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The Impact of New Technologies on Jobs and their Effects on Local Economies - McCann

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Presentation by Philip MCCANN, Professor of Urban and Regional Economics, University of Sheffield Management School, UK at the OECD session on "Impact of new technologies on jobs and its effect on local economies" 2 June 2018, Trento
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The Impact of New Technologies on Jobs and their Effects on Local Economies - McCann

  1. 1. The Impact of New Technologies on Jobs and their Effects on Local Economies: Economic and Governance Shocks and Responses Philip McCann 1
  2. 2. 1. Technology and Productivity • Why wonder or worry about new information and communications technologies ICTs? • Impacts on our future quality of life and the nature of our future livelihoods • New technologies – information and communications technologies ICTs → ‘big data’, electric cars, new battery technologies, robotics, autonomous vehicles, 3D-printing, cloud computing, supersonic travel, renewable energy systems and climate change • Fears about new technologies and governance challenges → loss of identity, lack of anonymity, loss of personal or community control 2
  3. 3. 1. Technology and Productivity • “Productivity isn't everything, but, in the long run, it is almost everything. A country's ability to improve its standard of living over time depends almost entirely on its ability to raise its output per worker.” Paul Krugman (1994) The Age of Diminished Expectations • 1950s-1980s Traditional notions of disembodied technology (‘falling out of the sky’) residual over and above capital (Solow-Swan) → capital intensity and factor mobility • 1980s spillovers (Romer), embodied human capital (Lucas) and innovation (Aghion and Howitt) • Technologies embodied in systems of innovation, organisations, clusters (Pavitt; Porter) and institutions (Ostrom, Rodrik → shift towards a societal view of technology • Examples of railways, electricity, street-lighting, sewerage, telephones, sanitation, health, air-traffic control → and competition for technical, legal and social standards 3
  4. 4. 1. Technology and Productivity • 1990s and 2000s impacts of ICTs on the growth in the ‘transatlantic productivity gap’: Silicon Valley effect and the Walmart Effect • In global financial markets technology was ahead of a systemic understanding of governance, institutions and regulation → 2008 Global Financial Crisis • 1990s → 2008 Growing global convergence and regional convergence and divergence; post-2008 growing global and regional divergence • Milanovic ‘elephant ’ income distribution curve • Post 2008 productivity slowdown and stagnant wages in OECD countries → McKinsey Global Institute: demand contractions, ageing and lack of digitization and ICT take-up 4
  5. 5. 1. Technology and Productivity • ‘Weightless’ knowledge economy (Quah and Varian) • Features of the Capitalism without Capital (Haskel and Westlake 2018) • 4Ss: Scaleable, Sunk costs, Synergies, Spillovers • Scalability and sunk costs → concentration in place or context • Synergies and spillovers → concentration or diffusion • Centralisation or decentralisation, convergence or divergence • Measurement problems for knowledge economy? → under- valuing the weightless economy? • Robert Solow “You can see the computer age everywhere but in the productivity statistics.” 5
  6. 6. 1. Technology and Productivity • Impact of new ICTs on cities, regions and local economies? • Excitement about new technologies in smart cities debates: traffic management, new urban mobility solutions, energy control, health management systems → key emphasis on the functioning and performance of cities • Global logistics and transportation → but erroneous optimistic commentaries: end of geography (O’Brien 1992); death of distance (Cairncross 1997); world is flat (Friedmann 2005); post-geography trading world (Fox 2016) • Growth of high-technology and high knowledge-workers, clusters and high-skills concentrations 6
  7. 7. 1. Technology and Productivity • ‘Hollowing out’ of middle level jobs and roles → rising job polarisation and income inequalities within countries (OECD 2018a) and cities (OECD 2018b) • Urban–v–rural divide in USA, Australia, Canada, NZ, France; Regional divides in UK, Italy, Germany; Intra-Urban inequality • Deindustrialisation concerns about out-sourcing and off- shoring facilitated by internet-based technologies → but 3D- printing may reduce economies of scale of out-sourcing? • Rise in ‘gig-economy’ employment → fragile, non-contract • Political and regulatory pressures • The new technological possibilities cannot respond to the productivity-related governance challenges 7
  8. 8. 2. The European Urban and Regional Context 8 Labour productivity in PPS in metro regions compared to the rest of their country, 2008 ES DE UK IT NL FR BEATSE FI BG RO LT LV PL HU EE SK CZ MT DK GRSI PT 0 40 80 120 160 200 240 280 LabourproductivityinPPS,non-metroregionscombined=100 Capital metro region Second tier metro region Smaller metro region Non-metro regions combined IE
  9. 9. 2. The European Urban and Regional Context 9 Change in labour productivity in pps, 2000-2008 MT DK DE IE BEFRAT SE IT FI UK NL ES BG RO LV LT PL EE HU CZ PT SK SI -40 -30 -20 -10 0 10 20 30 ChangeinProductivityrelativetothenationallevelinindexpoints Capital metro region Second tier metro region Smaller metro region Non metro regions combined 60
  10. 10. 2. The European Urban and Regional Context 10 Population change in metro regions, 2000-2008 IE UKNLFR SK DK PLIT RO BE PT CZ EE HU ES SILT DE BG SE AT MT LV GR FI -12 -8 -4 0 4 8 12 16 Changeinshareofnationalpopulationin% Capital metro region Second tier metro region Smaller metro region Non-metro regions combined
  11. 11. 11 OECD Extended Regional Typology of European Regions: Two Year Moving Average Growth Rates in GDP among TL3 regions, 1995-2011 -3% -2% -1% 0% 1% 2% 3% 4% 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 PU IN PRC PRR
  12. 12. 12 OECD Extended Regional Typology of European Regions: Two Year Moving Average Growth Rates in GDP per Capita among OECD TL3 regions, 1995-2011
  13. 13. 13 Effects of the crisis in OECD TL3 European Regions (Extended OECD Regional Typology) by Period
  14. 14. 2. The European Urban and Regional Context • In the post 2008-crisis period across European both cities and regions have suffered • The EU experience is very different to US stories of city prosperity - Triumph of the City etc • Cities exacerbate national post-crisis trends → growing countries are driven by growing cities and declining countries are weighed down by declining cities • Urban advantages relating to employment and productivity post-crisis are oriented towards EU13 economies while EU15 face severe urban disadvantages • Convergence → divergence. Greater emphasis on the challenges facing lagging regions (World Bank 2018) 14
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  16. 16. 3. Regional Reasons for the Brexit Vote UK Interregional problem is the worst in the OECD relative to national growth and development UK is diverging, dislocating and decoupling into 3 different economies - London + SE, E, SW - Scotland - WM, EM, NW, YH, NE, W, NI London and hinterland is decoupling from the rest of UK 16
  17. 17. 3. Regional Reasons for the Brexit Vote • Impacts of globalisation are totally different across the UK Brexit votes → age, education, skills and occupation, social attitudes, local economic conditions • Metropolitan elites argument for Brexit • The Geography of Discontent → a worldwide phenomenon? • Geography of 23rd June Referendum votes reflects the internal decoupling of the UK • Economic geography overlays all other characteristics 17
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  25. 25. 4. Regional Impacts of the Brexit Vote • UK Brexit risk exposure = 12.2% of UK GDP • EU Brexit risk exposure = 2.64% of UK GDP • UK regions →10%-17% of regional GDP • Irish regions → 10% of regional GDP • German regions → 4.5%-6.4% of regional GDP • Netherlands regions → 3.5%-5% of regional GDP • Belgian regions → 2.8%-4% of regional GDP • French regions → 1.8%-2.7% of regional GDP • Italy, Spain, Greece → < 1% of GDP • UK Brexit exposure risk is 4.6 times higher than the EU 25
  26. 26. 5. Geography of Discontent 26
  27. 27. 5. Geography of Discontent 27
  28. 28. 5. Geography of Discontent City Van der Bellen Hofer Graz 64.4 35.6 Vienna 63.6 36.4 Linz 63.4 36.6 Innsbruck 62.2 37.8 Dornbirn 61.4 38.6 Salzburg 60.0 40.0 Sankt Pölten 57.0 43.0 Wels 55.0 45.0 Klagenfurt 53.5 46.5 AUSTRIA 51.7 48.3 Villach 46.6 53.4 28
  29. 29. 5. Geography of Discontent 29 Source: http://www.repubblica.it/ 2016 Italy’s referendum by province
  30. 30. 5. Geography of Discontent City Yes No Italians abroad 64.7 35.3 Florence 56.3 43.7 Modena 55.8 44.2 Bologna 52.2 47.8 Milan 51.1 48.9 Brescia 48.4 51.6 Rimini 47.2 52.8 Turin 46.4 53.6 Genoa 41.0 59.0 Venice 40.9 59.1 ITALY 40.9 59.1 Rome 40.6 59.4 Naples 31.7 68.3 Bari 31.6 68.3 Palermo 27.7 72.3 Catania 25.3 74.7 30
  31. 31. 6. Conclusions • Impacts of technology on cities and regions cannot be understood ex ante • Caution regarding techno-optimism → advocated by the tech world • Technology solves problems but also creates new ones • Both productivity growth and income convergence are essential for democracy • The real challenges relate to institutions and governance and (income, service and wellbeing) distributional impacts • These real discussions are largely absent in the technology literature which still treats technology as exogenous • Need to focus on societal engagement and participation – can be facilitated by place-based development policy advocated for more than a decade by EU and OECD 31
  32. 32. References • L. Dijkstra, E. Garcilazo, and P. McCann, 2013, “The Economic Performance of European Cities and City-Regions: Myths and Realities”, European Planning Studies, 21.3, 334-354 • L. Dijkstra, E. Garcilazo, and P. McCann, 2015, “The Effects of the Global Financial Crisis on European Regions and Cities”, Journal of Economic Geography, 15.5, 935-949 • B. Los, J. Springford and M. Thissen, 2017, “The Mismatch between Local Voting and the Local Economic Consequences of Brexit”, Regional Studies, 51.5, 786-799 • Chen, W., Los, B., McCann, P., Ortega-Argilés, R., Thissen, M., and van Oort, F., 2018, “The Continental Divide? Economic Exposure to Brexit in Regions and Countries on Both Sides of the Channel”, Papers in Regional Science, 97.1, 25-54 • Haskell, J., and Westlake, S., 2018, Capitalism Without Capital: The Rise of the Intangible Economy, Princeton University Press, Princeton • OECD, 2018a, Productivity and Jobs: (How) Can All Regions Benefit?, Paris • OECD, 2018b, Divided Cities,: Understanding Intra-Urban Inequalities, Paris • World Bank, 2018, Rethinking Lagging Regions: Using Cohesion Policy to Deliver on the Potential of Europe’s Regions, Washington DC 32

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