Governance and regional incomes in Australia.
O'Malley, Denis Anthony "Tony"
1. INTRODUCTION
Regional disparities in income are a source of disadvantage and can
have consequences for social and economic development and growth
(National Economics, 2015). The 17th State of the Regions Report argues
that there is an "...association between income inequality at a
regional level and economic growth on a national level" (National
Economics, 2015).
Policies responding to income disparities can become a significant
drain on national and regional budgets. For example, concerns about
widening regional inequalities accounts for the bulk of the European
Commission's budget (Nazarczuk, 2015; Arbia et al., 2010).
The Gini coefficient is a measure of inequality which ranges from
zero, for no inequality, to one for extreme inequality. In 2005-06, the
Gini coefficient for disposable household income across all households
in Australia was 0.307: for the state capital cities inequality was
slightly greater (0.310), and for the balance of each state it was lower
(0.293) (Australian Bureau of Statistics (ABS), 2007b). At the same
time, average incomes in the capital cities of Australia were 16 per
cent above those outside the capital cities (ABS, 2007b).
This paper investigates the effects on income in Australian
functional economic regions in 2006 of the shares of the regional labour
force engaged in governance of transactions (the transaction services
industries), in each of the remaining transformation industries, and the
remoteness classification of the region.
Wallis and North (1986) segregate industries into those which
primarily conduct transactions, such as finance and trade, and those
which primarily transform inputs into output, such as manufacturing or
education and training.
"Every economic activity involves elements of transaction and
other costs.... [O]ur basic approach is to segregate economic activities
and actors into those that are primarily associated with making
exchanges and those that are not. The sum of the resources used by those
associated with transacting make up our estimate of the transaction
sector. ... Transaction costs are the costs associated with making
exchanges, the costs of performing the transaction function.
Transformation costs are the costs associated with transforming inputs
into outputs, the costs of performing the transformation function"
(Wallis and North, 1986: 97)
The transformation industries are thus defined as the industries
which transform inputs into outputs. The notes to Appendix 1 identify
the industry classifications allocated to the transformation industries.
This paper argues that variations in the local availability of
transaction governance services are the principal structural cause of
inter-regional variations in incomes. The aim is to demonstrate this
proposition by separating the effects on regional income of the share of
employment in transformation industries, the share of employment in
transaction governance industries, and the remoteness of the region.
2. LITERATURE
Governance, Transaction Services and Regional Incomes
Income arises from transactions in markets in which goods and
services are exchanged for money. Transactions have costs: "the
operation of a market costs something" (Coase, 1937: 392).
Transactions require the services of both an institutional environment
governing the acquisition and transfer of property rights and also, as
Williamson (1996: 5) notes, institutions for the governance of
transactions such as markets, hybrids, hierarchies, or bureaus.
Furubotn and Richter (2010: xi) point out that:
"[A]ny specific market order, or market design, has to find
ways of dealing with certain activities of trade such as: search,
inspection, bargaining, contract execution, control, and
enforcement."
Transaction services provide the governance required to assure the
integrity of the search, inspection, negotiation, contract agreement,
control and enforcement of rights activities which are necessary for the
transactions of trade (Furubotn and Richter, 2010). The governance
provided by transaction services enables the goods and services which
regions produce to be exchanged for income.
Wallis and North (1986) defined and measured transaction services
in the United States of America. The Wallis and North (1986) definition
of transaction service industries has been used and adapted to local
data sets in Australia by Dollery and Leong (1998), in Argentina by
Dagnino and Farina (1999), in West Germany by Bischoff and Bohnet
(2000), in Poland by Sulejewicz and Graca (2005) and in Bulgaria by
Chobenov and Egbert (2007).
Transaction services have grown over time, have a central role in
economic development and account for more than half of the Gross
Domestic Product of the United States of America and of Australia
(Wallis and North, 1986; Dollery and Leong, 1998). Wallis and North
(1986) conclude that:
"[T]ransaction costs are a significant part of the cost of
economic activity. One implication of this is that, throughout history,
the costs of transacting may have been as much a limiting factor on
economic growth as transformation costs" (Wallis and North, 1986:
121).
Wallis and North (1986) defined the transaction services sector as
including all the activities involved in conducting transactions and
exchanging and reallocating resources, such as sales, search,
inspection, negotiation, management, enforcement, finance, insurance,
administration.
This paper adapts the methods of Wallis and North (1986) to produce
estimates of the share of transaction services, or governance, in
employment in Australian functional regions using data on employment in
the transaction service industries in each region. These estimates are
then used as measures of the governance of trade in each region.
Hereafter, in this paper, transaction costs and governance have the same
meaning; local costs of the governance of regional trade.
Regional development
Traditional explanations for regional income disparities
(Nazarczuk, 2015) seldom involve institutions, governance or transaction
services. Regional development practice has tended to seek growth in
regional incomes by promoting and recruiting industry rather than by
promoting and developing governance.
Yeung (2015: 1) argues that:
"[A] self-contained and endogenous view of regions and
regional development can no longer hold water in this world economy
characterized by increasingly interdependent economic activities that
are organized through cross-border value chains and production networks
spearheaded and governed by global leading firms" (Y eung, 2015, p.
1).
This world economy view ignores the capacity of regional
institutions, where they exist, to create linkages with global
production networks and value chains. In this paper it is argued that
local governance is endogenous and is necessary to sustain regional
trade links with the outside world. If so, then local governance has a
critical role in extending global production networks into remote
regions.
Blakely and Leigh (2010) citing Friedman (2005) on the challenges
of globalization for local communities, argue that globalization calls
for:
"[A]n orientation away from traditional business development
and recruitment toward ensuring all participants in a local economy have
adequate preparation to make maximum contributions" (Blakely and
Leigh, 2010, p. 3).
Globalization drives change in every locality. Continuous
reinvention is needed 'through new technologies, innovations and
renewed commitments to ethical leadership' (Blakely and Leigh,
2010: 3). Sassen (2000) noted the increasingly urban concentration of
transaction governance services around the world. Saxenian (1996) and
Farole et al. (2010) point to a growing literature focused on the
institutional structures which govern transactions, and drive economic
growth and incomes in regions. Farole et al. (2010) argue that
explaining economic trajectories requires taking into account the role
of both formal and informal local and society-wide institutions. They
review the institutionalist approaches to economic development,
including the role of governance and cost.
Best (2001: 69) argues that the institutional structures of a
region, such as transaction governance or networks, do not guarantee
growth. He proposes 'the idea of the entrepreneurial firm as the
driver of cluster dynamics and regional growth' (Best, 2001, p.
69). While entrepreneurial firms can be drivers, they cannot exist
without access to governance services institutions such as finance,
marketing and trade.
Saxenian (1996) argues that:
"[M]ost companies or stable regions pursue a single technical
option and, over time, become increasingly committed to a single
technological trajectory. A network-based regional economy like Silicon
Valley, alternatively, generates and pursues a rich array of
technological and organizational options" (Saxenian (1996, p. 112).
Local governance enables a region to recombine ideas and materials
and to pursue a wider range of options. All of these adaptations require
governance to make new markets for the distinctive features and ideas of
the place, and to implement the innovations, new technologies and
practices required to build ethical communities and leaders.
Governance of transactions matters to regional incomes because
governance gives remote buyers of regional goods and services the
confidence needed to trade with the region. Governance, or transaction
services, can therefore play a role in linking distinctive capability to
market opportunity.
Remoteness and Incomes
Increasing remoteness is a modern feature of Australian human
geography:
"One of the strongest features of the nineteenth-century
Australian economy was the high proportion of the population living in
non-metropolitan towns.... Small towns benefited from the direct
relationship between farm production and the need for farmers to have
regular access to supplies and commercial services.... Small town firms
were protected by distance as services had to be consumed on the spot
and high transport costs restricted competition from producers in other
regions." (Frost, 2008: 72-73).
Frost (2008) notes that improved transport and communication
services led to the drift of population out of non-metropolitan regions.
As transport, storage and communications infrastructure improved small
town firms were no longer protected by distance, and the larger
'sponge' towns grew:
"[B]y creating jobs .with strong links to their rural
hinterlands, while also looking to Melbourne and Sydney for products and
access to larger markets" (Frost, 2008: 78).
What became of the institutional resources providing governance of
the trade transactions which enabled the settlers and producers to sell
the tradable goods and services which they produced? Historical changes
in the pattern of settlement gradually shifted transaction governance
out of remote and outer regional areas, thus limiting the potential for
local innovation and economic development. Improved transport,
communications and technologies shifted mobile governance services out
of the hinterlands and into regional and capital cities. The increased
scale of governance services in the 'sponge' towns and cities
can be expected to have increased the efficiency of these services,
through improved specialization. However, increased specialization may
diminish both the capacity of the now remote resident population in the
hinterlands to recognize opportunity, to access the governance services
required to innovate and to build trusted connections with faraway
markets.
3. DATA AND STATISTICAL ANALYSIS
The principal hypothesis of this paper is that governance services
have a primary role in income determination in regions. The paper aims
to explore and compare the contributions made to regional incomes by the
governance (or transaction sector) industries, by each of the remaining
(transformation) industries, and by remoteness.
A secondary aim is to explore the effect of remoteness on the
relationship between incomes and governance (transaction services).
This paper uses occupation by industry data from the 2006
Australian population census (ABS, 2006b, 2006c, 2007a) and the
definitions of transaction service industries used by Wallis and North
(1986) to construct estimates of the share of transaction governance
employment in the labour force of each of the 140 functional economic
regions in Australia defined for 2006 by Mitchell (2008) and described
by Mitchell and Stimson (2010). Each functional region is classified to
one of five remoteness categories (ABS, 2006d), based on the remoteness
category in which the median population of the functional region
resides. Median income is calculated from Australian Bureau of
Statistics (ABS) tables from the 2006 Population Census for Statistical
Local Area (SLA) and Indigenous Status (INGP) by Individual Income
(weekly) (INCP).
The measure used to represent the governance sector for each
functional economic region in this study is the sum of employment in the
region in the industries of (F) Wholesale trade, (G) Retail trade, (J)
Information Media and Telecommunications, (K) Financial and Insurance
Services, (L) Rental, Hiring and Real Estate Services and (M)
Professional, Scientific and Technical Services from ABS (2006a) all
expressed as a share of the employed workforce in the region.
While the (J) Information Media and Telecommunications industry
class of ABS (2006a) does facilitate search, inspection, sales and
procurement through publishing, websites, telecommunications,
broadcasting, newspapers and libraries, Wallis and North (1986) do not
identify this class as a transaction industry. However, since Wallis and
North (1986) conducted their study, this industry class has changed from
print and wireless publishing to Internet services and search, expanding
the range of information, advertising, search and inspection tools
available to buyers and sellers.
The (M) Professional, Scientific and Technical Services industry
class of ABS (2006a) is added to the transaction industries in order to
capture the (693) Legal and Accounting services provided by professional
firms, which are transaction industries. Most of the other services in
this class are business services related to defining requirements,
search, marketing and management, and therefore can be treated as
transaction services; these are (691) Scientific Research Services;
(692) Architectural, Engineering and Technical Services; (694)
Advertising Services; (695) Market Research and Statistical Services;
(696) Management and Related Consulting Services; and (70) Computer
System Design and Related Services. This industry class also includes
transformation services in the (697) Veterinary Services section and in
the (6991) Professional Photographic Services subsection (ABS, 2006a).
As Wallis and North (1986: 97) noted "every economic activity
involves elements of transaction and other costs". These other
costs are transformation costs. Each industry class contains both
transaction governance and transformation activities. The transformation
industry classes have as their primary activity the transformation of
inputs into outputs of goods and services, however, they do contain some
transaction services. Similarly, the transaction industries have as
their primary activity the conduct of transactions, however, they do
contain some transformation services.
The presence of some transactions governance services in each
measure of transformation activities may overstate the scale of
transformation activities, and understate the regression coefficients;
and similarly the presence of some transformation services within the
measure of transactions governance may overstate transaction services
and understate the regression coefficients. On balance we would expect
the effects of these unmeasured governance and transformation services
to offset each other to some extent, leaving only a minor effect on
findings about the relative importance of governance services or
transformation services on income.
In this paper, the aim is to separate the effects on regional
income of the share of employment in transformation industries, the
share of employment in transaction governance industries, and the
remoteness of the region. Accordingly, the transaction governance
services provided by managers, sales employees and administration
workers employed in the region by transformation industries are not
included in the data on transaction or governance services in each
region. These employees are in the transformation industries where they
arrange the transactions of the firm with suppliers and customers, and
coordinate the allocation of resources within the firm (Wallis and
North, 1986: 101).
Excluding these employees from the transaction or governance sector
understates the aggregate scale of governance services in the region and
thus increases their regression coefficient, and retaining these
employees overstates the scale of transformation services and thus
reduces their regression coefficient. However, it does allow an
estimation of the full contribution to regional income of the industries
making up the transformation sector as well as giving a clear indication
of the importance of the contribution of the specialized governance
sectors.
Public Administration and Safety is classified as a transaction
industry but is presented separately in this analysis because government
at local level is involved in community development but may be less
involved in facilitating trade.
All the data, except Median Weekly Income, are expressed as ratios
in the range 0 to 1.
Appendix 2 presents a plot of regional income against the share of
regional transaction governance in regional employment in 2006.
Simple Correlation Analysis
Appendix 1 provides a complete set of correlation coefficients and
the notes to Appendix 1 provide definitions and sources of all data. The
correlation coefficient describes the relationship between two variables
each of which is assumed to vary randomly; in our case this variability
is between functional regions (Christ, 1966: 26). The correlation
coefficient takes no account of the effects of any other variables and
does not indicate causality. We use correlation coefficients to better
understand the interactions between individual variables.
Income: Only governance (TSec) (0.373, p < 0.01), Public
Administration and Safety (PubAd) (-0.297, p < 0.01) and Very Remote
(VryRem) regions (-0.402, p < 0.01) have coefficients of correlation
with income which are statistically significant. Of these, only
governance (TSec) is positively correlated with income.
The positive correlation of income with governance (TSec), and the
lack of any significant correlations with any other industry sector,
suggests that policies to stimulate regional governance may be an
effective means of reducing regional income disparities or of enlarging
opportunities in poorly performing regions.
The negative correlation of income with Public Administration and
Safety (PubAd) and with Very Remote (VryRem) regions may reflect some
substitution effects between these variables in 2006. Public
Administration and Safety (PubAd) may have expanded in low income
functional regions, such as Very Remote (VryRem) regions, under the
former Australian Commonwealth Government Community Development
Employment Projects program. This program was abolished in stages
following July 2007. Employment in Public Administration and Safety in
four Very Remote functional regions exceeded half of the employed
workforce in these regions in 2006.
Governance Services: In addition to their correlation with income,
governance services (TSec) are also strongly and positively correlated
with Other Services (OthSvc) (0.288, p < 0.01), with Major Cities
(MjrCty) (0.292, p < 0.01), and with Inner Regions (InReg) (0.238, p
< 0.02).
The positive correlation of governance (TSec) with Major Cities
(MjrCty) and with Inner Regions (InReg) is consistent with Sassen (2000)
who argues that governance services concentrate in major cities.
The positive correlation of governance (TSec) with Other Services
(OthSvc) is unexpected and suggests further examination of ways in which
the Other Services industry classification complements governance. The
2006 Australian Census Dictionary Industry of Employment Classification
(IND06P) (ABS, 2006a) defines Other Services as including (94) Repair
and Maintenance, (95) Personal and Other Services, (96) Private
Households Employing Staff and Undifferentiated Goods and
Service-Producing Activities of Households for Own Use. Within (95)
Personal and Other Services are Civic, Professional and Other Interest
Group Services: these include business, professional, labour and other
association services, such as Chambers of Commerce and unions, which
employ people in many regions who play a role in governance.
Governance (TSec) is also positively correlated with Manufacturing
(Mfg) (0.223, p < 0.05), Construction (Constn) (0.228, p < 0.05),
and Transport (Trnspt) (0.199, p < 0.05), all of which are
substantial users of the finance and insurance services component of
governance.
Governance (TSec) is weakly and negatively correlated with Health
Care and Social Assistance (HlthSoc) (-0.196, p < 0.05), which has a
strong and positive correlation with Public Administration and Safety
(PubAd) (0.244, p < 0.02). Governance (TSec) is also strongly and
negatively correlated with Public Administration and Safety (PubAd)
(0.462, p < 0.01) and with Very Remote (VryRem) functional regions
(0.455, p< 0.01). The negative correlation of transaction governance
(TSec) with Public Administration and Safety (PubAd) and with Very
Remote regions (VryRem) suggests that Public Administration and Safety
(PubAd) is more evenly distributed across functional economic regions
than transaction governance; this reflects the findings of Sassen (2000)
that transaction governance services are concentrated in Major Cities.
However, the significant and negative correlations between Very
Remote regions and both income (-0.402, p< 0.01) and transaction
governance (-0.455, p < 0.01) is interesting and may reward further
research.
Public Administration and Safety (PubAd) is also strongly and
positively correlated with Very Remote (VryRem) regions (0.578, p <
0.01) reflecting the large share of employment in Public Administration
in Very Remote regions. This may reflect employment under the Community
Development Employment Program which was classified as employment in the
2006 Census (ABS, 2006a).
Public Administration and Safety (PubAd) is strongly and negatively
correlated with Manufacturing (Mfg) (-0.451, p < 0 .01), Other
Services (OthSvc) (-0.410, p < 0.01) and Transport (Trnspt) (-0.538,
p < 0.01); and less strongly and negatively correlated with
Accommodation and Food (AccomFd) (-0.241, p < 0.02), Electricity Gas
and Water (ElGW) (0.222, p < 0.05) and Inner Regions (InReg) (-0.214,
p < 0.05). These patterns may reflect concentration of Public
Administration and Safety in inner city locations.
Agriculture Forestry and Fishing (Agric) is positively correlated
with Outer Regions (OutReg) (0.412, p < 0.01) and negatively
correlated with Major Cities (MjrCty) (0.429, p < 0.01), which
reflects the geography of Agriculture. Agriculture Forestry and Fishing
(Agric) is also negatively correlated with Construction (Constn)
(-0.243, p < 0.01), and with Arts and Recreation (ArtRec) (-0.399, p
< 0.01).
Mining (Mine) is positively correlated with remote regions (0.404,
p < 0.01) but not significantly with regional income or with regional
governance. Transaction services for both Mining and Agriculture tend to
be managed in head offices of mining and bulk commodities trading
businesses.
Multiple Linear Regression Analysis
We use multiple linear regression analysis which assumes a
functional relationship between a dependent variable, in our case income
in each region, and a set of independent variables, in our case
employment in transaction governance, specified transformation
industries, and remoteness. The analysis estimates a coefficient for
each independent variable and a constant for the functional relationship
which minimises a measure of the deviations between the estimated and
the observed values of income in each region.
The multiple linear regression result (standard error of
coefficient estimate in parentheses) is as follows:
Income = 828 + 394*TSec - 516*PubAd - 639*Agric - 525*Mine
(193) (148) (212) (246) (283)
- 655*Mfg - 221*ElGW - 1507*Constn - 895*AccomFd - 581*Trnspt
(368) (1994) (584) (370) (1142)
- 1592*EdTr - 862*HlthSoc + 267*ArtRec - 547*OthSvc - 76*MjrCty
(825) (414) (1935) (1521) (84)
+54*InReg + 58*OutReg + 121*Remote + 10*VryRem.
(84) (86) (93) (99)
The r-squared statistic for this multiple linear regression is 0.32
which is significant (p < 0.01) (Mills, 1955: 771). The F statistic
is 3.15; for a regression with 121 degrees of freedom (v2) and v1 of 18
the F99 value is 2.19 (Mills, 1955: 777). The regression reveals a
statistically significant relationship between the variables p <
0.01.
The regression has six constants, allowing for 5 remoteness values
and the regression constant, so that n = 140 - 1 - 1 - 5 = 133. The t
statistic for the regression coefficients n = 120 is 2.358 for p <
0.01, 1.98 for p < 0.025, and 1.658 for p < 0.05 (Christ, 1966:
667).
All the coefficients, including the constant, are large numbers
because all the independent variables are in the range 0 to 1. Across
all regions the average share of governance (TSec) in the employed
workforce is 0.216; the largest share of all the variables. The share
for Public Administration is 0.118.
The positive regression coefficients for which p < 0.01 are for
the Constant and governance (TSec); the negative coefficients with p
< 0.01 are for Public Administration, Agriculture, Construction,
Accommodation and Food. Health and Social Service has a negative
coefficient with p < 0.025, and Mining, Manufacturing and Education
and Training all have negative coefficients with p < 0.05.
The only statistically significant and positive regression
coefficients are the Constant and the governance variable (TSec).
The Remoteness of the region does not have a significant effect on
regional incomes, while all but Major Cities make a positive
contribution to incomes. Every transformation industry makes a negative
contribution to incomes, with the exception of Arts and Recreation.
Summary of Analysis
One hypothesis for this analysis has been that governance has a
positive and statistically significant relationship with incomes in
Australian functional economic regions. Both the correlation and
regression analyses demonstrate a strong and positive relationship
between local income and the share of local employment engaged in
transaction governance. This finding supports the hypothesis.
While governance is not the only factor affecting regional incomes,
in this model governance appears overwhelmingly as the most important
factor.
The negative regression coefficients for Public Administration and
Safety, Health and Social Services, Manufacturing, and Education and
Training may reflect redistributive or labour cost reducing location
choices by these industries. The result for Agriculture reflects drought
conditions in 2006 (ABS, 2008) and these effects may also be reflected
in negative coefficients for Construction, and for Accommodation and
Food.
On balance the results suggest that decentralizing Public
Administration and Safety is not likely to improve regional incomes, but
decentralizing governance may improve regional incomes.
The negative correlation and regression coefficients between Mining
and income may reflect the tendency for regional employment in mining to
concentrate in Outer Regional and Remote regions which may have lower
incomes.
A secondary hypothesis has been that remoteness presents a barrier
to the development of governance of transactions and therefore to
income. The remoteness zones, with the exception of Major Cities,
attract positive but not statistically significant regression
coefficients for their effects on regional income. Remoteness by itself
does not consistently bring a significant change in income.
4. DISCUSSION
Coase (1937) defines transaction costs as the costs of using the
price system. North (1987) describes the costs of exchange as the costs
of bringing order to transactions. In other words, transaction costs are
the costs of the governance of transactions.
The aim in this paper has been to assess and compare the effects on
regional incomes of variations in the shares of local employment
accounted for by transactions governance, other industries and the
remoteness classification of the region.
The concentration of the transactions governance in cities and high
income regions is well known (Sassen, 2000). Remoteness does not alter
this relationship: remote regions have less transaction governance and
less income.
The strong performance of regional governance as a contributor to
local incomes in this regression and correlation analysis is consistent
with the findings of Dollery and Leong (1998) about the significant
contribution of transaction services to Australia's National
Income.
This result should encourage regional economic developers to seek
ways of improving the governance of local transactions as a means to
increase regional incomes. Regions with weak governance over local
transactions will find it difficult to grow incomes.
Of course, high incomes can attract better the governance of
transactions. Providers of transaction services, such as retail traders,
are attracted to regions exhibiting high incomes. However, some high
income regions have limited transaction governance services,
particularly in mining and agriculture, where local enterprises rely for
transaction governance on head offices or on bulk material traders
located elsewhere. These regions will find it difficult to access new
markets.
Some transaction governance services exist in every region, and
they will be attracted to regions with opportunities for economic growth
and development. Regional development policy makers seeking to grow
local incomes should consider ways of enlarging the accessible range of
local transaction governance services as a means of stimulating economic
development by better connecting existing and potential industries to
customers and investors.
Further research
The work reported here decomposes the effect on regional incomes of
the transformation industries but does not decompose the contributions
of the transaction governance industries.
Further research is required to disaggregate transaction services
in order to define which element of the transaction services most
contributes to regional incomes, and how these elements interact. This
would contribute to the research needed to integrate transaction
governance into models of regional development.
Further research is also required to understand how the
distribution of transaction services or governance across regions is
changing over time. Studies show consistent growth in national
transaction services in Australia (Dollery and Leong, 1998) and in the
United States of America (Wallis and North, 1986).
The positive correlation of governance with the Other Services
industry suggests a need for further research on the ways in which the
Other Services industry classification complements governance. There may
be a case for including Other Services in the transaction governance
services.
The significant and negative correlations between Very Remote
regions and both income (-0.402, p< 0.01) and transaction governance
(-0.455, p < 0.01) is interesting. The regression confirms governance
services as the principal source of variations in income. The
association of very remote regions with low incomes and low governance
services is demonstrated by the location of these regions in the bottom
left hand corner of Appendix 2. The policy recommendation is to
strengthen governance in very remote regions. Further research is needed
to determine how stronger governance might be achieved in very remote
regions.
These results are consistent with a positive relationship between
transaction governance and income, but suggest that bringing transaction
governance to very remote regions, as a means of raising incomes, may
encounter difficulty.
One related hypothesis deserving further research may be that
remote regions have relatively closed local economies, which protect
local traders and limit the leakage of incomes to other regions.
Stronger transaction governance could disrupt a closed economy. This
research could investigate regional chambers of commerce as institutions
with a role in the governance of regional transactions.
Most importantly, further research into practical ways of
stimulating the regional governance of transactions may lead to the
practical reduction of regional income disparities.
Appendix 1. Correlation Coefficients.
TSec PubAd Agric Mine Mfg ELGW
Income 0.373 -0.297 0.012 0.081 0.067 0.111
P < 0.01 < 0.01
TSec -0.462 0.012 -0.034 0.223 0.114
P < 0.01 < 0.05
PubAd -0.211 -0.081 -0.451 -0.222
P < 0.05 < 0.01 < 0.05
Agric -0.105 0.047 0.125
P
Mine -0.185 0.037
P
Mfg 0.145
P
ELGWr
P
Constrn
P
AcomFd
P
Trnspt
P
EducTr
P
HlthSoc
P
ArtsRec
P
OthSvcs
P
MajCit
P
InReg
P
OutReg
P
Remote
P
Const AccFd Trnpt EdcTr
Income 0.090 0.062 0.202 -0.081
P
TSec 0.228 -0.003 0.199 -0.095
P < 0.05 < 0.05
PubAd -0.414 -0.241 -0.538 -0.004
P < 0.01 < 0.02 < 0.01
Agric -0.243 -0.092 0.052 -0.164
P < 0.02
Mine -0.021 0.031 0.031 -0.060
P
Mfg 0.294 -0.152 0.327 -0.152
P < 0.01 < 0.01
ELGWr 0.144 -0.097 0.137 0.086
P
Constrn -0.026 0.295 -0.010
P < 0.01
AcomFd 0.203 -0.263
P < 0.05 < 0.01
Trnspt -0.154
P
EducTr
P
HlthSoc
P
ArtsRec
P
OthSvcs
P
MajCit
P
InReg
P
OutReg
P
Remote
P
HlthSoc ArtRec OthSvc MajCit
Income -0.225 -0.075 0.160 -0.042
P
TSec -0.196 -0.161 0.288 0.292
P < 0.05 < 0.01 < 0.01
PubAd 0.244 0.103 -0.410 -0.169
P < 0.02 < 0.01
Agric -0.162 -0.399 -0.128 -0.429
P < 0.01 < 0.01
Mine -0.190 -0.079 -0.068 -0.184
P
Mfg -0.235 -0.308 0.224 0.149
P < 0.02 < 0.01 < 0.05
ELGWr -0.068 -0.116 0.106 -0.177
P
Constrn -0.092 0.0312 0.204 0.144
P < 0.05
AcomFd -0.301 0.090 -0.250 -0.041
P < 0.01 < 0.02
Trnspt -0.428 -0.170 0.201 0.062
P < 0.01 < 0.05
EducTr 0.434 0.220 0.167 -0.026
P < 0.01 < 0.05
HlthSoc 0.469 0.201 -0.041
P < 0.01 < 0.05
ArtsRec 0.029 0.154
P
OthSvcs 0.185
P
MajCit
P
InReg
P
OutReg
P
Remote
P
InnReg OutReg Remt VRem
Income 0.174 0.104 0.084 -0.402
P < 0.01
TSec 0.238 0.009 -0.183 -0.455
P < 0.02 < 0.01
PubAd -0.214 -0.080 0.020 0.578
P < 0.05 < 0.01
Agric -0.038 0.412 -0.025 0.051
P < 0.01
Mine -0.136 -0.037 0.404 0.039
P < 0.01
Mfg 0.224 0.030 -0.303 -0.222
P < 0.05 < 0.01 < 0.05
ELGWr 0.298 0.063 -0.084 -0.176
P < 0.01
Constrn 0.250 -0.099 0.046 -0.434
P < 0.02 < 0.01
AcomFd -0.002 -0.076 0.240 -0.079
P < 0.02
Trnspt 0.061 0.141 -0.004 -0.349
P < 0.01
EducTr 0.093 -0.124 0.091 -0.008
P
HlthSoc 0.036 -0.199 9.32E-06 0.281
P < 0.05 < 0.01
ArtsRec -0.059 -0.186 0.052 0.096
P
OthSvcs 0.209 0.012 -0.219 -0.306
P < 0.05 < 0.05 < 0.01
MajCit -0.276 -0.307 -0.183 -0.183
P < 0.01 < 0.01
InReg -0.372 -0.222 -0.222
P < 0.01 < 0.05 < 0.05
OutReg -0.247 -0.247
P < 0.02
Remote -0.148
P
Notes for Appendix 1.
TSec: The share of the employed regional workforce reported as
working in the Australian Census (ABS, 2006a) consisting of all persons
employed, except those recorded as Not stated, Not applicable or
Inadequately described, in industry classes (F) Wholesale Trade; (G)
Retail Trade; (J) Information Media and Telecommunications; (K)
Financial and Insurance Services; (L) Rental, Hiring and Real Estate
Services; and (M) Professional, Scientific and Technical Services. The
sum of the persons employed in these industries and occupations is
divided by the sum of all employed persons.
Income: Median individual weekly income derived from downloaded
Australian Census 2006 tables of Statistical Local Area (SLA) and
Indigenous Status (INGP) by Individual Income (weekly) (INCP). Counting:
Persons, Place of Usual Residence. (ABS, 2007).
All data on occupation by industry of employment was collected from
downloaded ABS source tables for Statistical Local Area (SLA) and
Occupation 06 (ANZSCO) (OCC06P) by Industry of Employment (ANZSIC06)
(IND06P) (ABS, 2007). Counting: Persons, Place of Usual Residence
PubAd: The share of the employed regional workforce reported as
working in the Australian Census (ABS, 2006a) industry classification
(O) Public Administration and Safety.
Agric: The share of the employed regional workforce reported as
working in the Australian Census (ABS, 2006a) industry classification
(A) Agriculture, Forestry and Fishing.
Mine: The share of the employed regional workforce reported in the
Australian Census (ABS, 2006a) industry classification (B) Mining.
Mfg: The share of the employed regional workforce reported in the
Australian Census (ABS, 2006a) industry classification (C)
Manufacturing.
ElGW: The share of the employed regional workforce reported in the
Australian Census (ABS, 2006a) industry classification (D) Electricity
Gas and Water Services.
Const: The share of the employed regional workforce reported in the
Australian Census (ABS, 2006a) industry classification (E) Construction.
AccFd: The share of the employed regional workforce reported in the
Australian Census (ABS, 2006a) industry classification (H) Accommodation
and Food Services.
Trnpt: The share of the employed regional workforce reported in the
Australian Census (ABS, 2006a) industry classification (I) Transport,
Postal and Warehousing.
EdcTr: The share of the employed regional workforce reported in the
Australian Census (ABS, 2006a) industry classification (P) Education and
Training.
HlthSoc: The share of the employed regional workforce reported in
the Australian Census (ABS, 2006a) industry classification (Q)
Healthcare and Social Assistance.
ArtRec: The share of the employed regional workforce in the
Australian Census (ABS, 2006a) industry classification (R) Arts and
Recreation Services.
OthSvc: The share of the employed regional workforce reported as
working in the Australian Census (ABS, 2006a) industry classification
(S) Other Services.
MajCit: Major City remoteness class (ABS, 2006d).
InnReg: Inner Regional remoteness class (ABS, 2006d).
OutReg: Outer Regional remoteness class (ABS, 2006d).
Remt: Remote remoteness class (ABS, 2006d).
VRem: Very Remote remoteness class (ABS, 2006d).
Appendix 2. Gross Personal Weekly Income by share of employment in
Transaction Services, Australia, 2006.
[GRAPHIC OMITTED]
Location Codes for selected Functional Economic
Regions in Appendix 2
Code Location
101 Inner and South Sydney
102 Inner West Sydney Canterbury Bankstown
103 Sydney North
104 St George Sutherland
110 Bathurst Orange
112 Muswellbrook Upper Hunter
114 Shoalhaven
124 Far North Coast NSW and hinterland
128 Griffith Darling
206 Frankston Mornington Peninsula
408 Port Pirie Flinders Ranges SA
508 Albany and Surrounds
509 Bunbury Collie South WA
515 Ashburton-Roebourne
516 Port Hedland
517 Broom West Kimberley
601 Hobart
602 Sorrell Tasman Peninsula
604 Glenorchy Derwent Valley Tas
607 Launceston and Surrounds
610 Meander Valley Tas
611 West Coast Tas
614 Flinders Tas
701 Inner Darwin
704 Palmerston Litchfield East NT
713 Groote Eylandt and surrounds
714 Borroloola and surrounds
718 Yuendumu NT
722 Petermann-Simpson NT
Source: Mitchell and Stimson (2010)
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Denis Anthony (Tony) O'Malley
Research fellow, Business School, University of South Australia,
Adelaide, South Australia, 5001 Australia. Email:
Denis.O'Malley@unisa.edu.au
