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
“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 20th century.
Ireland
EU
12
10
8
%
6
4
2
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
0
Annual Real GDP Growth: Ireland & EU15 (prior to recent expansion). Source: Eurostat
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.
140
130
120
110
90
80
70
60
50
Per capita GDP: Ireland as % EU15 Source: Eurostat
2007
2005
2003
2001
1999
1997
1995
1993
1991
1989
1987
1985
1983
1981
1979
1977
1975
40
1973
%
100
Ireland’s 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.
Planning
regions
1964-87
These are the
regions
referred to in
the following
graph
The period 1961-1991 witnessed a major trend towards the equalisation of
each region’s 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.
1961
1991
1.80
1.60
1.40
1.20
1.00
0.80
0.60
0.40
0.20
0.00
NE
E
SE
SW
MW
Mid
W
NW
Ratio of regional manufacturing employment share to regional population share.
Source: Census of Population
Donegal
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.
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.
Employment in IDA-su.pported foreign firms grew by 60%
between 1993-2000.
180000
160000
140000
120000
100000
80000
Source: Forfás
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
1989
1988
1987
1986
1985
1984
1983
60000
Value-added in IDA-supported foreign firms grew more
than fourfold between 1993-2000 in real terms
(2000 prices; 1990 = 100)
450
400
350
300
250
200
150
100
50
0
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
Value added: The difference between the value of sales and the
value of material & service inputs. Source: Forfás
2000
Foreign firm share (2000)
Employment
GDP
9.7%
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.
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
Total in education
Total in higher ed
% in higher ed
1983/84
934,000
48,000
5.2%
2002/03
913,000
129,000
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).
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.
Economic
Per capita
dependency
GDP €
rate**
Workforce
(m)
GDP/
worker €
1991
1.149
59,791
19,475
2.07
2006
1.930
91,606
41,698
1.20
+68.0%
+53.2%
+114.1%
-58.0%
Productivity in the Irish economy 1991-2006*
*All values in 2006 prices Sources: Census of Population; Census
of Industrial Production
** Economic dependency rate: The number of people not in paid
employment divided by the number of people in paid employment
A further major development in the 1990s was the
growth of inward investment in export services.
35.0
30.0
25.0
20.0
15.0
10.0
5.0
05
20
04
20
03
20
02
20
01
20
00
20
99
19
98
19
97
19
96
19
95
19
94
19
93
19
92
19
19
91
0.0
Service employment as % total foreign employment
Source: Forfás
Between 1998-2006 the share of total exports accounted for by
services rose from under a quarter to almost one half.
Merchandise
Services
160000
140000
47.9%
100000
€bn
€bn (2006 prices)
120000
80000
60000
40000
24.6%
20000
0
1998
1999
2000
2001
2002
2003
Composition of Irish exports 1998-2006.
Source: CSO External Trade Statistics
Note: Services exports include recorded computer media
2004
2005
2006
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 world’s leading
exporter).
70000
€bn (2006 prices)
60000
€M
50000
Other
Transport & Comms
40000
Tourism & Travel
30000
Business Services
Financial Services
20000
Computer Services
10000
0
1998
1999
2000
2001
2002
2003
2004
2005
Composition of services exports 1998-2006.
Source: CSO Balance of Payments Statistics
2006
Ireland’s share of global service exports has
been rising strongly
Source: UNCTAD
2.5
2
1.5
%
1
0.5
0
1998
1999
2000
2001
2002
Ireland’s share of global services exports
2003
2004
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
7.5
-17.0
1.6
14.8
-40.9
5.4
Secondary
38.0
+248.2
34.0
27.7
+52.8
26.1
Tertiary
54.5
+359.8
64.4
57.6
+92.3
68.5
Primary
Sectoral change in GDP & employment 1991-2006
Source: Census of Population
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.
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 aboveaverage loss of Primary employment in this region.
Region
Total
Primary
Secondary
Tertiary
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
Regional employment change 1991-2006*. Source: Census of Population
* Excluding “Industry not stated”
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)
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)
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.
Region
1991
2006
Prim %
Sec %
Tert %
Prim %
Sec %
Tert %
Border
20.7
30.0
49.3
7.7
29.0
63.4
Midlands
25.5
28.1
46.5
8.5
30.5
61.0
West
20.9
25.1
46.0
8.4
29.4
62.2
East
4.4
26.0
69.5
1.9
20.9
77.2
Mid West
19.7
29.3
50.9
7.3
30.6
62.1
South East
21.6
30.3
48.1
8.7
30.6
60.7
South West
18.1
28.9
53.0
7.0
29.0
64.0
Total
14.9
27.7
57.6
5.4
26.1
68.5
Sectoral composition of employment by region.
Source: Census of Population
Regional distribution of employment in
manufacturing and international services
The following four graphs show each region’s 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.
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.
1996
2005
SE
Border
1.60
1.40
1.20
1.00
0.80
0.60
0.40
0.20
0.00
Dublin
W
SW
Midlands
MW
ME
Ratio of employment share to population share: Indigenous manufacturing.
Source: Forfás
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.
1996
2005
1.80
1.60
1.40
1.20
1.00
0.80
0.60
0.40
0.20
0.00
Dublin
W
SW
SE
Border
Midlands
MW
ME
Ratio of employment share to population share: Foreign manufacturing
Source: Forfás
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.
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.
1996
2005
1.60
1.40
1.20
1.00
0.80
0.60
0.40
0.20
0.00
Dublin
W
SW
SE
Border Midlands
MW
ME
Ratio of employment share to population share: all manufacturing
Source: Forfás
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.
1996
2005
3.00
2.50
2.00
1.50
1.00
0.50
0.00
Dublin
W
SW
SE
Border
Midlands
MW
ME
Ratio of employment share to population share: Internationallytraded services Source: Forfás
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 19952006 %
Disp Income as
% East 2006
Border
82.9
64.7
83.2
Midlands
80.7
68.0
82.7
West
82.5
68.8
85.0
East
100.0
63.0
100.0
Mid West
88.2
64.8
88.6
South East
82.5
69.0
85.1
South West
87.1
65.9
88.1
Total
65.7
Regional distribution of per capita disposable income
Source: CSO National Accounts statistics
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.
Emigration
Immigration
80
70
60
50
40
30
20
10
Annual Net Emigration/Immigration.
Source: CSO Demographic statistics
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
0
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.
Ratio of immigrant* share to population share
1991
2006
1.60
1.40
1.20
1.00
0.80
0.60
0.40
0.20
0.00
East
SE
SW
MW
West
Midlands
* Refers to residents born in countries outside UK & USA
Source: Census of Population
Border
Other aspects of spatial change in the
Celtic Tiger period
Growth in long-distance commuting linked to
the rapidly-rising level of car ownership
Source: Walsh et al (2005)
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)
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).
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.
Inter-urban commuting (cont.)
The following table gives an idea of the complexity of urban commuting patterns
in Irish towns today.
While Youghal’s 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 Cashel’s 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 town’s 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.
Employment configuration of selected towns
2006
Resident
Residents
Employed
Pop
working
in town
2006
(anywhere)
Cashel
2,338
1,802
916
Youghal
6,785
1,830
2,004
Nenagh
7,751
4,732
2,760
New Ross 7,709
2,543
2,389
Killorglin
1,627
1,635
512
Leixlip
14,676
7,121
6,494
Residents
working in
town
Residents
working
elsewhere
Incoming
workers
536
380
1,266
1,111
893
719
1,701
1,059
3,031
1,000
1,389
1,543
280
232
1,355
1,327
5,167
5,794
(58.5%)
(55.4%)
(61.6%)
(41.9%)
(54.7%)
(20.4%)
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
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)
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
Problems with the NSS


The NSS is supposed to be supported by the National
Development Plans (NDPs) 2000-2006 and 20072013 (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.
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.
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.