nep-geo New Economics Papers
on Economic Geography
Issue of 2005‒10‒29
eighteen papers chosen by
Vassilis Monastiriotis
London School of Economics

  1. Determinants of Recent Immigrants’ Location Choices: Quasi-Experimental Evidence By Anna Piil Damm
  2. Trade, growth and geography: A synthetic By David-Pascal Dion
  3. Spatial externalities between Brazilian municipios and their neighbours By Philippe De Vreyer; Gilles Spielvogel
  4. Heterogeneity within Communities: A Stochastic Model with Tenure Choice By François Ortalo-Magné; Sven Rady
  5. Agglomeration and the Spatial Distribution of Creativity By Andersson, Roland; Quigley, John. M; Wilhelmsson, Mats
  6. Foreign Direct Investment, Regional Geographical and Market Conditions, and Regional Development: A Panel Study on China By Mei Wen
  7. Regional integration and economic development: A theoretical approach By David-Pascal Dion
  8. Knowledge Accessibility and Regional Economic Growth By Andersson, Martin; Karlsson, Charlie
  9. European Integration, FDI and the Internal Geography of Trade: Evidence from Western European Border Regions By Miren Lafourcade and Elisenda Paluzie
  10. The Location of Industry R&D and the Location of University R&D - How are They related? By Karlsson, Charlie; Andersson, Martin
  11. Trade, Location, and Wages in the United States By Thijs Knaap
  12. Skills and Creativity in a Cross-section of Dutch Cities By Gerard Marlet; Clemens van Woerkens
  13. Twin - Peaks in E.U. Regional Productivity Dynamics: a nonparametric analysis By Georgios Fotopoulos
  14. Global and local players in a model of spatial competition By Simon Loertscher; Gerd Muehlheusser
  15. Labour Mobility and Regional Disparities: The role of female labour participation By Sjef Ederveen; Richard Nahuis; Ashok Parikh
  16. Housing Market Dynamics: On the Contribution of Income Shocks and Credit Constraint By François Ortalo-Magné; Sven Rady
  17. The Role of Inflation Differentials in Regional Adjustment: Evidence from the United States By Ivo J.M. Arnold; Clemens J.M. Kool
  18. The Effect of Home-ownership on Labor Mobility in The Netherlands By Michiel van Leuvensteijn; Pierre Koning

  1. By: Anna Piil Damm (Department of Economics, University of Copenhagen)
    Abstract: This paper exploits a Danish spatial dispersal policy on refugees which can be regarded a natural experiment to investigate the influence of regional factors on recent immigrants’ location choices. The main push factors are lack of co-ethnics and presence of immigrants. Additional push factors are lack of access to jobs, education and housing which explain why recent immigrants are attracted to large cities. Finally, placed refugees are sensitive to regional unemployment and some evidence of welfare seeking is presented as well.
    Keywords: location choices; push factors; immigrants
    JEL: J15 R15 H0
    Date: 2005–10
  2. By: David-Pascal Dion (Department of Economics, University of Mannheim)
    Abstract: Economic integration affects economic development through two main channels: growth and localization of the economic activities. The theories of endogenous growth and economic geography enable us to understand these mechanisms. We study in this paper their similarities and specificities before suggesting their useful combination within a single model. Indeed, both theories are based on the same Spence-Dixit-Stiglitz monopolistic competition framework. However, they suggest two different approaches to deal with the impact of economic integration. We consider that a third path, by proposing a synthetic approach, better answers the issues raised in terms of economic convergence and divergence by these two sets of models.
    Keywords: regional economic integration, endogenous growth, economic geography
    JEL: F12 F15 F43 O18 O30 O41 R11 R12 R13
    Date: 2004–03
  3. By: Philippe De Vreyer (Université de Lille II, DIAL); Gilles Spielvogel (DIAL, IEP-Paris)
    Abstract: (english) Clustering of economic performance and growth in space has generated considerable research on the spillovers and linkages among geographical neighbours. In this paper, we study the growth process of a large sample of Brazilian municipalities for the period 1970-1996 and attempt to evaluate the spatial externalities at work among them. We estimate the convergence speed of per capita income among municipios and test whether spatial externalities are linked to local income growth. Conditionally on structural characteristics, we find evidence of convergence between municipios and of positive spatial dependence in growth. These two facts could help explain the persistent inequalities between municipios and the increasing clustering of poor localities in the Northeast region. _________________________________ (français) La concentration des revenus et de la croissance économique dans l'espace a suscité une littérature abondante sur les effets de débordements et les liens entre localités voisines. Dans ce papier, nous étudions le processus de croissance d'un large échantillon de municipalités brésiliennes durant la période 1970-1996 et tentons d'évaluer les externalités spatiales à l'oeuvre entre celles-ci. Nous estimons la vitesse de convergence du niveau de revenu par habitant des municipalités et testons la présence d'externalités spatiales liées à la croissance locale. Conditionnellement aux caractéristiques structurelles des municipalités, nos résultats indiquent la présence d'une convergence du revenu moyen par habitant ainsi que d'une dépendance spatiale positive de la croissance locale. Ces deux résultats permettent d'expliquer les inégalités persistantes entre les municipalités et la concentration croissante des localités pauvres dans la région Nord-Est.
    Keywords: Local growth, convergence, spatial externalities, spatial econometrics, Brazil, Croissance locale, convergence, externalités spatiales, économétrie spatiale, Brésil
    JEL: O40 R11 R12
    Date: 2005–10
  4. By: François Ortalo-Magné (Department of Real Estate and Urban Land Economics, University of Wisconsin-Madison, 975 University Avenue, Madison, WI 53706, USA); Sven Rady (Department of Economics, University of Munich, Kaulbachstr. 45, D-80539 Munich, Germany)
    Abstract: Standard explanations for the income heterogeneity within neighborhoods rely on differences of preferences across households and heterogeneity of the housing stock. We propose an alternative and complementary explanation. We construct a stochastic equilibrium sorting model where (1) income is the sole dimension of household heterogeneity, (2) households form state-contingent housing location plans that may involve moves over their lifetimes, (3) households choose whether to own or rent depending on the housing expenditure risk associated with each tenure mode, and (4) there is a probability that newcomer households move in and compete for homes with native households. Income mixing within neighborhood arises for two reasons. First, allowing natives to form state-contingent housing location plans breaks the indivisibility of housing consumption implicit in the literature where households choose their location once and for all. Second, natives can insure themselves against rent fluctuations by buying their home prior to the realization of the population shock; newcomers cannot. As a result, poorer natives stay in the more desirable communities and only richer newcomers move in these communities. Evidence from U.S. metropolitan areas supports the effects predicted by the model.
    Keywords: Equilibrium Sorting, Income Mixing, Housing Demand, Tenure Choice
    JEL: D31 R12 R21
    Date: 2005–05
  5. By: Andersson, Roland (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology); Quigley, John. M (University of California Berkeley); Wilhelmsson, Mats (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology)
    Abstract: This paper analyzes the spatial distribution of “creativity” -- the production of new knowledge. We analyze commercial patents granted in Sweden during 1994-2001 using a panel of one hundred labor market areas which encompass the entire country. We relate patent activity to measures of localization and urbanization, to the industrial composition and size distribution of firms, and to the regional distribution of human capital. Our analysis confirms the importance of human capital and research facilities in stimulating regional patent output. Importantly, our results document the importance of agglomeration and spatial factors in influencing creativity: Patent activity is increased in larger and more dense labor markets and in regions in which a larger fraction of the labor force is employed in medium-sized firms. Our results also indicate that creativity is greater in labor markets with more diverse employment bases and in those which contain a larger share of national employment in certain industries, confirming the importance of urbanization and localization economies in stimulating creativity. Our quantitative results suggest that the urbanization of Sweden during the 1990s had an important effect upon the aggregate level of patent activity in the country, leading to increases of up to five percent in aggregate patents.
    Keywords: Agglomeration; patent; spatial distribution; creativity
    JEL: N34 O31 R11
    Date: 2005–10–18
  6. By: Mei Wen
    Abstract: This paper uses regional panel data to investigate the mechanism of how FDI has contributed to China’s regional development through quantifying regional marketization level. It is found that FDI inflow generates a demonstration effect in identifying regional market conditions for investment in fixed assets and hence affects industrial location. In addition, its effects on regional export and regional income growth varied across east, central and west China since the second half of the 1990s, depending on FDI-orientation in different regions. In east China, geographical advantage in export attracts FDI inflow and FDI promotes export. In addition, rise of FDI-GDP ratio increases regional share in industrial value added in east China. These effects contribute positively to regional income growth in east China although there is a direct crowding out effect between FDI and domestic investment (as input) in growth. In contrast, the negative impact of FDI inflow in central China on regional export orientation weakens its contribution to regional income growth. Furthermore, contribution of improvement of market mechanism to regional development is evidenced in attracting FDI, in promoting export and directly contributing to regional income growth.
    Keywords: Export-oriented FDI and import substitute FDI, marketization, industrial location, and regional growth
    JEL: F23 O53 P52 R11
    Date: 2005
  7. By: David-Pascal Dion (Department of Economics, University of Mannheim)
    Abstract: We use a model of combined endogenous growth and economic geography to study the impact of regional economic integration on the member and non-member countries of a regional union. Regional integration affects growth through interregional technology diffusion symbolized by knowledge spillovers generated at home and spreading to the partner countries. Spillovers flow from the leader to the follower. Following integration, the lagging country has access to a bigger stock of knowledge that fosters an increase in its rate of growth and extends the diversity of its products. Trade in goods - or in FDI - and flows of ideas are two faces of the same coin. We show that the progressive decrease in transaction costs through the phasing out of barriers to trade together with product imitation can foster growth and convergence in the member countries. However, in order to avoid eventual trade and investment diversions, the non-member should envisage to join the integrated zone.
    Keywords: regional economic integration, endogenous growth, economic geography
    JEL: F12 F15 F43 O18 O30 O41 R11 R12 R13
    Date: 2004–03
  8. By: Andersson, Martin (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology); Karlsson, Charlie (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology)
    Abstract: In this paper, we analyze the relationship between knowledge accessibility and regional economic growth in Sweden. The research question we ask in this paper is the following: can the variation between regions in knowledge accessibility in a given period explain the variation in the growth performance of Swedish regions in the following period? A main assumption in the paper is that the potential for human interaction a various spatial scales transforms into potential knowledge flows. Based upon an endogenous growth framework we show how the potential for knowledge flows at different spatial scales can be modelled using an accessibility approach. An advantage of modelling the interaction potentials at different spatial scales is that we in principle takes care of the spatial auto-correlation in the modelling, and that we then can estimate our models using ordinary OLS. Our results indicate that the intra-municipal and intra-regional knowledge accessibilities are both significant and capable of explaining a significant share of the variation in growth of value added per employee between Swedish municipalities. However, inter-regional knowledge accessibility turned out to be insignificant, indicating that knowledge flows are bounded in space.
    Keywords: knowledge; endogenous growth; region; accessibility; Sweden
    JEL: O10 O30 O52 R11
    Date: 2005–10–18
  9. By: Miren Lafourcade and Elisenda Paluzie (Universitat de Barcelona)
    Abstract: In this paper we use a gravity model to study the trade performance of French and Spanish border regions relatively to non-border regions, over the past two decades. We find that, controlling for their size, proximity and location characteristics, border regions trade on average between 62% and 193% more with their neighbouring country than other regions, and twice as much if they are endowed with good cross border transport infrastructures. Despite European integration, however, this trade outperformance has fallen for the most peripheral regions within the EU. We show that this trend was linked in part to a shift in the propensity of foreign investors to move their affiliates from the regions near their home market to the regions bordering the EU core.
    Keywords: Trade, Gravity, Border Regions, European Integration, Foreign Direct Investment
    JEL: F15 F23 R12 R58
    Date: 2005
  10. By: Karlsson, Charlie (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology); Andersson, Martin (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology)
    Abstract: During the years, a large number of formal studies have presented evidences of a positive impact of university R&D on firm performance in general and on the location of industrial R&D, in particular. The question is does it also work the other way around? Does industrial R&D function as an attractor for university R&D? What are the behavioural relationships between industrial R&D and university R&D and vice versa? The fact that knowledge flows seem to be spatially bounded implies that proximity matters for the relationships between industrial and university R&D. We argue that spatial proximity should be measured using accessibility measures. Furthermore, accessibility measures can be used to model interaction opportunities at different spatial scales: local, intra-regional and inter-regional. Against this background, the purpose of this paper is to analyse the locational relationship between industry R&D and university R&D in Sweden using a simultaneous equation approach. Our results indicate that the location of industrial R&D is quite sensitive to the location of university R&D, and that the location of university R&D is sensitive to the location of industrial R&D. However, the latter result is achieved only when we take away one outlier in the data.
    Keywords: R&D; Industry; University; Accessibility; Location
    JEL: C30 H50 L10 O30 R10
    Date: 2005–10–18
  11. By: Thijs Knaap (Utrecht School of Economics)
    Abstract: This paper estimates a spatial wage structure for the United States. I employ the market-access and supplier-access method of Redding and Venables (2004), where access is determined using interstate trade data. Economic geography models predict that state-level wages are correlated to this measure, owing to higher levels of demand and better availability of intermediate goods in easily accessible regions. After correcting for omitted-variable bias with exogenous (first nature) regressors and using the appropriate instruments, I find that the explanatory power of access-variables is weak in this dataset.
    Keywords: Spatial wage structure, United States, Economic Geography
    JEL: R30 J30 F12
    Date: 2005–07
  12. By: Gerard Marlet; Clemens van Woerkens
    Abstract: In this paper we examine Richard Florida's Creative Capital theory in comparison with Human Capital theory, using a cross section of Dutch cities as our sample. Employment growth in Dutch cities can be predicted both from local education levels and from the presence of a large creative class, but especially from the latter. We conclude that in theory creativity is not very different from human capital. Nevertheless Florida's creative class is a better standard to measure human capital then education is.
    Keywords: human capital, creative class, urban growth.
    Date: 2004–10
  13. By: Georgios Fotopoulos
    Abstract: Working within the 'distributional approach', this research offers evidence, based on empirical density estimates and modality tests, of past polarization in regional labour productivity in EU-15. Most importantly, it provides evidence on the related ergodic density which suggests that this polarization may persist in the future. This past and probably future polarization is primarily related to the service sector of the regional economies and not to manufacturing industries sector.
    Keywords: regional labour productivity, EU, distributional analysis, nonparametric methods, stochastic processes
    JEL: D39 O18 C14
    Date: 2005–10
  14. By: Simon Loertscher; Gerd Muehlheusser
    Abstract: We consider Hotelling location games with global and local players. Global players are active in several markets, while local players act in a single market only. The decisive feature is that global players cannot tailor their product to each market but have to choose a location on the Hotelling line that is valid for all markets in which they are active. Obvious examples include the media industry and politics, where competitors typically compete in several markets with basically the same product. We determine equilibrium configurations for simple specifications of such games. We then show that the presence of \gp s\ tends to induce lower product diversity across markets. Finally, when the number of firms is endogenous, we show how \gp s\ may use their location choice as a preemptive device
    Keywords: Hotelling location games; spatial competition; multiple markets; product differentiation; diversity; preemption
    JEL: D45 K21 K23 L11 L51
    Date: 2005–09
  15. By: Sjef Ederveen; Richard Nahuis; Ashok Parikh
    Abstract: Unemployment rates as well as income per capita differ vastly across the regions of Europe. Labour mobility can play a role in resolving regional disparities. This paper focuses on the questions why labour mobility is low in the EU and how it is possible that it remains low. We explore whether changes in male and female labour participation act as an important alternative adjustment mechanism. We answer this question in the affirmative. We argue that female labour participation is very important in adjusting to regional disparities.
    Keywords: Labour Mobility, Labour Participation, European Union
    JEL: F22 J61
    Date: 2005–10
  16. By: François Ortalo-Magné (Department of Real Estate and Urban Land Economics, University of Wisconsin-Madison, 975 University Avenue, Madison, WI 53706, USA); Sven Rady (Department of Economics, University of Munich, Kaulbachstr. 45, D-80539 Munich, Germany)
    Abstract: We propose a life-cycle model of the housing market with a property ladder and a credit constraint. We focus on equilibria which replicate the facts that credit constraints delay some households' first home purchase and force other households to buy a home smaller than they would like. The model helps us identify a powerful driver of the housing market: the ability of young households to afford the down payment on a starter home, and in particular their income. The model also highlights a channel whereby changes in income may yield housing price overshooting, with prices of trade-up homes displaying the most volatility, and a positive correlation between housing prices and transactions. This channel relies on the capital gains or losses on starter homes incurred by credit-constrained owners. We provide empirical support for our arguments with evidence from both the U.K. and the U.S.
    Keywords: Housing Demand, Income Fluctuations, Overlapping Generations, Collateral Constraint
    JEL: E32 G12 G21 R21
    Date: 2005–05
  17. By: Ivo J.M. Arnold; Clemens J.M. Kool
    Abstract: Within a monetary union, regional inflation differentials lead to a competition between the real interest rate and wealth channels on the one hand and the real exchange rate channel on the other hand in the transmission of regional shocks. This may have implications for the length and vehemence of regional business cycles. This paper tries to quantify how these forces work against each other using regional data for the United States. Our estimates indicate that, following an increase in the regional inflation rate, in the short run the pro-cyclical effect through the real interest rate and wealth channels is strongest. After a period of about 3-4 years the cumulative worsening of the competitive position asserts its influence. Regional cycles in the housing market have a clear pro-cyclical effect and are, on their part, affected by regional real interest rates and real growth.
    Keywords: monetary union, regional effects, inflation differentials, monetary transmission
    JEL: E58
    Date: 2003–11
  18. By: Michiel van Leuvensteijn; Pierre Koning
    Abstract: In various macro-studies, home-ownership is found to hamper job mobility and to increase unemployment. This paper addresses similar issues, but uses a microeconometric framework where both individual job mobility, as well as the probability of being homeowner are modeled simultaneously. Using a panel of individual labor and housing market histories for the period 1989-1998, we estimate a nonparametric model of both job durations and home-ownership. We do not find homeowners to change less from jobs than tenants. Instead, our results suggest that the housing decision is driven by job commitment, and not the reverse. We do however find homeowners to be less vulnerable for unemployment.
    Keywords: Duration Models, Labor Mobility, Housing Market Analysis
    JEL: J6 R2
    Date: 2004–01

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.