Can the Periphery Survive Innovation-led Growth?

Insights from Israel

Abstract

This article explores the question of the integration ability of peripheral regions into innovation-led growth. While previous research has suggested that peripheral regions may be at a disadvantage, recent studies have argued that there may be potential benefits to their integration into the innovation process. This article offers a different approach for the examination of this controversy. First, it uses knowledge-based occupations as a measure of innovation activity (instead of types of activities such as startups, high-tech activities, or services). Second, it considers innovation advance under two perspectives: demand (as measured by types of occupations installed in a region) and supply (as measured by types of occupations of the resident labor force). We use regression analysis to compare trends in the last two decades in Israel. 

Although findings indicate a process of adaptation of both periphery and centre to the innovation trend (in terms of increasing relative growth of high-level occupations), both in terms of supply and demand, steady gaps between the growth coefficients lead to a process of degradation of the periphery: lower increase of skills in the periphery and lower adaptation of demand to increasing skills. This results in a higher commuting rate (or migration) of skilled workers from the periphery, a substantial relative concentration of blue-collar occupations, and an increasing supply of unskilled workers to the centre. The prevention or attenuation of such a process requires the consideration of policy measures regarding the prevailing ecosystem factors.