A Vibrant Economy? Exploring Evidence of Economic Convergence in Post-Devolution Wales.
Cardiff Metropolitan University
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This thesis investigates the consequences of devolved government in Wales for its economic performance. Economic theory is ambivalent concerning the consequences of changes in governance that are often considered as issues in fiscal decentralization or fiscal federalism. Economic growth theory however can be interpreted as dogmatic in expecting convergence between the economies of nation-states: for neo-classical growth convergence between similar states at different stages of development is considered to be inevitable; under endogenous growth theory, convergence is attainable through identifying and adjusting key policy variables. I have examined UK regional economic data using a selection of descriptive statistics and have not found evidence of neo-classical economic convergence between Wales and other regions of the UK. I have investigated the possibility of endogenous growth in Wales in relation to other regions of the UK in terms of spending on economic development and differences in human capital within the workforce. The evidence suggests that public spending on economic development has not been effective in improving Welsh economic performance although there is evidence that it is positively influenced by education. I have also undertaken an investigation of spatial dependence in economic activity between Wales and other UK regions. This analysis indicates that an endogenous model augmented with a spatial lag based on the distance between regions does provide some evidence that spending on economic development and investment in human capital do contribute to our understanding of Welsh economic performance. However, the analysis that was undertaken has not found evidence that Devolution has yet been instrumental in improving Welsh economic performance in relation to other regions of the UK.
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