North and South: A regional model of the UK

Minford, Patrick ORCID: https://orcid.org/0000-0003-2499-935X, Gai, Yue ORCID: https://orcid.org/0000-0003-4521-3176 and Meenagh, David ORCID: https://orcid.org/0000-0002-9930-7947 2022. North and South: A regional model of the UK. Open Economies Review 33 , pp. 565-616. 10.1007/s11079-021-09633-7

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Abstract

We set up a two-region model to study the policy challenge of bringing the North’s income up to the level of the South in the UK. The model focuses on labour costs as the driver of output gains through the international competitiveness channel; and on tax/regulative costs to entrepreneurs as the driver of productivity growth. The empirical results show that the regional model behaviour fits the regional UK data behaviour over the period of 1986Q1 and 2019Q4, using the demanding Indirect Inference method. We also carry out a Monte Carlo power test, which shows the empirical results we obtain are trustworthy and can provide us a reliable guide for policy reform. The results suggest that in response to tax cuts and labour market reforms GDP in the North increases almost twice as much as GDP in the South. Given that a broad programme of tax cuts and regulatory reform would more than pay for itself in the long run, it must be considered as a highly attractive political agenda.

Item Type:	Article
Date Type:	Publication
Status:	Published
Schools:	Business (Including Economics)
Additional Information:	This article is licensed under a Creative Commons Attribution 4.0 International License
Publisher:	Springer
ISSN:	0923-7992
Date of First Compliant Deposit:	27 September 2021
Date of Acceptance:	1 September 2021
Last Modified:	06 Jan 2024 03:45
URI:	https://orca.cardiff.ac.uk/id/eprint/144454

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