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Institute for Political and Economic Governance (IPEG)

The Manchester Regional Economics Centre

The Manchester Regional Economics Centre (MREC) is housed in the Institute for Political and Economic Governance (IPEG) and was directed by Professor Michael Artis, who returned from Florence, Italy in November 2005 to initiate the Centre’s operations. Mike left the Centre for Swansea University in 2008 but continued to direct research within the Centre until 2009, when he retired from work due to ill health.

The Manchester Regional Economics Centre’s research is in the areas of urban economics, regional economics as traditionally understood and the newer “intra-national macroeconomics”. The Centre’s foundation benefits from a number of favourable factors - the remarkable renaissance of Manchester as a city being one of them; others include the rewriting of regional policy objectives by the last British government, recent initiatives in the UK radically to improve the available data base for sophisticated study of the economic interaction of the regions; and the development of the Euro Area. In the latter case the ceding of monetary policy sovereignty and the acceptance of substantial restraint on fiscal policy discretion have the effect of making member state interaction approximate that of the interaction of regions within a country. All these factors have been complemented by important innovations in the academic study of regional economic interaction.

The following projects have been undertaken by MREC:

MREC Mission Statement

Agglomeration economies in the UK and Europe
A recent study for the European Spatial Planning Observation Network (ESPON) entitled “The Case for Agglomeration Economies in Europe” (CAEE) studied the relationship between agglomeration economies and city-regional/metropolitan governance by an empirical panel study of the European regional data and reporting case study analysis on four cities where the research teams were based – Manchester, Dublin, Lyon and Barcelona (see Harding, Rees and Sensier, 2010). To assess empirical agglomeration economies in Sensier, Curran and Artis (2010) we compared annual data at the NUTS 2 and 3 spatial scale across France, Germany, Ireland, Italy, Spain and the UK over 1980-2006 and three sub-samples to see if the effects have changed over time. Our results are consistent with claims that the last thirty years has seen a significant shift from the late industrial period, in which manufacturing industries benefited from localisation economies, to a period in which knowledge based economic activities, dominated by service industries located in cities, have benefited more from urbanisation economies.

Harding, A., Rees, J. and Sensier, M. (2010) “Agglomeration and Governance: Greater Manchester in a European Perspective”, New Economy Working Paper NEWP: 05.

Sensier, M., Curran, D. and Artis, M.J. (2010) “Investigating Agglomeration Economies in a panel of European Cities and Regions”, University of Manchester working paper.

Artis, Miguélez, and Moreno (2009) was part of a research programme of the Spatial Economics Research Centre funded by the ESRC, BERR, DCLG and the Welsh Assembly. The paper is concerned with the influence of agglomeration economies on economic outcomes across British regions. The concentration of economic activity in one place can foster economic performance due to the reduction in transportation costs, the ready availability of customers and suppliers, and knowledge spillovers. However, the concentration of several types of intangible assets can boost productivity as well. Thus, using an interesting dataset which proxies regional productivity, we will assess the relative importance of agglomeration and other assets, controlling both for endogeneity and for spatial autocorrelation at the same time. Our results suggest that agglomeration has a definite positive influence on productivity, although our estimates of its effect are dramatically reduced when spatial dependence and other hitherto omitted variables proxying intangible assets are controlled for.

Artis, M.J, Miguélez, E. and Moreno, R. (2009) “Assessing agglomeration economies in a spatial framework with endogenous regressors”, Centre for Economic Policy Research Discussion Paper number 7267 and Spatial Economic Research Centre Discussion Paper number 23

Artis, Greasley and Miguélez (2009) analyses the productivity performance of the Manchester Region with special reference to the phenomenon of agglomeration economies. The aim of the study is to locate the region in relation to the nation as a whole and to selected comparator regions in respect of its productivity performance and the factors that determine that performance. This work was commissioned for the Manchester Independent Economic Review (MIER).

Artis, M.J, Greasley, S. and Miguélez, E. (2009) “Productivity and agglomeration economies in the Manchester region”, MIER report.

This following three publications studied relationship between regional economic correlations and agglomeration/industrial clustering using firm/plant level or regional level data sets. Using micro-econometrics and spatial econometrics methodology, we investigate a variety of issues such as regional business cycle and spatial transmission, skilled labour and job creation in urban areas, unemployment clustering, the impact of regional subsidy and industrial clustering policy on firm productivity, regional average productivity, business cycle and regional employment.

  1. Artis, M.J., Dreger, C. And Kholodilin, K.A. (2009). “Common and Spatial Drivers in Regional Business Cycles”, Discussion Papers of DIW Berlin 859, DIW Berlin, German Institute for Economic Research.
  2. Okubo, T. and Tomiura, E., (2010). “Industrial Relocation Policy and Heterogeneous Plants Sorted by Productivity: Evidence from Japan,” RIETI Discussion papers 10016, Research Institute of Economy, Trade and Industry (RIETI).
  3. Okubo, T. and Tomiura, E., (2010). “Productivity Distribution, Firm Heterogeneity, and Agglomeration: Evidence from firm-level data,” RIETI Discussion papers 10017, Research Institute of Economy, Trade and Industry (RIETI).

“Intra-national” (Regional) Business Cycles
Artis and Okubo (2010, 2011) focus on regional heterogeneity in business cycle and transmission mechanism. The national level of business cycle has been long studied in many previous studies. As economy is integrated and monetary and trade policies are coordinated, business cycles are much more correlated with one another. However, turning to region (e.g. regions for the UK and prefectures for Japan) within a country, each region has different factor endowments and different components of industries together with different regional policies. In the viewpoint of regional policies, it is quite important to study how different and synchronized regional business cycle is. This also leads to re-evaluate whether one nation corresponds to optimal currency area and discuss regional consumption risk sharing.

  1. Artis, M. J., and Okubo, T. (2011). The Intranational Business Cycle in Japan. Oxford Economic Papers.
  2. Artis, M. J., and Okubo, T. (2010). The UK Intranational Business Cycle. Journal of Forecasting. 29 (1), pp71-93.

The employment cycle in regions of the UK economy are in examine in Artis and Sensier, (2009) to see how synchronised the regions are to the UK aggregate data. We predict the employment cycle of the North West of England in Artis and Sensier (2010) and Wales in Sensier and Artis (2010). We initially date the turning points of the business cycle of districts within the region by analysing claimant count unemployment data. This allows us to show in a series of maps how the recession spreads through an area and which areas have recovered. We test the relationship between areas that lead a region into recession and high proportions of employment in particular sectors. For the North West of England we found that areas that had more labour in financial services lead the way into recession and for Wales it areas with a larger construction sector employment. By applying the logistic models of Sensier, et al (2004) we are able to forecast the regional employment cycle by using leading indicators of economic activity in the region. In this regard we find that the house price index leads the employment cycle by 2-3 years. We also investigate a number of regional variables from the Confederation British Industry and Chamber of Commerce surveys.

  1. Artis, M.J. and Sensier, M. (2009) “UK Regional Employment Cycles”, University of Manchester working paper.
  2. Artis, M.J. and Sensier, M. (2010) “Tracking Unemployment in the North West Through Recession and Forecasting Recovery”, IPEG working paper 2010-04, University of Manchester and New Economy Working Paper NEWP: 02.
  3. Sensier, M. and Artis, M.J. (2010) ‘Tracking Unemployment in Wales Through Recession and into Recovery’, University of Manchester working paper.

Regional coincident indicators of economic activity
This project looked at ways of building a high-frequency, topical and reliable indicator of economic activity at the regional level. The methods of construction that can be used are similar in principle to those that can be used at the national (or supra-national) level. A recent supranational example of such an indicator is the Euro-Coin for the Euro Area. Martin Turner and Michael Artis produced a coincident indicator for the North West.

Globalisation, International Trade and Business Cycle
This projects aim was to re-examine international trade, national border, business cycle and globalisation using long-run historical data. We make some comparisons between the first wave of globalisation (1890s to before World War I) and the current (second) wave of globalisation since 1960s. We also apply a new methodology such as cluster analysis. The project resulted in the following publications:

  1. Artis, M.J. and Okubo, T. (2011) Does international trade really lead to business cycle synchronization? A panel data approach. Manchester School.
  2. Artis, M. J, and Okubo, T. (2009). Globalisation and Business Cycle Transmission. North American Journal of Economics and Finance. 20(2), pp.91-99.
  3. Okubo, T. (2008). Shake Hands or Shake Apart? International Relationship of Japan with Global Blocs. Economie Internationale, 113, pp.35-64.
  4. Okubo, T (2007). Trade Bloc Formation in Interwar Japan-A Gravity Model Analysis. Journal of the Japanese and International Economies, 21, pp.214-236.
  5. Artis, M. J. and T. Okubo (2009) “Business Cycle, Currency and Trade, Revisited”, INFINITI Conference 2009, Trinity College Dublin, Ireland (May 1st , 2009).

New Economic Geography with firm heterogeneity
This project is initially conceived as a primarily theoretical one. The highly influential New Economic Geography generally assumes homogeneous firms in the framework of the Dixit-Stiglitz model, in contrast to modern models of international trade which rely upon assumptions of firm-heterogeneity to help explain trade. The project combined the two approaches in an endeavour to enrich the explanatory power of economic geography models. Toshihiro Okubo was the lead researcher on the project and the work led to the following publications.

  1. Publications:
    Okubo, T. Picard, P.M and Thisse, J-F (2010). "The spatial selection of heterogeneous firms", Journal of International Economics
  2. Baldwin, R.E., and Okubo, T. (2009). "Tax Reform, Delocation and Heterogeneous Firms. Scandinavian Journal of Economics 111(4), pp.741-764.
  3. Okubo, T (2009). Trade Liberalisation and Agglomeration with Firm Heterogeneity -Forward and Backward Linkages. Regional Science and Urban Economics 39 (5), pp.530-541.
  4. Okubo, T. (2009). Firm Heterogeneity and Ricardian Comparative advantage within and across sectors. Economic Theory 38 (3), pp.533-559
  5. Baldwin, R.E., and Okubo, T. (2006). Heterogeneous firms, agglomeration and economic geography: spatial selection and sorting. Journal of Economic Geography, 6, pp.323-346.
  6. Helble, M. and Okubo, T., (2008). “Heterogeneous quality firms and trade costs”, World Bank Policy Research Working Paper Series 4550, The World Bank.
  7. Okubo, T. and Forslid, R. (2010). “Spatial Relocation with Heterogeneous Firms and Heterogeneous Sectors”, RIETI Discussion papers 10056, Research Institute of Economy, Trade and Industry (RIETI).
  8. Okubo T., Cole M.A. and Elliott, R.J.R. (2010). "Environmental Outsourcing," RIETI Discussion papers 10055, Research Institute of Economy, Trade and Industry (RIETI).
  9. Okubo, T. and Picard, P.M., (2008). "Firms’ location Under taste and demand heterogeneity," CORE Discussion Papers 2008071, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).

Strengthening the evidence base for the North West
This project, commissioned by the North West Development Agency (NWDA) was designed to produce a better understanding of key economic linkages between the North-West's city-regions, rural areas and Cumbria and to cast light on the potential for further development of the region as a whole and its sub-regions. The work involved Michael Artis and Brian Robson of Manchester University and Alan Harding when he was at SURF, Salford University.

Consumption risk sharing across regions
This project derives from the often-expressed concern that countries which contain regions with asymmetric business cycles or monetary unions that contain countries with asymmetric business cycles face a problem of dealing with the diversity of cyclical outcomes across the regions/countries concerned. The project looks at one means by which this problem may be handled, viz that of lending and borrowing and the cross-border/cross-national ownership of assets. Through these means consumption risk may be shared across regions or countries. Empirical evidence shows that consumption risk spreading across US regions is much higher than consumption risk-sharing across OECD countries. This work is being carried out by Michael Artis in conjunction with Mathias Hoffmann of the University of Zurich.

Artis, M.J. and Hoffmann, M. (2008), “Financial Globalization, International Business Cycles and Consumption Risk Sharing”, Scandinavian Journal of Economics, vol. 110, issue 3 (09), pp. 447-471.

Artis, M.J. and Hoffmann, M. (2006), “The Home Bias and Capital Income Flows between Countries and Regions”, Centre for Economic Policy Research Discussion Paper number 5691.

Artis, M.J. and Hoffmann, M. (2007), “Declining Home Bias and the Increase in International Risk Sharing: Lessons from European Integration”, Centre for Economic Policy Research Discussion Paper number 6617. And published in EU conference volume:
Lars Jonung, Christoph Walker and Max Watson (eds.) Building the Financial Foundations of the Euro: Experiences and Challenges, Routledge.

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