How to assess regional excellence Benchmarking as a tool for regional economic policy: An applicatio

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How to assess regional excellence?Benchmarking
as a tool for regional economic policyAn
application by BAK Basel Economics

• Helsinki-Tallinn EUREGIO Forum 2004
• November 17-18, 2004
• Biomedicum, Helsinki
• Martin Eichler, BAK Basel Economics
• Senior Economist
• Head of Research and Model Development

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Contents

• Regional Benchmarking What, why, how
• The IBC BAK International Benchmark Club
• Positioning the region in economic terms
• Key factors of regional development
• Innovation
• Taxation
• Regulation
• Accessibility
• Quantitative analysis of regional growth
• Conclusions Benefits from regional benchmarking

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Methods and tools in benchmarking Why
benchmarking?

• The pressure of international competition is
• increasing and
• moving to the regional level
• To guarantee regional economic wellbeing in high
  cost regions
• high (private) productivity and
• continuous innovation
• are a necessity
• Regional economic policies have to focus on
• maintaining and
• improving
• innovation friendly framework conditions

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Methods and tools in benchmarking What is
benchmarking?

• Internal view is not sufficient
• Decision makers have to know their competitors!
• Benchmarking
• Comparing with a specific reference point (the
  benchmark)
• Quantitative economic benchmarking for regions
• to monitor economic performance
  (inlook/outlook)
• to identify strengths and weaknesses,
  opportunities and threats relative to
  competitors
• to analyse the factors that determine long term
  growth

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Methods and tools in benchmarking Benchmarking
regional economies

• Benchmarking thus needs to be
• focused on the regional level
• continuous
• international
• Benchmarking needs to monitor in level and growth
  
• economic performance (e.g. GDP, employment,
  productivity, )
• important location factors (innovation,
  taxation, regulation, accessibility, )

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Regional BenchmarkingIBC BAK International
Benchmark Club

• The IBC BAK International Benchmark Club (IBC)
  
• Supports regions in benchmarking continuously
  and internationally
• Provides regions with
• data on economic performance and important
  location factors
• a platform for discussion, learning and exchange
• studies to specific aspects and topics
• region specific analysis
• regional benchmarking events
• Founded in 1994 and continuously expanded
• (regional coverage, time dimension, variables
  included)

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Regional BenchmarkingIBC BAK International
Benchmark Club (IBC) database 2004

• More than 300 Regions in Europe
• Data for 1980 to 2003
• GDP, employment, hours worked, output per man
  hour, labour costs
• Industry Figures for 45 NACE industries
  (GVA, employment, hours worked, output per man
  hour, labour costs)
• Selected growth factors

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Regional Benchmarking IBC sector and topic
specific analysis

• Sector specific analysis
• benchmarking of Tourism
• monitoring Life Sciences locations
• benchmarking of Investment Goods Industries
  locations
• monitoring Financial Services locations
• Studies of specific topics
• The impact of policy variables on economic
  growth of regions
• The international accessibility of Switzerland
  in danger?

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Regional Benchmarking IBC region specific
presentations, reports and platforms

• Cologne its economic profile and perspectives
  in the global market place (Cologne, November
  2004)
• The Zurich Benchmarking Forum (Zurich, November
  2004)
• Financial services as drivers of metropolitan
  economic growth
• (London, September 2004)
• Massachusetts and Basel Two world class (Life)
  science based economies (Boston / Basel,
  Switzerland, September 2004)
• Regional benchmarking as a tool for Scottish
  economic policy
• (Edinborough, February 2004)
• The region of Veneto facing the challenges of
  globalisation
• (Venice, December 2003)
• International competitiveness of the Austrian
  federal states
• (Vienna, September 2003)
• International competitiveness of the Lorraine
  Region (Metz, February 2003)

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Real GDP per capita and output per man hour
2003in USD, PPP 1997 and 1995 prices
Rank 1 2 3
4 5 6 7 8 9
10 11 12 13 14 15 16
17 18 19 Rank1) 5
3 1 4 6 11 2
9 10 7 17 12 8 13
15 16 18 14 19
D, F, I, UK
Rank1) Output per man hour 2003
Source IBC Performance Database 2004
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Real GDP per capita and output per man hour
1995-2003in USD, PPP 1997 and 1995 prices,
annual average growth rate 1995-2003
Rank 1 2 2
4 5 5 7 8 9
10 11 12 13 14 15
16 16 18 19 Rank1)
1 2 16 3 8 11
4 19 17 6 6 4
8 8 13 12 15 17
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D, F, I, UK
Rank1) Output per man hour
Source IBC Performance Database 2004
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Contribution of the "New Economy" to GDP growth
1995-2003in USD at 1990 prices and 1997 PPP's
Annual average growth rate 1995-2003 in
Share in GDP 2003 in
D, F, I, UK
Source IBC Performance Database 2004
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Contribution of the Old Economy" to GDP growth
1995-2003in USD at 1990 prices and 1997 PPP's
Annual average growth rate 1995-2003 in
Share in GDP 2003 in
D, F, I, UK
Source IBC Performance Database 2004
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Persons in employment and resident population
1995-2003Annual average growth rates in
Rank 1 2 3
4 5 6 6 6 9
9 9 12 13 14 15
16 16 18 19 Rank1)
1 2 8 4 13 3
8 10 4 11 18 13
15 11 15 4 7 15
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D, F, I, UK
Rank1) Annual average employment growth 1995-2003
Source IBC Performance Database 2004
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Labour costs 2003Labour costs per hour 2003, in
USD, current prices and exchange rates
Source IBC Report 2004
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Key factors of regional developmentInnovation a
necessity for high cost regions

• Continuous innovation a necessity
• - to stay competitive and
• - to ensure economic growth
• Innovation itself is difficult to measure
• Measurement by indicators
• and difficult to ensure through political
  decisions
• Policy to support an innovative environment

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The IBC Policy Variables DatabaseInnovation
IBC database policy area INNOVATION
Coverage 2004 140 regions in 21
countries Partner institutes ISI Fraunhofer
Institut, Karlsruhe Dun Bradstreet, Zürich

• Innovation resources
• Expenditure on research and development as
  percent of regional GDP
• Shanghai Index of the research quality of the 500
  best universities in the world
• Share of employment with tertiary education
  (total and by industry)
• Share of employment with secondary education
  (total and by industry)
• Innovation processes
• Patents (total and by industry)
• Bibliometric indicators (total and by research
  field)
• Company start-ups (total and by industry)

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Innovation resources Availability of highly
skilled manpower 2003Share of employees with
tertiary education in total employment in
D, F, I, UK
Source IBC Module Innovation 2004
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Innovation processes Patents registrated with
the European Patent Office 1998-2000
D, F, I, UK
Source IBC Module Innovation 2004
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Innovation processesNumber of scientific
publications 1998-2000
D, F, I, UK
Source IBC Module Innovation 2004
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Key factors of regional developmentTaxation

• of companies to attract new companies
• of highly qualified labour
• to attract high potentials

• Taxation

• IBC database policy area TAXATION
• Indicators The IBC TAXATION INDEX Tax burden
  of companies and highly qualified manpower
• Coverage 2004 65 regions in 21 countries
• Partner institute ZEW Center for European
  Economic Research, Mannheim

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Company TaxationEffective average tax rates 2003
in at the corporate level
Source IBC Report 2004
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Tax burden on highly skilled manpowerEffective
average tax rates 2003 in singles income
100000
Source IBC Report 2004
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Key factors of regional developmentMarket
regulations

• of labour markets
• to attract flexible companies
• to enable restructuring
• of product markets
• to enable business opportunities
• to enforce competition

Regulation

• IBC database policy area REGULATION
• Indicators OECD Regulation Indices for product
  and labour markets
• Coverage 2004 21 countries

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Index of regulations of product markets
(OECD)0very liberal / 6 very restrictive
D, F, I, UK
Source IBC Report 2004 / OECD Regulation Database
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Index of regulations of labour markets
(OECD)0very liberal / 6 very restrictive
D, F, I, UK
Source IBC Report 2004 / OECD Regulation Database
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The IBC Policy Variables DatabaseAccessibility
To reach customers, suppliers, competitors and
collaborators Dimensions - intercontinental -
interregional - intraregional IBC database
policy area ACCESSIBILITY Indicators Indicat
ors of intercontinental and interregional
(European) accessibility Coverage 2004 250
regions in 21 countries Partner Institute IVT
Institute for Transport Planning and Systems of
ETH Federal Polytechnical Institute, Zürich
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Accessibility of regionsIntercontinental
Accessibility
Source IBC Report 2004
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Accessibility of regionsInterregional
Accessibility
Source IBC Report 2004
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Key factors of regional development Research
project the impact of policy variables on
economic growth of regions
Regional Growth Factors A quantitative
exploration on the influence of location factors
on regional growth

• First research phase in 2004, ongoing in 2005
  and beyond
• First research phase sponsored by
• - Swiss National Bank (Schweizer Nationalbank)
• - Zürich Cantonal Bank (Züricher Kantonalbank)

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Key factors of regional development Research
project the impact of policy variables on
economic growth of regions

• Growth can be driven by
• national and supra-national economic factors
• i.e. fiscal and monetary policy, business-cycle,
  economic trends
• national political factors
• i.e. national regulations
• region-specific factors, i.e.
• industry-mix
• human capital resources
• taxation
• path dependency

What are the major factors underlying regional
growth?
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Key factors of regional development Research
project the impact of policy variables on
economic growth of regions

• Step I Decomposition of regional growth in its
  components (Shift-Share Analysis)
• Global Effect (GE) Growth of the top level
  geographical unit
• Structural Effect (SE) Difference between
  regional and top level growth due to a
  different industry mix in the region
• Regional Effect (RE) Difference between
  regional and top level growth due to regionally
  different developments (not otherwise
  explained)

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Key factors of regional development Results from
the Shift-Share Analysis for selected regions
Source IBC Report 2004
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Key factors of regional development Research
project the impact of policy variables on
economic growth of regions

• Step II Econometric analysis of the
  relationship between regional location factors
  and the regional effect derived in step I
• The database of right-hand-variables to
  explain the regional effect reflects
• social-demographic
• economic
• political influence areas
• The main political areas included in phase I are
• innovation
• taxation
• regulation
• accessibility

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Key factors of regional development The impact
of selected growth factors on regional growth
1996-2002
Calculated effects based on estimations for
64 Regions in Europe with all explanatory
variables available
Share of population with tertiary
education Growth rate
Source IBC Report 2004
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Reasons for regional benchmarking

• The pressure of international competition is
  moving to the regional level.
• International benchmarking helps regions
• to monitor their and their competitors economic
  performance internationally
• to identify their strengths, weaknesses and
  strategic options
• to analyse the factors that determine long term
  growth and development

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Reasons for regional benchmarking

• International benchmarking can be used
• to encourage an internal call for action
• to lobby effectively vis-à-vis central
  government and/or Brussel
• to present and promote regional strength to the
  outside world
• to provide essential elements for regional
  policy design

WHAT GETS MEASURED GETS DONE !
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How to assess regional excellence?Benchmarking
as a tool for regional economic policyAn
application by BAK Basel Economics

• Helsinki-Tallinn EUREGIO Forum 2004
• November 17-18, 2004
• Biomedicum, Helsinki
• Martin Eichler, BAK Basel Economics
• Senior Economist
• Head of Research and Model Development