 1961, and 1971. A great many other data sources were, however, sought out and some of these data proved useful in the investigation.

The two greatest weaknesses in data availability are in the areas of income and investment statistics. The latter data are collected but remain confidential, creating a considerable handicap for re­ search. However, the data are available to the Oesterreichisches

Institut fuer Wirtschaftsforschung (Austrian Institute for Economic

Research), which then publishes useful indices of income. These in­ dices include gross and net domestic product. Gross domestic pro­ duct data are available by province for intermittent dates between

1952 and 1964 and then, at the time of this writing, for 1964-1972.

Net domestic product is available by district for 1961 and 1971. The latter data are also reported per employed person, one indication of

Income levels. However, income per capita is also useful, since it helps to account for variations in dependency ratios among regions.

The analyses were conducted using both per capita and per worker data in order to provide two views of income variation and change in Austria.

Not too surprisingly, the results from both sets of data were quite similar.

Investment data are especially difficult to collect for Austria.

Estimations by province for industrial investment are available from the Economic Research Institute and from the Oesterreichesche Sta-

tistische Zentralamt (Austrian C e n t r a l Statistical Office, hereafter 69

O.St.Z) beginning with the mid-1960's. Data on investment in infra­ structure is, however, even more difficult to obtain but is available

for some time periods from the accounts of the provinces and munic­ ipalities by way of the O.St.Z. Federal infrastructural investment data are not available.

One other data set which requires some comment is the migration data set. The migration data utilized in this investigation are in­ direct data derived from demographic statistics. A region's net mi­ gration rate is calculated by using known values of population size and birth and death rates for the time period being considered. These data can be assumed to be quite accurate for Austria, where demographic

data are carefully collected.

Methodology

Several quantitative techniques have been used in the analyses, some of which require some clarification at this point. First, in order to measure regional inequalities two different aggregated meas­ ures of inequality were employed. Each has distinctive characteristics which both encourage and discourage its use. It was ffelt that the use of hath would provide the most information and best opportunity

for thoroughly investigating changing regional inequalities in Austria.

One measure is the coefficient of variation shown below.

I P Regional Inequality^ r-1 r(Ir-T)

I i-'

70

where, ?r - population, in region r

lr « income per capita in region r

I « national income per capita

This measure has been employed by many researchers, notably Williamson

(1965), and has the added benefit of producing inequality values

ranging . 0.0 to 1.0. However, the method squares deviations from

the mean, which tends to exaggerate extreme values vis-a-vis .near aver­

age values. A second measure using information statistics avoids this

problem by using logarithms. An example of this statistic for the pro­

vincial level is shown below (Semple, n.d.):

I zr Regional Inequality = r=l (GDPr) (log2 _____) Y

where, GDPr - % o f gross domestic product accounted for by region r

Ir and I are as above .

This statistic has the additional advantage of being completely in­

sensitive to changes in regional income differentials caused by in­

flation (assuming inflation rates are equal everywhere). However,

this statistic has not been as widely used as the coefficient of

variation and does not have a constant range of inequality values.

Using both measures, then, seemed to be a reasonably good strategy,

and it was anticipated that*, in any event, strong forces toward in-

*' ■ come divergence or convergence should be reflected in the values of

both. This proved to be true and adds reliability to the results. 71

It should be noted, though, that these results derive from aggregated

statistics; they measure inequality at one specific scale and as

applied here do not reflect inequalities that exist within the par -

ticular units being studied.

The use of sets of simultaneous equations in the analysis-also

requires some comment. The procedure was adopted in order to model

complex interrelationships existing between sets of variables, such

as the interrelationsips existing among variables used to explain mi­

gration flows. The method is designed to remove the simultaneous bias

from interdependent variables used in a regression analysis by pro­

ducing estimates of the independent (regressor) variables which are

uncorrelated to the error terms. This is necessary to fulfill the

assumptions of regression and to obtain unbiased estimates. The bias that must be removed is the extent to which the dependent variable

influences the independent variables. The problem is resolved by

estimating the independent variables using exogenous variables which

are uncorrelated with the error terms (Willis, 1974, pp. 121-132). i 1 . This estimation procedure, however, may create identification

problems for the regression equations. Willis provides the follow­

ing explanation of identification:

To be identified, an equation in a model of G linear equations must exclude at .least G-l of the variables that appear in the model. This is a necessary order condition. The rank condition for identification also exists. An equation in a linear model of G equations is identified if, and only if, at least one non-zero determinant of G-l rows and columns is contained in the array of coefficients formed as follows: starting with the row and column array of coefficients in the 72

model, omit all columns not having a prescribed zero In the equation in question, and omit the row coeffi­ cients of that equation. ^ (Willis, 1974, p. 133)

The problem referred to earlier arises, however, when there are more independent variables in the equation than are required to estimate

the parameters. This is referred to as overidentification and results from the fact that the order condition is more than satisfied

(Christ, 1966, pp. 323-327).

The problem can be resolved by using two-stage least squares

(Willis,' 1974, p. 134). Two stage least squares replaces indepen­ dent varialbes with estimates which derive from a first-stage esti­ mation of the independent variable so that this variable is not cor­ related with the error terras resulting from its regression upon the dependent variable (which is the second-stage) (Johnston, 1972). In its application here, the two-stage least squares technique has been employed to.estimate variables which are themselves determined within the simultaneous equatios system (i.e. endogenous variables).

Since they are determined within the system, the direct use of these endogenous variables would result in biased estimations owing to correlations between themselves and the error terms from re­ gression. Their estimated can be utilized, since the estimation procedure makes use of variables which are good predictors of the endogenous variables but are not highly correlated with other var­ iables in the equations system. The variables utilized as predictors can either be variables within the equation already or other variables being estimated. In this study the former procedure has been used. 73

A point also must be made here concerning the use of t-scores

In the presentation of regression results. These scores are pro­

vided not in order to test significance levels but in order to

assess the reliability of relationships among variables derived

from the Austrian data set. This data set is considered to be a

population and means, standard deviations, and regression coef­

ficients derived in the analyses are assumed to represent popu­

lation statistics and not estimates. However, when regression co- efficeints have low t-scores their standard errors of the estimates are large. Even for a population this would suggest that there is considerable error in the regressor1s estimation of the dependent variable (see: Draper and Smith, 1966, p. 16). In such a situa­ tion there would be less confidence in the regression coefficient as an indicator of the nature of the relationship between two var­ iables. Thus, in order to provide some indication of the reliabil­ ity of regression coefficients, t-scores will be reported with all regression results.

Finally, some comment is also needed regarding the use of path analysis in this paper. Good reviews of the technique are presented in Fararo (1973) and Van de Geer (1971). Path analysis is disigned to disaggregate correlations between variables into direct and indirect components. Indirect components derive from the relationship between two varlalbes via a third, intermediate variable. The relationships between variables can be identified by-using correlation, partial correlation, or regression coeffi­ cients (See: Van de Geer, 1971, pp. 112-127). The technique is especially useful in situations where an entire equations system is 74 under investigation. In such a case the net impact of, for example, a policy measure can be broken into direct and indirect effects in order to ascertain the measure's diverse impact upon a nation's socio-economic structure. This is one of the technique's applica­ tions in this study.

In order to calculate the direct and indirect effects of one variable on another, a diagram is constructed which graphically portrays the interrelationships among the entire set of variables, as postulated by the researcher. The "paths" between variable are given values which derive from correlation or regression analysis,

These values are then referred to as path coefficients. To cal­ culate the effect of a variable X on a variable Y, one "walks" along all possible paths from X to Y, multiplying path coefficients which are met along the way and summing over all paths (Van de Geer,

1971, p. 124). This provides a total or net effect; the product of any set of paths between X and Y provides an individual indirect effect.

Unfortunately, the application of the technique is not as sim­ ple as has been suggested thus far. There are a number of problems which are encountered in any: real world application. First', the multicollinearlty inherent in any Interrelated system can result in

Inaccurately estimated regression coefficients, which in turn cause problems in the calculation of direct and indirect effects utilizing the path (or regression ) coefficients. This problem can only be avoided 75

by eliminating the problems of multicollinearity in the original

regression equations. However, multicollinearity can be minimized

by utilizing factor analysis to extract minimally correlated factors

which can be introduced into the regression analysis. This, though,

results in an obliteration of the original variables, which in this

case are policy insturments and essential to the analysis. A sec­

ond method to minimize multicollinearity is to remove variables

from the analysis which are most highly correlated with other var­

iables in the regression format. This, of course, detracts from

the optimal theoretical structure of the equation system but was

an acceptable option in its application in this study and has, thus,

been employed.

Second, there is a problem of verifying the results from path

analysis. Fararo (1971) and Spady and Greenwood (n.d.) maintain

that the net effects produced by the model should correspond to

the simple correlations between variables in the model. However,

this writer is not convinced that it is necessary to satisfy this

condition. Differences between the results from path analysis

and the results of correlation analysis may, indeed, be caused by

an imcomplete specification of the model but not necessarily in­

validate results from the path analysis. It is possible that the

path analysis results may produce lower levels of explanation

than correlation analysis due to the absence of important explan­

atory variables which are correlated to both dependent and inde­ pendent variables in the analysis. However, such variables might 76

also be absent from analyses where path and correlation analysis

results are similar. In this case the absent variables might, In

fact, be the true explanors while Independent variables Included

In. the analysis closely co-vary with dependent variables due to

complex Interrelationships in the data set. For example, this is

fhe case where there is a high degree of correlation between levels

of aid provided by the Kommunalkredit A.G. and by redistributed

taxes from the F.A.G. The relationship is not causal but, rather,

coincident, and placing a "path" between the two variables might

produce misleading results.

In any event, it would not seem wise to depend upon a com­

parison of the results from path and correlation analyses to de­

termine the adequacy of the model as specified by the researcher.

Rather, the model must be constructed upon a firm theoretical base

derived from a knowledge of the relevant literature. Then the

results from path analysis may indicate ways to improve the model by 1 ) failing to substantiate hypothesized relationships and/or by 2) indicating where intermediate variables are missing. In such cases the path analysis model may still help identify par­ tial relationships which can serve as a base for a subsequent improved model.

The path analyses used in the investigation which follow will, then, not be evaluated according to their ability to duplicate results from correlation analysis. The results from these analyses 77

will instead be interpreted as results stemming from a partial

systems analysis. They will thus not be immediately accepted

as indications of causality since causality cannot be determined ‘ by path analysis; it can only be inferred from theoretically sound

and complete equations systems, a condition which is not satisfied here. Chapter 5

REGIONAL CHANGE AND REGIONAL INEQUALITY IN AUSTRIA

The changing structure of Austrian regions and internal levels of inequality must first be set in the perspective of m o d e m day Austria.

The nation must now cope with problems stemming from its location in

Europe, problems which arose with the dissolution of the Austro-

Hungarian Empire and which create disadvantages for Austria in its new role as a neutral, border state.

First, Austria is disadvantaged by "its unfavourable geographical location on the periphery of the Western European economic area" (OECD,

1974, p. 12). This disadvantage is further exacerbated by lingering

Cold War tensions and subsequent impediments to economic co-operation between Austria and its East European neighbors. Vienna, the capital,

Is, after all, located well east of Prague on a potentially Important but little used, navigable river, the Danube. Thus, as the result of natural features (mountain chains) and Europe's political divisiveness,

Austria suffers from poor accessibility to real and potential sources of economic stimulation.

Austria has also been forced to adjust to the end of its imperial era, during which the nation was an important Europena power and the economic center of parts of Central and Southeastern Europe. Austria, a small mountain state thrust deeply into socialist controlled Europe, now must deal with..regional problems common to other nations, yet problems which are made more difficult by Austria's location in Europe.

78. 79

Despite claims .that Austria suffers from ''massive regional ine­

qualities” (OECD, 1974, p. 1), these inequalities are not as great as

those in many other European nations (Wiener Institut fuer Wirtschaft-

sforschung, 1959, p. 12). Austria also has no major urban problem area

in comparison to France or Britain. Austria's problem regions, de­

scribed previously, are mainly rural border areas in the eastern part

of the country. These areas suffer from sectorial imbalance, from the

disintegration of Austro-Hungary, and from the failure of a restora­ tion of pre-World War I economic relations in central and eastern Eur­

ope.

At the end of World War I Austria was reduced to 1/8 of its pre - vious size as the result of the dissolution of the Austro-Hungarian

Empire into several succession states (Pachucki, 1967, p. 8 ). The

empire's demise resulted in serious economic problems for many regions which have not all overcome the disadvantage. Lower Austria's north­

ern border region, the Waldviertel, lost contact with Important textile

activities in Bohemia. The eastern Alps lost tourists, something which

further worsened after World War II. Wiener Neustadt lost the imperial

defense industry, and its resumption under German auspices lead to heavy

destruction during the Second World War (OIR, 1966, p. 26). Burgen—

land, part of western Hungary until after World War I, emerged as an

Austrian province, but a poor one owing to Its earlier association with less progressive Hungarian rule and to its severance from the rest of its former province and major city, Sopron. This region has also been hindered by its historical role as an oft devastated, oft 80

Ignored borderland.(Burghardt, 1962, pp. 236, 278). The dissolution

of the empire also resulted in a severe loss in.accessibility for

Carinthla owing to the loss of the port of Trieste (Proksch, 1962,

p. 30). Carinthla, in fact all of southern Austria, continues to

suffer from poor access to the European market. .

During the inter-War period Austria struggled to cope with eco­

nomic realignment, and difficulties in that sphere helped generate

political problems as well. The period, of course, culminated in in­

corporation into the Third Reich. Austria emerged from this exper­

ience with a greater sense of national identity as well as an impor­

tant new heavy industrial region at Linz. The War, however, took a

heavy economic toll on Austria by way of Soviet reparations and oc­

cupation and by way of the depletion of the working age groups, which

has resulted in periodic labor shortages. Eastern Austria, occupied

by the Soviets, was especially disadvantaged because of the lack of

incentives for private investment and because of poorer opportunities

for trade (Streit et. al., 1967, p. 2; OKKAG, n.d., pp. 4-5). The

legacy of occupation and effects of the Cold War continue to depress

living standards in many eastern regions. The relative economic

opportunities available to the East are considerably less than those

available to the West as is well illustrated by the trade flow data

presented in Map 1.

However, the post-War era has been one of economic and political

success for Austria. It reachieved complete independence in 1955 and has enjoyed stable political conditions and steady economic growth 81

ever since. All of Austria has benefitted from this growth, although

Styrla has lagged'behind somewhat. (This related to the steel

crisis of the early 1960’s and lingering structural problems in the

Styrian economic structure (Jeglitsch, 1975, p. 29) ). Regional

inequalities are less than in other European nations and these ine­

qualities have declined in recent years.

Income Inequality

The best and perhaps most important example of declining regional

inequality in Austria is provided by the examination of income data.

Regional income inequalities declined during the 1960's and early

1970!s at both the provincial and district level. These declines can be largely related to the lessening of industrial concentration, par­

ticularly benefitting lesser industrialized areas of the East, and to

the rapid increase of tourism and related tertiary acitvities In the

West (Butschek, n.d.; p. 32).

In 1971, 26.4% of Austria’s gross domestic product derived from

industry, about 6% from agriculture, 23.8% from commerce and trade,

10*1% from construction, 6% from transport, and the remaining 27.7%

from various service industries and activities. Map 2 displays

regions which are heavily dominated by either industrial or agricul­ tural activities In Austria. Th® major industrial axis extends from

Vienna to northern Styria. There is also a lesser Linz-Salzburg axis.

The eastern border regions are predominantly agricultural. The re­ maining districts have either more sectoral diversity or large ter- I tiary sectors (Jeglitsch, 1967). i Data source: O.StZ German Federal Rep. Federal German Map 1. Austrian trade with Central Europe. 100 100 Km represents 10 million represents schilling Austrian

Jo Total Trade with Neighboring Nations in 1970 Sectoral Shares of Gross Domestic Product by District, 1971

ISSS >40% in industry

>20% in agriculture diversifid or large share in service sector

oo 100 Km <-o Data aourca: Jaglltach, 1076

Map 2. Sectoral structure of the economies of Austrian districts. 84

This regional economic structure has an important impact on re­

gional income levelsi The only available regional income statistic

at the district level is net domestic product/worker, and Map 3 dis­

plays districts where incomes differ considerably from the median. A

comparison of Map 2 and Map 3 reveals that there is a strong relation­ ship between industrialization and income. Map 3 illustrates the

fact that large urban and important tourist centers also enjoy rela­

tively high, income levels.

However, industrial deconcentration and increased tourism during the 1960*8 has, as noted previously, caused declines in regional in­ come inequalities. This is illustrated by Map 4, which depicts the districts where income grew most rapidly during 1961-1971 and by Map

5 depicting districts with above average industrial employment growth.

A comparison of Maps 3 and 5 reveals the fact that industrial growth has been greatest in heretofore agriculturally dominated districts.

A comparison of Maps 4 and 5 illustrates the point that this sectoral diversification has often led to marked improvement in income levels.

In 1971 the distribution of income by province favored Vienna and the West. The data presented in Table 1 verify this. The rank order for both, income measures is quite similar, and it- can be rea-

. j sonably assumed.that the data adequately represent relative income equalities. Absolute income inequalities may be somewhat less, how­ ever, since there is considerable commuting from some of the lower income to higher income provinces. These data do not reflect that in­ come flow, because both, measures only account for income generated at the production site. Net Domestic Product/Worker, 1971

(000's Austrian schilling)

m >ioo

Q U <100, >75

E V j < 75

100 Km a Data sourca: Jeglitsch, 1976 j

Map 3. Net domestic product/worker, 1971. Percentage Change in Net Domestic Product/Worker, 1961—1971

Data, eourca: Jaglttach, 1976

Map 4. Change in net domestic product/worker.1961—1971. Change In Industrial Employment as a

Percentage of Total Employment

>5% growth

<5% growth

(midlon=3.3%)

oo 100 Km Data aourca: O.StZ.

Map 5. Change in Industrial employment, 1961—1971. 88 Regional income inequalities showed declines during the 1960's at both the provincial and district levels. Table 2 presents the results of investigations of provincial income inequality using two measures of income and two measures of income inequality. Although the results vary somewhat, there is a clear tendency toward declining

Income inequality during the time period investigated.

Table 1

Provincial Income 1971 (Austrian Schillings)

GDP/capita NDP/worker

Vienna 75,033 Vienna 126,400

Salzburg 63,517 Vorarlberg 113,000

Vorarlberg 61,258 Salzburg 107,100

Tirol 57,004 Tirol 104,800

AUSTRIA 55,405 AUSTRIA 101,600

Upper Austria 54,631 Upper Austria 96,900

Lower Austria 47,113 Carinthla 91,100

Carinthla 46,507 Lower Austria 87,100

Styria 44,174 Styria 85,900

Burgenland 30,906 Burgenland 66,500 sources: Jeglitsch, 1975; Jeglitsch, 1976 . Table 2

Provincial Income Inequality

GDP/capita NDP/worker Annual Annual 1964 1972 Ave. change 1961 1971 Ave. change

Coefficients of .2276 .2079 —1.08% 1718 .1663 -0.32% Variation information .03634 .03099 -1.84% 02257 .01996 -1.16% statistic

Data on GDP/capita were available for each year from 1964 to 1972, and

in this case the period 1964-1968 showed a slight increase in inequal­

ity and then, during 1968-1972, a more rapid inequality decline. There

is also some evidence that income inequality increased during the 4 period 1952-1964, so that there appear to be emerging tendencies to­

ward and forces creating provincial income convergence.

Income inequality also declined among the political districts. m In this case only net domestic product data were available for compar­

ison for 1961 and 1971. Table 3 presents results which again indicate

income convergence. 90 Table 3

' District Income Inequality

NDP/worker

1961 1971 Ave. Annual change coefficient of variation .2620 .2155 -1.77%

Information statistic .06570 .04158 -3.67%

This tendency toward income convergence is also pronounced among

districts within any given province. The decline is greatest in the

higher income provinces, but this result is probably somewhat related

to the fact that most of these provinces have a small number of dis­

tricts. Income increase In any one district has a larger relative im­

pact on the provincial inequality than would be true of such an In­

crease In the larger, lower income provinces. Results of an investi­

gation of intra-provincial income inequalities are presented in Table 91

Table 4

Intra-Provincial Income Inequality

NDP/worker (coefficient of variation)

1961 1971 Ave. Annual <

Vorarlberg .0763 .0267 -6.50%

Tirol .1703 .0747 -5.61%

Upper Austria .3012 .1962 -3.49%

Salzburg .1630 .1146 -2.97%

Styria .3371 .2380 -2.94%

Burgenland .2496 .1767 -2.92%

Lower Austria .2301 .2113 -0.82%

Carinthia .0951 .1031 +0.84%

Data source: Jeglitsch, 1976

Unemployment

Like income, unemployment changes in Austria indicate declining

regional inequality. Unemployment data by province are available be­

ginning with 1954 and Table 5 presents these data for 1954 and 1973. Table 5

Average Annual Provincial Unemployment'(Province of Residence)

Absolute change 1954 1973 1954-:

Vorarlberg 2 . 2 0 . 8 -1.4%

Vienna 7.9 1 . 0 -6.9%

Salzburg 3.8 1 . 2 -2 .6%

Styria 7.0 1.5 -5.5%

Upper Austria 6.6 1 . 6 -5.8%

AUSTRIA 7.6 1 . 6 -6 .0 %

Tirol 6.5 1. 8 -4.7%

Lower Austria 917 1.9 -7.8%

Carlnthia 8.4 3.1 -5.3%

Burgenland 20.3 4.2 -15.9%

source: Bundesralnisterlum fuer sozlale Verwaltung

As might be expected, the lower Income provinces generally ex- perlence higher rates of unemployment, however these provinces have

shown large declines, especially Burgenland. Styria has fared some­ what better than the other lower Income provinces, but it is also threatened with the loss of many jobs in the future with the potential closure of large mining operations. Unfortunately the lower income provJnces also suffer the greatest fluctuations in employment levels, the higher income provinces the least. For example, in 1973 Vorarl— bergfs monthly unemployment pealc (1 .2 %) was only 0.4% above the 93

annual average, but In Burgenland the.peak C12.2%) was 8.0% above

the average (Bundesministerium fuer soziale Verwaltung). Thus, ‘job

security, measured by seasonal unemployment, as well as employment

opportunities are poorer in lower income provinces, although there has

been consistent and marked improvement in both respects since these

statistics have been collected.

Unemployment changes at the district level were also large during

the period 1961-1971. Maps 6 and 7 present these data, clearly illus­

trating the unemployment problems of the agricultural districts along

Austria's eastern borders. By 1971 the situation had improved consid­

erably due to out-migration, out-commuting* Increased industrial em­

ployment, and a changing population age structure. Some of these

forces have contributed to greater economic opportunity and security

for many rural regions, but in particular the border regions.

Other Indications of Changing Regional Inequality

One fairly sensitive indicator of social inequality is infant mortality. Austrian infant mortality is now fairly low, although there

are some regional variations. These variations do not, however, al­ ways conform to variations in income levels. This is apparent from a comparison of Maps 3 and 8 . And, unlike unemployment, fluctuations

in the infant mortality rate do not appear to be greatest in lower in­

come regions. Several “inor Epidemics caused infant mortality increases

in many political districts•during the period 1970-1973 in comparison with the 1965-1969 average. The districts experiencing such increases

/ Unemployment, 1961

annual avt. >5%, ptak month >10%

Y/X\ annual avt. >5%

| | annual avt. < 5%

100 Km VO Data sourca: Bundaamlnlaterlum fuar sozlala Varwattung

Map 6. Unemployment, 1961. Unemployment, 1971

annual ava. 5 >%, paak month 10 > %

^ / X A annual avo. 5 >% ^

| 1 annual ava. 5 <% ) '

Data aourca: Bundaamlnlstarlum fuar aozlala Varwattung

Map 7. Unemployment, 1971. Infant Mortality, 1970-1973

r a >30.0

<30.0, >22.0

IV.l <22.0

(m«an=25.6)

Data aourco: O.StZ.

Map 8. Infant mortality, 1970—1973. 97

are identified in Hap 9. No clear spatial pattern emerges and there

is, again, no clear relationship with income level. This seems to

indicate that infant health care has improved enough in poorer regions

so that the threat of periodic fluctuation is no greater than in high­

er income regions.

The most significant evidence for the reduction of regional ine­

qualities in Austria is demonstrated by the results from a factor

analysis investigating changes in factors derived from nine socio­

economic variables at the provincial level. These variables include

the three variables noted thus far plus six others. The factor load­

ings are reported in Table 6 and the factor scores in Table 7. The

factor scores present a good summary of existing regional inequality

and changes in this since 1957. Factor 1 identifies some of the basic

characteristics of provincial socio-economic structures. Factor 2,

on the other hand, is a composite of several variables which reflect

consumption patterns in Austria. The two factors explain 83.4% of the

variance in the raw data and have a factor correlation equal to -.435.

Using the coefficient of variation, factor 1 changed -14% and factor

' 2 -16% during the period 1957-1971.

These results and several other indications point to the fact

that regional Inequalities are declining at both the provincial and

district levels in Austria. This is true for basic economic consid­

erations like income and employment opportunities, for social indi­

cators like infant mortality, and for measures of consumption like

auto and television ownership. These trends are completely consistent Increases in Infant Mortality

m m

100 Km Data aourca: O.StX.

Map 9. Infant mortality increases for 1970—1973 in comparison to 1965—1969. 99

Table 6

‘ Factor Loadings:

Variable Factor 1 Factor :

Income/capita 0.986 0.077 hospital beds/capita 0.972 0.209 % population non-agrlcultural 0.789 -0.250 monthly unemployment peak -0.837 0.188 annual unemployment average -0.761 0.261 % apartments electrified 0.172 -0.755 TV sets/capita -0.052 -0.912 autos/capita -0.008 -0.946 infant mortality -0.005 0.913

Data source: Jeglitsch, 1976; 0. St. Z., 1975a, 1957-73 1955 -72, 1955-73, 1963, 1953; Seidl et. al., 1966.

Table 7

Oblique Factor Analysis: Factor Scores

1957: Factor 1971: Factor

1 2 1 1

Vienna 1.57 1.19 1.40 -1.74

Salzburg 0.34 1.26 0.70 -1.51

Vorarlberg 0.84 0.89 0.56 -1.30

Tirol -0.10 0.97 0.44 -1.14

Upper Austria -0.18 1.20 0.24 -1.24

Styria -0.11 1.77 0.08 —1.00

Lower Austria -0.59 1.54 -Q.Q7 -1.18

Carinthia -0.61 1.86 -Q.Q9 -0.91

Burgenland -3.07 2.67 -1.47 -1.Q3

Data source: see Table 6 100

with regional policy goals. The nature of the causal relationship

will, however, be considered in the next chapter.

Net Migration

Changes in the pattern of net migration are an Important cause

and effect of other regional changes and are particularly relevant

to regional planning in Austria. It is, as noted earlier, Austrian

policy to inhibit the depopulation of many rural regions. This policy was developed in response to net migration patterns which have existed

in some cases since the late 19th century, but in particular in re­

sponse to immediate post-war experiences. Net migration losses have

limited population growth in many regions but In some these losses have

resulted in absolute population decline over a considerable period of

time. Map 10 depicts regions which tjave experienced consistent popu­

lation decline during the last century. Again, it is the eastern border regions which are identified. These regions are characterized by "old” population structures, often the result of long periods of selective out-migration. Out-migration has resulted from poor eco­ nomic opportunity, related to the absence of significant Industrial­ ization as well as the lack of commercial ties.across the eastern boundaries. Even Vienna has experienced long-term population decline, in spite of consistent net in-migration. Age selective suburbaniza­ tion (the suburbanization of the younger part of the populace), a gen­ eral aging of the city's population (both causing fertility delclnes la the city), and Vienna's sharply reduced political role in central

Europe have resulted in population declines for the city proper for Population Decline during the Period:

BS53 1890-1961

Map 10. Population decline In Austrian districts. 102 some time. The metropolitan area has, however, maintained population stability.

An. interesting aspect of the net migration pattern in Austria is the close coincidence of nodal net migrant regions with provincial boundaries. Examining 1961-1971 data, it was found that with very few exceptions political districts had their largest net migration losses to the respective provincial capital. Lower Austria, with its government seat in Vienna, and Burgenland, with its old capital now in

Hungary and present capital a small town, are both oriented to Vienna.

Styria is oriented to Graz, Carinthia to Klagenfurt Cor, in some cases,

Villach), Tirol to Innsbruck, and Vorarlberg to Feldkirch and Bregenz.

The only real exception to this adherence to provincial boundaries is the orientation of two western Upper Austrian districts to Salzburg.

All of Salzburg province is oriented to Salzburg and the greatest part of Upper Austira to Linz.

The migration of Austrians to these major cities is also an in­ dication of a more general tendency of rural to urban migration. This tendency is noticeable in migration data for the period 1951-1961 and 1961-1971, presented in Maps 11 and 12. These maps also document the fact that many regions have suffered and, in many cases, continue to suffer from heavy net out-migration. This is particularly true for the eastern border regions and poorly accessible regions of south central Austria. The tendency, for migration away from the eastern borderlands and toward western Austria is clearly observable from results of a study , of the asymmetric portion of total migratory flow Population Change Resulting from Net Migration, 1951—1961

pop, growth >5% f CZH c h a r ,. <5%

l*.*.1 pop. dtclin# >5%

Q S'

0> & 103 100 Km Data sourca: O.StZ.

Map 11. Net migration, 1951—1961. I Population Change Resulting from Net Migration, 1961—1971

m pop. growth >5% 4

I . * . * ] pop- dtdint >5% 104 100 Km Data aourca: O.StZ.

Map 12. Net migration, 1961—1971. 105 in Austria (MacKinnan and Skarke, 1975; Tobler, 1975). The "wind vectors" of Map 13 originate from the centroids of all political districts and represent the intensity and direction of migration move­ ments which, are not counterbalanced by movements in the opposite direction.

However, perhaps the most important conclusion which can be de­ rived from recent Austrian net migration is that there has been a decided decline in population loss resulting from out-migration in many parts of Austria. The eastern border districts have especially experienced lessened net out-migration, although the net figure is still negative. The most spectacular decline has, however, been in a five district region west of Linz where migration resulted in the net departure of 30,038 people during the period 1951-1961 but only 1,471 during 1961-1971.

These trends in migration in Austria, as well as clear indica­ tions of the convergence of incomes (and living standards in general) leave no doubt that regional inequalities, including variations in social and economic levels of well-being, are declining in Austria at both the provincial and district level. These trends are coincident with Austrian planning goals. However, the results presented above do not necessarily- imply that a causal relationship exists between the achievement of these goals and regional-planning efforts. The fpllowing chapter will investigate the causal factors involved in the trends observed here and attempt to evaluate the impact of the planning ef­ fort. If a positive relationship between planning and regional change Wind'Vector 106 100 Km Source: MacKinnon and Skarke, 1975

Map 13. “Wind" vectors in Austria. is established, the effectiveness of the Asutrian planning strategy will have been established. Chapter 6

EVALUATION OF AUSTRIAN REGIONAL PLANNING

Introduction

An evaluation of Austrian regional planning efforts is presented here in two sections. First, there is a consideration of goal con­ flicts, which exist both between the goals themselves and between the goals' of various regions. Second, there is a two part analysis of the impact of planning upon the achievement of planning goals. This includes an analysis of the importance of policy measures relative to provincial investment levels and a causal analysis of the achieve­ ment of the planning goals in Austria. The latter investigation is pursued at both the provincial and district levels utilizing a simul­ taneous equations format and path analysis.

Goal Conflicts in Austrian Regional Planning

Goal conflicts in Austrian regional policy exist in three differ­ ent forms. First, there is a potential conflict between at least 2 of the 3 major planning goals, specifically between income convergence and the lessening of net out-migration from ruralregions. Second, there are potential impediments to the achievement of the planning goals at both the national and provincial levels. For example,

108 109

national Income convergence might be best achieved by a continuing

decline In the relative income levels in Vienna. Clearly, however,

it is very unlikely that Viennese city administration would be will­

ing to support any national policy which embodied such an implication.

Third, and finally, the provinces themselves espouse provincial goals

which are not always consistent with the planning goals of neighbor­

ing provinces.

1. Potential Conflicts Between Planning Goals

The. most notable conflict between planning goals in Austria is the

issue concerning income convergence and the lessening of net out­

migration from rural regions. The controversy concerning the effects

of net out-migration upon a region was outlined in Chapter II. As

noted earlier there are many researchers who favor out-migration in

situations where regions do not have or cannot attract the other re­

quisite factors of production needed to assure long-term employment 9 growth and stability. This argument is based on notions of national

economic efficiency and attempts to emphasize "people" as opposed to

"place prosperity". However, there are also many researchers who em­

phasize the economic problems caused by selective out-migration, which may result in downward spiralling local economies and population densities below levels required for tourism or national defense (see literature review).

Authorities implementing regional planning in Austria have thus far been most convinced by arguments emphasizing the problems created by out-migration. However, the national goal to lessen net out-uiigra- tion from many rural regions creates several potential problems, some 110

which are special to Austria. One of these problems relates to

migration movements in western Austria, where there is much concern

about the loss of Austrian labor to Bavaria. Specifically, there

has been concern that Linz has lost influence upon its traditional

migration field in Upper Austria due to influences from the German

Federal Republic (OIR, 1973c, p.143). It is possible that regional

policy is lessening the "pull" of Austrian metropolitan areas upon

the rural populace while the influence from German metropolitan

regions remains unimpeded In cases where people are considering migrating to urban centers for social rather than economic reasons

(i.e. the attractiveness of the urban life style), a German metropolis may seem to be more attractive than an Austrian city. Thus, regional policies to strengthen local economies may have an impact on economic

causes of migration but may not provide alternatives for those po­

tential migrants who are more concerned with the social benefits of urban life. Such a policy impasse would most likely not exist in a situation where regional policy emphasized growth in large or medium-sized cities, as would be the case with the use of a growth center strategy.

Another special problem created by a policy to inhibit migration in Austria relates to subsidies to mountain farmers. These farmers have poorer possibilities to mechanize production, a shorter growing season, and usually smaller farms than farmers elsewhere. As a result, net productivity per man hour in mountain agriculture is 25% to

40% below productivity on the plains. Social amenities and infra­ structure are also often lacking in the mountain communities and Ill provision of these services Is more expensive In the mountains than elsewhere. It Is no surprise, then, that people are leaving mountain agriculture for places where they will have greater economic and social opportunities. This out-migration concerns Austrian officials who argue that depopulation in the mountains hurts tourism and is a "hardship to individuals". They feel that a "purely passive attitude

toward this migratory movement) would be irresponsible" (OECD,

1974, p.29). In order to remedy the situation the government recom­ mends improving social and economic opportunities in the mountains so that they are roughly equal to those in the non-mountainous region (OECD, 1974, p.29-32).

Direct and indirect subsidies to mountain farmers are now in existence at both the national and provincial levels, but the con­ tinuation or expansion of these would require serious contemplation.

It would seem to be very inconsistent with attempts to reduce in­ come inequalities and potentially very expensive to seek to improve economic and social conditions in regions which are as disadvantaged as the mountain farm communities. Out-migration is this case ap­ pears to be in response to real differences in efficiency and not as a result of efficiency differences caused by the distortions in investment patterns noted by Friedmann. Austrian efforts to impede out-migration from poorer mountain regions, if successful, certainly mean either lessened regional income convergence or slower national growth resulting from the large income transfers that would be necessary to achieve this particular goal. A reasonable and potentially effective compromise on this issue might be the 112

selection of a few mountain communities for a concentration of aid

which is now distributed over all mountain regions, so that the

goal to inhibit out-migration might be achieved in areas which,

for example, are most influential on tourism (e.g. the Inn Valley,

Krimml, and Kltzbuehl regions, portions of the Salzkammergut, etc.).

In addition to the Income convergence-migration issue, Austrian

regional policy also must face another potentially contradictory sit­

uation. As outlined previously, national and provincial authorties

are concerned about economic problems on Austria's borders. This

includes the problems of economic stagnation in the east and the prob­

lems related to the flow of labor across borders In the west. A

seeming contradiction is the contention that the problems in the east are partly the result of closed borders while, quite clearly, problems in the west are the result of open borders. Steps to close

the borders in the west might well result in the kind of problems existing in the east, and an improvement of political and economic relations with Eastern Europe might well result in the outflow of east Austrian labor to cities like Prague, Brno, Bratislava, Sopron, and Budapest - cities in nations, which, like the German Federal

Republic, are short of labor. In short, there is no guarantee that Austria would experience only positive effects as the result of increased international economic Integration. More likely, the net effect would be positive and the nation would have to accept the Inevitable negative economic effects related to inter­ national competition. 113

Austrian authorities have taken and are considering action to

alleviate the impact of these adverse economic effects of inter­

national economic integration. Thus, for example, one of the motiv­

ations for subsidies to industries locating in rural Lower Austria

is to combat the attraction of Bavaria for Austrian labor (OROK,

1974, pp.44-45). Another example is the unwillingness of Austria

to always consider more general European accessibility in its

autobahn location decisions in Vorarlberg and Tirol (Meingast,

1965, pp.110, 123). At the same time, however, Austria is con­

cerned with German regional aid in southern Bavaria and the po­

tential for counterproductive regional policy competition in the

Swiss - German - Austrian border regions (OECD, 1974, p. 1).

In fact, this issue is a fairly complex political and economic

problem that faces Western Europe in general. Again, the problem

revolves around "place" and "people" prosperity. Efforts by

individual nations to achieve all domestic goals may well result

in poorer international economic efficiency, which in turn adversely affects the economies of all of the nations. The nations of

Western Europe, Austria included, are in the position of having

to make difficult political decisions concerning the prospective economic benefits of relinquishing some domestic political control over their respective national economies. The problem for Austria, is, perhaps, especially difficult, since Austria straddles the gulf between the economic systems of Eastern and Western Europe, 114

and since Austria borders on no less than seven other nations.

2. Goal Conflicts between Regions in Austria

Goal conflicts between regions in Austria exist among all three levels of governmental authority - national, provincial, and municipal. However, the conflicts are most visible with respect to the goals of' the federal and provincial governments. These conflicts pose a considerable problem for the implementation of national policy, especially because of the limited authority of the Bund to oversee all aspects of regional planning. Cer­ tainly the situation in Austria does not meet Friedmann's con­ ditions that "A national policy of regional development must be designed to deal with the diverse problems of development re­ gions as a comprehensive system of interdependencies" (Friedmann,

1966, p.45). In fact, a prominent Austrian researcher feels that

"Regionalpolitik 1st die Politik des Regionalegoismus" (Marzner,

1975), which is at least partially true in Austria.

This regional egotism or egocentrism is only another mani­ festation of the problems discussed earlier with regard to inter­ national co-operation. Here the only difference is one of scale.

In thLs case the provinces, protecting their own interests as they see them, take actions which are incongruous with action at the national level. For example, when requested to rank order priority regions for a ministry involved in regional planning, the provinces responded by delimiting such regions but not rank ordering them 115

for priority of action (OIR, 1973b', p.l). This response was,

no doubt, the result of provincial politics and the desire to

make the elimination of aid for any particular region more dif­

ficult, and to place any such responsibility on national and not

provincial authorities.

The provinces also attempt to retain as much control as pos­

sible over the allocation of development funds, which frustrates more integrated national planning (Streit, et. al., 1967, pp. 16,23).

This has had a very great impact upon the selection of a planning strategy. The choice of decentralized concentration as a planning strategy reflects the power of provincial and local political interests. However, given the level of decentralization, there is some question whether subsidized regional development will sig­ nificantly further national development. There is, as noted by a prominent Austrian economist, the danger of the encouragement of low-wage industries and the creation of one-company towns in the rural hinterland (Nowotny, n.d. p.53).

Again, the problem of incorporating optimal national development into a system characterized by fragmented political authority neces­ sitates difficult political decisions. The spirit of political compromise and accomodation in Austria which has brought stability to a society with many cleavages (Steiner, 1972, p.284) provides an appropriate context, but perhaps results in too much accomodation, for local interests. An active planner in Austria, Rudolf Wurzer, has correctly assessed the situation. He argues that there is no 116

sense In pursuing politically unrealistic development plans but that

Austria must rather view itself as an entity greater than the sum of its provinces (Wurzer, 1969, p.54).

Unfortunately, the provinces not only jealously protect their powers vis-a-vis the Bund, but also exercise those powers in a way which contradicts the efforts of other provinces. Goal conflicts among provinces is greatest in eastern Austria, where each province is particularly concerned with satisfying the demands of an expanding economy with sufficient labor resources. Thus, Lower Austria and

Burgenland are very concerned about the out-migration and out-commuting of labor from those respective provinces, in spite of the fact that this factor flow may be best for the larger economic region (OIR, 1965, p.43). Lower Austria is not only concerned with labor movement to

Vienna but to Linz as well (OIR, 1972; Lower Austrian section p.8) and, yet, continues to develop a provincial development policy which fails to enhance alternative urban growth centers within the province.

The resolution of goal conflicts among provinces must evolve from the same political dialogue which is necessary to resolve problems at the national and international level. The problem is one of agree­ ment upon a course of action which Is deemed optimal for all levels of government and all regions taken as a sum, and upon a course of action which recognizes that it is impossible for progress without a change in the status quo. Clearly, change will cause adverse influences upon most, if not all regions. However, a direction must be chosen which minimizes these influences and maximizes growth and development for the larger politlcal-grographlcal entity. 117

Policy Impact Analysis

The preceding chapters have described regional goals, regional

policy, and trends in regional inequality in Austria. It has been

made clear that the major planning goals have been at least partially

achieved, i.e. out-migration from many regions has declined and there

has been a convergence in standards of living within Austria. These

trends have coincided with the initiation and In some cases contin­

uation of several regional policy measures which were designed to

assist in the achievement of these goals. However, there are other

forces at work in Austria which could also potentially be responsible

for the achievement of the planning goals. Thus, It is necessary to

investigate the impact of regional policy in order to assess policy's

role, if any, in affecting the observed trends in Austria.

There are two important ways In which regional policy should be

analyzed. Policy should be scrutinized for both equity and effec-*

tlveness In its application. The Austrians, of course, believe that

their particular planning strategy satisfies both important criteria.

That is, they believe that the most effective policy Is one which

disperses the aid to the places where people are now unemployed

.and/or have low incomes. These are, of course, also the places from

which people are out-migrating in the largest numbers. Thus equity,

as defined by the Asutrian goal structure itself, means the dispersal

of the largest share of regional development aid to lowest income

regions. This section will, then, first investigate the distribution

of regional aid in order to see if the greatest amount of aid has, 118

Indeed, been directed toward the poorest regions. If this has been

true, the distribution can be considered equitable, although not

necessarily effedtive.

To date there is only circumstantial evidence suggesting that

regional aid has, in fact, been effective. Therefore, analyses to

follow will attempt to ascertain the causal relationships, if any,

which exist between 1) declining regional income inequalities and

lessening out-migrating from many regions and 2) regional policy

measures. If such relationships exist and they are positive, it

will suggest that policy has been effective in achieving the plan­

ning goals. The causal analysis will, however, not answer all ques­

tions related to effectiveness. Even if policy measures can be proven

to positively affect goal achievement, there is still the possibility

that an alternative planning strategy may have been more effective.

1. The Importance of Policy Measures Relative to Provincial Investment Levels

The absolute importance of regional levels of aid vis-a-vis

regional levels of Investment Is one necessary aspect of an inves­

tigation of regional policy measures. This is especially true here

in order to put in perspective the Impact of regional policy upon

the provincial economies. This type of analysis is also important within, the Austrian context in order to see If regional aid has been

distributed in favor of poorer regions, regardless of the actual

impact of that aid upon these areas. In order to be distributed 119 equitably, aid in Austria must favor poorer regions, since the plan­ ning goals are to raise incomes of these areas without redistributing their populations. This clearly implies the investment of funds in the provinces in which problem regions are Ideated.

In order to assess the effects of policy measures on investment levels, data concerning 1) regional aid as a percentage of total in­ vestment and 2) regional aid per capita will be presented. This will be done for both industrial and infrastructural investment.

a. Regional Policy Measures and Industrial Investment

Table 8 presents data concerning the absolute inportance of regional policy measures and industrial investment in Austrian pro­ vinces. The data show that, in general, a fairly equal proportion of total industrial investment is subsidized in each of the pro­ vinces. However, one of the most Industrialized provinces, Upper

Austria, receives somewhat less than average and Burgenland, the least industrialized and poorest province, receives by far the largest pro­ portionate share. The distribution, however, varies according to the type of aid. The E.R.P. has a slight bias toward higher income pro­ vincas; the K.K.A.G. and transport tax have a fairly strong bias toward lower income regions. The pattern for provincial aid is somewhat mixed, but Lower Austria and Burgenland receive the largest shares from their provincial governments. This is very likely the result of the * • fact that these two provinces also receive the largest shares of re­ distributed taxed from the Bund. 120

Table 8

Aid as % of Total Provincial Industrial Investment - 1966-1970

K.K.A.G. and ERP Provincial Transport Total

Vienna 6.7 0.9 0.7 8.3

Salzburg 5.8 1.2 0.1 7.1

Vorarlberg 5.7 0.4 0.0 6.1

Tirol 6.3 1.5 0.7 8.5

Upper Austria 3.7 0.7 0.2 4.6

Styria 4.9 1.0 1.3 7.2

Lower Austria 5.1 2.5 0.8 8.4

Carinthia 3.7 0.4 3.5 7.6

Burgenland 16.7 9.2 16.2 42.1

K.K.A.G. = loans from KommunalKredit A.G. and transport tax reductions

Provincial = aid to industry and commerce from provinces

ERP * loans from the E.R.P.

Data sources: OIR, 1973a; O.St. Z.; Bundesministerium fuer Finanzen 121

Table 9 shows ..regional aid per Industrial worker, which has a

somewhat different pattern owing to variation in levels of industrial

investment per industrial worker. The highest lewis of E.R.P. aid

go to Lower Austria and Burgenland, two of the poorest provinces,

although another poorer province, Carinthla, receives the least of

all provinces. In general, though, the data support statements that

the E.R.P. has been especially concerned with encouraging investment

in eastern Austria. And, the highest levels of provincial aid by far are

distributed by Lower Austria and. Burgenland, which again corresponds well to the amount of federal taxes which are redistributed to pro­ vinces. Finally, there is a fairly good inverse relationship between

K.K.A.G. and transport tax benefits and level of development. Thus,

there is a tendency for poorer provinces to receive more industrial aid than wealthier provinces.

One way of more precisely evaluating this tendency is to use a simple technique suggested by Ruehmann. He constructs an index of national income weighted by levels of regional aid in order to see If national governments are, in fact, helping the poorest regions. Ap­ plying Ruehmann*s ideas, the following index was constructed:

E * ^( A i/A^ GDPi/GDPn

where,

E * index of equality of aid distribution « regional aid/capita in region 1 Ajj « average level of national aid/capita GDP^ « gross domestic product.accounted for by region i GDPn ** gross domestic product 122

Table 9

Aid/industrial worker (Austrian Schillings)

1966-70 1961-65

KKAG Provincial ERP KKAG Provincial ERP

Vienna 152 228 1492 46 42 1098

Salzburg 37 472 2505 19 200 1576

Vorarlberg 18 137 2476 0 141 1266

Tirol 242 460 2257 0 308 1531

Upper Austria 200 405 2309 128 268 1237

Styria 542 385 1993 280 247 1647

Lower Austria 478 1409 3038 557 814 2217

Carinthia 1145 134 1183 512 127 717

Burgenland 2813 1265 2890 1848 610 1111

Data sources; see Table 8 123

If E is greater than 1.0, aid is distributed In favor of wealthier

regions; if E is less than 1.0 the distribution favors poorer regions.

For Belguim in the 1960's Ruehmann*s data produced a value of E = 0.962

at the provincial level (Ruehmann, 1968). F°r Austria, considering the

types of regional aid represented in Table 2 plus the federal aid to

development regions, E = 0.967 for 1962-1964 and E = 0.904 for 1971—

1973. This, agian, suggests that there has been some realization of

the goal to equitably distribute industrial aid and that this tendency

has strengthened through time.

b. Regional Policy Measures and Infrastructural Investment

There are many policy measures which serve to improve the capa­

bility of provinces and municipalities to invest in needed infrastruc­

ture. The most Important of these are laws which redistribute federally

collected taxes to provincial and local governments. The F.A.G. and

Kopfquotenausglelch are the two most important of these legislative

actions. The F.A.G. disperses nationally collected taxes to provinces

largely according to population. This benefits poorer provinces where

lower than.„average tax revenues are generated. However, some of the

money redistributed through the F.A.G. is actually generated by taxes

from corporations which have branch plants in several different pro­ vinces but pay their taxes to the province where headquarters is

located, Vienna for example.

Still, there is no question that the F.A.G. is an important

policy tool. One way to assess the impact of the tax laws which bene­

fit poorer provinces is to compare the amount of taxes collected by 124

the Bund with the amount it returns to each .respective province.

Thus, for example, in 1970 the Bund returned 57.53% of all of the

‘ tabces it collected to the provinces according to the provisions of the

F.A.G. However, Vienna received only 35.05% of all of the taxes col­

lected there while Burgenland actually received more than it paid.

Burgenland thus gained the difference between the average return, 57.53%,

and its actual return, 153.53%, a benefit of about $24 million (Verbin-

dungsstelle der Bundeslaender, 1972). A provincial official estimates

that perhaps one-half of this benefit is real, i.e. not the result of

simply returning taxes paid by, for example, corporations operating in

Burgenland but paying taxes in Vienna (Szorger, 1975). For the purposes

of this investigation the estimate was made even more conservative so

as not to bias results. Henceforth only one-third of all gains via re­

distributed taxes will be utilized for the purpose of analysis.

A second important source of revenue for provinces is the Kopf-

quotenausgleich, which returns federally collected taxes to provinces with below average per capita tax revenues. These monies are actually direct subsidies to poorer provinces. This is also true of money given

to provinces for regions in need of development. The latter measure, however, is a much smaller source of assistance than the F.A.G. and

Kopfquotenausgleich.

The Importance of gains from tax redistribution upon provincial

and municipal budgets is made clear by the data in Table 10. For ex­ ample, Burgenland1s $24 million gain in 1970, even when lowered to

$8 million to compensate for centralized tax collections, still rep­ resents nearly 9% of the money in the provincial and municipal budgets. 125

Total tax redistribution, and development region money represent nearly

13% of all monies used to run government in Burgenland. The data, in

general, show that the poorer provinces' receive considerable and im­

portant gains from redistriubted taxes. These gains are in a sense the

losses of the wealthier provinces showing no gain in Table 10.

Another important consideration is the relationship between gains

from redistributed taxes and investment in infrastructure. In Table

1 1 there is an attempt to show the potential importance of these gains

relative to such investment. Although money gained by tax redistribu­

tion is not automatically invested in infrastructure, this money would

make more investment possible. Here again there is clear evidence that

policies in Austria benefit poorer regions. In fact, there is no doubt

that the tax redistribution system in Austria has been an important

contributor to the lessening of regional inequalities and quite possib­

ly to the lessening of out-migration from poorer regions. However,

this argument is supported here only by Implication. The coincidence

of 1 ) declines in regional inequalities and 2 ) levels of industrial and

infrastructural aid to the provinces only verifies that the greatest

amount of aid is received by poorer provinces. It does not represent

a real test of the causal relationship existing between levels of regional aid and changes in lining standards and rates of migration.

Analyses designed to test , such a relationship now follow.

2 , The Achievement of Planning Goalss A Causal Analysis

An investigation of the relationship between regional planning 1 2 6

Table 10

Gains from Redistributed Taxes as a Percentage of Municipal

‘ and Provincial Budgets, 1970

F.A.G. Kopf Dev. Regions Total

Vienna - - 0 . 0 0 . 0

Salzburg - — 0 . 0 0 . 0

Vorarlberg - - 0 . 0 0 . 0

Tirol 0.3 - 0 . 0 0.3

Upper Austria 1.9 0.4 0 . 1 ' 2.4

Styria 4.0 1.0 0 . 1 5.1

Lower Austria 5.8 1 . 0 0 . 1 6.9

Carinthia 3.3 0 . 8 0 . 1 4.2

Burgenland 8.9 3.8 0 . 2 12.9

F.A.G. = positive gains from redistributed taxes governed by the F.A.G.

Kopf ■ monies distributed under the Kopfquotenausgleich

Dev. Regions ** monies distributed to provinces for investment in "regions in need of development"

Data source: Verbindungsstelle der Bundeslaender, 1972.

r 127

Table 11

Gains from Redistributed Taxes as a Percentage of Municipal

and Provincial Investment in Construction, 1970

F.A.G. Kopf Dev. Region Total

Vienna - - 0 . 0 0 . 0

Salzburg -- 0 . 2 0 . 2

Vorarlberg - - 0 . 1 0 . 1

Tirol 1.2 — 0 . 1 1.3

Upper Austria 11.5 2.6 0.4 14.5

Styria 29.7 7.5 0.5 37.7

Lower Austria 40.9 7.0 0 . 6 48.5

Carinthia 2 1 . 6 5.5 0.5 27.6

Burgenland 43.0 18.4 1 . 1 62.5

F.A.G., Kopf, Dev. Region - see Table 10

Data sources: Verblndungsstelle der Bundeslaender, 1972; O.St. Z. 128

policies and the achievement of planning goals Is presented in this

section. Due to the fact that the best policy data are available at

the provincial level, the first analysis investigates the relation­

ship between policy and goal achievement using the nine provinces as

observations. At this scale the most appropriate investigations are

of the impact of policy upon the achievement of the goals relating to

the decline of living standard and unemployment differentials. The

impact of population movements (commuting and migration) upon regional

socio-economic changes will also be included in the analysis. However,

the importance of tflese movements are best observed at the district lev-

.el, since the Austrians are concerned with depopulation of particular

regions in each province. Thus, a second analysis is presented for data collected at the district level.

a. Provincial Analysis

The purpose of the analysis presented here is to assess the effects of regional policy initiatives upon the socio-economic structure of

Austrian provinces. The hypotheses of this analysis all relate to the

Impact of particular policy measures upon the change in living standards in Austrian provinces during the periods 1961-1966 and 1966-1971. The

"change in living standards" was measured by using the factor analysis results presented in chapter 5. A composite factor score was calculated for each province for 1961, 1966, and 1971 from the factor scores from those respective years? "Change" was defined as the difference between . 129 the values .for 1961 and 1966 and for 1966 and 1971. Thus, there 6 were two observations for each province and 18 observations in all.

The hypothesized relationships are as follows:

la. It is hypothesized that low cost industrial loans from

the Kommunalkredit A.G. and transport tax reductions from the Bund

are positively related to changes in living standards.

lb. It is hypothesized that economic aid (excluding aid to

agriculture and tourism) from the provincial governments is positively

related to changes in living standards.

lc. It Is hypothesized that industrial and commercial aid from

the European Recovery Program (E.R.P.) Is positively related to changes

in living standards.

Id. It is hypothesized that gains from redistributed taxes are positively related to changes in living standards. It is anticipated that the indirect effects of this variable upon such changes may be more important than direct effects due to the positive effect of im­ proved infrastructure upon the economic structure (measured in this case via industrial employment).

2. It is hypothesized that greater labor mobility decreases the rate of improvement in living standards. (This is in keeping with the predominant Austrian view that labor movements from poorer to wealthier areas are detrimental to the economies of the former regions.)

Thus, it is further hypothesized that (a) increases in commuter mobil­ ity are negatively related to changes in living standards and that (b) levels of net migration are positively related to changes in living standards. The testing procedure involved the use of both second stage

least square estimates In a simultaneous equations format and path

analysis. The path coefficients were the standardized partial re­

gression coefficients derived from the simultaneous equations analysis

The equations system was comprised of six exogenous and three

endogenous variables:

' DEMP± = f(ERPi, ISUB^ PSUB^, TAX±)

DUEM^ = f(DCOMM±, NMIG^, ERP^, ISUBj., PSUB.^ DEMP±)

DLIVj; *= f (DEMP^, DUEM^, TAXt> ERP±, ISUB^ P S U B ^ DCOMM^, NMIG^)

where,

DLIV^ *= change in living standards in region i

DEMP^ *= change in industrial workers per 1 0 0 0 population

DUEM^ = change in average annual unemployment rate

TAX^ = gains from redistributed taxes per inhabitant

ERP^ = E.R.P. industrial and commercial investment funds loaned per industrial worker

PSUB - provincial industrial and commercial loans and subsidies per industrial worker

ISUB^ « loans from the Kommunalkredit A.G. and benefits from transport tax reductions per industrial worker

DCOMM^ « changes in commuter mobility

NMXG^ ~ level, of net migration^

The order condition for the identification of a simultaneous equation was not fulfilled for the change in living standards (DLIV) equation as originally formulated. That is, too few exogenous vari­ ables were excluded from the equation. Thus, successive runs were 131

performed, excluding the minimum number of exogenous variables until

it was ascertained which of the exogenous variables should be finally

excluded from this equation. Preliminary analysis of the other two

equations also resulted in the elimination of a number of variables

owing to low t-scores. The resultant equations system, shown below, was, however, overidentified and the equations were, solved utilizing

the two-stage least squares regression technique.

DEMPj. - c± + ERP± + ISUBi + PSUB± A DUEM± = c2 + DCOMM± + NMIG^. + ISUB± + DEMP^ A DLIVj = c, + TAX. + ISUB. + DCOMM. + DUEM. i 3 i i i ± where,

cl* c2 * an<* c 3 are constants' and A represents an estimate.

The most important endogenous variable was change in living stand­ ards (DLIV), derived from the factor analysis. The two other endogen­ ous variables were change in industrial employment (DEMP) and change in unemployment (DUEM). These variables were assumed to play an inter­ mediate role between many of the exogenous variables and DLIV. That is, it was assumed that the policy measures indirectly affected DLIV by increasing local industrial employment and decreasing unemployment.

It was further assumed .that higher incomes from the latter effects would positively influence provincial tax bases and cause economic multiplier effects which would be in addition to the effects of the policy meas­ ures upon the labor market. These tax and multiplier effects were estimated by including the policy variables directly in the determination 132 of DLIV. The presumption was that the effects of the policy variables

upon changes in living standards which were not accounted for by changes

in industrial employment and changes in unemployment could be attributed

to "other", i.e. tax and multiplier, effects. Preliminary analysis

showed, however, that only the inclusion of K.K.A.G. aid and transport

tax reductions (ISUB) was warranted, due to its explanatory power in

the DLIV equation. Similarly, it was assumed that redistributed taxes

(TAX) had both direct and indirect effects upon DLIV. It was antici­

pated that the indirect effect would be large, since the presumption

was that these tax receipts would be utilized to improve infrastructure,

which in turn would promote greater economic growth. Finally, in keep­

ing with Austrian concerns relating to migration and commuting, the

impact of net migration levels and changes in commuting mobilities

were included in the analysis.

The estimation of parameters from this equations system encountered

a serious methodological problem - multicollinearity. The severity of

the problem makes the interpretation of the regression coefficients

more difficult, particularly because of the hypothesized direct and

indirect effects of several of the variables.. However, the estimation

problems did not seem entirely intractable. The.,equations system was

solved several times, successively eliminating variables which proved

consistently unimportant. This reduced the multicollinearity problem

considerably. However, at one point all variables except TAX in the

DEMP equation appeared to be insignificant, largely due to high levels

of multicollinearity. The equation was estimated without the TAX 133

variable and more reasonable results were obtained. It was then decided

to utilize the simple correlation coefficient between TAX and DEMP

Q C709) to estimate the path coefficient.

The final two-stage regression results are presented In Table 12.

Results from the first equation suggest that the relationship between

industrial employment changes and the policy measures is not strong.

In fact, E.R.P. aid is actually negatively related to employment change.

This suggests that the E.R.P. has not contributed to the above average

rates of industrialization in, for example, Burgenland. The most effec­

tive policy measures appear to be.aid from the Kommunalkredit A.G. and

transport tax reductions, which have a positive relationship to changes

in industrial employment. These measures also show a. strong negative

relationship to changes in unemployment, a result which is consistent with hypothesized expectations. This Is also true of changes In In­

dustrial employment, suggesting that efforts to increase such employ­ ment do indeed have strong effects on unemployment decline. Finally,

the variable measuring commuter mobility suggests that increases in

that mobility may actually slow unemployment declines. This is pre-. sumably the result of the loss of the employment multiplier effects related to locally based economic activities. The other variable measuring labor mobility, net migration, is clearly unimportant.

The results of equation 3A show the anticipated negative relation­ ship between living standards and unemployment changes and the hypothe­ sized positive relationship between changes in living standards and aid from the K.K.A.G. and transport tax reductions. However, in this 134

TABLE 12

Simultaneous Equation. Regression Results

Equation Dependent Independent Regression Number Variable Variable Coeff. t-score d.f.

1 DEMP I SUB .321 1.041 14 .262 ERP -.360 -0.978 PSUB .353 0.801 TAX (.709)a

2 DUEM I SUB -.657 -2.924 13 .694 DEMP -.744 -1.959 DCOMM .482 1.342 NMIG .022 0.092

3A DLIV DCOMM .402 2.173 13 9.14 DUEM -.407 -2.047 ISUB .381 1.774 TAX -.084 -0.368

3B DLIV DUEM -.694 -5.777 14 .902 DCOMM .234 1.426 TAX .174 0.966

assumption 135

equation, the results suggest that greater commuter mobility increases

living standards, a.result which is contrary to the indirect effect of ¥ increased commuter mibility on changes' in living standards Cby way of

unemployment changes — equation 2 ).

Table 13 presents the results of the path analysis which assesses

both the direct and indirect effects of all variables on changes in

.living standards. Although these results do not prove causality, they

do provide important information about the nature of the interrelation­

ships among the variables.

The surprisingly large total effect of ISUB led to the conclusion

that perhaps the direct effect of ISUB and DLIV reported in equation

3A was more coincidental than causal. Thus, another equation 3B was

run, eliminating ISUB. The final result with respect to ISUB, however,

was much the same as evidenced by the path analysis results presented

in Table 14. Thus, the evidence supports hypothesis la; there does

appear to be a positive relationship between loans from the Kommunal—

kredit A.G. and transport tax reductions and changes in regional levels

of standard of living.

The results, however, do not support hypotheses lb and lc. Reg­

ional policy measures taken by the E.R.P. are negatively related to

changes in the living standard and actions by provincial authorities

show no great Impact, although the impact is in the hypothesized direc­ tion.

The results generally support hypothesis Id. The effects of gains

from tax redistribution upon changes in living standards are positive 136

Table 13

Direct and Indirect Effects upon Changes In Living Standards

(DLIV) from Path Analysis

Using Equations 1, 2, and 3A

Variable Direct Effect Indirect Effects Total

ISUB .381 .365 .746

DEMP .303 .303

DCOMM .402 -.196 .206

TAX -.084 (.215)a .131

PSUB .107 .107

NMIG

ERP -.109 -.109

DUEM -.407 .000 -.407

indicates an assumption that path = .000

%y assumption Table 14

Direct and Indirect Effects upon Changes la Living Standards

(DLIV) from Path Analysis

Using Equations 1, 2, and 3B

Variable Direct Effect Indirect Effect Total

■ ISUB - .622 .622

TAX .174 (.366)a .540

DEMP - .516 .516

PSUB - .182 .182

NMIG

DCOMM .234 -.335 -.101

ERP - .186 -.186 t

DUEM -.694 .000 -<694

‘(-^Indicates an assumption that path = .000

assumption 138

no matter which form of equation 3 is.accepted. The results are

most promising, however, when equation 3B is used. And as anticipated,

the indirect effects of redistributed taxes are larger in either the

case of equation 3A or 3B.

Hypothesis 2 is not supported by the results. There is little

evidence that lessened labor mobility creates increases in living stan -

dards. Levels of net migration were not found to be important to changes

either in unemployment or living standards. Changes in levels of com­

muting mobility shows a more complex pattern. Using either equation

3A or 3B, changes in commuting had a negative effect on changes in liv­

ing standards but a positive direct effect. The total net effect is

positive using equation 3A, negative using equation 3B. The results

are, thus, indeterminate. However, the lack of support for hypothesis

2 may also be due to 1 ) the fact that the raw commuter and migration

data were interpolated for this analysis and/or 2 ) the fact that the

hypothesized results may be more observable at the sub-provincial

level. ,

Given a small population size and methodological problems in the

estimation of parameters, it would not be wise to attempt a rigorous

statistical test of the hypotheses. However, the results presented

above do give some indications of the impact of regional policy at the

provincial levell They indicate that some types of regional policy

measures are apparently important causal factors in the achievement

.of lessened regional inequalities. They also indicate, however, that,

at least at the provincial level, attempts to restrict the mobility of 139

of labor may not result in the effects desired by the Austrian government.

This, then, suggests that Austria*s potential goal conflicts may, in

fact, be real.

Finally, the results also make it possible to disaggregate the

net effect of policy into direct and indirect effects. Figure 2

graphically summarizes these effects, derived from Tables 13 and 1 4 .

The indirect effects, some of which have already been discussed,

can be very interesting. For example, referring to Figure 2, it is

possible to trace and evaluate all indirect effects of aid from the

K.K.A.G. and transport tax reductions upon changes in living stan­

dards. Thus, the path from K.K.A.G. aid to industrial employment

changes to unemployment changes to changes in living standards

(ISUB-DEMP-DUEM-DLIV) results in the multiplication of coefficients with signs (+)(-)(-), resulting in a positive indirect effect.

Similarly, the path from K.K.A.G. aid to unemployment changes to

changes in living standards (ISUB-DUEM-DLIV) means multiplication

of signs (-)(-), resulting in another positive indirect effect.

These results are also all consistent with the hypotheses. Conversely,

the indirect effect of changes in commuter mobility on changes in

living standards (DCOMM-DUEM-DLIV) results in a negative effect, while the direct effect is positive. In general, the technique

employed here helps identify more precisely the complex nature of*

.relationships among several interdependent variables. In doing so

it permits a closer scrutiny of the impact of policy upon socio­ economic trends in Austria. 140

E.R.P. Investment redistributed taxes

(-.360) +.890 provincial subsidies (+.353) change in ■►industrial 084 employment (+.321)

Kommunalkredit investment and +.381 change in ▼ transportation tax gains ► living standards

-.657 net migration |change in inemployment +.022 +.402

+.482 change in commuting mobility

Figure 2

Summary Results of Regression Analysisa

••These results derive from a simultaneous equations system solved by use of second stage least squares estimations. The data are for the 9 Austrian provinces for the periods 1961-1966 and 1966-1971.

^By assumption 141

Thus, the same approach was applied to the Investigation of the changes in such trends at the district level, an analysis that now follows.

b. District Analysis

The purpose of the district analysis is to Investigate the causes of important socio-economic changes in Austria during the period 1961-1971. The investigation Includes an analysis of the causes for reduced unemployment In and net out—migration from many districts, as well as the causes of the decline in regional living standard inequalities. The analysis includes the testing of several hypotheses which are related to the regional planning strategy adopted In Austria. The analysis investigates the Austrian conten­ tion that labor mobility, migration or commuting, is counter­ productive to the reduction of interregional inequalities. The in­ vestigation also includes an analysis of residuals from regression in attempts to Isolate important regional variations which are not explained by national trends. The causes of these regional varia­ tions may, of course, be related to regional policy and/or to important differences in regional economic structures. The iden­ tification of either type of relationship would provide useful In­ formation about the achievement of the regional planning goals, notably the desire for lessened out-migration and reductions in regional income inequalities. 142

Analyzing the relationship between regional policy and changes

In .incomes and net migration levels at the district level is made

difficult by the lack of good regional policy and other data for

districts. However, this problem is resolved below by the use of dummy variables to denote regions which are known to receive above average levels of regional development aid (Burgenland in this case) and regions which are distinctive in some other important way. (The importance of these dummy variables was first iden­ tified by analysis of the regression residuals and subsequently verified by the inclusion of the variables in modified regression formats.)

The data were collected for the period 1961-1971, and ’'change'* was defined as the change between values in 1961 and 1971. For changes in net migration, the level of net migration for 1951-1961 was com­ pared with the level for 1961-1971.

The analysis includes the following hypothesized relationships:

1. It is hypothesized that greater labor mobility impedes

income growth relative to the national average. It is

further hypothesized that (a) increased levels of com­

muting are negatively related to relative income changes

and that (b) levels of net migration and positive changes

in net migration are positively related to relative in­

come changes.

2. It is hypothesized that an analysis of regression resid­

uals will identify a spatial coincidence of unexplained

Variance with areas receiving the highest levels of re -

gional development aid. 143

The testing procedure involved the use of both second stage least square estimates in a simultaneous equations format and path analysis. The path coefficients were, again, the standarlzed par­ tial regression coefficients from the simultaneous equations anal­ ysis.

The equations system was comprised of nine exongenous and three' ’ endogenous variables:

DUNEMP^, = f (NMIG^, DMIG± , DCMMMO± , DCMMCT^, DIKDUS±)

DMIG. - f(DUNEMP , DINDUS , DINC , DCMMCT , DCMMMO ) i i x i i D1NC± » f(DUNEMP±, DMIG^, NMIG^, DCMMCT^, DCMMMO±, AGE±) where,

DUNEMP^ = change in average annual unemployment rate in district i

DMIGj[ = change in the level of net migration

DINC^ = change in the relative income level3

NMIGj, “ net migration during the period 1961-1971

DCMMMO^ = change in the level of commuter mobility**

DCMMCTi = change in the level of commuting to major metropolitan

centers0

a Relative income is defined as (income per worker 1971/nat’l. ave.) — (income per worker 1961/nat'l. ave.) £ Mobility is defined as the percentage of workers who are employed outside the municipality in which they reside.

° Commuting to major cities was defined as the percentage of workers who commute to Vienna, Linz, Graz, Salzburg, Villach, Klagen- furt, and/or Innsbruck. 144

DINDUS^ *= changes' in. the percentage of population employed in

industry

AGE^ *» percentage of the population within the ages 20-50 in .

1961

As in the previous analysis* the hypothesized relationships were

tested with successive runs, excluding variables which were unimportant

to explanation. At this point the residuals were examined and dummy variables entered into the regression format in order to improve expla­ nation. The final regression format was as follows:

DUNEMP-t = cx + BURG± + NMIG1 + DCMMMO^ + DCMMCT + DINDUSi A A DMIGi = c2 + LINZ1 + DINC^ + EAST^ + DCMMCT± + DINDUS± + DUHSMP^ A A DINC± “ c3 + STYRIA±+ AGE^ + NMIG± + BURG± + DUNEMP^ + DCMMCT± + DMIG± where,

BURG^ = a dummy variable. All districts in Burgenalnd were given

a value = 1 , all others = 0 .

LINZ^ = a dummy variable. Districts experiencing rapid increases

in industrial employment in the Linz region during 1961-

1971 were given a value 85 1, all others = 0.

EAST^ = a dummy variable. Districts north and east of Vienna

were given a value = 1 , all others - 0 .

STYRXA^ « a dummy variable. Districts with structural problems in

industry in northern Styria and adjacent Lower Austria

were given a value « 1 , all others = 0 .

The two most important endogenous variables were change in relative levels of income (DINC) and change in levels of net migration (DMIG). 145

These variables embody the goals of Austrian regional policy, namely

the reduction of net out-migration from many regions and the lessening

of regional inequalities in living standards. Previous analysis has

already confirmed the partial attainment of the goals, and the analysis presented here was conducted to attempt to identify some of the causes of the observed trends. The results of this investigation are presented in Table 15. The results of equations 1A and IB are especially inter­ esting. In both equations the results indicated that more commuting and net out-migration result in lower rates of' unemployment. These results are not consistent with the Austrian view that labor mobility is undesireable. Clearly, this labor mobility does foster greater equality among people, but it may not foster the population distribution desired by the Austrians. In this case, the results support earlier contentions that goal conflicts do exist in regional planning in Austria.

The results of equation 1A suggest that industrial employment growth is also an important contributor to unemployment decline, which is, of course, consistent with expectations. However, after an analysis of residuals and the inclusion of a dummy variable representing the districts in Burgenalnd (equation IB), the industrial employment variable becomes less important and total explanation improves considerably. The inclu- sion of the dummy variable for Burgenland accoutns for several of the districts showing large unemployment declines, in part related to in­ dustrial growth. However, Burgenland has, in fact, seen a more general diversification of its economy as well as a markedly increased trend toward out-commuting. Both of these trends are certainly related to the Table 15 146

' R jt R2 F

1A. DUNEMP .330 9.353 NMIG .320 3.144 DCMMMO -.300 -3.002 DINDUS -.172 -1.551 DCMMCT -.070 -0.700

DUNEMP .450 12.267 BURG -.373 -4.053 NMIG .317 3.416 DCMMMO -.225 -2.424 DCMMCT -.088 -0.955 DINDUS -.073 -0.703

DMIG .432 9.373 LINZ .448 4.520 DINC .458 3.598 EAST .255 2.804 DCMMCT .141 1.440 DINDUS .113 1.039 DUNEMP -.109 -0.911

DMIG .418 10.773 LINZ .481 5.110 DINC .474 3.729 EAST .264 2.889 DCMMCT .172 1.823 DUNEMP -.157 -1.403

3A. DINC .292 6.173 AGE -.387 -2 . 8 8 6 DUNEMP -.345 -2.587 DMIG .354 2.253 NMIG .291 1.932 DCMMCT -.092 -0.983

DINC .535 10.352 STYRIA -.487 -5.070 AGE ' -.534 -3.508 NMIG .367 2.198 BURG .218 2 . 0 1 0 DUNEMP -.282 -1.680 DCMMCT - . 1 2 1 -1.248 DMIG -.087 -0.337 147

Important Impact of regional development aid and the cumulative and

self-reinforcing growth effects resulting from it. Infrastructural

aid has probably discouraged migration, encouraged commuting, and en­

hanced the industrial potential of Burgenland. The province has also,

of course, been aided by direct industrial assistance by the K.K.A.G.,

the E.R.P., and the province itself. Thus, the results of the first

equation suggest that regional policy has been successful where it has

been pursued most vigorously, I.e. in Burgenland.

The results of the second equation suggest several reasons for

generally lower rates of net out-migration from Austrian districts

during 1961-1971 In comparison to the period 1951-1961. Again, great­

er commuting plays an important role. This is evidnet from the positive

sign of the variable measuring increases in commuting to major centers.

Not 'surprisingly, one of the most important factors resulting in les­

sened net out-migration is increased relative income levels (DINC).

Also, increased industrial employment retards out-migration. This is

evident not only In the industrial employment variable itself, but

also In the dummy variable for the Linz region, where an apparent

natural growth center has emerged, propelled by increased Industrial

employment generated by the large nationalized steel Industry centered

in Linz.

A similar regional employment effect Is clearly Identifiable for

the districts north and east of Vienna (EAST), which, however, have not been affected by a growth center. The sharp reductions In net out—migration from this region are probably the result of a great many 148

things which are of lesser Importance elsewhere. First, the area

is within the area most affected by Vienna, a city which has become

less attractive to migrants in general in the post-war era. Laobr now also has a greater opportunity to commute to Vienna from these regions, lessening to need to migrate.

Second, this region may have been most affected by what has been termed the "Ruckstaub", the settling of the "dust” after World War XI.

This refers to the possibility that levels of net out-migration during the 1951-1961 period were unusually high in these districts due to

1 ) constraints on internal population movements during the war, result­ ing in increased mobility thereafter; 2 ) real opportunities for more rapid socio-economic advancement in Vienna vis-a-vis these rural dis­ tricts; and 3) the potential hazard of living in a border region in a time of European political instability. These effects were probably self-reinforcing during 1951-1961 just as reduced net out-migration has probably created self-reinforcing multiplier effects resulting from improved market possibilities for local Industries and services during

1961-1971. And, third, industrial expansion in this area has benefitted significantly from the labor shortages which appeared in Vienna during the 1960’s, exemplified by Vienna’s importation of over 60,000 foreign workers during 1961-1971 (Oesterrelchisches Institut fuer Wirtschafts- forschung and Oesterrelchisches Statistisches Zentralamt, 1968 and 1971).

These shortages in Vienna led to a considerable movement of industry from Vienna to Lower Austria, where people leaving agriculture were available for industrial empldyment. Finally, the results of the second equation indicate that unem­

ployment changes are negatively related to changes in net migration.

This is, of course, the expected relationship. The partial regression

coefficient was more reliable, however, when the industrial employ­

ment variable was omitted. This was apparently caused by fairly high

levels of multi-collinearity existing between these two variables.

(In general, however, multi-collinearity did not pose the serious

problem which it created in the provincial analysis.)

•The results of the third equation give some insights into the

nature of income convergence in Austria. The results of equation 3

indicated that unemployment decline is an important contributor to

relative income increases. However, the most interesting relation­

ships in equation 3A are those between labor mobility and income change.

In keeping with the Austrian view that migration and commuting are

harmful to local economies, the results of this equation suggest that

districts with net out-migration rates (NMIG) and slower declines in

net out-migration (DMIG) experience lower rates of relative income

change. Further, there is a tendency for districts experiencing growth

in commuting to major centers (DCMMCT) to enjoy lower rates of relative

income change. However, the variable measuring percentage of the pop­

ulation in the 20-50 age group has a negative relationship with relative

income change. This result suggests that age specific out-migration is

not necessarily an important impediment to local economic Improvement.

It, thus, suggests that concerns about the long-term effects of selec­ tive out-migration are perhaps over estimated. On the other hand, this 150

result may also simply reflect the fact that very strong forces of

income convergence (i.e. metropolitan labor shortages, for example)

are, in the short-run overshadowing the long-term negative impact of

selective out-migration.

The results of equation 3B follow from the analysis of the resi­

duals from equation 3A and the resultant inclusion of two important

dummy variables. The sizeable increase in explanation and the regres­

sion coefficients indicate the Importance of these variables in explain­

ing relative income changes in Austria. They are important because-they

represent important free market and regional policy impacts upon chang­

ing income levels. One of the variables, STYRIA, represents a struc­

turally and locationally disadvantaged industrial region in northern

Styria and western Lower Austria. The disadvantagous economic position

of this region vis-a-^is the rest of Austria is clearly evident from

Its large negative regression coefficient. Importantly, however, an

analysis of the residuals from equation 3B suggest that the situation

in Knittelfeld and Judenburg, two of the seven districts in this region, .

is possibly aided by the special E.R.P. mining project. (Further aid

has also been more recently directed at this area by the Aichfeld-

Muerboden project.) This conclusion is based on the fact that in spite,

of the inclusion of this dummy variable, four of the seven districts

still have predicted relative income changes which are over estimated • by regression; the two above-mentioned districts are among the three .

districts which are under estimated. Thus, although the structural-

deficiencies of the area are apparently not completely accounted for 151

by the dummy variable, relative income change in the portion of the

region which receives the most regional policy attention is not lower

than expected.

Another strong indication of the importance of specific regional

patterns, and regional policy in particular, derives from the inter­

pretation of the regression coefficient for the dummy variable rep­

resenting Burgenland,s districts (BURG). The positive coefficient

suggests that some socio-economic forces influencing income conver­

gence are stronger in Burgenland than elsewhere. These forces probebly include benefits accruing from reduced out-migration (in part related

to increased commuting) and increased sectoral diversification. The

latter trend has resulted from an increase in the industrial and ter­ tiary sectors. Industry has received considerable benefit from both ' the direct effects of industrial subsidies and the indirect Impacts of improved infrastructure. Expansion in the number of industrial jobs! has helped create the expansion in the tertiary sector. These eco­ nomic developments in Burgenland, however, have also resulted from more general national trends like the decentralization of industry during the 1960*s, when labor was in short supply.

The other notable difference between equations 3A and 3B is the coefficient for change in levels of net ncLgration (DMIG), which is con­ siderably altered by the inclusion of the dummy variables. Since ex­ planation in 3B is greater than in 3A, DMIG is apparently of lesser importance than the results of equation 3A. would Indicate. 152

In fact, the results of the path analysis, reported In Tables

16 and 17, seem to indicate that interpretation 6f the impact of the

mobility variables upon regional change is, in some cases, problemat­

ical. The results of these tables were derived from a path analysis

Which utilized the most statistically reliable path coefficients.

(all coefficients with t-scores greater than or equal to 1.300 were

included in the analysis.) These results permit the most critical

evaluation of the hypotheses presented earlier, and, in particular,

do not entirely support the hypothesis that greater labor mobility

impedes relative income growth. The effects of the migratory variables,

listed in the first group of Table 16 , are neither the most important

nor the most consistent among the independent variables. Greater

commuter mobility is not negatively related to relative income change

(hypothesis la), but is rather a weak positive force for income con— '

vergence. And, as noted earlier, the age specific nature of out-nigra.-

tlon has not necessarily had a large adverse impact on relative income

change. On the other hand, net out-migration does appear to have a negative impact on income changes, confirming hypothesis lb. Thus, labor mobility affects both income divergence and convergence, and the results do not entirely confirm or reject the first hypothesis.

The results presented in Table 16 do, however, tend to confirm the' second hypothesis. Perhaps the strongest forces affecting Income con­ vergence in Austria are forces which are operative in particular regions.

The forces previously mentioned with regard to Burgenland include the impact of regional policy. Similarly, structural problems in Austrian 153

Table 16

EFFECTS OF INDEPENDENT VARIABLES UPON

CHANGING RELATIVE INCOMESa

Indirect direct total effect

% population age 20-50 (AGE) — —.534 —.534 net migration (NMIG) —.109 +.367 +.258 change in commuting +.078 - +.078 mobility (DCMMMO)

Styria (STYRIA) - -.487 -.487

Burgenland (BURG) +.129 +.218 +.347 change In unemployment — — .282 -.282 (DUNEMP) a Results derive from a path analysis of a simultaneous equations system. 154

Table 17

EFFECTS OF INDEPENDENT VARIABLES UPON

CHANGING LEVELS OF NET MIGRATION (DMIG) 3

indirect direct total effect

AGE -.253 - -.253 change In commuting to — +.172 +.172 major centers (DCMMCT)

NMIG +.101 - +.101

DCMMMO +.052 - +.052 region near Linz (LINZ) - +.481 +.481 districts north and east — +.264 +.264 of Vienna (EAST)

STYRIA -.231 - -.231

BURG +.162 - +.162 change in relative - +.474 +.474 incomes (DINC)

DUNEMP -.074 -.157 -.231 a Results derive from a'path analysis of a simultaneous equations system.

* 155

industry are to some extent concentrated in northern Styria, and this

problem has a strong negative relationship to relative income change.

Most of the districts in this area had above average incomes in 1961 but

all were below the 1971 national average. The relative income decline

was again, however, less rapid in some districts which have received

more attention from regional policy makers.

The results presented in Table 17 do not relate directly to the hypotheses posed at the outset of this analysis, but they are very

important to the analysis of the regional planning strategy. The first

group of variables in Table 17 suggest, for example, that there are

several forces at work in reducing out-migration. One of these is the reduction in the percentage of population in younger age groups (AGE), lessening the potential for out-migration. Another is increased commut­ ing activity (DCMMCT, DCMMMO). However, as in the case of changing relative incomes, specific regional trends are among the most important independent variables. Thus, strong growth impulses in the Linz region and Burgenland have lessened out-migration, while the reverse has been true in the stagnating industrial regions of northern Styria. Importantly, changing relative incomes and unemployment levels have a strong in­ fluence on changing migration patterns.

A simultaneous evaluation of the results presented in Tables 16 and provides an interesting insight into the regional planning strategy adopted in Austria. First, these results suggest that a complete halt to labor mobility may not help income convergence and, especially

In the case of commuter mobility, would not help decrease levels of net 156

out-migration. These implications are the same as those derived

from the provincial analysis and again emphasize the potential

conflict between the planning goals in Austria. (A potential

alternative strategy, more consistent with the empirical findings and still compatible with the reality of Austrian politics will be proposed in the concluding chapter.)

' A second general conclusion which can be drawn from the analysis is the importance of sub-national forces upon the achievement of the national planning goals. These forces are often important contributors to the achievement of the planning goals. The existence of these r e ­ gional forces underlines the complexity of the causes of regional change and the need for researchers to be familiar with socio-economic trends at the sub-national level. In this particular case some of the regional trends confirm the contention that regional policy has been somewhat ' effective in aiding in the achievement of goals. And, these results are again consistent with findings at the provincial level.

A third important conclusion which derives form the preceeding analysis is that changes in regional economic and social structures are highly interrelated. This is apparent from interrelationships which have been established at both the district and provincial levels.

The existence of these interrelationships confirms the desireability of the investigation of regional changes within a systems framework, such, as is possible with the use of a simultaneous equations format.

A more general evaluation and summary of the regional planning experience in Austria will be presented in the following chapter along 157 with a discussion of some potential modifications of the planning strategy in Austria. Chapter 7

SUMMARY AND CONCLUSIONS

The foregoing analysis has established the fact that regional

policy has had a positive impact upon the lessening of regional

Income inequalities and the reduction of out-migration from rural

regions in Austria. These trends represent a partial achievement

of Austrian regional planning goals and suggest that Austria's

planning strategy has been reasonably well devised. Industrial sub­

sidies and improved local infrastructures have aided in the industrial­

ization of rural regions (see Map 5, Chapter 5). This has, in turn,

lessened unemployment and raised income levels in these areas. Further,

the provision of secure employment opportunities and improved social

services and the improved possibility for commuting (resulting from

better roads and more automobiles) have been important factors in

declining rates of net out-migration in rural, east Austrian regions.

It must again be noted, however, that there are several free

market forces which have probably been most instrumental.in producing

the observed economic and social trends in Austria. First, the wealthiest and most attractive in-migrant province, Vienna, has ex­ perienced relatively slow economic growth due to its location and to

the age structure of its. population. Two Austrian researchers have shown that Vienna has experienced locational disadvantages during the period 1964-1971, as the result of the city's distance from the core industrial growth region in northwestern Europe. The western provinces

158 159

in Austria have, on the other hand, benefitted from location vis-a-vis

western Europe and have shown sharp income and in-migrant gains (Skarke

and Skarke, 1974, Abbildung 2). A second factor, related to the first,

is that western Austria has benefitted considerably from higher levels

of tourism. This has, again, raised many rural west Austrian income

levels vis-a—vis Vienna and contributed to lessening Income Inequalities

and reduced out-migration. And, third, the evolution of the production'

cycle (see Chapter 2) in Austria has considerably benefitted the poorer

rural regions. The decentralization of labor-intensive industry away

from Vienna, hastened by labor shortages in the capital, has meant more

industrial jobs for rural areas of Austria.

There is, however, some question about how long free market forces will continue to lessen regional income inequalities and rural out­ migration. This is particularly true with regard to decentralization of industry, a trend which may slow in the future if labor shortages ease. Further, decentralization may not, in any event, prove to be of long term benefit for the rural regions. As noted earlier, the indus­ tries which are decentraliizing are not generally growth industries and also tend to be somewhat mobile, i.e. they may resettle again if wage rates Increase. Thus, the current trend of industrial decen­ tralization does not guarantee a viable and vital economic structure for rural regions in the long run. They may well need to again attract, the next "wave" of economic activity that decentralizes from the metro­ politan regions- 160

Under these circumstances there may be considerable need for

continued regional planning. Planning may either 1) continue to

complement and reinforce free market forces or 2) be the sole agent

fostering the achievement of regional planning goals during an era

when free market forces are no longer favoring growth in poorer and

rural regions. In either case, but especially in the latter, Austrian

regional policy might be more successful if some modifications were

adopted in the planning strategy. These modifications might include:

1) reduced emphasis upon halting out-commuting from rural regions

and more favorable attitudes towards this type of labor mobility as a

subsitute for migration; and 2) greater concentration of regional aid

in larger towns than is now the case in order to take advantage of

economies of scale and agglommeration and to create alternative in- •

migrant and in-commuter centers in closer proximity to the existent

rural population.

The second point, of course, relates well to the first; the crea­

tion of alternative in-migrant and in-commuter centers might hasten local

commuting and lessen migration in both the short- and long-term. Thu6,

for example, such smaller centers might impede a common practice of

stepped migration to Vienna - first commuting and then, later, migration

to the capital. The foregoing analyses provide considerable evidence which indicates that such a strategy might be a successful one. First," .

commuting has been found to be a substitute for migration and has con- •

trlhuted to declines in income inequalities in Austria. Second, the

emergence of Linz, a smaller metropolitan region, as a growth center has 161

been, a very strong check on continued out-migration from rural regions

In the vicinity of Linz. Thus, if it were possible to create other

growth centers in Austira, even if only on a smaller scale, the ten­

dencies toward income convergence and reduced rural out-migration might

be strengthened. This might be particularly important if free market

forces tending toward economic and demographic concentration re-emerge

in Austira. A system of more dynamic towns and small cities, strength­

ened by regional policy, might prevent an erosion of advancements made

thus far toward the achievement of the regional planning goals.

In order to implement these modifications it would, as noted ear­

lier, be necessary to concentrate more regional development aid in

larger urban centers. This might be particularly true for aid. to in­

dustry, which has been very decentralized in th&_ past. Such aid might

be concentrated in larger towns selected by national and provincial

planners and leaders (e.g. by OROK) as real potential growth centers.

These would necessarily have to be few in number, perhaps only one

or two towns in the smaller provinces. The selection process would not be easy politcially, but smaller localities must be made to real­

ize that the free market forces aiding regional convergence may not

continue indefinitely and that renewed forces of economic concentration might quickly issue in a new era of divergence in regional levels of well-being. If the non-urban areas do not avail themselves of the op­ portunity to now construct a viable, stable economic base in selected

growth,centers, there is the possibility that forces of economic con­

centration may only benefit the larger provincial capitals. This 162 would inevitably lead to greater rural out-migration and renewed re­ gional income idvergence.

Implimentation of a modified policy to encourage growth in selected centers would also necessitate some emphasis on infrastructural invest­ ment in those centers. However, the investment might also be well spent in improved regional transport facilities in order to create commuting regions centered on the growth center. There would be no special need to create new administrative bodies to co-ordinate such investment if existing administrative agencies were agreeable to the regional planning strategy and made internal investment decisions to support it. The tax redistribution system would also not need major changes, although tax incentives for the growth centers and greater tax returns to them would warrant consideration. Major changes in the tax redistribution system do not seem urgent, since the results of Chapters

5 and 6 suggest that regional inequalities in infrastructure are de­ clining and that this decline is related to the way in which taxes are presently redistributed.

Other modifications in the present regional planning stragety that might be considered include greater communication among the Institutions implementing policy and a consideration of a wider range of potential policy measures. Co-ordination of planning activities is poor in Austria, but the establishment of the Austrian Regional Planning Commission

COROK) provides some hope for the future. This forum may also provide on-going evaluation of the effectiveness of Austrian regional policy and recommend the incorporation of new types of policy measures into the program. 163

Even without modification the strategy adopted to date in Austria

(decentralized concentration) has proven to be at least partially suc­

cessful. It has complemented free market forces which have aided in

the partial achievement of the major planning goals. The strategy has also worked fairly well politically, since the emphasis on decentrali­

zation of aid has reduced the incidence and seriousness of conflict between areas competing for regional aid. Thus, decentralized concen­ tration might be an acceptable regional policy in other national contexts where there are free market forces which are also aiding in the.reduction of regional inequalities and where political realities make the adopt­ ion of more elegant theoretical planning alternative impossible.

Clearly, further research is needed to analyze the potential im­ pact of these other planning alternatives and to investigate their applicability in diverse political contexts. Further research is also required in order to better ascertain the nature of the complex socio­ economic interrelationships which exist in regional and national eco­ nomic systems and to develop methodologies to handle these interrela­ tionships. This research is intended to be one. part of such a more comprehensive analysis of regional policy alternatives and one example of a methodological framework for the investigation of these alternatives within a partial systems analysis framework. LIST OF REFERENCES

Alonso, William. "Equity and its Relationship to Efficiency in Urban­ ization." Essays in Regional Economics. Edited by John F. Kain and John R. Meyer (Cambridge: Harvard University Press, 1971).

Beirat fuer WIrtschafts- und Sozialfragen. Verschlaege zur Regionalen Strukturpolitik. Vienna: Carl Ueberreuter Druck und Verlag, 1972.

Berger, Heinz; Austrian National Railways. Interview conducted in Vienna, March 1975.

Berry, Brian. Growth Centers in the American Urban System. Cambridge, Mass.: Ballinger Pub. Co., 1973.

Berry, Brian. "Hierarchical Diffusion. The Basis of Developmental Filtering and Spread in a System of Growth Centers." Growth Centers in Regional Economic Development. Edited by N. Hansen (1972).

Berry, Brian. "Commuting Patterns: Labor Market Participation and Regional Potential." Growth and Change (October. 1970), 3-10.

Blalock, H.M; -. Jr. Causal Inferences .in Nonexperimental Research. Chapel Hill: University of North Carolina Press-, 1961.

Blumenfeld, H. "The Economic Base of the Metropolis." Journal of American Institute of Planners 21 (Fall, 1955), 114-132.

Bobek, Hans, ed. Atlas der Republic Oesterreich. Vienna: Freytag- Berndt und Artaria, 1961.

Boeventer, Edwin von. "Regional Economic Problems in West Germany." Backward Areas in Advanced Countries. Edited by E.A.G. Robinson, (1969).

Boudeville, J.R. L Tespace et les poles de croissance. Paris: Presses Uniyersltaries de France, 1968.

Boekemann, Dieter. Talk on Infrastructure as a determinant of changing urban hierarchies, in Vienna, May 1975.

Bundeskanzleramt, Buero fuer Raumplanung. Erster Raumordnungsbericht; Bundesbeitrag. Vienna: Bundeskranzleramt, 1975a.

Bundeskanzleramt, Buero fuer Ramplanung. Regionale Entwicklungspol— ' itik in Oesterreich. Raumplanung fuer Oesberreich, 1/75. Vienna: Bundeskanzleramt /Bundespressedienst, 1975b.

164 165

Bundeskanzleramt, Buero fuer Raumplanung. Regional Development Policy In Austria. Vienna: Oesterreichische Raumordnungskonferenz, 1973.

Bundeskanzleramt, Buero fuer Raumplanung.' Raumordnung fuer Oesterreich. Vienna: Bundeskanzleramt, 1969.

Bundesministerium fuer Finanzen. Unpublished data on investment by provinces in infrastructure and tax savings resulting from exemptions from the transport tax. Data gathered in Vienna.

Bundesministerium fuer sozlale Verwaltung. Bericht ueber die soziale Lage. Vienna: Bundesministerium fuer soziale Verwaltung, editions 1966-1972.

Bunesministerium fuer soziale Verwaltung. Unpublished unemployment data; gathered in Vienna.

Bundesministerium fuer Wissenschaft und Forschung. Die Vollendung der Ausbaustufe der Hochschule fuer Bildungswissenschaften in Klagenf urt~ Vienna: Bundesministerium fuer Wissenschaft und Forschung, 1973.

Bundesministerium fuer Wissenschaft und Forschung. Hochschulbericht 1972, Band 2 . Vienna: Bundesministerium fuer Wissenschaft und Forschung, 1972.

Burgenlaendlsche Industrie- und Betriebsansiedlungs Ges. M.B.H. Thr Industrie Standort: Burgenland. Eisenstadt: Burgenlaen- dische Industre- und Betriebsansiedlungs Ges. M.B.H., n.d.

Burghardt, Andrew F. Borderland. Madison: University of Wisconsin Press, 1962

Butschek, Felix. "Regionalpolitische Industriefoerderung. n.p.: Bundesministerium fuer Handel, Uewerbe, und Industrie, n.d.

Bylund, Erik. ’’Industrial Location Policy and the Problems of Sparsely Populated Areas in Sweden." Backward Areas in Advanced Coun- tries. Edited by E.A.G. Robinson (1969).

Christ, Carl F. Econometric Models and Methods. New York: John Wiley & Sons, Inc., 1966.

Clark, Colin. "The Economic Fluctuations of a City in Relation to its 51ze.” Econometrica 13 (April 1945), 97-113.

Copes, P. and Steed, G. "Regional Policy and Settlement.Strategy: Constraints and Contradictions in Newfoundland's Experience." Regional Studies 9 (1975), 93-110. Davin, Louis E. "The Structural Crisis of a Regional Economy. A Case Study: The Walloon Area." Backward Areas in Advanced Countries. Edited by E.A.G. Robinson (1969).

' Die Presse. "Flaute ,rettetel Raumordnungsprojekt." April 22, 1975.

Draper, N.R. and Smith, H. Applied Regression Analysis. New York: John Wiley and Sons, Inc., 1966.

European Free Trade Association. National Settlement Strategies: A Framework for Regional Development. Geneva: Secretariat of E.F.T.A., n.d.

European Recovery Program. Bericht der Geschaeftsfuehrung des ERP Foods. Vienna: European Recovery Program, 1974.

Foerster, Ministerialrat. Interview conducted at the Finanzamt in Vienna, February 1975.

Friedmann, John. "A General Theory of Polarized Growth." Growth Centers in Regional Economic Development. Edited by N.M. Hansen, 1972.

Friedmann, John. Regional Development Policy: A Case Study of Vene­ zuela. Cambridge, Mass.: M.I.T. Press, 1966.

Friedmann, John. "Regional Economic Policy for Developing Areas." Papers of the Regional Science Association 11 (1963), 41-62.

Gatscha, Otto. "Die oesterreichisc.he verstaatlichte Industrie und Ihre Rolle im Rahmen der oesterreichischen Regionalpolitik." Regionale Entwicklungspolitik in Oesterreich. Edited by Bundeskanzleramt, Buero fuer Raumplanung, (1975b).

Gauthier, Howard. Lectures in a seminar in regional development presented at The Ohio State University, Columbus, Ohio in 1976.

Gober-Meyers, Patricia. "Interregional Migration, Per Capita Income Inequality and Regional Attractiveness: A Simultaneous Equa­ tions Approach." Unpublished Ph.D. dissertation, The Ohio State University, 1975.

Greenwood, M.J. "Urban Economic Growth and Migration: Their Interaction. Environment and Planning 5 (1973), 91-112.

Froenman, S. "Social Aspects of Backwardness in Developed Countries Backward Areas in Advanced Countries. Edited by E.A.G. Robinson, (1969).

Hadn, Hofrat. Interview in the transport planning department of the Lower Austrian provincial government in Vienna, May 1975. 167

Hansen,* Niles M. Location Preferences, Migration, and Regional Growth: A Study of the South and Southwest U.S. New York: Praeger Pub., 1973.

Hansen, Niles M. "Criteria for a Growth Centre.Policy." Growth Poles and Growth Centres in Regional Planning. Edited by Antoni R. Kuklinski (Paris: Mouton, 1972).

Hansen, Niles M. Intermediate-Size Cities as Growth Centers: Applica­ tions for Kentucky, the Piedmont Crescent, the Ozarks, and Texas. New York: Praeger Pub., 1971.

Hansen, Niles M. French Regional Planning. Bloomington, Indiana: Indiana University Press, 1968.

IFermansen, Tormod. "Development Poles and Development Centres in Na­ tional and Regional Development: Elements of a Theoretical Framework." Growth Poles and Growth Centres in Regional Planning Edited by Antoni R. Kuklinski (Paris: Mouton, 1972).

Herrick, Bruce. Urban Migration and Economic Development in Chile. Cambridge, Mass.: M.I.T. Press, 1965.

Hilhorst, Jos G.M. Regional Planning: A System Approach. Rotteram: Rotterdam University Press, 1971.

Hirschman, Albert 0. The Strategy of Economic Development. New Haven: Yale University Press, 1958.

Holzman, Gustav. "Die Regionale Raumordnung in Oesterreich." From a manuscript of Oesterreichischer Rundfunk telecasts, January 10, 1970 through June 15, 1971.

Hoover, Edgar M. "Some Old and New Issues In Regional Development." Backward Areas in Advanced Countries. Edited by E.A.G. Robinson, (1969) .

Hufbauer, G.L. Synthetic Materials and the Theory of International Trade. London: Duckworth, 1965.

Institut fuer Empirische Sozialforschung. Zuwanderung nach Wien. Vienna; Institut fuer Empirische Sozialforschung, 1970.

Jaeger, Kastner. Gesamtverkehr und Raumplanung. Vienna: Oesterreich- isches Institut fuer Raumplanung, 1973.

Jeffrey, Douglas. "Economic Impulses in an Urban System." Ph.D. dis­ sertation, The Ohio State University, 1970. 168

Jeglitsch, Helmut. Unpublished income data, estimated by Dr. Jeglitsch at the Oesterreichisches Institut fuer Wirtschaftsforschung, Vienna, 1976.

Jeglitsch, Helmut. "Der Beitrag der Bundeslaender zum Brutto-National- produkt 1961 bis 1972." Monatsberichte 1/1975, Oesterreich­ isches Institut fuer Wirtschaftsforschung.

Jessl, Albert. Interview conducted at the Oesterreichisches Institut fuer Raumplanung, Vienna, on March 3, 1975.

John * Doktor. Interview at the Bundeskanzleramt, Vienna, on October 29, 1974.

Johnston, J. Econometric Methods. New York: McGraw-Hill Book Company, Inc., 1960.

Klassen, L.H. and Drewe, P. Migration Policy in Europe. Glasgow: Saxon House, D.C. Heath Ltd., 1973.

Koeszegi, L. "Development Problems of Backward Areas In Hungary." Backward Areas in Advanced Countries. Edited by E.A.G. Robinson, (1969).

Kohlbacher, Alfred. Interview conducted in the Bundeskanzleramt, Vienna, on November 18, 1974.

Lasuen, J.R. "On Growth Poles." Urban Studies 6 (June, 1969) 137-161.

Lentsch, Brigitte. "Raumordnungsprogratran ueber zentrale Orte in Niederoesterreich." Kultur Berichte (Land Niederoesterreich). (Nov. 1973) 8-14.

Loerderer, B.J. and Nowotny, Ewald. Oberoesterreich 1980. Vienna: Europa Verlag, 1969.

MacKinnon, Ross D. and Skarke, Anna Maria. "Exploratory Analyses of the 1966-1971 Austrian Migration Table." Research Report of the International Institute for Applied Systems Analysis. Schloss Laxenburg, Austria: International Institute for Applied Systems Analysis, 1975.

Maclennan, M.C, and Robertson, D.J. "Regional Policy in the United Kingdom." Backward Areas in Advanced Countries. Edited by E.A.G. Robinson (1969).

Magistrat der Stadt-WIenj Geschaeftsgruppe VI, Plannung. Taetigkeits- bericht. Vienna: Magistrat der Stadt Wien, years 1971, 1972, and 1973. 169

Magistrat der Stadt Wien, Geschaeftsgruppe VI, Plannung. Kulturbericht 1973/3. Vienna: Magistrat der Stadt Wien, 1973a.

l^glstrat der Stadt Wien. "Motive und Einstellung der Zuwanderer nach Wien.” Unpublished paper. Vienna, 1973b.

Malecki, Edward J. "Innovation Diffusion Among Finns: .A Dissertation." Studies in Diffusion of Innovation, No. 27. Columbus: Depart­ ment of Geography, Ohio State University, 1975.

Mastalier, Volker. Interview conducted at the Wiener Institut fuer Standort Beratung, Vienna, March 1975.

Matzner, E. Talk on the Finanzausgleigh in Vienna, May 1975.

Matzner, Egon. Oeffentliche Investitionen, 1950—1966. Informations- zentrum fuer Kommunale Finanzierung Reihe, No. 5. Vienna: Informationszentrum fuer Kommunale Finanzierung, 1969.

Meingast, Josef. "Landesplanung in Oesterreich." Unpublished Ph.D. Dissertation, Hochschule fuer Welthandel, Vienna, 1965.

Mera, Koichi. "A Multiple Layer Theory of National Urban Systems." Paper presented at the Conference on National Settlement Systems and Strategies, International Institute for Applied Systems Analysis, Schloss Laxenburg, Austria, December 16-19, 1974.

Mueller, Georg. Raumordnung in Bund, Laendem und Gemeinden. Mainz: W. Kohlhammer Verlag und Deutscher Gemeindeverlag, 1965.

Myrdal, Gunnar. Economic Theory and Underdeveloped Regions. London: Duckworth, 1957.

Niederoesterreich, Landesreglerung, Abteilung R/2, Raumordnung. Untersuchungsergebnisse ueber die Gemeinden des Grenzlandes. Planungs- und Entscheidungsgrundlagen, No. 13. Vienna: Amt der Niederoesterreichischen Landesreglerung, Abteilung R/2, RAumord- nung, 1974a.

Niederoesterreich, Landesreglerung. Grenzland-Raumordnungsprogramm, provincial law 218/74, 1974b.

Niederoesterreich, Landesreglerung. Zentrale-Orte-Raumordnungspro— gramm, provincial law 142/73, 1973.

Niederoesterreich, Landesreglerung. Raumordnungsprogramm zur Verbess- erung der Kommunalstruktur in Niederoesterreich, provincial law 233/71, 1971a.

Niederoesterreich, Landesreglerung. Raumordnungsprogramm zur Schaffung, Verbesserung oder Sicherung geeigneter Standorte fuer Betriebe des gueterproduzierenden fembedarfstaetigen Gewerbes und der Industrie, provincial law 255/71, 1971b. 170

Niederoesterreich, Landesreglerung. Untersuchung ueber Industrieelg- nungszonen In Niederoesterreich. Vienna: Amt der Niederoes- terreichischen Landesreglerung, 1969.

Niederoesterreich, Landesreglerung. Rechnungsabschluss des Landes Niederoesterreich. Vienna: Land Niederoesterreich, volumes 1961-1967.

North, D.C. ''Location Theory and Regional Economic Growth," Journal of Political Economy 63 (no. 3 1955), 243-258.

Nowotny, Ewald. Regionale Probleme der Industriepolitik. n.p.: Bundes— ministeriura fuer Handel, Gewerbe und Industrie, n.d.

Nussbaumer, Adolf. "Raumordnung - Zielsetzung und Verwirklichung." Oberoesterreich: Entwicklung und Aufstieg 1/1969, 7-12.

Oesterreich, Republik. Finanzausgleichgestez J973, federal law Nr.445, 1972

Oesterreich, Republik. Finanausgleichgesetz 1967, federal law Nr. 2, 1967a.

Oesterreich, Republik. Befoerderungssteuergesetz-Novelle 1967, federal law Nr. 51, 1967b.

Oesterreich, Republik. Einkommensteuergesetz 1967, federal law Nr. 268, 1967c.

Oesterreich, Republik. Flnanzausgleichgesetz 1959, federal law Nr. 97, 1959.

Oesterreichische.Kommunalkredit A.G. Geschaeftsbericht der Oester- reichlschen Kommunalkredit A.G. Vienna: Oesterreichische Kommunalkredit A.G., volumes 1962-1963.

Oesterreichische Kommunalkredit A.G. Aufgaben und Ziele der Oester- ■ reichischen Kommunalkredit A.G. zur Aufschliessung von Indus- triegelaende. Vienna: Oesterreichische Kommunalkredit A.G., n.d.

Oesterreichische Raumordnungskonferenz. Erster Raumordnungsbericht. Vienna: Oesterreichische Raumordnungskonferenz, 1975.

Oesterreichische Raumordnungskonferenz. Reglonalpolitik im Grenzebiet gegenueber Bayern. Schriftenreihe der oesterreichishen Raumordnungskonferenz No. 4. Vienna: Oesterreichische Raum­ ordnungskonferenz, 1974. 171

Oesterreichisches Institut fuer Raumplanung. Das Instrumentarium des Bundes fuer die Regionale Industriepolitik in Oester— reich. Vienna: Bundesministerium fuer Handel, Gewerbe und Industrie, 1973a.

Oesterreichisches Institut fuer Raumplanung. Dringliche Faelle der Regionalen Industriepolitk: Fragebogenauswertung. Vienna: Bundesministerium fuer Handel, Gewerbe und Industrie, 1973b.

Oesterreichisches Institut fuer Raumplanung. Regionalplanung Innviertel Voruntersuchung: Auswtrkungen von Entwicklungen im Bayer- ischen Raum. Ihpublished b o o kprepared at the Oesterreich­ isches Institut fuer Raumplanung, Vienna, 1973c (mimeographed).

Oesterreichisches Institut fuer Raumplanung. Ziele und Grundsaetze der Regionalen Industriepolitk in den oesterreichischen Bundeslaendem. Unpublished book prepared at the Oester— reichisches Institut fuer Raumplanung, Vienna, 1972 (mimeo­ graphed) .

Oesterreichisches Institut fuer Raumplanung (under contract from the Styrian provincial government). Reglonalplanung Aichfeld- Murboden. Vienna: Oesterreichisches Institut fuer Raumplanung, 1969.

Oesterreichisches Institut fuer Raumplanung. Landesentwlcklungspro- gramm Burgenland. Vienna: Oesterreichisches Institut fuer Raumplanung, 1968.

Oesterreichisches Institut fuer Raumplanung. Raumordnung in Oester— reich. Vienna: Oesterreichisches Institut fuer Raumplanung, 1966.

Oesterreichisches Institut fuer Raumplanung. Industrie-Entwicklungs- programm Niederoesterreich. Vienna: Oesterreichische Institut fuer Raumplanung, 1965.

Oesterreichisches Institut fuer Wirtschaftsforschung and Oesterreich­ isches Statistiches Zentralamt. Statistische Uebersichten. 7/68, 7/71, and 7/74 (1968, J.971,- and- 1974).

Oesterreichisches Institut fuer Wirtschaftsforschung. "Die Verteilung des Volkseinkommens nach Bundes laendem." Honatsberichte 1/1973, Oesterreichisches Institut fuer Wirtschaftsforschung.

Oesterreichisches Institut fuer Wirtschaftsforschung. "Die Ver­ teilung' des Volkseinkommens nach Bundes laendem." Honats­ berichte 12/1959, Oesterreichisches Institut fuer Wirt­ schaftsforschung. 172

Oesterreichisches Statistlsche Zentralamt. Statistlsche Uebersichten 1/75. Vienna: Oesterreichische Statlstiche Zentralamt und Oesterrichlsches Institut fuer Wirtschaftforschung, 1975a.

Oesterreichisches Statistlsche Zentralamt. Unpublished Einkommen— und Lohnsteuerstatistk, 1975b.

Oesterreichisches Statistlsche Zentralamt. Bestands-Statistik der Kraftfahrzeugen in Oesterreich. Vienna: Oesterreichisches Statistlsche Zentralamt, volumes 1957-1973.

Oesterreichisches Statistlsche Zentralamt. Ergebnisse der Volkszaeh- lung vom 12. Mai 1971. Vienna: Druck und Kommissionsverlag Carl Ueberreuter, 1973.

Oesterreichisches Statistlsche Zentralamt. Bericht ueber das Gesund- heitwesen Oesterreichs. Vienna: Oesterreichisches Statistlsche Zentralamt, 1955-1973.

Oesterreichisches Statistlsche Zentralamt. Statistisches Handbuch , fuer die Republik Oesterreich. Vienna: Oesterreichische Staatsdruckerei, volumes 1955-1972.

Oesterreichisches Statistlsche Zentralamt. Die Naturliche Bevolker- ungsbewegung im Jahre 1971. Vienna:Oesterreichisches • Statis­ tisches Zentralamt, 1972.

Oesterreichisches Statistlsche Zentralamt. Ergbriisse der Volkszaeh- lung 1961. Vienna: Oesterreichisches Statistlsche Zentralamt, 1963.

Oesterreichisches Statistisches Zentralamt. Ergebnisse der Volks- zaehlung 1951. Vienna: Oesterreichisches Statistlsche Zentral­ amt, 1953.

Okun, Bernard and Richardson, R.W. "Regional Income Inequality and Internal Population Migration." Economic Development and Cultural Change IX (January 1961).

Organisation for Economic Co-operation and Development. Salient Features of Regional Development Policy in Austria. Paris: Organisation for Economic Co-operation and'Development, 1974.

Pachucki, Herbert. Regionalpolitik. Vienna: Verlag fuer Geschichte : und:Politik, 1967. . - ■ - . . ^ .... -

Pachucki, Herbert, "Regionale Wirtschaftspolitk. " Spezielle Auswirk- ungen einzelner •Bestimmungen der Europaeischen Vertraege auf die raeumliche Entwicklung des Bundesgebietes. Unpub­ lished book available at the Oesterreichisches Institut fuer Raumplanung, Vienna, n.d. 173

Parr, John B. "Outmigration and the Depressed Area Problem." Land Economics II (May 1966), 149-159.

Pedersen, Paul 0. "Innovation Diffusion within and between National Urban Systems." Geographical Analysis (July 1970), 203-254.

Perroux, Francois. "Note sur la Notion de ’pole de Crolssance'".. Economic appliquee 8 (1955), 307-320.-

Perroux, Francois. "Economic Space: Theory and Applications." Quarterly Journal of Economics LXIV (February 1950), 94-97, 1950a.

Perroux, Francois. "Les spaces economiques." Economic appliquee 3 (1950), 225, 1950b.

Petrella, Ricardo. Interview conducted at the European Co-ordination Center for Research and Documentation in Social Sciences in Vienna on April 10, 1975.

Petzmanh, Heinz. Interview conducted at the Oesterreichisches Institut fuer Raumplanung in Vienna on March 3, 1975.

Pred, Allan R. "Diffusion, Organizational Spatial Structure, and City- System Development." Economic Geography 51 (July 1975), 252-268.

Pred, Allan Major Job-Providing Organizations and Systems of Cities. Commission on College Geography, Resource Paper No. 27. Washington, D.C.: Association of American Geographers, 1974.

Proksch, Anton. Vollbeschaeftigung, Entwicklungsgebiete, Dauerarbeit- plaetze. Vienna: Verlag des Oesterreichischen Gewerkschafts- bundes, 1962.

Proraboek. E. Interview conducted in the Department of Economic Planning and Co-ordination for the City of Vienna on March 5, 1975.

Richardson, Harry W. Regional Economics. New York: Praeger Pub­ lishers. 1969.

Rill, Heinz P. and Schaeffer, Heinz. Die Rechtsnormen fuer die Planungs- koordlnierung seitens der oeffentlichen Hand auf dem Gebiete der Raumordnung. Oesterreichische Raumordnungskonferenz Schrif- tenreihe No. 6. Vienna: Oesterreichische Raumordnungskongerenz, 1975.

Robinson, E.A.G., ed. Backward Areas in Advanced Countries. New York: St. Martin’s Press, 1969. 174

Rodgers, Allan. "Migration and Industrial Development: The Southern Italian Experience." Economic Geography 46 (April 1970), 111-135.

Ruehmann, Peter, Die regionale Wirtschaftspolitik Belgiens. Kieler Studien No. 93. Tuebingen: Mohr, 1968.

Schwind, Paul J . Migration and Regional Development in the United States 1950-1960. University of Chicago, Department of Geog­ raphy. Research Paper No. 133. Chicago: University of Chicago: 1971.

Scitovsky, T. "Two Concepts of External Economies." Journal of Political Economics (April 1954), 143-151.

Schramke, Doktor. Interview conducted at the Oesterreichische Kommunalkredit A.G., Vienna, on October 18, 1974.

Seidel, Hans. "Regionale Strukturpolitik Oesterreichs unter der gegen- waertigen europaeischen Realitaet." Regionalpolitik in der Sechsergemeinschaft und in Oesterreich. Zweite Internationale Studientagung, Europahaus Wien, October 1969. Vienna: Europa- haus, 1969.

Seidel, .Hans; Butschek, Felix; Kausel, Anton. Die Regionale Dynamlk der oesterreichischen Wirtschaft. Vienna: Oesterreichisches Institut fuer Wirtschaftsforschung, 1966.

Semple, Keith. "Geography and Information Theory." Unpublished paper, The Ohio State University, n.d. (mimeographed).

Sinnhuber, Karl A. "Eisenhuettenstadt and Other New Industrial Locations East of Berlin," Wiener Geographische Schriften. (1965), 328-349.

Sjaastad, L.A. "The Costs and Returns of Human Migration." The Journal of Political Economy 70 (October 1962), 80-93.

Skarke, Anna Maria and Skarke, Peter, Wachstumsunterschiede der Oesterreichischen Bundeslander 1964-1971.. Institut fuer Hoehere Studien Forschungsbericht Nr. 87. (Vienna, Institut fuer Hoehere Studien), 1974.

Spady, William G. and Greenwood, Donna. "Instant Path Analysis: An Elementary Cookbook." Unpublished paper, the Ontario Institute for Studies in Education, n.d. (mimeographed).

Spector, Aron. "A Description and Review of Path Analysis." Unpublished paper, Department of Geography, Ohio State University, n.d. (mimeographed). 175

Steiermark, Landesreglerung. Landesrechnungsabschluss. Graz: Land Steiermark, .volumes 1960-1968.

Stein, Jerome L. Economic Growth In a Free Market. New York: Columbia University Press, 1964.

Steiner, Kurt. Politics In Austria. Boston: Little, Brown, and Company, 1972.

Stipschitsch, Franz. Interview conducted at the federal Finanzamt, Vienna, on May 7, 1975.

« Stoehr, Walter. "Development Planning for Depressed Areas: A Method­ ological Approach." Journal of the American Institute of Planners. 30 (May 1964), 123-131.

Streit, Max; Kubinzky, A.; Gordesch, Johannes. Underdeveloped Areas in Industrialized Countries. The Austrian Report to the European Coordination Centre for Research and Documentation in Social Sciences. Graz: Institut fuer Soziologle an der Universitaet Graz, 1967.

Strummer, Franz. "Regionalpolitik in Oesterreich: Aus der Sicht der Land - und Forstwirtschaft." Land- und Forstwirtschaft in Oesterreich: Sozialoekonomische Tatbestaende. Linz: Praesldent- konferenz der Landwirtschaftskammem Oesterreichs, 1969.

Szorger, Hofrat. Interview conducted in the Finanzamt, province of Burgenland, in Eisenstadt on June 2, 1975.

Szorger, Hofrat. "Die Auswirkungen der Gemeindezusammenlegungen auf die Ertragsanteile der burgenlaendischen Gemeinden." Unpub­ lished paper, n.d. (mimeographed).

Thomas, Morgan. "The Regional Problem, Structural Change and Growth Pole Theory." Growth Poles and Growth Centres in Regional Planning. Edited by Antoni R. Kuklinski (Paris: Mouton, 1972).

Tirol, Landesreglerung. Landwirtschaftsgesetz, provincial law 3/1975.

Tobler, W.R. "Spatial Interaction Patterns." International Institute for Applied Systems Analysis, Research Memorandum RM-75-26. Schloss Laxenburg, Austria: International Institute for Applied Systems Analysis, 1975.

Trauner, Rudolh. "Betriebsgruendung - Wunsch und Realiteat." Oberoesterreich: Entwicklung und Aufstieg. 1/1969, 19-26.

Van de Geer, John. Introduction to Multivariate Analysis for the Social Sciences. San Francisco: W.H. Freeman and Company, 1971. 176

Verbindungsstelle der Bundeslaender. Oesterreichische- Finanzwirtschaft. Vienna: Verbindungsstelle der Bundeslaender, 1972.

Verein .zur Foerderung der Burgenlaendischen Wirtschaft. Neue Betriebe 1956—1971. Eisenstadt: Verein zur Foederung der Burgaenlaen- dischen Wirtschaft, n.d.

Vorarlberg, Landesreglerung. Letter received from the Amt der Vorarl- berger Landesreglerung, Bregenz, Austria; dated June 13, 1975.

Vorarlberg, Landesreglerung. Gesetz ueber die Gewaehrung von Darlehen zum Bau und zur Erhaltung von Krankenanstalten, provincial law 7/1970.

Wagner, Georg. "Regionalprogramra Aichfeld- Murboden." Regionale Entwicklungspolitik in Oesterreich. Edited by the Bundes­ kanzleramt, Buero fur Raumplanung, 1975a.

Wagner, Georg. Interview conducted in Vienna on June 6, 1975b.

Wiener Institut fuer Standortberatung. Raumwirksamkeit von Foerderungen, Band 1. Vienna: Bundeskanzleramt, Buero fuer Raumplanung, 1975.

Williamson, Jeffrey G. "Regional Inequality and the Process of National Development: A Description of Patterns." Economic Development and Cultural Change XIII No. 4 part II (July 1965), 1-84.

Willis, Kenneth G. Problems in Migration Analysis. Westmead, England: Saxon House/Lexington Books, 1974.

Winlarskl, B. "The Programming and Development Policy of Backward Areas in National Economic Planning." Backward Areas in Advanced Countries. Edited by E.A.G. Robinson (1969).

Winnick, Louis. "Place Prosperity versus People Prosperity: Welfare Considerations in the Geographical Redistribution of Economic Activity." Essays in Urban Land Economics. Edited by S. Grebber. (Los Angeles: University of California, 1966).

Wurzer, Rudolf. "Die Grundprinzipien einer oesterreichischen Raumordnung." Regionalpolitik in der Sechsergemeinschaft und in Oesterreich. Zwelte Internationale Studlentagung, Europahaus Wien, October 1969. Vienna: Europahaus Wien, 1969. FOOTNOTES

This institute also has the best regional planning library in Austria.

^This excludes one district, Dornbrin, for which separate data are not available prior to the 1961 census.

The matrix procedure outlined here by Willis can be illustrated by the use of the equation system used in this study in the provincial analysis section of Chapter 6. That system has 9 variables, 3 endo­ genous (Y) and 6 exogenous (x). The table below presents that system with variable names above the variable symbols

DEMP DUEM DLIV ERP 1SUB PSUB NMIG DCOMM TAX Equation Y, Y? Y„ x. x-

1 2 2 0 0 2 3 0 x. x6

If we consider equation 1, we eliminate that row of coefficients and "all columns not having a prescribed zero" in that row. Those entries are lined through above and there does exist at least one non-zero determinant of a matrix with G-l rows and columns (here a 2X2 matrix). That matrix is braketed above and the determinant is ((x^) (Xc)-(O) (xij)) , which is clearly non-zero. The same pro­ cedure applied to the other equations reveals that they also satisfy this rank condition for Identification.

This result derives from the comparison of two data sets for different time periods and by different authors. However, the time periods do overlap and the comparison, thus, seems justified (data from Jeglitsch, 1976; Seldl et. al., 1966).

^The composite scores were produced by combining the factor scores of each province frpm the two factors which were identified. Each respective score was weighted by the proportion of variance explained by the factor in question and the two weighted factor scores were added. The result was a composite score, one for each province and time period. This procedure is similar to a procedure outlined by Rummel (1970, p.441) for producing composite factor estimates.

177 17.8

Thla population size Is adequate for the purposes of regression analysis, but it is not optimal and the estimates from regression must be Interpreted with some caution.

^All data were collected for the periods 1961-1966 and 1966-1971 with the following modifications:

1) Monies for the period 1961-1966 were calculated from the years 1961—1965 and for the period 1966-1971 from the years 1966-1970.

2) DCOMM and NMIG were interpolated values deriving from data for the entire 1961-1971 period.

®This is also actually somewhat smaller than the estimated regression coefficient which was 0.901.