Measuring Efficiency in Northern Ireland Manufacturing Using a Frontier Production Function Approach

The Employment Creation Effects of Factor Subsidies: Some Estimates for Northern Ireland Manufacturing Industry, 1955‐1983

“…'The reasons for the faster growth in unit wage costs are discussed in Harris (1989); basically, this occurred because of the relative growth in the public sector (where wage rates are higher) and the growth in external ownership of companies (with externally owned companies usually paying a higher rate negotiated for all Great Britain plants owned by a company).…”

“…Equation (5) shows how the price of investment goods can be reduced by incentives, which feed through to a lower cost of capital [Equation (4)], which in turn should result in higher levels of investment. The formula that expresses V is quite complicated (Harris, 1983), although it follows the standard Jorgenson-type approach [see Nickel1 (1978a) for a thorough treatment]. "In the Cournot model, each supplier sets its output on the supposition that the outputs of all other suppliers will remain unchanged, algebraically this conjecture implies that (6Y/6Yr) = 1.…”

“…It is presumed that industry in Northern Ireland is in oligopolistic competition with the rest of U.K. manufacturing.16 Based upon the Cowling and Waterson (1976) price-cost margin model of oligopoly, the industry demand In c= [va/(a -I)] In [ol~;*(~-l)'~ + p L:("-')'~ I 13The inclusion of a time trend to represent technological progress did not prove successful, since the estimated coefficient was generally insignificant. Previous attempts to incorporate time in a CES production function have also proven unsuccessful, since it is likely that the capital-stock variable is picking up technological progress and is therefore nearly collinear with the time trend (Harris, 1982;.…”

“…The rapid growth of manufacturing capital stocks in those regions has been analysed in Harris (1983) and Rees and Miall (1979). Survey evidence has also shown that firms take capital grants into account when computing the present value of future capital projects, and thus invest more than they would otherwise (Begg and McDowell, 1987).…”

“…Much of post-war regional policy in the U.K. (and especially Northern Ireland) has relied on capital andor labor subsidies in order to stimulate development in the high-unemployment regions of Britain (Harris, 1990). More recently, government policy has abolished standard (i.e., automatic) capital grants (Great Britain, 1988) and tax inducements for investment (Great Britain, 19841, and instead moved towards regional aid that aims to increase the competitiveness and the technological advancement of the peripheral regional economies' [see the recent Government White Paper on regional aid (Great Britain, 1988)l.…”