nep-geo New Economics Papers
on Economic Geography
Issue of 2005‒04‒30
nine papers chosen by
Vassilis Monastiriotis
London School of Economics

  1. Marriage and the City By Pieter A. Gautier; Michael Svarer; Coenraad N. Teulings
  2. Knowledge-Capital Meets New Economic Geography By Peter Egger; Stefan Gruber; Mario Larch; Michael Pfaffermayr
  3. Regional Grants as Pork Barrel Politics By Kevin Milligan; Michael Smart
  4. Net Capital Flows and Productivity: Evidence from U.S. States By Sebnem Kalemli-Ozcan, Ariell Reshef; Bent E. Sørensen,Oved Yosha
  5. Employment Effects of Spatial Dispersal of Refugees By Anna Piil Damm; Michael Rosholm
  6. Will Industrial Districts Exploit B2B? A local experience and a general assessment. By Guido Fioretti
  7. Agent-Based Models of Industrial Clusters and Districts By Guido Fioretti
  8. Individual Contacts, Collective Patterns. Prato 1975-97, a story of interactions. By Guido Fioretti
  9. The effects of public transfers on productivity By F. Calidoni

  1. By: Pieter A. Gautier; Michael Svarer; Coenraad N. Teulings
    Abstract: Do people move to cities because of marriage market considerations? In cities singles can meet more potential partners than in rural areas. Singles are therefore prepared to pay a premium in terms of higher housing prices. Once married, the marriage market benefits disappear while the housing premium remains. We extend the model of Burdett and Coles (1997) with a distinction between efficient (cities) and less efficient (non-cities) search markets. One implication of the model is that singles are more likely to move from rural areas to cities while married couples are more likely to make the reverse movement. A second prediction of the model is that attractive singles benefit most from a dense market (i.e. from being choosy). Those predictions are tested with a unique Danish dataset.
    Keywords: marriage, search, mobility, city
    JEL: J12 J64
    Date: 2005
  2. By: Peter Egger; Stefan Gruber; Mario Larch; Michael Pfaffermayr
    Abstract: We incorporate the now standard knowledge-capital model of multinational firms in a new economic geography setting. The theoretical predictions of our model suggest that unskilled labor mobility leads to less concentration of production than skilled labor mobility does. This is in line with empirical evidence that agglomeration of production among European nations is less pronounced than among US regions. Our model shows that the different patterns in labor mobility can explain actual differences in the spreading of industries. According to our welfare analysis, trade liberalization is likely Pareto-improving for a larger (smaller) country with mobile unskilled (skilled) labor. In the supplement, we investigate the sensitivity of our results in several respects. In the first section, we provide the figures of real factor rewards for the trade liberalization scenarios discussed in and underlying Figures 7 and 8 of the paper. Second, in Figures 3(n) - 5(v) (6(n) - 6b(v)) we infer the existence, or non-existence, of each firm type separately in the ? - ?L-space (? - ?S-space) for country i firms and all four scenarios of firm regimes. Third, we illustrate how changes in the parameters ?, ? and ? affect the outcome. Finally, we analyze how the asymmetric endowment with the immobile factor influences the core-periphery patterns.
    Keywords: knowledge-capital model, new economic geography, unskilled labor mobility, skilled labor mobility
    JEL: F12 F23 R12 R13
    Date: 2005
  3. By: Kevin Milligan; Michael Smart
    Abstract: We investigate the political and economic factors influencing the allocation of regional development grants for a panel of Canadian electoral districts in the 1988-2001 period. In a strong party system such as Canada’s, models of political competition predict little role for individual legislators, as party leaders allocate resources to maximize party success. While spending is targeted toward some “swing” districts, we do also find it is higher in districts represented by members of the government party, especially those in the federal Cabinet, and those of lower seniority. We develop a model featuring bargaining over legislative and non-legislative favours that is consistent with the evidence.
    JEL: D72 H25 R58
    Date: 2005
  4. By: Sebnem Kalemli-Ozcan, Ariell Reshef; Bent E. Sørensen,Oved Yosha
    Abstract: We study net capital flows between U.S. states. We present a simple neoclassical model in which total factor productivity (TFP) varies across states and over time and where capital freely moves across state borders. In this framework capital flows to states that experience a relative increase in TFP thus creating net cross-state capital ownership positions. Net ownership positions converge to zero over time in the absence of further TFP movements. While TFP can not be directly observed, we can identify states with high TFP growth as states with high output growth. By comparing the level of personal income to output, we construct indicators of net capital flows into a state. We then examine empirically if the level of net capital flows between states following relative movements in TFP corresponds to the predictions of the model and whether net ownership positions tend to converge to zero. Our empirical results imply large flows of capital between states; for example, we find that a state with annual per capita output growth 1 percent higher than the average state over 10 years would attract capital in the amount of $9,900 per capita over those 10 years. These magnitudes are in close agreement with the predictions of the model. We conclude that frictions associated with borders are likely to be the main explanation for “low” international capital flows.
    Keywords: regional net capital flows, ownership, dividend income, historical income,
    Date: 2005–04–20
  5. By: Anna Piil Damm (Institute of Economics, University of Copenhagen); Michael Rosholm (Department of Economics, University of Aarhus)
    Abstract: Spatial dispersal policies may influence labour market integration of refugees through two mechanisms. First, it may affect the local job offer arrival rate, and second, it may affect place utility. We investigate the second mechanism theoretically by formulating a partial search model in which an individual searches simultaneously for a job and for a new residential location. The model predicts that the reservation wage for local jobs is decreasing in place utility. We argue that spatial dispersal policies decrease average place utility of refugees which decrease the transition rate into first job due to large local reservation wage effects. We investigate both mechanisms empirically and test the predictions of the theoretical model by evaluating the employment effects of the Danish spatial dispersal policy carried out 1986-1998.
    Keywords: spatial dispersal policy; job search; residential search; employment; migration
    JEL: J64 J61 J68 J15
    Date: 2005–04
  6. By: Guido Fioretti (University of Bologna)
    Abstract: What are the prospects of B2B electronic commerce when production is carried out by a number of small firms specialized in single production phases? Prato, Italy, is home to thousands of textile firms as well as the locus of an early and innovative experience of a local Internet in the mid-1980s. This experience suggests that, since they fear to be imatated by their geographical proximates, geographically clustered firms may lag behind in the exploitation of information and communication technologies. Analysis of today's web sites of Pratese firms confiorms this intuition. A similar analysis of web sites is carried out for producers of fabrics worldwide. Contrary to Europe, in Asian countries geographically clustered firms exhibit little fear of information leakages. Differences in the organization of production may explain this puzzle.
    Keywords: ICT, e-commerce, B2B, Textile Industry, Industrial Clusters, Industrial Districts, Prato.
    JEL: D82 F29 L67 L23 R12
    Date: 2005–04–28
  7. By: Guido Fioretti (University of Bologna)
    Abstract: Agent-based models, an instance of the wider class of connectionist models, allow bottom-up simulations of organizations constituted byu a large number of interacting parts. Thus, geogrfaphical clusters of competing or collaborating firms constitute an obvious field of application. This contribution explains what agent-based models are, reviews applications in the field of industrial clusters and focuses on a simulator of infra- and inter-firm communications.
    Keywords: Agent-based models, industrial clusters, industrial districts
    JEL: R
    Date: 2005–04–28
  8. By: Guido Fioretti (University of Bologna)
    Abstract: This article presents an agent-based model of an Italian textile district where thousands of small firms specialise in particular phases of fabrics production. It is an empirical model that reconstructs the communications between firms when they arrange production chains. In their turn, production chains reflect into the pattern of traffic in the geographical areas where the district extends.
    Keywords: Agent-based models, industrial clusters, industrial districts, Prato.
    JEL: R
    Date: 2005–04–28
  9. By: F. Calidoni
    Abstract: This paper attempts to establish empirically the effects of transfers to household on labour productivity growth. In particular, I investigate the effects of health and social security expenditure on the rate of growth of GDP per labour units in 19 sectors and 13 OECD countries in the period 1976-2000. The main result is that transfers such as health expenditure and social security spending have positive and significant effects on labour productivity in the sectors that require low skilled workers, such as manufacturing of non-durable goods, energy supply, construction and services. This research shows that these results could be due to a "risk insuring" mechanism: employees with low wages (on average low skilled and high labour intensive jobs are less paid than high tech ones) find in higher government spending a guarantee of safety and wellbeing, otherwise difficult to achieve with their own resources. Moreover the increased security allows them to divert resources towards higher saving and investment in education. These results are consistent with the assumption that fiscal variables affect growth by means of total factor productivity and robust to the test of a possible spurious correlation between public transfers and growth, due to openness to trade.
    Keywords: public transfers, productivity growth
    JEL: F12 R12
    Date: 2005

This nep-geo issue is ©2005 by Vassilis Monastiriotis. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.