THE CELTIC TIGER AND REGIONAL ECONOMIC CHANGE IN IRELAND
Proinnsias Breathnach Department of Geography & National
Institute for Regional & Spatial Analysis National University
of Ireland Maynooth Association of Geography Teachers of Ireland
35th Annual Conference Green Isle Hotel, Naas Road, Dublin 22.
October 2, 2009 Slide 2 Celtic Tiger refers to period of high
economic growth beginning in 1994 and reaching unprecedented levels
1995-2000. Ireland compared to Asian Tiger economies (S Korea,
Taiwan, Hong Kong, Singapore) which achieved similar growth rates
in the late 20 th century. Annual Real GDP Growth: Ireland &
EU15 (prior to recent expansion). Source: Eurostat Slide 3 Since
joining the EU in 1973, Ireland had failed to significantly close
the per capita GDP gap with the EU up to the late 1980s. Ireland
surpassed the EU average in 1997 and was 35% ahead of the average
by 2007. However, note that per capita is not an accurate measure
of living standards in Ireland as 15% of GDP leaves the country
annually as profit repatriation and other payments. Per capita GDP:
Ireland as % EU15 Source: Eurostat Slide 4 Irelands economic
development pre-Celtic Tiger What became the Republic of Ireland
had little manufacturing industry when independence was achieved in
1922. The protectionist industrialisation policy introduced in the
1930s sought to make Ireland self-sufficient in terms of its
industrial needs. This generated significant employment growth in
the 1930s and 1940s, mainly concentrated in the Dublin region and
other main urban centres. By the 1950s, the domestic market was
catered for and the small size of Irish firms ruled out expansion
into exports. Economic stagnation ensued causing the abandonment of
the protectionist policy and the introduction of an export-oriented
industrial policy in the late 1950s based on the attraction of
foreign investment. The main attractions included generous capital
grants and tax incentives, a cheap but well-educated labour force
and, after EU entry in 1973, duty-free access to the main
industrial economies of Western Europe. This led to an accelerating
inflow of foreign firms, especially after 1973. The government
introduced measures (such as the construction of ready-made advance
factories) to disperse these firms as widely as possible throughout
the country. Slide 5 Planning regions 1964-87 These are the regions
referred to in the following graph Slide 6 The period 1961-1991
witnessed a major trend towards the equalisation of each regions
share of manufacturing employment relative to population share,
with the East region losing is predominant position and the western
regions gaining strongly. This dispersal was facilitated by the
unskilled nature of the work in most foreign firms and the fact
that they made little use of local suppliers of inputs. Ratio of
regional manufacturing employment share to regional population
share. Source: Census of Population Slide 7 Trends in other sectors
The period 1961-1991 saw a continuation of the established outflow
of workers from agriculture which mainly affected the small-farm
western regions. This period also saw rapid growth in services
employment, especially in business services which were
disproportionately concentrated in Dublin. Thus, despite the
relocation of manufacturing employment towards the west, this was
more than counterbalanced in employment terms by the loss of
agricultural jobs and the disproportionated concentration of new
service jobs in the East. Slide 8 Explaining the Celtic Tiger The
key driving force behind the Celtic Tiger was a major surge in the
inflow of foreign investment which began in 1993. This is reflected
in the growth of employment and especially value-added in foreign
firms between 1993-2000. Slide 9 Employment in IDA-su.pported
foreign firms grew by 60% between 1993-2000. Source: Forfs Slide 10
Value-added in IDA-supported foreign firms grew more than fourfold
between 1993-2000 in real terms (2000 prices; 1990 = 100) Value
added: The difference between the value of sales and the value of
material & service inputs. Source: Forfs Slide 11 Foreign firm
share (2000) Employment 9.7% GDP 31.4% Although a large proportion
of the GDP generated by foreign firms leaves the country as
repatriated profits, they still have a major spinoff effect
elsewhere in the economy, in the form of wages and purchases, due
to the large proportion of GDP which they represent. Slide 12
Explaining the surge of inward investment Growing global shortages
of workers with IT skills Rising education levels in Ireland
Growing supply of skilled workers in 1990s due to 1970s baby boom
1983/84 2002/03 Total in education934,000 913,000 Total in higher
ed 48,000129,000 % in higher ed5.2% 14.2% Ireland was increasingly
attractive as location for high-skill investment at a time of rapid
growth in high-tech economic activity and adoption of new
technology in existing industries. The decision (made in 1989) by
Intel to locate its first overseas microchip manufacturing plant in
Ireland had a major demonstration effect in encouraging other
high-tech firms to locate here. Thus, a key feature of inward
investment in the 1990s was a much higher level of skill and
sophistication compared with that which had occurred earlier. This
was reflected in the much higher productivity of workers in these
firms (i.e. value-added per workers). Slide 13 The period 1991-2006
witnessed rapid growth in both employment and the average
productivity of workers, but the latter accounted for less than
half of the rapid rise in living standards (per capital GDP), the
main factor here being a sharp drop in the economic dependency
rate. This in turn was due mainly to a rapid rise (from 33% to 56%)
in the proportion of women aged 15-64 engaged in paid work.
Workforce (m) GDP/ worker Per capita GDP Economic dependency rate**
19911.14959,79119,4752.07 20061.93091,60641,6981.20
+68.0%+53.2%+114.1%-58.0% ** Economic dependency rate: The number
of people not in paid employment divided by the number of people in
paid employment Productivity in the Irish economy 1991-2006* *All
values in 2006 prices Sources: Census of Population; Census of
Industrial Production Slide 14 A further major development in the
1990s was the growth of inward investment in export services.
Source: Forfs Service employment as % total foreign employment
Slide 15 Between 1998-2006 the share of total exports accounted for
by services rose from under a quarter to almost one half. Note:
Services exports include recorded computer media bn (2006 prices)
24.6% 47.9% Composition of Irish exports 1998-2006. Source: CSO
External Trade Statistics Slide 16 The main growth areas in service
exports have been Business Services (mainly administrative services
provided from Ireland for TNC units distributed throughout Europe),
Financial Services (mainly via the International Financial Services
Centre [IFSC] in Dublin, and Computer Services (mainly software, of
which Ireland is now the worlds leading exporter). bn (2006 prices)
Composition of services exports 1998-2006. Source: CSO Balance of
Payments Statistics Slide 17 Irelands share of global service
exports has been rising strongly Source: UNCTAD Irelands share of
global services exports Slide 18 In value-added terms, the
agricultural sector virtually dropped out of sight between
1991-2006, and actually was producing less at the end of the
period. While the Secondary sector (manufacturing &
construction) grew strongly, its share of GDP and employment fell
due to the even stronger performance of the tertiary sector, which
accounted for two thirds of GDP and employment in 2006. % GDP 1991
GDP change 1991-2006 % % GDP 2006 % Empl 1991 Empl change 1991-2006
% % Empl 2006 Primary7.5-17.01.614.8-40.95.4
Secondary38.0+248.234.027.7+52.826.1
Tertiary54.5+359.864.457.6+92.368.5 Sectoral change in GDP &
employment 1991-2006 Source: Census of Population Slide 19
Administrative Regions A new set of Regional Authority regions
(some of them the same as the old Planning Regions) was introduced
in 1994 and is used in the diagrams and tables to follow. Slide 20
There was strong employment growth in all regions between
1991-2006. The Midlands particularly strong performance may be
accounted for by the spread into this area of commuters to the
Dublin area (the population census records people by where they
live rather than where they work). There was partiucularly strong
growth in both Secondary and Tertiary employment in the West
region, more than counteracting the above- average loss of Primary
employment in this region. RegionTotalPrimarySecondaryTertiary
Border+56.5-41.9+51.1+101.1 Midlands+74.2-41.8+89.2+128.7
West+69.1-50.9+98.7+128.5 East+64.2-30.2+32.1+82.2 Mid
West+54.0-43.0+60.7+87.7 South East+61.0-34.9+62.3+103.1 South
West+55.0-40.6+55.8+87.3 Total+61.7-40.9+52.8+92.3 * Excluding
Industry not stated Regional employment change 1991-2006*. Source:
Census of Population Slide 21 The wide spatial spread of employment
growth in the 1991-2006 period is reflected in the spread of
population growth in this period (maps below) compared with the
period 1926-1991 (following map), although the rapid fall in the
agricultural population in the west pre-1991 also contributes to
the changing pattern post-1991. Population change 1991-2006 Source:
Walsh J (2007) Slide 22 This map shows how population growth
between 1921-2006 was strongly concentrated in the Dublin region,
and secondarily in the vicinity of the other main cities. Source:
Walsh (2007) Slide 23 This table shows the rapid fall in the share
of employment taken by agriculture in all regions, from around
20-25% in 1991 (excepting the East region) to less than 10% in
2006. The share of the Secondary sector has remained fairly
constant at around 30% (again excepting the East) while there has
been strong growth in the tertiary share in all regions. By 2006
this sector accounted for over three quarters of all employment in
the East. Region19912006 Prim %Sec %Tert %Prim %Sec %Tert %
Border20.730.049.37.729.063.4 Midlands25.528.146.58.530.561.0
West20.925.146.08.429.462.2 East4.426.069.51.920.977.2 Mid
West19.729.350.97.330.662.1 South East21.630.348.18.730.660.7 South
West18.128.953.07.029.064.0 Total14.927.757.65.426.168.5 Sectoral
composition of employment by region. Source: Census of Population
Slide 24 Regional distribution of employment in manufacturing and
international services The following four graphs show each regions
share of manufacturing and state-supported international (i.e.
export) services relative to its share of national population for
1991 and 2006. A ratio in excess of 1.0 (see black line) indicates
a disproportionate employment share. Note that in these graphs,
Dublin is separated from the Mid-East region where several major
manufacturing plants are located. These data refer to the location
of the jobs themselves, not the location of the workers residences,
as with the Census of Population. Slide 25 The South East, Border
and Midlands regions have the biggest relative shares of indigenous
manufacturing employment (with the Midlands having gained
substantially in 1991-2006. The Dublin region has the lowest share
and this has been falling. Ratio of employment share to population
share: Indigenous manufacturing. Source: Forfs Slide 26 The
strongest relative concentration of foreign manufacturing
employment is in the Mid West region, with the West, South West and
Midlands East all having gained strongly over the period, while the
Border, the Midlands and Dublin have been losing out. Ratio of
employment share to population share: Foreign manufacturing Source:
Forfs Slide 27 Explaining the regional trends in foreign
manufacturing employment Mid West: The location of the big Dell
computer plant in Limerick. This is now in the process of locating
most of its manufacturing activities to Poland. Mid East: Location
of the major Intel (Leixlip), Hewlett Packard (Leixlip) and IBM
(Mulhuddart) plants West: Main centre for the high-growth medical
devices (especially stents) industry (Galway) South West: Main
location of the high-growth pharmaceuticals industry (Cork
Harbour). Border: Decline and eventual closure of the Fruit of the
Loom clothing operation, which once employed several thousand
people in a number of locations in Donegal. Slide 28 Combining the
previous two graphs together shows quite an even relative regional
distribution of manufacturing employment, with the Mid West in the
strongest position and Dublin by far the weakest. Ratio of
employment share to population share: all manufacturing Source:
Forfs Slide 29 This graph shows a highly-disproportionate
concentration of export services employment in the Dublin region,
location of the IFSC and where the software industry is strongly
clustered. This sector has a particularly strong need for
urban-based skills and services. While some other regions have been
gaining ground, this disparity with Dublin is important given the
rising role of export services in the overall economy. Ratio of
employment share to population share: Internationally- traded
services Source: Forfs Slide 30 All other regions have an average
disposable income (after allowing for taxes and transfers payments
[e.g. welfare]) of between 80-90% of that of Dublin. All regions
gained slightly on Dublin between 1995-2006. It should be noted
that Dublin residents pay a higher proportion of their incomes in
taxes and received the lowest proportion of transfers, so the gap
between Dublin and other regions is significantly reduced by net
transfers of tax revenues from Dublin. Disp Income as % East 1995
Growth 1995- 2006 % Disp Income as % East 2006 Border82.964.783.2
Midlands80.768.082.7 West82.568.885.0 East100.063.0100.0 Mid
West88.264.888.6 South East82.569.085.1 South West87.165.988.1
Total65.7 Regional distribution of per capita disposable income
Source: CSO National Accounts statistics Slide 31 In 1996 Ireland
moved from a position of net emigration to net immigration.
Emigration fell continuously after 1999, while immigration (mainly
from East Europe) rose strongly, attracted by the availability of
mainly low-skill jobs in Ireland. Annual Net
Emigration/Immigration. Source: CSO Demographic statistics Slide 32
The regional spread of new immigrant workers Between 1991-2006, the
number of immigrants in Ireland who were born in countries outside
the UK and the USA (from where immigrants to Ireland traditionally
came) grew almost ninefold, from 40,000 to 351,000. In other
countries the historical pattern has been for unskilled immigrants
to concentrate in the main urban centres, and especially the
national capital. In Ireland, as the following graph shows, while
there is a disproportionate concentration of immigrants from
outside the UK/USA in Dublin, there is also quite a reasonable
spread throughout the regions. This reflects the wide regional
spread of new employment and population growth generally, and the
consequent spread in demand for workers in such areas as
construction, hotels, bars and restaurants in which new immigrants
have been concentrated. The particularly strong growth in the
relative share of the Midlands region can be attributed to
overspill of commuters from the Dublin region where accommodation
is very expensive. Slide 33 Ratio of immigrant* share to population
share * Refers to residents born in countries outside UK & USA
Source: Census of Population Slide 34 Other aspects of spatial
change in the Celtic Tiger period Slide 35 Growth in long-distance
commuting linked to the rapidly-rising level of car ownership
Source: Walsh et al (2005) Slide 36 Workforce travelling 30+ miles
to work 2001/2002 Note the particular concentration in a ring
around the Dublin region, with similar rings around Galway,
Limerick and Cork Source: Walsh (2007) Slide 37 This map shows the
particular concentration of long-distance commuting, in time terms,
around the Dublin region, with high proportions of workers from
parts of north Wexford, south Wicklow, Laois, northwest Meath and
southeast Cavan spending over 90 minutes getting to work each day.
Source: Walsh et al (2005). Slide 38 Inter-urban commuting
Long-distance commuting is not confined to movement from small
towns and rural areas to local urban centres. There is also an
increasing amount of inter-urban commuting. While the published
population census volumes only list workers by where they live, new
data available from the CSO for research purposes shows the actual
places where people work. This is made possible via the census
question which asks about where people live and work. Slide 39
Inter-urban commuting (cont.) The following table gives an idea of
the complexity of urban commuting patterns in Irish towns today.
While Youghals population is three times that of Cashel, the number
of people working in both towns is almost identical. This is partly
due to the fact that a higher proportion of Cashels resident
population is in employment (39.2% as against 29.5% for Youghal)
which may be related to Youghal attracting a significant retirement
population but mainly due to the fact that Cashel attracts almost
twice as many incoming daily workers (the proportion of resident
workers who work elsewhere is almost the same for both towns). In
the cases of Nenagh and New Ross, the situation is reversed these
towns have almost identical populations but there are almost twice
as many people working in Nenagh. This is partly because a much
higher proportion of New Ross residents work elsewhere, but mainly
because twice as many workers come in to work in Nenagh as come
into New Ross. Killorglin is in the unusual position of having more
people working in the town than actually live there, due to a
strong influx of workers daily, mainly to the Fexco financial
services operation in the town. In the case of Leixlip, 80% of the
towns resident workers leave the town daily to work elsewhere,
while an even larger number comes into the town to work. This is
because Leixlip developed as a dormitory town most of whose
residents are service workers working in Dublin. The subsequent
location in the town of two major industrial projects Intel and
Hewlett Packard is the reason for the huge daily influx of workers
into the town from elsewhere. Slide 40 Employment configuration of
selected towns 2006 Resident Pop 2006 Employed in town Residents
working (anywhere) Residents working in town Residents working
elsewhere Incoming workers Cashel2,3381,802916 536 (58.5%) 3801,266
Youghal6,7851,8302,004 1,111 (55.4%) 893719 Nenagh7,7514,7322,760
1,701 (61.6%) 1,0593,031 New Ross7,7092,5432,389 1,000 (41.9%)
1,3891,543 Killorglin1,6271,635512 280 (54.7%) 2321,355
Leixlip14,6767,1216,494 1,327 (20.4%) 5,1675,794 Slide 41 The
National Spatial Strategy (NSS) Launched 2002 Objective: Balanced
regional development Reduce overconcentration of development in the
Dublin area Predicts that, under existing trends, 80% of new
population growth will occur in the Greater Dublin Area (GDA)
between 2002-2020 [the data presented earlier in this slide show
would not appear to support this] Based on European Spatial
Development Perspective (ESDP): Reduce dominant position of
national metropoles Encourage development of regional cities as
independent centres in polycentric urban system Slide 42 The
National Spatial Strategy (NSS) Key element of NSS: Focus
investment on developing a select number of provincial urban
centres These to be known as gateway cities which will act as
conduits for attracting investment to their regions Simultaneous
development of hubs (smaller urban centres whose role in the
strategy is not well explained) Slide 43 The NSS 9 gateways In
brown on the map, including Letterkenny/Derry and
Athlone/Mullingar/ Tullamore as linked gateways. 8 hubs In blue on
the map, including Castlebar/Ballina and Killarney/Tralee is linked
hubs. Source: The National Spatial Strategy Slide 44 Problems with
the NSS The NSS is supposed to be supported by the National
Development Plans (NDPs) 2000-2006 and 2007- 2013 (which identify
balanced regional development as core objectives), but regional
objectives (including the NSS itself) have not been taken into
account in NDP spending. The main element in NDP spending has been
focused on improving road links between Dublin and the main
provincial centres, which reinforces existing spatial trends.
Proposed roads from Dundalk to Limerick and Rosslare to Sligo,
which would have improved interregional links and reduced the
dominance of Dublin (in line with the ESDP) have not been built.
Slide 45 Problems with the NSS (continued) Implementation of the
NSS has been very slow to date. A special Gateway Development Fund
a key building block in achieving NSS objectives was one of the
first casualties of government spending cutbacks in 2008. The NSS
has identified too many gateways, most of which have no chance of
reaching the level of population and economic activity regarded as
necessary for self-sustaining growth. This over-proliferation of
gateways and the inclusion of hub towns of unclear purpose suggests
that political considerations played a key role in fashioning the
NSS. The NSS also fails to set out the measures required to develop
the economic structures of the identified gateways along the lines
envisaged by the strategy. Slide 46 References cited Walsh J, Foley
R, Kavanagh A, McElwain A (2005) Origins, Destinations and
Catchments: Mapping Travel to Work in Ireland in 2002. Journal of
the Statistical & Social Inquiry Society of Ireland, Vol, XXXV,
1-37. Walsh JA (ed) (2007) People and place: a census atlas of the
Republic of Ireland. National Institute for Regional & Spatial
Analysis, NUI Maynooth.