THE SYSTEM-WIDE IMPACT ON THE RECIPIENT REGION OF A REGIONAL LABOUR SUBSIDY

This paper analyses the impact of the introduction of a general,automatic labour subsidy in a regional economy, concentratingon employment effects. We adopt a computable general equilibrium(CGE) approach, using a model parameterised on data from a UKregion, Scotland. Two particular issues are identified whichhave usually been neglected in previous work in this area: theimpact of the fiscal injection associated with the subsidy andthe qualitative and quantitative consequences of allowing thenature of the regional labour market to vary.