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Building Economic Competitiveness: Lessons from Small Peripheral European States

Background

This research was commissioned by the Northern Ireland Department of Enterprise, Trade and Investment (DETI) as a contribution to their work on revising regional economic development strategy in the context of major potential changes in the EU State Aids regime after 2013.

Aims & objectives

The key objectives of this research were as follows: 

  • To study policy initiatives relating to economic development, productivity growth and competitiveness in small open regional or national economies.
  • To do this in such away as to generate policy ideas of relevance to DETI's aim of raising labour productivity in the Northern Ireland economy.

Subsidiary objectives were:

  • To involve members of the DETI steering group in aspects of the research in order to maximise the value to the Department of the lessons learned.
  • To produce an initial report outlining a short-list of countries or regions to be studied in greater depth and to discuss this list with the steering group in order to arrive at an agreed list of areas for study.
  • To investigate a range of policy areas to be studied in each of the agreed target countries or regions.
  • An in-depth investigation of the factors under-pinning high GVA per head and high productivity in each selected country to involve a combination of desk-based analyses and direct contact with country experts including targeted visits to the countries.
  • To produce a final report which brought together all of the data on each country to form a coherent view on the critically important factors in each country, and to generalise this across countries.
  • The final report outlined the potential relevance of the conclusions for the aim of raising productivity in Northern Ireland.

Results & dissemination

The report reviewed the overall and sectoral productivity records of a range of small peripheral OECD economies; reviewed existing and new evidence on the drivers of productivity; and examined policies in four countries selected for further study, focusing on the main drivers of productivity. The conclusions were that there were different paths to raising productivity but most of these paths involved complex combinations of policy which were difficult to replicate. An important contrast existed between countries like Ireland and Estonia which have relied on low corporate taxation to attract FDI, and countries like Finland or Sweden which have developed strong locally-owned corporate sectors. Finland is particularly interesting as a small remote country which has transformed its economy from a base dependent largely on processing local raw materials to a globally competitive economy based on high-tech companies. The report contains considerable detail on how this transition was achieved in Finland and what lessons can be learned for UK regions. 

The report was launched in Northern Ireland in June 2011 and formed an important contribution to ongoing economic strategy development, including DETI's new economic strategy for Northern Ireland launched in Autumn 2011.

Report

Gudgin, G., McKenzie, N., Magill, M. and Gibson, N. (2011) Building Economic Competitiveness - Lessons from Small Peripheral European States. Report to the Northern Ireland Department of Enterprise, Trade and Investment (DETI) by the CBR and Oxford Economics, March.

Project dates

2009-2011

Funding

DETI