September 2017 Prof Henry Overman Director What Works Centre for Local Economic Growth I am not a development expert Experience of working with UK government for nearly 20 years on local growth ID: 642266
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Slide1
Local Economic Growth: Do we know (or care) what works?
September 2017
Prof
.
Henry Overman
Director, What Works Centre for Local Economic GrowthSlide2
I am not a development expertExperience of working with UK government for (nearly) 20 years on local growth
Broad big picture (Spatial Economics Research Centre)More recently – policy details (What Works Centre for Local Economic Growth)Role of evidence in developing policies to improve growth in lagging regions: do we know or care what works?
OverviewSlide3
The UK challengeSlide4Slide5
Growth (%)
Place
Region
1991-2001
2001-2011
Great Britain
4.1
7.5
London
London
7.2
13.1
Birmingham
W. Midlands
0.5
7.9
Stoke
W. Midlands
-0.1
3.2
Manchester
North West
-1.0
9.3
Liverpool
North West
-2.1
1.4
Newcastle
North East
-0.2
4.4
Sunderland
North East
-3.5
-1.3Slide6
Do we know (or care) what works?The big pictureSlide7
Uneven development: Economic
driversSlide8
Industry Group
Agglomeration
Average
all
manufacturing
0.077
Publishing, printing, repro of media
0.105
Advertising
0.137
Average
all
services
0.197
Motion picture, video and TV
0.222
Hotels and restaurants
0.224
Finance and insurance
0.251
Public services
0.292
Business and man. consultancy
0.298
Transport services
0.325
Manufacture radio, TV and
comms
0.382Slide9
City
Working age pop %NVQ4+ (2010)
Oxford
53.7
Cambridge
50.7
Edinburgh
47.4
Brighton
44.1
Aberdeen
43.5
London
40.9
York
39.9
Cardiff
39.8
Reading
39.6
Dundee
36.5Slide10Slide11
Tech change and globalisationShift towards services that benefit from agglomeration
Uneven developmentReinforced
by two factors
Concentration of skilled workers
(Potential) link between concentration skilled workers and strength of agglomeration economies
Uneven developmentSlide12
Understanding uneveneconomic performanceSlide13
People versus place
Max/Min
p90/p10
p75/p25
Raw
67%
26%
11%
Full controls
16%
7%
4%Slide14
PersistenceSlide15Slide16
Strong market forces driving uneven development
Can use government policy to reinforce or
counter
these market forces
Do we know what works?Slide17
Need realism on policy effectiveness and extent to which we can ‘re-balance’
(Incoming) governments fail to understand or recognise underlying economic factors and extent of the challenge‘Difficult’ for constituency-based
politician
Number
one
conceptual challenge when trying to help places formulate (place-based) policy?
Do we care what works?Slide18
Do we know (or care) what works?The detailed pictureSlide19
What Works Centre for Local Economic
GrowthSlide20
What Works CentreSlide21
Impact evaluationSlide22
Policy
#
Studies
SMS3
Jobs effect
Positive
Access to
Finance
1450
27
11
6
Apprenticeships
1250
27
9
7
Broadband
1000
16
10
5
Business
Advice
700
23
17
8
Employment training
1000
71
65
33
Estate renewal
1050
21
5
1
Innovation
1700
63
10
6
Public realm
1140
0
0
0
Sports and culture
550
36
16
4
Transport
2300
29
6
2
ABIs (EZs and similar)
1300
30
27
15
EU Structural
Funds
1300
18
11 (GDP)
5Slide23
Employment Training Shorter (<6 months): best for less formal trainingLonger programmes: should be skill-intensive In firm > on the job. Co-design programmes with employers
Apprenticeships Higher-level apprenticeships deliver the biggest gains More effective for employment than employment training (unless ET involves firms)Little evidence on benefits/costs to firms
People-based policies
http://www.whatworksgrowth.org/policy-reviews/Slide24
Business advice More consistent effects on productivity than jobs Hands-on / face to face > light touch / online But we don’t have decent info on value for money
Access to business finance Impacts on productivity / wages / jobs in 50% of casesEffective at dealing with credit constraints But loan guarantees increase default risk Firm-based policies
http://www.whatworksgrowth.org/policy-reviews/Slide25
R&D grants and loans Stronger impacts on reported innovation than on patents 7/16 studies find positive effects on wider firm performanceImpacts stronger for SMEs, and for programmes that emphasise collaboration (e.g. FP7)
R&D tax credits Very effective at raising R&D spend Little evidence on downstream economic impacts (as yet)Impacts stronger for SMEs
Firm-based policies
http://www.whatworksgrowth.org/policy-reviews/Slide26
Broadband (fixed line, not mobile)Positive economic effects in 14/16 cases But targeted on services, skilled workers, urban places Important that firms combine IT with management changes
Transport Economic gains from road and rail projects (bigger for more congested/successful places)Productivity effects and property price gains Lack of good evidence on light rail, cycling, walking
Area-based policies
http://www.whatworksgrowth.org/policy-reviews/Slide27
Enterprise Zones (economic ABIs) Just over 50% success rate for employment, wages Best design – US Empowerment Zones, which have a local employment requirement Where evalutions
test for displacement, they often find it Sports and culture, estate renewal Small / zero economic effects (except on house prices) But evidence of important social welfare / wellbeing gains
Area-based policies
http://www.whatworksgrowth.org/policy-reviews/Slide28
Overall success rate = 50% Effect sizes aren’t always very large Perhaps not surprising when we think about what local economic growth policies are trying to do
Example: employment training programmes are often working with ‘hard to help’ clients Example: the majority of firms do not use state business advice programmes; they ask friends, family, colleagues and e.g. accountants for advice (CEEDR 2011)
What have we learned?
http://www.whatworksgrowth.org/policy-reviews/Slide29
Success rates vary on key outcomes like employment Employment training and apprenticeships are better for raising employment.
Firm-focused programmes, not so much. But firm-focused policies can help raise innovation, sales & profits Why does this matter? Many policies have multiple objectives (e.g. ‘raising our game’). We need more clarity on what programmes want to achieve, and how
What have we learned?
http://www.whatworksgrowth.org/policy-reviews/Slide30
Targeting matters. For example: broadband’s economic impacts are higher for SMEs; skilled workers; urban areas But not always.
Targeted business advice programmes do no better than generalist programmes Economic vs social rationales. Some programmes are pitched as economic wins, but actually deliver social wins (estate renewal, sports and culture). Broadband is an economic development tool – but isn’t it also a public utility?
What have we learned?
http://www.whatworksgrowth.org/policy-reviews/Slide31
Know more than we used to:
Relative effectiveness of different policiesEmployment training vs sports and cultureRelative effectiveness for different objectivesInnovation grants and loans (R&D or employment?)
Relative effectiveness for different areas
Broadband (urban or rural; services or manufacturing)
What determines effectiveness
In-work component of employment training
Selectiveness of area-based initiatives
But not as much as we’d like …
Do we know what works?Slide32
Toolkits: employment trainingSlide33
Toolkits: business adviceSlide34
Toolkits: Responding to Major Job LossesSlide35
Relative
effectiveness of different policiesRelative effectiveness for different objectivesRelative effectiveness for different
areas
What determines effectiveness
Reminders?
Mentors > Subsidised Consultancy > Public Support > Tailored Support?
Retraining > Outplacement
But not as much as we’d like …
Do we know what works?Slide36
Learning from local interventionsSlide37
Understanding evidence and embedding in policy design is difficult – especially when goes against strong prior beliefsThere are
large capacity and resource constraints, even in a country like the UK
Robust
policy development and evaluation
can be high risk / low
benefit, particularly
from a
local government
perspective
Centralisers
vs
localisers
Strong views not supported by evidence
No systematic pattern national/local effectiveness emerge
(
emp. training, business advice / finance)
Do we care what works?Slide38
Understanding evidence and embedding in policy design is difficult – especially when goes against strong prior beliefsThere are
large capacity and resource constraints, even in a country like the UK
Robust
policy development and evaluation
can be high risk / low
benefit, particularly
from a
local government
perspective
Centralisers
vs
localisers
Strong views not supported by evidence
No systematic pattern national/local effectiveness emerge
(
emp. training, business advice / finance)
Do we care what works?Slide39
So what works?Slide40
Make sure institutions are capable of deliveringRealism
about underlying market forces (‘context’)Invest in infrastructure in areas where likely to increase productivity and generate jobs
Make
sure people have the skills they need to access new jobs
To
improve outcomes for disadvantaged people, focus support on them don’t rely on ‘trickle-down
’
What works: The big pictureSlide41
Understanding evidence and embedding in policy design is difficult – especially when goes against strong prior beliefs
This is true for academics as well as policy makersThere are large capacity
and resource
constraints, even in a country like the UK
Robust
policy development and evaluation
can be high risk / low
benefit, particularly
from a
local government
perspective
Do we care what works?Slide42
Centralisers vs localisers
Strong views not supported by evidenceNo systematic pattern national/local effectiveness emerge
(
emp. training, business advice / finance
)
Overall policy effectiveness
Everything works, just spend more
Nothing works, don’t spend anything
Crucial questions?
What can we learn about policy cost-effectiveness?
What lessons generalise?
How do we embed lessons in to decision making?
The big questionsSlide43
What works: The detailed pictureSlide44
What Works Centre