The demand for industrial-development certificates and the effect of regional policy

The demand for industrial development certificates and the effect of regional policy, Reg. Studies 23,301-314. Attempts to cstimate the effects of UK regional policy are frequently restricted by lack of data. However, this paper uses the statistics resulting from the policy of Industrial Development Certificate (ID C) control to construct a space-factor-demand model of the demand for industrial floorspace. The IDC data set is viewed as reflccting observations on successive stages of a factor-demand model and allowance is made for spatial substitution as well as the more usual factor substitution possibilities. The effects of different regional policy instruments are modelled including the transmission mechanism through which IDC policy exerts its effect on Development Areas (DAs). The results of estimation appear to provide considerable support for our hypotheses: applications for ID C and hence demands for floorspace in D As are found to increase as national output rises; individual incentives are shown to have induced factor substitution suggesting that incentives for industrial buildings and plant and machinery are not additive in their effect on factor demands; own-location factor substitution effects of incentives appear to dominate any spatial substitution effects that they may have generated directly; factor availabilities appear to have induced a predominant spatial substitution effect; and finally, ID C policy appears to have played a significant role in reducing the spatial isolation ofD As and enhancing the effectiveness ofthe financial incentives.