nep-geo New Economics Papers
on Economic Geography
Issue of 2005‒04‒09
five papers chosen by
Vassilis Monastiriotis
London School of Economics

  1. Linking public investment to private investment. By Diego Martínez López
  2. Does Sutton Apply to Supermarkets? By Ellickson, Paul
  3. Los mecanismos de cohesión territorial en España: un análisis y algunas propuestas By Angel de la Fuente
  4. Choosing Electoral Rules: Theory and Evidence from US Cities By Philippe Aghion; Alberto Alesina; Francesco Trebbi
  5. The Thick Market Effect on Local Unemployment Rate Fluctuations By Li Gan; Qinghua Zhang

  1. By: Diego Martínez López (Centro de Estudios Andaluces y Universidad Pablo de Olavide)
    Abstract: Literature describes a positive effect of public investment on private capital accumulation. This paper seeks to provide new empirical evidence on this latter relationship for the case of Spanish regions over period 1965-1997. We use a crowding-out theoretical framework and panel data methodology. The results show a positive effect of productive and social public investment (especially in education) on private investment. The spillover effects generated by productive infrastructures located in other regions do not seem to encourage private investment in neighbouring regions. Public consumption and interest rate exert a negative influence on private capital accumulation. These results are robust to changes in the econometric specification.
    Keywords: Crowding-out, regional economics, investment, panel data.
    JEL: R53 H54 E62 C33
    Date: 2005
  2. By: Ellickson, Paul
    Abstract: This paper presents empirical evidence that endogenous sunk costs play a central role in determining the equilibrium structure of the supermarket industry. Using the endogenous sunk cost (ESC) framework developed in Sutton (1991), I construct a model of supermarket competition where escalating investment in firm level distribution systems is driven by the incentive to produce a greater variety of products in every store. Using the observed networks of store and warehouse locations, I identify 51 distinct geographic markets covering nearly the entire United States and empirically verify their relative independence. Employing a dataset consisting of every supermarket operating in these markets, I establish the existence of a lower bound to concentration that remains strictly positive as market size expands. Furthermore, I am able to verify that this non-fragmentation result applies only to firms that have built their own distribution networks, as the model predicts.
    Keywords: endogenous sunk costs, vertical product differentiation, oligopoly, retail, supermarkets, market concentration
    JEL: L13 L22 L81
    Date: 2005
  3. By: Angel de la Fuente
  4. By: Philippe Aghion; Alberto Alesina; Francesco Trebbi
    Abstract: This paper studies the choice of electoral rules, in particular, the question of minority representation. Majorities tend to disenfranchise minorities through strategic manipulation of electoral rules. With the aim of explaining changes in electoral rules adopted by US cities (particularly in the South), we show why majorities tend to adopt "winner-take-all" city-wide rules (at-large elections) in response to an increase in the size of the minority when the minority they are facing is relatively small. In this case, for the majority it is more effective to leverage on its sheer size instead of risking to concede representation to voters from minority-elected districts. However, as the minority becomes larger (closer to a fifty-fifty split), the possibility of losing the whole city induces the majority to prefer minority votes to be confined in minority-packed districts. Single-member district rules serve this purpose. We show empirical results consistent with these implications of the model.
    Date: 2005–04
  5. By: Li Gan; Qinghua Zhang
    Abstract: This paper studies how the thick market effect influences local unemployment rate fluctuations. The paper presents a model to demonstrate that the average matching quality improves as the number of workers and firms increases. Unemployed workers accumulate in a city until the local labor market reaches a critical minimum size, which leads to cyclical fluctuations in the local unemployment rates. Since larger cities attain the critical market size more frequently, they have shorter unemployment cycles, lower peak unemployment rates, and lower mean unemployment rates. Our empirical tests are consisten with the predictions of the model. In particular, we find that an increase of two standard deviations in city size shortens the unemployment cycles by about 0.72 months, lowers the peak unemployment rates by 0.33 percentage points, and lowers the mean unemployment rates by 0.16 percentage points.
    JEL: J64 R23
    Date: 2005–04

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