nep-geo New Economics Papers
on Economic Geography
Issue of 2005‒06‒05
fifteen papers chosen by
Vassilis Monastiriotis
London School of Economics

  1. Knowledge spillovers, location of industry, and endogenous growth By Kyoko Hirose; Kazuhiro Yamamoto
  2. Migration and agglomeration with knowledge By Kyoko Hirose
  3. Market Size, Trade, and Productivity By Marc J. Melitz; Gianmarco I.P. Ottaviano
  4. Concurrence spatiale, différenciation verticale et comportement bancaire By dhafer saidane
  5. Spatial Spillovers in Metropolitan Areas: Evidence from Swiss Communes By Christoph A. Schaltegger; Simon Zemp
  6. Growth Effects of Public Expenditure on the State and Local Level: Evidence from a Sample of Rich Governments By Christoph A. Schaltegger; Benno Torgler
  7. Energy development under regional autonomy: Distributions, poverty alleviation, subsidies and corporate social responsibilities By Hadi Soesastro
  8. The Role of Industry, Geography and Firm Heterogeneity in Credit Risk Diversification By M. Hashem Pesaran; Til Schuermann; Björn-Jakob Treutler
  9. Determining the Level of Transportation Costs in the Core-Periphery Model: a Majority Voting Approach By Gallo, Fredrik
  10. Governance of Diversity Between Social Dynamics and Conflicts in Multicultural Cities. A Selected Survey on Historical Bibliography By Ercole Sori; Renato Sansa
  11. Preferences regarding road transports of hazardous materials using choice experiments - any sign of biases? By Hiselius, Lena Winslott
  12. Proximities in Modular Production: an Analysis of the Globalization of the Automotive Fisrt Tier Suppliers (In French) By Vincent FRIGANT (E3i, IFReDE-GRES)
  13. Accommodating Differences By Elsbeth van Hylckama Vlieg
  14. Making Capitalism Work: Social Capital and Economic Growth in Italy, 1970-1995 By Thomas P. Lyon
  15. On-line distribution of working papers through NEP: A Brief Business History By Bernardo Batiz-Lazo; Thomas Krichel

  1. By: Kyoko Hirose (Graduate School of Economics, Osaka University); Kazuhiro Yamamoto (Graduate School of Economics, Osaka University)
    Abstract: A Grossman-Helpman-Romer-type endogenous-growth model is developed in this study. This model has two countries in which there are knowledge spillovers that are partially local. Owing to these spillovers, innovation cost in a particular country decreases as the number of firms locating in both that country and the other country increases. If international knowledge spillovers are symmetric, innovation cost is lower in the country that has the larger market. However, if a small-market country can absorb the international knowledge spillovers better than a large-market country, the innovation cost may be lower in the small-market country. When the innovation cost is lower in the country that has a large market, the growth rate increases with agglomeration, which is generated by a reduction in the transportation costs. However, when the innovation cost is lower in the country that has a small market, the growth rate decreases with the reduction in the transportation costs.
    Keywords: knowledge spillovers, growth rate, transportation costs, market scale
    JEL: F43 O30 R12
    Date: 2005–06
  2. By: Kyoko Hirose (Graduate School of Economics, Osaka University)
    Abstract: In this paper, a Grossman-Helpman-Romer-type endogenous growth model is developed with two regions in which there are mobile workers and linkage between consumption goods and differentiated intermediate goods. The economy has the potential to reach the following spatial configuration: full agglomeration, partial agglomeration, and segmented agglomeration. In perfect agglomeration, the innovation sector and intermediate goods sector agglomerate in one region. In partial agglomeration, intermediate goods firms partially agglomerate in the region where the innovation sector agglomerates perfectly. In segmented agglomeration, the innovation sector agglomerates in the region where both intermediate goods sector and final good sector do not agglomerate perfectly. In addition, we show the comparison of the welfare of skilled workers in each steady state. Not surprisingly, the welfare of the skilled in full agglomeration is always the highest. However, even though there are transportation costs of final good, the welfare in segmented agglomeration is not necessarily the lowest.
    Keywords: knowledge spillovers, transportation costs, inter-regional trade
    JEL: F43 O18 R11
    Date: 2005–06
  3. By: Marc J. Melitz; Gianmarco I.P. Ottaviano
    Abstract: We develop a monopolistically competitive model of trade with firm heterogeneity - in terms of productivity differences - and endogenous differences in the `toughness' of competition across markets - in terms of the number and average productivity of competing firms. We analyze how these features vary across markets of different size that are not perfectly integrated through trade; we then study the effects of different trade liberalization policies. In our model, market size and trade affect the toughness of competition, which then feeds back into the selection of heterogeneous producers and exporters in that market. Aggregate productivity and average markups thus respond to both the size of a market and the extent of its integration through trade (larger, more integrated markets exhibit higher productivity and lower markups). Our model remains highly tractable, even when extended to a general framework with multiple asymmetric countries integrated to different extents through asymmetric trade costs. We believe this provides a useful modeling framework that is particularly well suited to the analysis of trade and regional integration policy scenarios in an environment with heterogeneous firms and endogenous markups.
    JEL: F12 R13
    Date: 2005–06
  4. By: dhafer saidane (gremars - University Lille 3)
    Abstract: A banking spatial competition model is developed to activate the horizontal and vertical parameters of differentiation in a two- dimensional space. Banking competition has become more relevant given the vertical differentiation elements related to some financial assets features. We consider a model in which spatial competition including vertical differentiation sets banks into a geometrical variable space linked with the regulation of deposit interest rates and financial transformation intensity. Thus we can rehabilitate in some case the Hotelling minimum differentiation principle applied to banking space and the financial changes based on the relation between financial imitation and financial innovation.
    Keywords: Banking, spatial competition
    JEL: G L
    Date: 2005–05–28
  5. By: Christoph A. Schaltegger; Simon Zemp
    Abstract: This paper investigates spatial spillovers in local spending decisions by using panel data of the Swiss communes in the canton of Lucerne during the 1990s. Due to the geographical fragmentation with a major central city and some 100 suburban communes within a distance from 4 to 55 kilometers to the center this area represents a particularly useful data base in order to test the relevance of spatial interactions in metropolitan areas. The empirical evidence confirms strategic interactions among suburban governments and the central city for public security spending. A 10% increase of the city’s security spending leads to a 3% decrease in security spending of the suburban communes in the Lucerne area. For all other spending items, the empirical evidence suggests no quantitative and significant spatial spillover effects. The same applies for spatial spillovers in overall local spending between the Lucerne communes and the Lucerne central city.
    Keywords: spatial spillovers; strategic interaction; central city exploitation
    JEL: D72 H72
    Date: 2003–10
  6. By: Christoph A. Schaltegger; Benno Torgler
    Abstract: There is a vast empirical literature investigating the relationship between government size and economic growth. But the empirical evidence of growth effects of public expenditure using cross-country regres-sions is still inconclusive. According to a number of authors this is not surprising since the negative rela-tionship only applies for rich countries with a large public sector. Restricting their analysis on rich coun-tries only they can show the predicted negative impact. Naturally, a selection of a sub-sample of rich countries is always somewhat arbitrary. Another possibility is to concentrate on governments within a rich country. However, only few studies investigate the effect of state and local spending on economic growth. This paper concentrates on the relationship between public expenditure and economic growth within a rich country using the full sample of state and local governments from Switzerland over the 1981-2001 period. The general finding is a fairly robust negative relationship between government size and economic growth. However, in contrast to public spending from operating budgets there is no significant impact on economic growth by expenditure from capital budgets.
    Keywords: Economic Growth; Government expenditure; Public Sector
    JEL: E62 H20 O23
    Date: 2004–07
  7. By: Hadi Soesastro (Centre for Strategic and International Studies, Jakarta, Indonesia)
    Abstract: This paper examines problems and policies in regard to energy development under regional autonomy, distributions - in the sense of distributional or equity issues, poverty alleviation, subsidies, and corporate social responsibilities. The paper examines the problem from a simplified perspective, namely that of a centralized system versus decentralized system of energy development.
    Keywords: Indonesia, energy policy, fuel subsidies
    Date: 2004–11
  8. By: M. Hashem Pesaran; Til Schuermann; Björn-Jakob Treutler
    Abstract: In theory the potential for credit risk diversification for banks could be substantial. Portfolio diversification is driven broadly by two characteristics: the degree to which systematic risk factors are correlated with each other and the degree of dependence individual firms have to the different types of risk factors. We propose a model for exploring these dimensions of credit risk diversification: across industry sectors and across different countries or regions. We find that full firm-level parameter heterogeneity matters a great deal for capturing differences in simulated credit loss distributions. Imposing homogeneity results in overly skewed and fat-tailed loss distributions. These differences become more pronounced in the presence of systematic risk factor shocks: increased parameter heterogeneity greatly reduces shock sensitivity. Allowing for regional parameter heterogeneity seems to better approximate the loss distributions generated by the fully heterogeneous model than allowing just for industry heterogeneity. The regional model also exhibits less shock sensitivity.
    Keywords: Risk management, default dependence, economic interlinkages, portfolio choice
    JEL: C32 E17 G20
    Date: 2005–05
  9. By: Gallo, Fredrik (Department of Economics, Lund University)
    Abstract: We analyse the political determination of transportation costs in an analytically solvable core-periphery model. In a benchmark case with certainty about where agglomeration takes place, we find that a majority of voters prefers low trade costs and the resulting equilibrium is an industrialised core and a de-industrialised periphery. Allowing for uncertainty we show that a high trade cost candidate, that guarantees the initial symmetric equilibrium, may defeat the core-periphery equilibrium candidate. The reason is that a coalition of risk-averse immobile factors of production votes for status quo due to uncertainty about which region that will attract industrial activity.
    Keywords: core-periphery model; majority voting; new economic geography; regional policy
    JEL: F12 F15 R12
    Date: 2005–05–31
  10. By: Ercole Sori (Università Politecnica delle Marche); Renato Sansa (Università Politecnica delle Marche)
    Abstract: This paper is an excursus on multiculturalism from a historical perspective. It ranges from the encounters of different cultures in ancient times, through the Middle Ages, the Reformation and Counter-Reformation period up to the present times. It describes the peculiarity of the solutions adopted, juridical or social, formal or informal. Although it is difficult to classify the various attitudes towards foreigners, a decisive distinction should be made between modern history and previous times. Until the 19th century the number of migrants was significant in a historical perspective, but limited in absolute terms. May this fact have helped the hosting institutions to encourage a favourable policy towards foreign settlements? Another distinction must be made between high qualified migration and humble and unskilled workers. Cities’ histories are full of discriminatory measures towards local immigrants from villages who swelled the ranks of urban outcasts. Finally, it seems clear that the category of multiculturalism, as a premise for the successful integration of foreigners can only be applied with precautions to historical examples. The challenge of the clash of cultures was tackled differently in past societies, without necessarily meaning that those societies were racist or xenophobic. Successful examples of integration and development with the contribution of diversity in the past could involve exclusion and discrimination apparently unacceptable nowadays.
    Keywords: Social dynamics, Conflicts, Multicultural cities, Diversities
    Date: 2005–05
  11. By: Hiselius, Lena Winslott (Department of Economics, Lund University)
    Abstract: This paper uses the choice experiment approach to assess people's preferences regarding road transports of hazardous materials. In a mail survey, carried out in Stockholm, the capital of Sweden, changes in exposure to hazardous materials are used as a proxy for changes in accident risk. The results are analysed in the light of an earlier study on transports of hazardous materials by rail. Special attention is given to biases associated with the choice experiment method. The presence of hypothetical bias is studied by the use of self-reported degree of confidence that the respondent would vote the same way in a real referendum. The presence of a focusing effect is studied by an inclusion of information on other fatal risks. The indication is that there are no major differences in individual preferences for hazmat transported by rail or road. The estimates are also dependent on the confidence of stated choices and interpreting this dependence as a hypothetical bias, suggest that this type of bias tends to push estimated values downwards. The findings show that individual background data regarding transports of hazardous materials affect individuals in expected ways and there is no focusing effect.
    Keywords: Biases; Hazardous materials; Risk; Choice experiments
    JEL: C25 D61 D81 R41
    Date: 2005–05–23
  12. By: Vincent FRIGANT (E3i, IFReDE-GRES)
    Abstract: This paper analyzes the strategies of internationalization of the automotive First Tier Suppliers (FTS). The developments of the modular production in the car industry induce an evolution of the vertical relationships which explain, at the same time, the interest and the forms of the internationalization of the FTS. From this point of view, the paper seeks to explain the patterns of internationalization adopted by the FTS by proposing a grid of reading which try to identify proximity request according to complexity and exclusivity of the interfirms’ interactions. The argumentation is articulated around three parts. The first reconsiders the transformations induced by modularization. The second presents some stylized facts on the internationalization of the FTS. The third part presents the analytic grid and draws the implications on the internationalization of the firms.
    Keywords: Internationalization, Proximity, Vertical Relationships, Modularity, First Tier Suppliers, Automotive
    JEL: L2 F23 R3 L62
    Date: 2005
  13. By: Elsbeth van Hylckama Vlieg (The International Federation for Housing and Planning, The Hague)
    Abstract: Urban Planning is a discipline that covers the whole of spatial expressions of social processes. Like economics and culture, spatial development has an impact on all sectors of policy. The theme of this event focuses on diversity, growth and sustainable development, which are the key points for urban development in general. This paper concentrates on the creation of physical conditions, with particular emphasis on the accommodation of social differences in our built environment, the processes that lead to segregation, and how planning methods could provide a counterweight.
    Keywords: Urban planning, Spatial development, Diversities
    Date: 2005–05
  14. By: Thomas P. Lyon (Indiana University)
    Abstract: Using data on the 20 Italian regions for the period 1970-1995, I examine whether the presence of social capital, as reflected in a number of different measures collected by Putnam (1993), affects economic productivity. I find three types of effects. First, social capital, when treated as an input to regional production, has a positive and significant effect in the South, but a much weaker effect in the North. Second, some forms of social capital can significantly increase regions’ propensities to make physical capital investments; however, dense networks of association reduce capital investment in both the North and South. Instrumental variables estimates show that social capital affects growth both directly and through affecting investment in physical capital. Third, social capital contributes positively to the rate of total factor productivity growth in the Italian regions.
    Keywords: Social capital, Growth, Investment, Italy
    JEL: O17 O47 O52
    Date: 2005–05
  15. By: Bernardo Batiz-Lazo (Bristol Business School); Thomas Krichel (Long Island University)
    Abstract: This brief article tells of the emergence and development of a service for speedy, on-line distribution of recent additions to the broad literatures on economics and related areas called NEP: New Economics Papers. This service is part of a wider project called RePEc. RePEc is a digital library for the Economics discipline. Details are also provided on how to make individual and institutional contributions.
    Keywords: NEP, current awareness service, RePEc, WoPEc
    JEL: N
    Date: 2005–05–30

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.