City and agglomeration: economic relations and growth

Abstract

Economic analysis of an area, exploring its macroeconomic relations using quantitative methods, can have a great importance on both national and regional levels. The authors’ long-term objective is to develop a regional macroeconomic model calibrated for the Regional Automotive District of Győr. The region’s total production, output, final demand and value added disaggregated on sectoral-territorial level are the key elements of local development and economic growth. A macroeconomic model, describing their relations and expected values, suitable for regional forecasting and planning can be an essential tool for the development of the district, capable of elaborating its details and forecasting expected quantified effects.

What kind of multiplicative effects can the development of the businesses, governance, investments, local, governmental and EU resources utilized in the area, appearance and disappearance of actors have on the economy of the region? How would the local economy be affected by the change of the final consumption’s level and structure, the import demand of the consumption and production for supply from outside the region or the country, or the increase of the export? What kind of impact could the technological changes or the shift of the supplier relations have on a region? Does the application of certain local tax allowances or other incentives have a positive net result for the governance and economy? Answers to these and other similar questions could be found with this model. The applications and the groups of potential users can be diverse. Calculations with the model can be utilized not only in impact studies, but also as a decision support tool for the actors of the regional governance or private sector. It can also be helpful for the assessment and enforcement of the bargaining power of businesses, non-profit organizations and consumers as well.

In our study we try to put forth the foundations of a macroeconomic model, describing the relations and settings of the key variables from the first paragraph, preparing a multi-year research project that requires concentrated resources and profound analyses. The result of this research will be an analytic framework, precisely calibrated for Győr and its agglomeration, suitable for use in practice. The basic model discussed here is only a first draft. This initial system has been tested with arbitrary parameters and proven to be suitable for regional macroeconomic forecasting. Although a full data collection and calibration couldn’t be accomplished with the resources and time available, we began to supply the system with real data and develop an underlying database. As the essential results of the corporate and household surveys utilized by the whole automotive district project aren’t submitted yet, we can only incorporate them in the next stages.

In the first section we summarize the components of the theoretical background for the framework of the proposed model. In the second part, we present regional applications of the model. Using these, in the third section, we lay down a system suitable for describing the regional macroeconomy of the Győr automotive district. Finally, by providing more details, we discuss the requirements and the possible directions for further development of our model.