Irish Economy: A research note published today by the ESRI (Economic and Social Research Institute) suggests that the current “two-tier recovery” merely reflects longstanding problems not addressed during the boom and bubble years.
The note reviews the patterns of economic development across regions in Ireland from 1995 onwards, and examines whether this development has been balanced . The analysis in “Two-Speed Recovery? Spatial Development in Ireland” [pdf], by Dr Edgar Morgenroth, confirms that the recent pattern of economic recovery has not been evenly spread across the regions, but also shows that this pattern is evident at least since the mid-1990s.
The observed patterns of output growth in Ireland mirror what is found in many developed countries, where growth is led by urban areas, in which enterprises and households experience the benefits of 'agglomeration economies' through operating and living in larger centres.
Dr Morgenroth noted that “higher levels of per capita output are recorded particularly in the Dublin and South West regions. Employment has grown more in commuter regions such as the Mid-East, Midland and South East, which suggests that there is some positive spillover into neighbouring regions from the stronger economic performance of Dublin and Cork.”
He continued “This analysis points to significant differences between regions, linked to their economic activities and scale of urban development. Consequently, the size of the largest urban centre (and the associated agglomeration economies) is a key structural indicator of regional performance.
The findings in this paper suggest that policy should aim at increasing the scale of secondary urban centres and facilitating development spillovers into their wider hinterland, without encouraging further sprawl”. In this context, the development of both Limerick and Waterford cities merits particular focus.
The paper says that increasing urban focus of development is also supported by analysis at the small area level. Significant locational preferences for different sectors were found in an analysis of the economic geography of Ireland using 2006 data. Specifically, the more high value-added and high-tech sectors tend to prefer or require urban locations. An update of the analysis using 2011 data reveals that urban areas have increased their share in economic activity by 4.1% overall and in 21 out of 30 sectors since 2006. This suggests that firms in urban locations have fared better during the economic crisis. Urban areas accounted for 72% of all employment in 2011 compared to 68% in 2006.
Remote areas account for just 6.6% of employment in 2011, down from 7.6%, while economically central areas have increased their share of employment from 66.6% to 68.2%.