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This article presents a comment from R. R. MacKay on the evaluation made by Barry Moore and John Rhodes on the effects of regional economic policy (REP) on manufacturing employment in Great Britain from 1963 to 1971. In their study, Moore and Rhodes maintain that regional policy added to Development Area manufacturing employment. They show that there was a clear improvement from 1963, but both the claim that the net annual increase in employment, such as the gap between actual and expected employment, accelerated after 1967 and their assessment of the effect of the REP are questionable. Without the REP, the gap between actual and expected employment might have been smaller in 1971 than it was in 1967. Although Moore and Rhodes refer to the importance of the national economic situation, they do not compare the labor markets of the pre- and post-REP periods. Moore and Rhodes acknowledge that their provisional estimates are substantially below official expectations, but nevertheless claim that the total abolition of the REP could have serious adverse consequences for the Development Areas. They tend to overstate the effect of regional economic and while gifts are usually gratefully accepted it is possible that the introduction of the wage subsidy has diverted attention and emphasis from more promising forms of intervention.

This paper presents new evidence and analysis on the effectiveness of regional policy in the United Kingdom in the postwar period. The evidence relates to the movement of manufacturing firms into "development areas" from other regions of the United Kingdom and abroad---and thus provides information on one of the major mechanisms at work in creating employment in these regions of high unemployment. The analysis is designed to estimate the impact of different instruments of regional policy on the number of firms moving into development areas, although a short section examines the employment implications of these moves.
A "move" is defined as the opening in a new location of a new manufacturing establishment, the origin of which is in some other location. This concept of movement is appropriate for purposes of finding out how policy works and for evaluating its effects because a number of instruments of regional policy are specifically aimed at encouraging mobility in the sense in which it is here defined. An example of this is the system of industrial development controls whereby firms considering a factory expansion are required to obtain an Industrial Development Certificate (IDC) if that expansion exceeds a certain minimum limit (in terms of floor space required). The Department of Industry may refuse the IDC authorizing the firm to proceed with plans for expansion, thereby hoping to divert the proposed expansion to a development area. In these circumstances the firm may consider going ahead with the expansion by establishing a new plant in a new location in a development area. In this example the IDC policy would have had a direct effect in inducing a "move" as defined here. [ABSTRACT FROM AUTHOR]

This article presents a reply from Barry Moore and John Rhodes to comment from R. R. MacKay on their evaluation on the effects of regional economic policy (REP) on manufacturing employment in Great Britain from 1963 to 1971. Moore and Rhodes are pleased to be in agreement with MacKay when he says that the observed total regional policy effect between 1963 and 1971 was almost 150,000 manufacturing jobs and that this observed employment gain can be divided equally between the two periods 1967 to 1971 and 1963 to 1967. The authors also agree that the identification of an REP effect requires that account must be taken of the pressure of demand and the time lags associated with the effects of non-REP regional policy instruments. MacKay seeks to avoid the problem of assessing time lags, and to allow for changing activity levels, by adopting an approach altogether different from the authors based on an analysis of the Development Area share of employment expected from industrial development certificate approvals and the national male unemployment rate. The results of this continued work seem to be consistent with the range for the REP effect given in the article, even when the analysis is extended to 1971. Further confirmation that the REP has had a significant effect on employment in Development Areas has been provided by evidence obtained from our industrial enquiry covering 350 firms.