Annotation. The study explores the employment growth patterns across Georgian regions in the context of urban-rural linkages and applying the shift-share analysis. The results of the study show that during the recent decade Georgia experienced employment growth in all industry sectors driven primary by national share component. There was revealed mixed effects of industry and regional competitive components on employment growth across sectors and regions. The common trend across regions was negative industry mix and regional shift effects on Utility and Health sectors, However, in general, both sectors grew due to compensating national share effect.  The shift-share analysis revealed interesting rural-urban sectoral linkages in some Georgian regions. The shift-share analysis clearly identified allocation efficiency and the comparative advantage of each Georgian region across various industries and laid foundation for elaboration of recommendations for policy intervention.

Introduction. Ensuring sustainable livelihoods of the population in both rural and urban areas around the world represents a crucial challenge of global economic development. Recent tendencies in development theory and practices reflect a shift of research focus from simplified and isolated treatment of urban and rural areas to the study of the interrelationships between these two types of localities (Tacoli, 1998). The new approach in development policy highlights the poverty-reducing interlinkages between urban and rural spaces, including movement of goods and services, human and financial capital, technologies and other resources and possible complementarities from these interrelationships (OECD, 2013; UN-HABITAT, 2017). Generally, the following two types of flows within rural-urban continuum are acknowledged: spatial and sectoral (Tacoli, 1998; Von Braun, 2007). The spatial (goods, people, financial resources, technologies) and sectoral flows (input markets, agricultural and industrial products) creates strong interdependencies between rural and urban areas. These flows cause substantial transformation in these localities and lead to different patterns in development across regions.

The shift-share analysis of the employment growth. A good illustration of the patters of regional development is the analysis of the changes in employment levels across regions. The assessment of the regional development performance in relation to employment variable usually is conducted with the application of the shift-share model (Edwards, 2007; Esteban-Marquillas, 1972). A shift-share analysis, actually, shows which part of regional economic growth is due to the growth in national, industrial or regional component. In particular, the analysis decomposes the change over time in employment variable into three components: the national growth component; the industry-mix component; and regional growth component. The first two components are considered as the share portion of the model, while the latter one is regarded as the competitive or differential-shift component. The differential-shift component reflects the attractiveness and competitive advantages of the region. Shift-share analysis of the employment growth, actually, illustrates the demand side of the sectoral rural-urban linkages.

To identify rural-urban linkages, below, using the methodology of shift-share analysis, we discuss the changes in employment levels across Georgian regions during the period of 2009-2018[2]. During the period under review the employment in business sector grew by almost 90 percent. The highest growth experienced such industries as Arts, Entertainment and Recreation (323.3%); Accommodation &Food Service Activities (237.2%); Other Service Activities (209.2%); Wholesale and Retail Trade (195.5%); Administrative and Support Service Activities (190.2%), while the lowest growth rate shows Utility sector (2.7%), Other industry reveal positive dynamics with growth rates between 35 and 155 percent. Among regions the highest employment growth rate show Samegrelo (343%), Kvemo Kartli (173%), Mtskheta-Mtianeti (135%). Employment in such regions as Ajara, Guria, Tbilisi grew by more than a hundred percent during the period under review. Imereti and Racha have the lowest rates of employment growth, 9.7% and 12.3% respectively. The analysis reveals that regions substantially differ in their sectoral employment patterns. In this section we analyze the factors that influence the dynamics of employment rates across Georgian regions. For this purpose, we employ shift-share analysis, which allows to identify the structural transformation of the regions in terms of employment during the recent. This analysis allows to evaluate the competitiveness of regions across industries and to decide whether some policy intervention is necessary. Below we discuss the employment dynamics for each region separately.

Ajara. In Ajara region, the highest growing industries were Arts, Entertainment and Recreation (1161.6%); Real Estate Activities (405.4%); Other Service Activities (345.2%); Accommodation &Food Service Activities (321.5%); and Trade (203.1%). Other sectors showed growth, ranged from 31.1 to 128.3 percent. Only Information &Communication sector experienced a seven percent decline. The results of shift-share analysis identify the main forces that drive employment change across industries. For instance, the employment in Arts, Entertainment and Recreation sector increased by 3,381 persons during the review period. Out of this figure 2440 comes to regional factors (regional competitiveness), 680 to industry growth and only 261 to national growth. In Ajara, regional competitiveness plays substantial role in increasing employment in such industries as Real Estate Activities and Professional, Scientific and Technical Activities. The regional shift has a negative impact on Agriculture; Mining; Information &Communication and Education sectors. In the rest of industries regional shift is though positive but overwhelmed by national and industry effects. The analysis of resource allocation shows that the sectors with negative allocation of resources are: Utility; Trade; Real Estate; Professional, Scientific and Technical Activities, Administrative &Support services; Arts, Entertainment and Recreation; Other Service Activities and Education sectors. Form the above sectors, only Education has specialization but lacks discernable comparative advantage. Other industries in the list above, on the contrary, are not well specialized in the region but have comparative advantage. All these sectors reflect poor performance of market forces and require possibly policy intervention and further study. The allocation of resources in other sectors is efficient either because non-specialized sectors have no comparative advantage (Agriculture; Mining; Information &Communication) or because industries with comparative advantage are the same time well specialized (Manufacturing; Construction; Transportation; Accommodation; Health). These sectors require no policy intervention.

Guria. The following two sectors show negative growth rate during the period under review: Manufacturing and Health. In both cases the main driving forces behind the deployment decline were regional shift and industrial mix. Reginal shift had a negative impact on more than half of sectors in the region. Only the employment growth in Trade; Construction and Transportation sectors experienced significant positive impact from regional shift. The allocation of resources is efficient only for Accommodation; Real Estate; Education and Other Service Activities sectors. All other sectors require further study and possibly policy intervention.

Imereti. The highest rates of employment growth in the region show Other Service Activities (277.4%); Information &Communication (231.6%); Accommodation &Food Service Activities (205.2%); and Trade (180.5%). It worth to mention that, while the employment growth in the first two sectors was driven mainly by the regional competitiveness factors, regional shift had a negative impact. In the latter cases negative regional shift was compensated by the national and industry growth. In Imereti regional shift had a positive effect only on Mining; Transport; Information; Real Estate; and Other Services sectors. All other sectors experienced the negative impact of regional factors on the employment dynamics. In cases of Utility and Health sectors, negative regional shift along with negative impact from industry mix factor caused decrease in employment rates by 77 and 9 percent respectively. In terms of resource allocation, only the following five sectors require further study and further study and policy intervention: Manufacturing; Transportation; Information &Communication; Education; and Health. In the other sectors market forces work efficiently, with Mining and Real Estate sectors having comparative advantage.

Kakheti. Accommodation &Food Service Activities (1020.4%); Administrative &Support services (624%); Arts, Entertainment and Recreation (569.6%); Professional, Scientific and Technical Activities (356.3%) show the highest employment growth in the region. The positive employment dynamics in these sectors was driven largely by regional factors. All other industries with exception of Utility; Health and Other Services sectors reveal positive employment trend with growth rates between 25.7 (Mining) and 194.2 (Trade) percent. However, regional competitiveness contributed to positive growth rates only in a number of cases (Manufacturing; Transport; Information; Real Estate). In all other sectors the regional shift had a negative sign. Like in Imereti region, negative regional shift along with negative effect from industry mix led to decrease in Utility and Health sectors. Only four sectors (Manufacturing; Trade; Education and Other Services) show efficient allocation, while the other sectors require further study and policy intervention.

Mtskheta-Mtianeti[3]. Six sectors (Agriculture; Mining; Utility; Construction; Real Estate and Health) in the region experienced employment decline during the period under review. In all the cases the negative regional shift is behind these declining employment developments. Like other regions, the decline I Utility and Health employment is driven by both regional and industrial factors. On the contrary, the regional competitiveness substantially improves employment in such sectors Manufacturing; Trade; Accommodation &Food Service Activities; and Transportation. Practically all sectors (with exception of Accommodation &Food Service Activities; and Professional, Scientific and Technical Activities sectors) are characterized by inefficient allocation effect a require further study and policy intervention.

Racha. Accommodation &Food Service Activities (393.9%), Agriculture (215.9%) and Manufacturing (147.3%) have the highest employment growth rates among sectors in the region. Regional shift plays important role in these trends, especially for Manufacturing, characterized by negative Industry mix effects. Construction (-2.3%); Professional, Scientific and Technical Activities (-55.2%) and Health (-97.4%) sectors show negative employment trends cause by regional and industry factors. In the region only Agriculture and Trade sectors have efficient allocation of resources, while other require further study and policy intervention.

Samegrelo. Agriculture (343.9%), Arts, Entertainment and Recreation (315.2%); and Other Service Activities (428.9%) sectors are the most intensively expanding industries in the region. Interestingly, that Arts, Entertainment and Recreation sector shows increase in employment rates despite negative regional shift and is mainly driven by industry factors. It should be mentioned that positive regional shifts have only four sectors (Agriculture; Manufacturing; Real Estate; Other Service Activities) in Samegrelo, in all other cases regional factor has negative effect on employment growth. When this negative effect is not compensated by the national or industry factors the sector experiences employment reduction like Mining; Utility; Construction; Information &Communications; and Health sectors. In terms of resource allocation, all sectors in the region are distributed evenly.

Samtskhe-Javakheti. Transportation (622.2%), Administrative &Support services (348.2%), and Trade (333.9%)  are the most rapidly growing sectors in the region, supported by regional, industry and national factors. Agriculture, Utility and Health sectors show diminishing employment tendency. While the decrease in employment in the latter sectors, similarly to other regions, is driven by both regional and industry factors, the negative employment tendencies in Agriculture is mainly due to the regional shift. The allocative efficiency is attained only in Manufacturing, Education, Arts, Entertainment and Recreation sectors. All other industries in the region require further study and policy intervention.

Kvemo Kartli. The employment growth rates in the region is not so high as other regions with Arts, Entertainment and Recreation having the highest rate (461.8%), driven by the positive impacts from regional, industry and national factors. Only two sectors (Manufacturing; Utility) in the region have negative employment growth, caused by negative influence from regional shift and industry mix factors. Despite that six more of industries in the region experienced negative regional impact they show positive employment dynamics, since negative regional shift was compensated by national and/or industry factors. More than half of industries in the region require further study and policy intervention.

Shida Kartli. Similar to other regions Utility and Health sectors, as well as Education sector have decreasing employment tendency. In all cases this due the negative effect of the both regional and industry factors. Despite other sectors show positive tendency, regional shift in most cases is negative. Only Agriculture, Accommodation &Food Service Activities, Administrative &Support services, Arts, Entertainment and Recreation sectors are efficiently regulated by market forces. Other sectors in the region require further study and policy intervention

Tbilisi. Surprisingly, Agriculture industry (262.9%) along with Arts, Entertainment and Recreation sector (267.4%) show the highest rates of employment growth in Tbilisi. The interesting fact is that, while the impact of regional factor on Agricultural employment growth is substantial and positive, its effect on the Arts, Entertainment and Recreation sector is negative. The role of the regional shift in development of agricultural sector in such urban area as Tbilisi indicates on strong sectoral flows within the rural-urban linkages. Regional factor has also negative impact on the following sectors: Mining; Trade; Transportation; Accommodation &Food Service, Information; Real Estate. In most cases negative regional shift is compensated by positive national and industry effects and the relevant sectors experience employment growth. However, this is not the case for the Mining sector.  In terms of allocation efficiency, Tbilisi is not specialized in Agriculture sector, but has comparative advantage in this sector. Thus, this sector requires further study and policy intervention. In this regard only Mining, Accommodation &Food Service Activities, Professional, Scientific and Technical Activities, Administrative and Support Service Activities, and Education sectors are efficient in terms of resource allocation. All other sectors, like Agriculture sector, require further study and policy intervention.

Conclusions.  The shift-share analysis discussed above shows that during the recent decade Georgia experienced employment growth in all industry sectors driven primary by national share component. There was revealed mixed effects of industry and regional competitive components on employment growth across sectors and regions. The common trend across regions was negative industry mix and regional shift effects on Utility and Health sectors, However, in general, both sectors grew due to compensating national share effect.  The shift-share analysis revealed interesting rural-urban sectoral linkages in some Georgian regions. For instance, we find comparative advantage and substantial growth of Agriculture sector in such urban areas as Tbilisi. On the contrary, predominantly rural areas such Mtskhta-Mtianeti, Kakheti and Racha showed substantial regional comparative advantage and growth of Manufacturing sector. These trends provide a great opportunity for strengthening rural urban-linkages in Georgia. The shift-share analysis clearly identified allocation efficiency and the comparative advantage of each Georgian region across various industries and laid foundation for elaboration of recommendations for policy intervention.

References

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