REGIONAL CHANGE IN A NATIONAL CONTEXT- WESTERN AUSTRALIA, 1954-66 ALEX KERR The University of Western Australia I. INTRODUCTION The Australian economy has undergone considerable changes in the last two decades. Some of these changes have been documented in the series of articles in the Economic Record, numerous books have contributed data and opinions on aspects of national growth, and the Report of the Committee of Economic Enquiry dealt with a selection of major economic issues of a nation- al character. Within the national movement over this period may be observed changing structures and rates of growth of the component states and chang- ing economic relationships between them. This article offers a brief comment upon the changes in one of those States-Western Australia. Since on certain criteria the States of Australia may be regarded as economic regions, an attempt is made here to examine the character of Western Australia’s growth within a national context; to describe its changing relationship to the Aus- tralian whole of which it is a part. Preoccupation with analysing regional growth in a national context has characterised the efforts of many economists in the advanced countries during the last two decades1 and more recently interest in such problems has grown in the developing countries. As might be expected, techniques of regional analysis have proliferated.‘ The technique used here was used first by Creamer in a National Resources Planning Board study in 1943, and in 1960 it was developed by Dunn and incorporated in the Resources for the Future volume on Regions, Resources and Economic Growth. In 1965 it received its most comprehensive treatment by Ashby3 as part of the pro- gramme being developed by the newly established Division of Regional Economics of the United States Department of Commerce to provide regional 1 See Alex Kerr and Robert Williamson, “Regional Economics in the United States: A New Survey”, Growth and Change, I, 1970. 2 See W. Isard, Methods of Regional Analysis: An Introduction to Regional Science (Technology Press of M.I.T., 1960); more recent issues of the Journal of Regional Science; the Papers and Proceedings of the Regional Science Association; Land Economics; and W. Isard and J. Cumberland (Eds.), Regional Economic Planning: Techniques of Analysis for Less Developed Areas (Paris: O.E.E.C., 1961). 3 L. Ashby, Growth P~fterns in Employment by County, 1940-1950 and 1950-1960, 8 Volumes (Washington: Department of Commerce, 1965).
Transcript
REGIONAL CHANGE IN A NATIONAL CONTEXT- WESTERN AUSTRALIA, 1954-66
ALEX KERR
The University of Western Australia
I. INTRODUCTION
The Australian economy has undergone considerable changes in the last two decades. Some of these changes have been documented in the series of articles in the Economic Record, numerous books have contributed data and opinions on aspects of national growth, and the Report of the Committee of Economic Enquiry dealt with a selection of major economic issues of a nation- al character. Within the national movement over this period may be observed changing structures and rates of growth of the component states and chang- ing economic relationships between them. This article offers a brief comment upon the changes in one of those States-Western Australia. Since on certain criteria the States of Australia may be regarded as economic regions, an attempt is made here to examine the character of Western Australia’s growth within a national context; to describe its changing relationship to the Aus- tralian whole of which it is a part.
Preoccupation with analysing regional growth in a national context has characterised the efforts of many economists in the advanced countries during the last two decades1 and more recently interest in such problems has grown in the developing countries. As might be expected, techniques of regional analysis have proliferated.‘ The technique used here was used first by Creamer in a National Resources Planning Board study in 1943, and in 1960 it was developed by Dunn and incorporated in the Resources for the Future volume on Regions, Resources and Economic Growth. In 1965 it received its most comprehensive treatment by Ashby3 as part of the pro- gramme being developed by the newly established Division of Regional Economics of the United States Department of Commerce to provide regional
1 See Alex Kerr and Robert Williamson, “Regional Economics in the United States: A New Survey”, Growth and Change, I, 1970.
2 See W. Isard, Methods of Regional Analysis: An Introduction to Regional Science (Technology Press of M.I.T., 1960); more recent issues of the Journal of Regional Science; the Papers and Proceedings o f the Regional Science Association; Land Economics; and W. Isard and J. Cumberland (Eds.), Regional Economic Planning: Techniques of Analysis for Less Developed Areas (Paris: O.E.E.C., 1961).
3 L. Ashby, Growth P~f t e rns in Employment by County, 1940-1950 and 1950-1960, 8 Volumes (Washington: Department of Commerce, 1965).
94 AUSTRALIAN ECONOMIC PAPERS JUNE
economists with a flexible data bank of regionally oriented economic statistics. The wealth of statistical detail contained in the eight volumes of this work, covering all the counties in the United States, has relieved regional researchers of the tedious task of assembling and treating the data themselves since 1965. Since then the R.E.D. has pushed ahead with its data-assembly programme for further development of regional accounting in all f01-m.~
11. METHOD
The method recognises a change in employment in a particular industry in a given region as having three economically significant components. First, there is the change that would have occurred had the industry grown (or declined) at the national rate for all industries combined. This is computed by multiplying the base-year employment in the regional industry by the national rate of change in employment in all industries. The resulting figure may be called the “national-growth” component of employment change in that industry. A second element of change may exist if the industry con- cerned is growing slower or faster throughout the nation than all industries combined. To compute this it is necessary to calculate the national growth rate for the particular industry and subtract from it the national growth rate for all industries combined. The base-year employment in the regional indus- try is then multiplied by the resultant positive or negative growth rate. This may be called the “industrial-mix” component of employment change in that industry. The third type of change may arise from a difference between the regional and national growth rates of a peculiar industry, which may reflect the existence of regional factors favourable or unfavourable to the growth of that particular industry vis-ci-vis the rest of the economy. To com- pute this, the national growth rate for the particular industry is subtracted from the regional growth rate for that industry and the resulting positive or negative rate is applied to the base-year employment for the regional indus- try. This may be called the “regional-share” component of empIoyment change in that industry.5
4Robert E. Graham Jr. and J. Thomas Romans, “Regional Economic Accounting in the U.S. Office of Business Economics-An Appraisal”, paper prepared for the Eleventh Annual Conference of the International Association of Income and Wealth, Israel, August, 1969.
Specifically, the aggregate measures may be calculated as follows: National-Growth Component
Ei* - E CN = i ( Ei * ) e ,
IndustrialMix Component CI (E* . . , / E . . . ) e i
(Ei*/Ed ei Regional-Share Component
CR = i(e,*/ei) - where:
1970 REGIONAL CHANGE IN A NATIONAL CONTEXT 95
Of course, employment figures are not the only data which can be used to analyse structural change, though they are in many respects the most readily available and thus the most widely used. Value-added figures, for example, may be used for certain industries for which they are published, but the coverage is incomplete. A brief analysis of changes in the structure of Western Australian primary and secondary industry in these terms has already been carried out for the years 1953-54 and 1960-6fi6 The article men- tioned makes use of value-added figures for the manufacturing industry pub- lished by the Commonwealth Statistician. The recent series of gross national product at factor cost by industry, released by the Commonwealth Statistician in mimeographed form, represent an exciting addition to the flow of official statistics which may be used for the analysis of structural change. Conceptual problems notwithstanding, the production of these figures on a regional basis would add significantly to the official data which may be used to analyse regional change.
The industrial-mix component, which may be computed for a single industry or aggregated for all industries, shows the extent of the “growth industry” effect in regional change, though the regional aggregate for all industries will conceal divergent movements within industries or within sub- categories of industries. Of course, a region which has a negative industrial- mix figure may nevertheless still have grown by attracting a greater pro- portion of workers into slower-growing industries. Productivity in these industries in one particular region vis-d-vis the remaining regions in the economy may, because of some regional advantage, be increasing in such a way as to suggest that concentrating on methods of attracting the growth industries is not always the only or best path to satisfactory growth. The extent to which a region shares in the development of rapid growth industries will depend upon the total demand-supply relationships within each industry and the extent to which changing industrial technologies and changing re- gional structures create new regional attractions for the location of such industries.
The regional share component shows the effect of changing regional access to important markets and sources of inputs. It indicates change in the
e, = regional employment in the ith industry initial period. e,* = regional employment in the ith industry, terminal period. Ei = national employment in the ith industry, initial period. E,* = national employment in the ith industry, terminal period. E . . . = national employment in all industries, initial period. E* . . . = national employment in all industries, terminal period.
0 1 . Bowen and J. de Castro Lopo, “On the Industrial Structure of the Western Aus- tralian Economy”, in Economic Activity, University of Western Australia Press, XI, 1968.
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region’s locational advantages for the operations of different industries, which can best be understood by studying regional input-output relationships. It may be thought to reveal the extent to which the region’s resources, natural and man-made, and the way in which they were organised created compara- tively greater advantages for industry in that region, than in other regions of the economy, in the particular period under review. As suggested in the concluding section, this change may be transitory or continuing.
A summary measure of the net result of the operation of these two forces is given by the concept of “net relative change”. This represents simply the change in total employment which is net of the national-growth component of total change and may be calculated either as the sum of the industrial- mix and relative-share components or as the difference between the total change and the national-growth component. The three growth components and the net relative change can all be expressed as rates of change relative to base-year employment as well as in absolute numbers. Both sets of figures are contained in Tables I to IV. The net relative change for a region as a whole is invariant with respect to the level of industrial aggregation, but the industrial-mix and regional-share components for the region as a whole are not.
111. SECTORAL CHANGE 1954-61
It has been suggested? that a general sectoral approach to describing struc- tural change is still useful if some further disaggregation beyond the familiar threefold Clark-Fisher classification is adopted. Industries in which the product and factor supply and demand conditions are essentially similar could be grouped together and for useful regional studies one would want to be able to analyse both the production function and the product market conditions. Any meaningful testing of a hypothesis relating income to struc- tural change, for example, would need figures of wage income per person employed and figures of income from capital per person employed. In the meantime, it is still of some use to examine changes which have occurred on a broad sectoral basis as long as the limitations of such aggregation for subsequent analysis are clearly recognised.
If employment in Western Australian industries had grown at the same rate as for Australia as a whole in the first census period (14.1 per cent) her total employment would have increased by 36,513 persons. The actual increase was 21,383. Thus the State lost ground in comparison to the nation, recording a relative loss of 15,130 persons, or 5.9 per cent. This change
7 See, for example, Harvey S. Perloff, “Interrelations of State Income and Industrial Structure”, Review of Economics and Statistics, XXXIX, 1957.
TABLE I
Western Australia-Components of Change, 1954-61 ~
INDUSTRY
Numbers Employed Components of Change Increase (+) or Decrease (-)
1954 1961 Increase (+)
or Decrease (-)
Net Relative Change
National Growth
+ 222 + 5500 + 143 +1321
[ndustrial Mix
-300 -8197 - 242
-2384
-11123
Regional Share
+267 +2028 +243 -405
1. Fishing, Hunting and Trapping 2. Rural Industries 3. Forestry 4. Mining and Quarrying
Total Primary Industry
5. Founding, Engineering and Metalworking 6. Ships, Vehicles, etc. 7. Yams, Textiles (not Dress or Furn. Drapery) 8. Clothing, Knitted Goods, Boots, etc. 9. Food, Drink and Tobacco
10. Sawmilling and Wood Products (not Furniture) 11. Paper, Printing, etc. 12. Other Manufacturing 13. Electricity, Gas, Water and Sanitary Services 14. Building and Construction
Total Secondary Industry
15. Shipping, Loading and Discharging Vessels 16. Rail and Air Transport 17. Road Transport and Storage 18. Communication 19. Finance and Property
20. Commerce 21. Public Authority (N.E.I.) Defence Services 22. Communitv & Business Services (incl. Professional) 23. Amusemeit, Hotels, etc.
Total Tertiary Industry
24. Other and Indefinite
All Industries
+21656 + 6697 -2523 +4174 + 17485
+283 2000 4259 +2259 +2285 - 309 +1976
258401 279784 21383 36513 - 3689 -11440 -15129
Source: Census of the Commonnvalth 0-f Australia.
TABLE I1
Western Australia-Components of Change, 1961-66
1961
1698 40642 1098 8331
Numbers Employed
Increase (+) or
Decrease ( -)
-61 +2391
-58 +446
Components of Change Increase (+) or Decrease (-)
INDUSTRY ~~
1954 National Growth
Net Relative Change
Industrial Mix
Regional Share
1. Fishing, Hunting and Trapping 2. Rural Industries 3. Forestry 4. Mining and Quarrying
Total Primary Industry
5. Founding, Engineering and Metalworking 6. Ships, Vehicles, etc. 7. Yarns, Textiles (not Dress or Furn. Drapery) 8. Clothing, Knitted Goods, Boots, etc. 9. Food, Drink and Tobacco
10. Sawmilling and Wood Products (not Furniture) 11. Paper, Printing, etc. 12. Other Manufacturing 13. Electricity, Gas, Water and Sanitary Services 14. Building and Construction
Total Secondary Industry
15. Shipping, Loading and Discharging Vessels 16. Rail and Air Transport 17. Road Transport and Storage 18. Communication 19. Finance and Property 20. Commerce 21. Public Authority (N.E.I.) and Defence Services 22. Community & Business Services (incl. Professional) 23. Amusement, Hotels, etc.
Western Australia-Componenfs of Change, 1954-61 (Percentage changes)
Industry
1. Fishing, Hunting and Trapping 2. Rural Industries 3. Forestry 4. Mining and Quarrying
Total Primary Industry
5. Founding, Engineering and Metalworking 6. Ships, Vehicles, etc. 7. Yams, Textiles (not Dress or Furn. Drapery) 8. Clothing, Knitted Goods, Boots, etc. 9. Food, Drink and Tobacco
10. Sawmilling and Wood Products (not Furn.) 11. Paper, Printing, etc. 12. Other Manufacturing 13. Electricity, Gas, Water and Sanitary Services 14. Building and Construction
Total Secondary Industry
15. Shipping, Loading and Discharging Vessels 16. Rail and Air Transport 17. Road Transport and Storage 18. Communication 19. Finance and Property 20. Commerce 21. Public Authority (N.E.I.) and Defence
Services 22. Community and Business Services (incl.
Professional) 23. Amusement, Hotels, etc.
Total Tertiary Industry
24. Other and Indefinite
All Industries
Industrial Mix
-19.09 -21.06 -23'90 -25.49
-21 '87 ~
+12.66 -12.93 -14.64 -21.34 -8.01
-19.86 +10.23 +1.25
+13.92 +0.21
-1.89
-17'74 -14.34 +2.78 +2.34
+28.96 $4.82
-5.67
+27.10 -3.60
f5.41
$114.26
-1.43
Regional Share
+17.00 +5.21
+24.00 -4.33
+4.18
-6.46 -5.81
1-34.23 -24.76 +6.56
-10'39 -0.55
-10.94 -15.17 -24.47
-13.13
+23*01 -7.37 -2.79 +1-34
-14.15 -2.25
-7.68
+4.35 -8.17
-2.04
-15.44
-4.43
Net Relative Change
-2.09 -15-85 +0.10
-29.82
-17.69
+6.20 -18.74 +19+59 -46.10 -1.45
-30.25
-9.69 -1.25
-24.26
+9.68
-15.02
+5.27 -21.71 -0.01 +9*68
+14.81 +2.57
-13.35
+31.45 -11.77
+3.37
+98.82
-5.86
Source: Table I. Note: National growth rate for all industries = 14.13 per cent.
100
-0.44
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+3.45
-1.69
TABLE IV Western Australia-Components of Change, 1961-66
(Percentage changes)
$5.73
+16.62
Industry
1. Fishing, Hunting and Trapping 2. Rural Industries 3. Forestry 4. Mining and Quarrying
Total Primary Industries
5. Founding, Engineering and Metalworking 6. Ships, Vehicles, etc. 7. Yarns, Textiles (not Dress or Furn. Drapery) 8. Clothing, Knitted Goods, Boots, etc. 9. Food, Drink and Tobacco
10. Sawmilling and Wood Products (not Furn.) 11. Paper, Printing, etc. 12. Other Manufacturing 13. Electricity, Gas, Water and Sanitary Services 14. Building and Construction
Total Secondary Industries
15. Shipping, Loading and Discharging Vessels 16. Rail and Air Transport 17. Road Transport and Storage 18. Communication 19. Finance and Property 20. Commerce 21. Public Authority (N.E.I.) and Defence
Services 22. Community and Business Services (incl.
Professional) 23. Amusement, Hotels, etc.
Total Tertiary Industries
24. Other and Indefinite
All Industries
Industrial Mix
-20.42 -15.25 -17.50 -11.37
Regional Share
+2-01 +6*56 -2.46 +2.09
-14.86
+3.81 +10.58 -6.22 -9.93 +0.05
-18'62 +1.47 -1 .51 -2.51 +0.18
$5.47
+21.68 -4.62 -3.58 -6.96 +8.09 -0.97 +2.02 -0.22
+11.96 +22.85
-23.30 -19.38 +0.62 -4.46
+12.74 -0.51
+8.80
+18.42 +3.89
+12*01 +4*01
+24.24 +3.94
+11*72 +5.81
-1.68
+2.79 +4.51
-0.97 1 +7.39
Net Relative Change
-18.41 -8.69
-19'96 -9.28
-9.39
+25.49 +5.96 -9.80
-16.89 +8.14
-19.59 +3*49 -1.73 +9*45
+23*03
+ 10.63
-11.29 -15'37
-0.52 +24*86
+24.46 +5*30
+7.12
$21.21 +8.40
+9*18
$14.93
+6.42
Source: Table 11. Note: National growth rate for all industries = 14.94 per cent.
1970 REGIONAL CHANGE IN A NATIONAL CONTEXT 101
in relative position was due more to the regional-share component (the over- all attractiveness of the region for industry compared with the nation as a whole) than to the industrial-mix component, the former accounting for three-quarters of the ground lost.
On a broad sectoral basis (including mining and quarrying with primary industry, and building and construction with secondary or goods-producing industry) the primary and secondary sectors both experienced net relative declines of about the same magnitude. The characters of these movements were, however, quite different in the two sectors. In the primary sector, the industrial-mix component was responsible for a significant deterioration while the regional-share component was actually positive. This was a de- clining sector, in terms of employment, for the nation, but it declined less rapidly in the state than in the national economy. The absolute fall in em- ployment in the primary sector was due to a substantial decline in the numbers employed in mining and quarrying and a smaller decline in rural industries. Numbers employed in the other broad industry groups in this sector grew somewhat less than the national average. On the other hand, it was a decline in regional share which mainly retarded the secondary sector, although the industrial-mix component was also negative. For Australia as a whole this sector, like the primary sector, recorded employment growth below the overall national rate-hence the negative industrial-mix com- ponent; and for Western Australia it actually declined slightly-hence the large negative regional-share component. In the secondary sector significant declines in employment in the clothing, sawmilling and construction industries were sufficient to offset significant increases in engineering and satisfactory growth in other manufacturing activities, so that a small absolute fall in employment for the sector was recorded.
The tertiary sector showed a net relative gain of 3.4 per cent. It proved to be a “growth sector” for the nation during this period, resulting in a positive industrial-mix component for Western Australia, but it did not grow as fast in the state as in the nation, resulting in a negative regional-share component. The absolute increase in employment in the tertiary sector was due mainly to increases in transport and communications and in finance, property and business services.
Overall, the State did not fare well, vis-d-vis the nation as a whole, in the period 1954-61. It did not quite hold its place in the development of national growth industries and it lost workers to other regions (relatively) as the economy grew larger. On the whole, the primary sector performed well in employment terms, given that it was a declining sector for the nation as a whole, but the relative performances of the manufacturing sector and the tertiary sector were disappointing.
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IV. SECTORAL CHANGE 1961-66
A dramatic change became manifest in the region’s development in the second inter-censal period, though the seeds had been sown in earlier years. In fact, since the base year for the first period was one of brisk activity, the picture of change over this period has to be accepted with some caution. This merely highlights the artificiality of inter-censal periods if considered as development phases. Nevertheless, the rapid changes that the Western Australian region underwent in the second period are revealed in the com- parisons between employment in 1961 and 1966.
A net relative gain of 17,991 workers was registered. As before, the regional-share component was the dominant factor, but now it was positive, indicating that the economy was proving more attractive than that of the nation as a whole. The industrial-mix component, though still slightly nega- tive (indicating that employment was still not being channelled into growth sectors), was not an important element in the region’s overall growth per- formance. Not all sectors shared in the gain.
Once again the primary sector suffered a net relative decline (this time approximately half the magnitude of its previous loss). In similar fashion to previously it shared in the general national decline in primary employment but did not lose ground as rapidly as the national average for this sector. The State’s growth rate for employment in the primary sector over this period was 5.5 per cent, reflecting an absolute increase in rural industry employ- ment and the beginnings of an increase in mining employment that has been carried forward with an increasing tempo in the current inter-censal period. The sector actually gained 2,718 persons, in contrast to the loss registered previously.
The secondary sector enjoyed a net relative gain due to its high positive regional-share component. This was slightly offset by a negative industrial- mix component, indicating that once more the secondary sector did not prove to be a national growth sector. Its national growth rate was about equal to the overall national growth rate. The State’s growth rate for em- ployment in the secondary sector in this period was 25.6 per cent, represent- ing an absolute increase of 20,735 persons-a marked contrast to the small decline registered in the previous period. Once again, clothing and saw- milling languished, but most other industries, in particular construction, foods and engineering, recorded good increases which reflected the increasing tempo of activity in the region.
The tertiary sector, again a growth sector for the national economy, fared well in Western Australia in this period, with a positive industrial-mix com- ponent and a positive regional-share component, reversing the previous negative movement in this figure. Tertiary employment in the State proved more attractive than for the nation as a whole and the State’s growth rate
1970 REGIONAL CHANGE IN A NATIONAL CONTEXT 103
for employment in the tertiary sector was 24.1 per cent, representing an absolute increase of 35,070 persons, which was an increase on the gain registered in the previous period. This time most tertiary industries showed substantial growth, but the increase was particularly marked in road transport and finance and property.
Overall, the State fared much better in the second period than in the first. It attracted more than its normal share .of employment in all three sectors, while almost holding its place in the development of national growth indus- tries. The primary sector again performed better in Western Australia than in all other States combined, in employment terms, and the tertiary sector improved considerably its relative standing. But the transformation was most marked in the secondary sector which, together with the tertiary sector, rode up on the waves of development which were generated in the mining in- dustry’s expansion and the rapid growth of the Perth Metropolitan Region.
V. INDUSTRIAL CHANGE 1954-66
An examination of the performance of individual industries over the entire period 1954-66 and a comparison of their movements in each census period shows more precisely the changes that have taken place in the character of the region’s employment. Readers should be reminded that the industry classification used in this analysis is very broad and such an aggregative treatment conceals diverse movements that have taken place in the sub- aggregates. Despite this limitation, some interesting but not unexpected structural changes are revealed.
The generalisations previously made about primary industry as a whole apply broadly to each industry category within that grouping. The most significant employment shift in the secondary sector was away from textiles, clothing and sawmilling, and towards engineering and metalworking, which is the largest employer in the manufacturing sector. The other significant movement was the remarkable reversal of the fortunes of the building and construction trades, which accounted for about one-third of the secondary workforce in 1966. They staged a recovery from a net relative decline of 24 per cent in the first period to a gain of 23 per cent in the second. In the tertiary sector the transport and communications industries (industries 15 to 18) declined relatively in both periods, the main contributor to this movement being the rail and air transport industry. The decline in this indus- try was offset in the second period by strong growth in Western Australia’s regional share in the road transport and storage industry, which benefited greatly from the rapid mineral developments occurring throughout the State. The two major employers in the tertiary sector-commerce, and community and business services-both gained ground in each period and the two
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fastest-growing tertiary industries were finance and property and community and business services.
Movements in the regional economy since 1966 suggest that some of the changes observable in the 1961-66 inter-censal period are continuing, but some further structural changes are emerging. The mineral development activity proceeding apace in Western Australia should boost the State’s share of employment in this industry and may be sufficient to arrest the net relative decline of primary industry as a whole, though rural industries are by far the largest employer of labour in this sector and the performance of these industries will still be a major determinant of the sector’s performance in the current inter-censal period. The engineering and metalworking indus- tries are still experiencing buoyant demand for their products and are ex- panding to cope with it, but in the secondary sector it is the building and construction industries which are leading the way, in a burst of unprecedent activity both in business and residential construction. Land and housing values in the Perth Metropolitan Region have been climbing steeply for several years, and there still exists a critical shortage of low-cost housing. Road transport in the tertiary sector continues to expand, for obvious reasons, but the increasing use of railways for ore transport will not have much effect upon employment in this industry. Likewise, revitalisation of the State shipping services by using barge-carrying vessels and by dropping uneco- nomical services will not boost employment. Even if a slowing down of growth occurs in the Perth Metropolitan Region in the remainder of the current inter-censal period, it seems likely that the handsome employment increases previously recorded in the finance and property sector will be repeated for this period. Amusements and hotels can be expected to improve their relative position, and commerce and community and business services continue to flourish to the point that they may be expected to maintain their present relative standing.
VI. REGIONAL CHANGE AND INCOME
Changes in industrial structure will produce income changes, since the income-generating capacities of various industries differ. Likewise, income changes, through their influences on demand, will induce changes in indus- trial structure. Because of this two-way relationship, it is hazardous to assume causality in one direction or the other, but it would be useful, for policy and other purposes, to be able to relate income changes to changes in industrial structure, both sectorally and on an individual industry basis. In the absence, however, of detailed reliable estimates of income by industry and other relevant measures, such effects are difficult to gauge.
1970 REGIONAL CHANGE IN A NATIONAL CONTEXT 105
CHART I
REGIONAL CHANGE AND INCOME WESTERN AUSTRALIA 1954-61 AND 1961-66
+I0
I X
I = Industrial mix R = Regional share N = Net relative change
+5
Relative change in employment
-10 -5
(1954-61)
x x X N R I
- 10
x x N R
(1961-66)
0 E 8 .-
Apart from considering the relationships between income changes and changes in sectoral or industrial employment structure, one might investigate the relationships between income changes and movements in net relative change and its two components. This was attempted and the changes in the variables for the two census periods are illustrated in Chart I. The income measure used is personal income per head, and the region’s net relative income change per head is measured as the rate of change of personal income per head in Western Australia minus the rate of change of the same measure for Australia as a whole.
In the 1954-61 period a net relative decline in employment of 5.9 per cent was accompanied by a greater net relative decline in income per head of 6.5 per cent. For the 1961-66 period a net relative increase in employ- ment of 6.4 per cent was accompanied by a greater net relative increase in
106 AUSTRALIAN ECONOMIC PAPERS J U N E
income per head of 9.3 per cent. The corresponding movements in each component of net relative employment change suggest that the improvements in income per head in Western Australia were associated not with a move towards growth industries but with an all-round improvement in the attrac- tiveness of the regional economy to industry.
VII. CONCLUSIONS
The usefulness of an analysis of this sort, if one is looking into the future rather than describing economic history, lies not so much in what it says as in the question it poses. The net regional change for any State may be seen as the statistical result of its own specific reaction or adjustment to a given national growth in any period. The differing weight given to each of the two elements of net regional change will indicate the broad nature of the adjustment process and will suggest a host of questions requiring an answer before the process can be properly understood. From this point, more soundly based projections may then be made.
Changing local access to foreign, national and regional markets and to inputs of all kinds are the two fundamental factors underlying changes in the regional-share component of regional growth, though they may be so complex as to throw some doubt on the usefulness of such an aggregative concept. Their analysis demands a greater understanding of the short- and long-term forces affecting the growth and decline of markets and inter-industry demand supply relationships and linkages, as revealed in input-output studies. If the regional-share component shows up more strongly than the industrial- mix component, what is the explanation and is it a short-term or long-term phenomenon? Have government concessions to industry, whether transitory (such as cheap land) or continuing (such as cheap power) or intermediate between these (such as limited period taxation concessions), been respon- sible? Have the growth of population and the spread of industry created new or bigger markets or externalities that have influenced industry location decisions? Has one of the prime causes been rapid infrastructure growth, or perhaps the discovery and exploitation of hitherto untapped natural re- sources, or perhaps the rapid growth of a skilled labour force?
Explanations of the causes underlying changes in the industry-mix com- ponent, on the other hand, require analyses of the changing demand-supply relationships for individual industries and their reactions to changing income structures. Factors responsible for changes in tastes and in the technological requirements of specific industries need to be understood. What forces affect elasticities of demand in the region under study? What particular attractive- ness does it have €or fast or slow growing industries? Is there a feed-back from the regional-growth effect? In Florida and California, for example,
1970 REGIONAL CHANGE IN A NATIONAL CONTEXT 107
major population surges, reflecting the attractiveness of these locations, have pulled the market-oriented and rapid-growth service employments along with them.
In the period covered in this study it has been noted that the more com- plex regional-growth component was of greater importance, as a contributor to the region’s growth, than the industrial-mix component. It would be interesting to determine how other States have fared on this account and to examine the relationship between these two components over a longer period. In the United States over the period 1940-60 the importance of the industrial- mix component declined relative to that of the regional-share component in an analysis covering all States. This may be due to the fact that the indus- trial employment structure of regions in this country has become more homogenous over this twenty-year span. An analysis of the six capital city metropolitan areas in Australia for the two inter-censal periods suggests that the same movement might be taking place in these cities. This implies that for any such region future growth may be better attained by concentrat- ing on improving comparative advantage for industry in general than by concentrating on measures to attract growth industries, since the latter course may entail greater difficulties as the structure of the economy becomes more spatially homogenous over time.
An understanding of these underlying growth factors provides an explana- tion of past movements and forms some basis for guessing about future movements, Thus, it would enable the planner and the policy-maker to make more rational decisions given their objectives.
