nep-geo New Economics Papers
on Economic Geography
Issue of 2005‒05‒29
seventeen papers chosen by
Vassilis Monastiriotis
London School of Economics

  1. A simple model of economic geography à la Helpman-Tabuchi By Yasuda, MURATA; Jacques-François, THISSE
  2. Putting new economic geography to the test: Free-ness of trade and agglomeration in the EU regions By Brakman, S.; Garretsen, H.; Schramm, M.
  4. Urban Growth By Yannis Ioannides; Esteban Rossi-Hansberg
  5. Regional inequality and product variety By Kristian, BEHRENS; Jacques-François, THISSE
  6. Early Literacy Achievements, Population Density and the Transition to Modern Growth By Raouf, BOUCEKKINE; David, DE LA CROIX; Dominique, PEETERS
  7. Regional differences in productivity growth in the Netherlands: an industry-level growth accounting By Broersma, L.; Dijk, J. van
  8. Agricultural surplus, division of labour and the emergence of cities: A spatial general equilibrium model By Gilles Spielvogel
  9. Measuring Income Elasticity for Swiss Money Demand: What do the cantons say about financial innovation? By Andreas Fischer
  10. Conditions in Which Microfinance has Emerged in Certain Regions and Consequent Policy Implications By Sriram M S; Kumar Radha
  11. The Construction and Related Industries in a Changing Socio-Economic Environment: The case of Hong Kong„X By Charles Ka Yui Leung; Kelvin S. Wong
  12. Le panier de biens : une construction patrimoniale et territoriale. L'exemple de la Bresse By Bérard, L.; Hirczak, M.; Marchenay, P.; Mollard, A.; Pecqueur, B.
  13. Start-ups, firm growth and the consolidation of the French biotech industry By Avenel, E.; Corolleur, F.; Gauthier, C.; Rieu, C.
  14. Evidence of Environmental Migration: Housing values alone may not capture the full effects of local environmental disamenities By Trudy Ann Cameron; Ian McConnaha
  15. Market structure and environmental amenities in hedonic pricing of rural cottages By Mollard, A.; Rambonilaza, M.; Vollet, D.
  16. The Effects of Critical Habitat Designation on Housing Supply: An Analysis of California Housing Construction Activity By Robert W. Paterson; Jeffrey E. Zabel
  17. The Poverty Concentration Implications of Housing Subsidies: A Cellular Automata Thought Experiment By Kevin Jewell

  1. By: Yasuda, MURATA; Jacques-François, THISSE
    Abstract: This paper explores the interplay between commodities’ transportation costs and workers’ commuting costs within a general equilibrium framework à la Dixit-Stiglitz. Workers are mobile and choose a region where to work as well as an intraurban location to live. We sow that a more integrated economy need not be more agglomerated. Instead, low transportation costs lead to the dispersion of economic activities. This is because workers are able to alleviate the burden of urban costs by being dispersed, while retaining a good access to all varieties. By contrast, low commuting costs foster the agglomeration of economic activities.
    Keywords: Commuting costs; urban costs; transportation costs; economic geography; agglomeration
    JEL: F12 R12
    Date: 2004–09–14
  2. By: Brakman, S.; Garretsen, H.; Schramm, M. (Groningen University)
    Abstract: Based on a new economic geography model by Puga (1999), we use the equilibrium wage equation to estimate two key structural model parameters for the NUTS II EU regions. The estimation of these parameters enables us to come up with an empirically based free-ness of trade parameter. We then confront the empirically grounded free-ness of trade parameter with the theoretical relationship between this parameter and the degree of agglomeration. This is done for two versions of our model: one in which labor is immobile between regions, and one in which labor is mobile between regions. Overall, and in line with related studies, our main finding is that agglomeration forces still have only a limited geographical reach in the EU. Agglomeration forces appear to be rather localized
    Date: 2005
  3. By: Olga Alonso-Villar (Dpto. de Economia Aplicada. Universidad de Vigo)
    Abstract: There is no doubt that people like to migrate to large cities because they can acquire a wider range of products and jobs, but also because they can exchange information and ideas in an easier way. In this respect, we will attempt to explain the formation of metropolitan areas through a general equilibrium model in which concentration emerges not only from the interaction between increasing returns to scale at the rm level, transport costs and the mobility of labor, but also from human capital externalities. Our aim is to underline the role of human capital as a factor that fosters both the agglomeration of the economic activity and cities' growth. The paper shows that there is new scope for government activities.
    Keywords: Monopolistic Competition; Agglomeration; Human Capital; Education
  4. By: Yannis Ioannides; Esteban Rossi-Hansberg
    Abstract: Urban growth refers to the process of growth and decline of economic agglomerations. The pattern of concentration of economic activity, and its evolution, has been found to be an important determinant, and in some cases the result, of urbanization, the structure of cities, the organization of economic activity, and national economic growth. The size distribution of cities is the result of the patterns of urbanization, which result in city growth and city creation. The evolution of the size distribution of cities is in turn closely linked to national economic growth.
    JEL: E0 O4 R0
    Date: 2005
  5. By: Kristian, BEHRENS; Jacques-François, THISSE
    Abstract: We investigate how differences in set-up costs of various types affect the trade-off between global efficiency and spatial equity and show that the standard assumption of symmetry in fixed costs masks the existence of an interesting effect : the range of available varieties varies depends on the spatial distribution of firms. In such a setting, even when the market outcome leads to excessive agglomeration under symmetric fixed costs, a planner opts for asymmetric fixed costs and more agglomeration. The reason is that the losses induced by more agglomeration are offset by the gains due to additional product variety.
    Keywords: fixed costs; set-up costs; market size; international trade; homemarket effect
    JEL: F12 F15 R12 R38
    Date: 2005–01–23
  6. By: Raouf, BOUCEKKINE; David, DE LA CROIX; Dominique, PEETERS
    Abstract: The transition from economic stagnation to sustained growth is often modelled thanks to “population-induced” productivity improvements, which are assumed rather than derived from primary assumptions. In this paper the effect of population on productivity is derived from optimal behavior. More precisely, both the number and location of education facilities are chosen optimally by municipalities. Individuals determine their education investment depending on the distance to the nearest school, and also on technical progress and longevity. In this setting, higher population density enables the set-up costs of additional schools to be covered, opening the possibility to reach higher educational levels. Using conterfactual experiments we find that one third of the rise in literacy can be directly attributed to the effect of density, while one sixth is linked to higher longevity and one half to technical progress. Moreover, the effect of population density in the model is consistent with the available evidence from England, where it is shown that schools were established at a high rate over the period 1540-1620.
    Keywords: Human Capital; Population Density; Education Investment;School Location;Technical Progress
    JEL: O41 I21 R12 J11
    Date: 2005–03–18
  7. By: Broersma, L.; Dijk, J. van (Groningen University)
    Abstract: It is well known that the productivity growth in Europe is slowing down, against an increasing growth rate in the US. The Netherlands is one of countries in Europe with the lowest growth rates of productivity. This paper presents the results of a growth accounting exercise applied to regional industry data of The Netherlands between 1995-2002. We find that low productivity growth in The Netherlands is particularly situated in the economic core regions of the west and south and is caused by slow growth of MFP. Compared to the more peripheral regions, MFP-growth is lower in all industries, except social and non-market services. The high level of traffic congestion and relatively low labour effort in the core regions can explain part of this slow MFP-growth.
    Date: 2005
  8. By: Gilles Spielvogel (DIAL, Paris)
    Abstract: n this paper, we expose the economic conditions of cities emergence in a spatial general equilibrium framework. The presence of increasing returns based on the division of labour, transport costs and the possible existence of an agricultural surplus are enough to generate different possible urban equilibrium. A city may not be sustainable if internal transport costs are too high. On the other hand, a persistent migratory pressure may exist between the city and the surrounding rural hinterland if the urban labour market is saturated. In addition, we study the conditions of stability of the monocentric equilibrium in the different cases.
    Keywords: Urbanization, division of labour, agricultural surplus, monocentric urban system
    JEL: R13 R14 O18
  9. By: Andreas Fischer (Swiss National Bank)
    Abstract: Recent time-series evidence has re-confirmed the forecasting ability of Swiss broad money. The same money demand studies and others, however, find that the income elasticity is greater than one. Such parameter estimates are difficult to reconcile with transactions demand theory. This study re-examines the estimates for income elasticity in money demand based on cross-regional evidence for Switzerland. Particular attention is given to the influence of regional financial sophistication. The cross-cantonal results find that the income elasticity lies between 0.4 and 0.6. This discrepancy between the two empirical methodologies has important consequences for the conduct of Swiss monetary policy.
    Date: 2005–01
  10. By: Sriram M S; Kumar Radha
    Abstract: The paper looks at some macro data on the availability of infrastructure, economic growth, density of population and the availability of formal financial services to examine if any of these factors explain the growth of microfinance in certain regions, while the other regions lag behind. For the study, data from the four southern states and three states from the western part of the country have been examined. We find that most of the indicators are not significant enough to explain the regional disparity in the growth of microfinance. However, anecdotal evidence and a perusal of the state policy pronouncements explain that the role of the state could be significant in promoting some of these initiatives. In case of Karnataka, we also find that the banking system seems to have played an additional role in rolling out microfinancial services. The paper concludes by indicating that possibly the sector is still insignificant in the rural economy to establish causality with macro variables. However, there could be possibility of growth in states like Rajasthan where most of the parameters that could foster microfinance seem to exist and with policy intervention on the routing of developmental projects, the movement could get a big boost. We also indicate that the existing network has the potential of unleashing more finance and financial products, and that initiative should be seized forthwith.
    Date: 2005–05–24
  11. By: Charles Ka Yui Leung (Dept of Economics, Chinese University of Hong Kong, Hong Kong); Kelvin S. Wong (Dept of Real Estate and Construction, University of Hong Kong, Hong Kong)
    Abstract: Hong Kong is well known for its "housing market bubble". Both theoretical and empirical studies point to the supply side being the "root of all evil". This paper takes a preliminary step in understanding the supply side of the Hong Kong market by investigating the construction and related industries. After taking into consideration of the unusual public expenditure, the construction industry seems to be "normal" in international standard. Its relationship with the aggregate economy is also examined. Directions for future research are also suggested.
    Keywords: housing, construction, government policy, employment, investment
    JEL: E0 E3 R0
    Date: 2004–10
  12. By: Bérard, L.; Hirczak, M.; Marchenay, P.; Mollard, A.; Pecqueur, B.
    Abstract: This paper proposes the study of a special case of the model of the " basket of territorialized goods and services ", the Bresse (France). The agricultural dominating model, based on the modernization and the intensification of agriculture, coexists with many traditional productions. But the heterogeneity of these products asks the question of their relation and their coherence. How do products with different statute function together? How does quality exists in a territory where dominate sectoral and generic productions and forms of coordination? How to study the basket of goods in this context? To answer these questions we will associate ethnology and economy; the interdisciplinary dialogue allowing a basic thought on the evolution of the agricultural and food resources of Bresse. ...French Abstract: Cette communication propose l'étude d'un cas particulier du modèle dit du " panier de biens et de services territorialisés ", la Bresse (France). Le modèle agricole dominant, basé sur la modernisation et l'intensification de l'agriculture, coexiste avec de nombreuses productions traditionnelles. Mais l'hétérogénéité de ces dernières pose la question de leur cohérence les unes par rapport aux autres. Comment des produits de statut différents fonctionnent-ils ensemble ? Comment se positionne la qualité dans un territoire oû dominent des productions et des formes de coordination sectorielles et génériques ? Comment raisonner le panier de biens dans ce contexte ? Pour répondre à ces questions nous associerons le regard de l'ethnologue et de l'économiste ; le dialogue interdisciplinaire permettant une réflexion de fond sur l'évolution des ressources agricoles et alimentaires de la Bresse.
    JEL: Q12 Q13 Q20 R14 R20 R30
    Date: 2005
  13. By: Avenel, E.; Corolleur, F.; Gauthier, C.; Rieu, C.
    Abstract: Based on an original dataset, we analyze empirically the determinants of firm growth in the French biotech industry during two periods, 1996-1999 and 1999-2002. We have two main results. First, Gibrat's law is violated. The growth of annual turnover is influenced by teh initial size of the firm. The effect is non-linear, negative for small firms. Second, location has a significant impact on growth. We use different sets of dummies to characterize location and different measures of firm growth. As a whole, our results point at Marseilles (and its region) and Nanterre (but not Paris and Evry) as favorable places for the growth of firms between 1999 and 2002. For the 1996-1999, the favorable places are Strasbourg (and Alsace) and Rhône-Alpes (Lyon/Grenoble). Our analysis thus suggests that the changes in the (notably legal) environment of French biotech firms that took place in 1999 had a drastic effect of the comparative advantages of locations for biotech firms.
    JEL: L25 L65 R30
    Date: 2005
  14. By: Trudy Ann Cameron (Department of Economics, University of Oregon); Ian McConnaha (Student, Department of Economics, University of Oregon)
    Abstract: In hedonic property value models, economists typically assume that changing perceptions of environmental risk should be captured by changes in housing prices. However, for long-lived environmental problems, we find that many other features of neighborhoods seem to change as well, because households relocate in response to changes in perceived environmental quality. We consider spatial patterns in census variables over three decades in the vicinity of four Superfund sites. We find many examples of moving and staying behavior, inferred from changes in the relative concentrations of a wide range of socio-demographic groups in census tracts near the site versus farther away.
    Keywords: hedonic property values, environmental disamenities
    JEL: Q53 R31 R11
    Date: 2005–01–01
  15. By: Mollard, A.; Rambonilaza, M.; Vollet, D.
    Abstract: Site-specific characteristics are attributes of tourism services for consumers and a factor influencing their costs and quality for producers. These services are a fine illustration of territorial rents. Using estimates from hedonic price equations, we test the role of environmental/territorial variables as services differentiation tools in the context of a non-competitive market, and recover the value of territorial rent generated by tourism managers' strategies. Two territories of reference are chosen, one currently benefiting from the renewed interest of the public, and a usual tourist destination. The results of a comparative analysis suggest that tourists' preferences for new destinations, combined with firms' strategies generate some catching up effect by emerging territories.
    JEL: Q21 Q26 R14
    Date: 2004
  16. By: Robert W. Paterson; Jeffrey E. Zabel
    Abstract: Under the Endangered Species Act, the U.S. Fish and Wildlife Service is required to designate critical habitat for listed species. Designation could result in modification to or delay of residential development projects within habitat boundaries, generating concern over potential housing market impacts. This paper draws upon a large dataset of municipal-level (FIPS) building permit issuances and critical habitat designations in California over a 13-year period to identify changes in the spatial and temporal pattern of development activity associated with critical habitat designation. We find that the proposal of critical habitat results in a 20.5% decrease in the annual supply of housing permits in the short-run and a 32.6% decrease in the long-run. Further, the percent of the FIPS area that is designated as critical habitat significantly affects the number of permits issued. We also find that the impact varies across the two periods in which critical habitat is designated and by the number of years relative to when critical habitat was first proposed.
    Date: 2005
  17. By: Kevin Jewell
    Abstract: Looking at data from HUD’s low income housing tax credit database from 1987 to 2001, we examine how the US tax credit program has concentrated poverty in neighborhoods by offering advantages to developing low income housing projects in low income census tracts. We then use a simple Cellular Automata model to explore how alternative programs structures could impact economic diversity and poverty concentration. This model suggests that many widely dispersed fixed location affordable housing projects increase local economic diversity over alternative housing allocation rules. If policymakers wish align the Low Income Housing Tax Credit program with the goal of promoting economic diversity in our neighborhoods, they should restructure the bonus to reward to projects in areas without a concentration of subsidized housing.
    Keywords: low income housing tax credit; Residential Location; Simulation; segregation; cellular automata
    JEL: R14 R21 R31
    Date: 2005–05–22

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.