REGIONAL MULTIPLIERS AND DEMAND LEAKAGES AT ESTABLISHMENT LEVEL*
| Published date | 01 June 1974 |
| Date | 01 June 1974 |
| Author | W. F. Lever |
| DOI | http://doi.org/10.1111/j.1467-9485.1974.tb00183.x |
Scottish
Journal
of
Political
Economy
Vol.
XXI,
No.
2,
June
1974
REGIONAL MULTIPLIERS AND
DEMAND LEAKAGES AT
ESTABLISHMENT LEVEL*
W.
F.
LEVER
I
THE
INCOME
MULTIPLIER
The most important element in British regional policies since the mid-
1930s has been the encouragement of industrial growth in
areas
which have
persistently suffered from unemployment rates well above the national
average. Whilst
some
of the incentives for the establishment of industry
in areas of high unemployment have favoured the setting up
of
indigenous
firms
the bulk of the emphasis has fallen upon the movement of jobs from
the relatively prosperous regions of the south
and
east to the peripheral
depressed regions
of
the
north
and west. The scale of
this
movement became
apparent for the first time
in
1968 when the Board of Trade estimated that
between
1945 and 1965, 921 manufacturing establishments moved into the
peripheral regions and that
by
1966 these were providing
employment
for
345,000 workers. The importance
of
such movements
to
peripheral regions
can
be
illustrated by reference to Scotland where immigrant establishments
provided 50,000 jobs between 1953 and 1966 whilst
the
indigenous manu-
facturing sector declined by 51,000
jobs
out
of
a
total
of
740,000
manufac-
turing jobs in 1966 (Howard, 1968).
The process
by
which employment is fostered
in
areas of high unemploy-
ment by Government intervention
is
more complicated than the above
account suggests for additional jobs are created not
just
by the firms which
are induced to move to or to set up branches in development
areas
but by
other firms who are linked to the new
and
immigrant
firms.
The extent to
which the first round of additional jobs induces a second and subsequent
round of jobs is termed the employment multiplier. More commonly, how-
ever, the value
of
the multiplier is expressed in cash rather than employment
terms in order to
facilitate
calculations.
If
the initial injection of cash
continues to
flow
within the
local
economy then the multiplier approaches
infinity. The fact that
it
does not do
so
is a result
of
money leaking from
the local economy
in
one
of
a
number of ways. (Allen, 1969.)
These leakages have
been
defined as four main types-savings, taxation,
cash
transfers and imports. These four elements are usually combined in an
*
The author wishes to acknowledge the financial assistance
of
the Social Science
Research
Council
who funded the research project upon which this
paper
is
based.
111
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