Drivers of Local Prosperity Differences: People, Firms and Places
Lead Research Organisation:
Aston University
Department Name: College of Business and Social Sciences
Abstract
This project aims to learn more about what drives the large and persistent productivity differences across regions in the UK. Despite their importance, the factors behind these spatial economic imbalances are still poorly understood. The project will focus on the interaction between the distribution of workers' skills, the characteristics of firms, and local factors like infrastructure and amenities across areas.
There are several potential drivers of regional productivity gaps. Highly skilled workers tend to cluster in certain places, potentially making those areas more productive. But demand for skills also depends on the types of businesses located there. Differences in regional industrial structures, with some areas specializing in higher productivity sectors, could also play a role. Even within the same industry, more productive firms and tasks like management and R&D concentrate more in prosperous regions. Finally, differences in local endowments like transport links, housing availability and amenities across places may contribute to spatial inequalities.
Previous research has generally looked at these factors in isolation. This project will be the first to rigorously analyse their relative importance simultaneously using novel, granular data from linked administrative datasets covering all workers, firms and localities in England since the 2000s. This micro-level analysis will quantify how much spatial productivity gaps can be explained by the characteristics of people, firms, and places over time, and whether and to what extent some locations seem to be 'intrinsically' more productive.
The findings will shed light on what policy levers may be most effective for reducing these imbalances, a key objective of the government's Levelling Up agenda. Deliverables include a comprehensive report for policymakers, policy briefs, a manual enabling further research using these datasets, and workshops engaging stakeholders and building an analytical community in this space.
Understanding and addressing the root causes of the UK's severe spatial disparities in economic performance is crucial for enabling more inclusive, regionally balanced growth and boosting national productivity.
There are several potential drivers of regional productivity gaps. Highly skilled workers tend to cluster in certain places, potentially making those areas more productive. But demand for skills also depends on the types of businesses located there. Differences in regional industrial structures, with some areas specializing in higher productivity sectors, could also play a role. Even within the same industry, more productive firms and tasks like management and R&D concentrate more in prosperous regions. Finally, differences in local endowments like transport links, housing availability and amenities across places may contribute to spatial inequalities.
Previous research has generally looked at these factors in isolation. This project will be the first to rigorously analyse their relative importance simultaneously using novel, granular data from linked administrative datasets covering all workers, firms and localities in England since the 2000s. This micro-level analysis will quantify how much spatial productivity gaps can be explained by the characteristics of people, firms, and places over time, and whether and to what extent some locations seem to be 'intrinsically' more productive.
The findings will shed light on what policy levers may be most effective for reducing these imbalances, a key objective of the government's Levelling Up agenda. Deliverables include a comprehensive report for policymakers, policy briefs, a manual enabling further research using these datasets, and workshops engaging stakeholders and building an analytical community in this space.
Understanding and addressing the root causes of the UK's severe spatial disparities in economic performance is crucial for enabling more inclusive, regionally balanced growth and boosting national productivity.
