nep-geo New Economics Papers
on Economic Geography
Issue of 2005‒10‒04
nine papers chosen by
Vassilis Monastiriotis
London School of Economics

  1. Does Commuting Reduce Wage Disparities? By Mihails Hazans
  2. Regional disparities in the spatial correlation of state income growth By Thomas A. Garrett; Gary A. Wagner; David C. Wheelock
  3. Looking for Multiple Equilibria when Geography Matters: German City Growth and the WWII Shock By Maarten Bosker; Steven Brakman; Harry Garretsen; Marc Schramm
  4. Growth and Convergence across the U.S: Evidence from County-Level Data By Matthew Higgins; Daniel Levy; Andrew Young
  5. Regional and personal inequality in welfare in pre-WWII Japan (1892-1941): Physical stature, income, and health By Jean-Pascal Bassino
  6. Geographic versus industry diversification - constraints matter By Paul Ehling; Sofia Brito Ramos
  7. Trends in Regional Disparity in Human and Social Development in India By Dholakia Ravindra H
  8. Rethinking the Gains from Immigration: Theory and Evidence from the US By Ottaviano, Gianmarco I P; Peri, Giovanni
  9. Smaller Productivity Gap Between German Regions When Different Producer Prices are Taken into Account By Gerald Müller

  1. By: Mihails Hazans (University of Latvia & BICEPS)
    Abstract: This paper shows that in the Baltic countries, commuting reduces urban- rural wage and employment disparities and increases national output. To quantify the effect of commuting on wage differentials, two sets of earnings functions are estimated (based on Estonian, Latvian, and Lithuanian Labor Force Surveys) with location variables (capital city, rural, etc.) measured at the workplace and at the place of residence. We find that the ceteris paribus wage gap between capital city and rural areas, as well as between capital and other cities is significantly narrowed by commuting in some cases but remains almost unchanged in other. Different outcomes are explained by country-specific spatial patterns of commuting, educational and occupational composition of commuting flows, and presence or absence of wage discrimination against rural residents in urban markets. A treatment effects model is used to estimate individual wage gains to rural—urban or inter-city commuting; these gains are substantial in most but not all cases. Wage effects of commuting distance, as well as impact of education, gender, ethnicity, and local labor market conditions on the commuting decision are also explored.
    Keywords: commuting, wage disparities, earnings functions, Baltic countries
    JEL: J31 J61 P52 R12 R23
    Date: 2005–09–29
  2. By: Thomas A. Garrett; Gary A. Wagner; David C. Wheelock
    Abstract: This paper presents new evidence of spatial correlation in U.S. state income growth. We extend the basic spatial econometric model used in the growth literature by allowing spatial correlation in state income growth to vary across geographic regions. We find positive spatial correlation in income growth rates across neighboring states, but that the strength of this spatial correlation varies considerably by region. Spatial correlation in income growth is highest for states located in the Northeast and the South. Our findings have policy implications both at the state and national level, and also suggest that growth models may benefit from incorporating more complex forms of spatial correlation.
    Keywords: Regional economics ; Income distribution
    Date: 2005
  3. By: Maarten Bosker; Steven Brakman; Harry Garretsen; Marc Schramm
    Abstract: Many modern trade and growth models are characterized by multiple equilibria. In theory the analysis of multiple equilibria is possible, but in practice it is difficult to test for the presence of multiple equilibria. Based on the methodology developed by Davis and Weinstein (2004) for the case of Japanese cities and WWII, we look for multiple equilibria in a model of German city growth. The strategic bombing of Germany during WWII enables us to assess the empirical relevance of multiple equilibria in a model of city-growth. In doing so, and in addition to the Davis and Weinstein framework, we look at the spatial inter-dependencies between cities. The main findings are twofold. First, multiple equilibria seem to be present in German city growth. Our evidence supports a model with 2 stable equilibria. Second, the explicit inclusion of geography matters. Evidence for multiple equilibria is weaker when spatial interdependencies are not taken into account.
    JEL: F12 R11 R12
    Date: 2005
  4. By: Matthew Higgins (Georgia Institute of Technology); Daniel Levy (Bar-Ilan University); Andrew Young (University of Mississippi)
    Abstract: We use U.S. county data (3,058 observations) and 41 conditioning variables to study growth and convergence. Using OLS and 3SLS-IV we report on the full sample and metro, non-metro, and 5 regional samples: (1) OLS yields convergence rates around 2 percent; 3SLS yields 6–8 percent; (2) convergence rates vary (e.g., the Southern rate is 2.5 times the Northeastern rate); (3) federal, state and local government negatively correlates with growth; (4) the relationship between educational attainment and growth is nonlinear; and (5) finance, insurance & real estate industry and entertainment industry positively correlates with growth while education employment negatively correlates.
    Keywords: Economic Growth, Conditional Convergence, County-Level Data
    JEL: O40 O11 O18 O51 R11 H50 H70
    Date: 2005–09–22
  5. By: Jean-Pascal Bassino
    Abstract: This paper investigates the relationship between physical stature, per capita income, health,and regional inequality in Japan at the prefecture-level for the period 1892-1941. The analysis shows that inequality in income and access to health services explains differences in average body height of the population across the 47 Japanese prefectures during this period and that variation in income contributed to changes in height during the 1930s. Annual regional time series of height indicate that Japan experienced a regional convergence in biological welfare before 1914, and that a divergence occurred during the interwar period; personal inequality followed a similar pattern.
    Keywords: physical stature, height, health, midwives, inequality, income distribution, regional convergence, Japan
    JEL: I31 N35 N95 O15
    Date: 2005–09
  6. By: Paul Ehling (Pennsylvania State University); Sofia Brito Ramos (CEMAF/ISCTE-Business School Lisbon)
    Abstract: This research addresses whether geographic diversification provides benefits over industry diversification. In the absence of constraints, no empirical evidence is found to support the argument that country diversification is superior. With short-selling constraints, however, the geographic tangency portfolio is not attainable by industry portfolios. Results with upper and lower constraints on portfolio weights as well as an out-of-sample analysis show that geographic diversification almost consistently outperforms industry portfolios, although we cannot establish statistical significance.
    Keywords: Diversification gains, EMU, geographic diversification, industry diversification, block-bootstrap tests
    JEL: G11 G15
    Date: 2005–01
  7. By: Dholakia Ravindra H
    Abstract: In the present paper, we have examined trends in regional disparity in human and social development by considering numerous indicators other than State Income. We found no support to the general impression prevailing in the recent literature that disparity is increasing over the last two decades when we subjected the trend to statistical significance test. We considered numerous output as well as the input indicators for the purpose. In very few indicators, the disparity showed an increase, whereas in a large number of indicators it either remained the same or actually declined over the last two decades. The state governments’ efforts in the social sectors were perhaps a major reason for the outcome. Except education, in all other social sub-sectors, the interstate disparity in the government effort markedly declined during the 1990s compared to the 1980s. In education, it remained the same. Our findings in this paper point to a very clear policy prescription. The social and human development is considered by all the state governments as very important and a priority sector in their development strategy. The way they are making efforts in these directions is reducing disparity across states although each state has been acting on its own. This is perhaps because of the felt need of people and the polity in states. Explicit objective of reducing regional disparity in social and human development in the central planning may not, therefore, be specially required. Augmenting the revenue resources of states allowing the states to access public borrowings directly would enable most of them to concentrate on their priority areas – based on the local felt need. It is likely to address the issue of regional imbalance and disparity in a much better and efficient way without imposing excess burden since it would allow exploiting complementarities in growth and equity.
    Date: 2005–09–23
  8. By: Ottaviano, Gianmarco I P; Peri, Giovanni
    Abstract: Recent influential empirical work has emphasized the negative impact immigrants have on the wages of US-born workers, arguing that immigration harms less educated American workers in particular and all US-born workers in general. Because US and foreign born workers belong to different skill groups that are imperfectly substitutable, one needs to articulate a production function that aggregates different types of labour (and accounts for complementarity and substitution effects) in order to calculate the various effects of immigrant labour on US-born labour. We introduce such a production function, making the crucial assumption that US and foreign-born workers with similar education and experience levels may nevertheless be imperfectly substitutable, and allowing for endogenous capital accumulation. This function successfully accounts for the negative impact of the relative skill levels of immigrants on the relative wages of US workers. However, contrary to the findings of previous literature, overall immigration generates a large positive effect on the average wages of US-born workers. We show evidence of this positive effect by estimating the impact of immigration on both average wages and housing values across US metropolitan areas (1970-2000). We also reproduce this positive effect by simulating the behaviour of average wages and housing prices in an open city-economy, with optimizing US-born agents who respond to an inflow of foreign-born workers of the size and composition comparable to the immigration of the 1990s.
    Keywords: foreign-born; gains from migration; skill complementarity; wages
    JEL: F22 J31 J61 R13
    Date: 2005–09
  9. By: Gerald Müller
    Abstract: Der Vergleich von 300 Erzeugerpreisen zeigt, dass vergleichbare Produkte in Ostdeutschland etwa 20 Prozent preiswerter sind als in Westdeutschland. Durch die Verwendung von Regressionsschätzungen lässt sich ein Konfidenzintervall für diesen Wert berechnen. Weitere Rechnungen mit Hilfe von Input-Output-Tabellen zeigen, dass auf gesamtwirtschaftlicher Ebene rechnerisch etwa zehn Prozentpunkte der Produktivitätslücke auf die niedrigeren Erzeugerpreise zurückzuführen sind.

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.