nep-geo New Economics Papers
on Economic Geography
Issue of 2006‒02‒19
nineteen papers chosen by
Vassilis Monastiriotis
London School of Economics

  1. Modeling Spatial Sustainability: Spatial Welfare Economics versus Ecological Footprint By Fabio Grazi; Jeroen C.J.M. van den Bergh; Piet Rietveld
  2. SPATIAL STABILITY By Pascal Mossay
  3. Factores determinantes del nivel de desarrollo económico en Andalucía: un análisis comparativo en el contexto de las regiones españolas By Antonio Rafael Peña Sánchez
  4. Role of Educational and R&D Institutions in City Clusters: An Exploratory Study of Bangalore and Pune Regions in India By Basant Rakesh; Chandra Pankaj
  5. Can New Orleans Play Its Way Past Katrina? By Victor Matheson; Robert Baade
  6. Regional Labor Markets, Network Externalities and Migration: The Case of German Reunification By Harald Uhlig
  7. Social Capital, Public Spending and the Quality of Economic Development: The Case of Italy By Fabio Sabatini
  8. Research challenges in modelling urban road pricing: an overview By Andre de Palma; Lindsey Robin; Proost Stef
  9. Regional aspects of electricity sector regulations in Russia By Pobochy Serguey; Yudashkina Galina
  10. Asymmetric Duopoly in Space - what policies work? By Dunkerley Fay; Andre de Palma; Proost Stef
  11. FISCAL COMPETITION AND PUBLIC EDUCATION IN REGIONS By Jorge Durán; Charles Figuieres; Alexandra Rillaers
  12. Strategic investment and pricing decisions in a congested transport corridor By Proost Stef; De Borger Bruno
  13. Are NIMBY's commuters? By Saveyn Bert
  15. Designing Efficient Policies in a Regional Economy. A MCDM-CGE Approach By Francisco J. André; M. Alejandro Cardenete Flores
  16. Does Commuting Change the ranking of environmental instruments? By Saveyn Bert
  17. Crédits aux particuliers - Analyse des données de la Centrale des Crédits aux Particuliers By Helga De Doncker
  18. The Role of Community in Migration Dynamics By Sergio Vergalli
  19. How Far and For How Much? Evidence on Wages and Potential Travel-to-Work Distances from a Survey of the Economically Inactive By Paul Latreille; David H. Blackaby; Philip D. Murphy; Nigel O'Leary; Peter J. Sloane

  1. By: Fabio Grazi (University of Venice); Jeroen C.J.M. van den Bergh (Free University); Piet Rietveld (Free University)
    Abstract: A spatial welfare framework for the analysis of the spatial dimensions of sustainability is developed. It incorporates agglomeration effects, interregional trade, negative environmental externalities and various land use categories. The model is used to compare rankings of spatial configurations according to evaluations based on social welfare and ecological footprint indicators. Five spatial configurations are considered for this purpose. The exercise is operationalized with the help of a two-region model of the economy that is in line with the ‘new economic geography’. Various (counter) examples show that the footprint method is not consistent with an approach aimed at maximum social welfare.
    Keywords: Agglomeration effects, Trade advantages, Negative externalities, Population density, Spatial configuration, Transport
    JEL: F12 F18 Q56 Q57 R12
    Date: 2006–01
  2. By: Pascal Mossay (Universidad de Alicante)
    Abstract: We consider a continuous spatial economy consisting of pure exchange local economies. Agents are allowed to change their location over time as a response to spatial utility differentials. These spatial adjustments toward higher utility neighborhoods lead the spatial economy to converge to a spatially uniform allocation of resources, provided that the matrix of price effects is quasi-negative definite. Furthermore our model provides a real time interpretation of the tâtonnement story. Also, spatial fluctuations are shown to be damped at different rates according to their spatial scale.
    Keywords: local markets, migration, spatial economy, convergence, stability, tâtonnement, normal modes.
    JEL: D51 C60 R23
    Date: 2004–12
  3. By: Antonio Rafael Peña Sánchez (Universidad de Cádiz)
    Abstract: En un trabajo anterior se realizó un análisis de la evolución del nivel de bienestar económico de Andalucía en el periodo 1967-1997, así como de algunos de los factores que la explicaban. El mismo nos permitió concluir que la escasa productividad aparente del empleo y de los empleos per cápita había constituido un hecho diferencial de enorme trascendencia para su nivel de desarrollo y bienestar. En esta línea, el objetivo principal de este trabajo es analizar la evolución de los factores determinantes del desarrollo económico relativo andaluz en el contexto regional español, en el periodo 1980-2000, así como los obstáculos que plantean dichos factores favoreciendo el modelo desigual de crecimiento económico de Andalucía en el conjunto de las regiones españolas.
    Keywords: Economic development, apparent productivity of employment, human capital, physical capital, sectorial structure
    JEL: D24 O18 R11 R58
    Date: 2006
  4. By: Basant Rakesh; Chandra Pankaj
    Abstract: This paper explores the role played by academic institutions in Bangalore and Pune cities of India. It shows that there exists a large variety of linkages between industry and academia in the two Indian cities; a hierarchy of institutions satisfies a hierarchy of local demands ranging from skills to new technologies. While labor market linkages continue to dominate, global and local changes are creating opportunities for knowledge based linkages. With enhanced competition and privatization of research and education, these linkages are bound to undergo significant change in the future and policy should facilitate this transition.
    Keywords: India, South Asia, spatial clusters, academia-industry linkages
    Date: 2006–02–13
  5. By: Victor Matheson (Department of Economics, College of the Holy Cross); Robert Baade (Department of Economics and Business, Lake Forest College)
    Abstract: Hurricane Katrina devastated the city of New Orleans in late August 2005, and debates are now underway across the country concerning strategies for reconstructing the City. A key to redevelopment involves encouraging former citizens and businesses to return. Both of New Orleans’s professional sports teams, the National Football League Saints and the National Basketball Association Hornets, have taken up residence in other cities, and the question of what the city should provide in the way of financial accommodation to encourage them to return should be considered in devising a reconstruction plan. Infrastructure to facilitate professional sports and mega-events constitutes a significant fraction of capital budgets for even the largest cities. New Orleans has hosted a disproportionate share of mega-sports events in the United States given its size and demographics. An important question concerns whether these events have contributed enough to the New Orleans economy to justify reinvestment in infrastructure to restore New Orleans’s place as a leading host of professional sports and mega-events in the United States. A careful review of the evidence suggests that the redevelopment efforts of New Orleans are better directed at first providing infrastructure that will encourage the return of its middle class citizenry and the restoration of its culture. Playing host to professional sports and mega-events does have symbolic significance, but it is arguable that the city cannot afford to invite guests until it has the means to accommodate them.
    Keywords: sports, public finance, economic impact, New Orleans, Hurricane Katrina
    JEL: H25 H71 H40 L83 Q54
    Date: 2006–02
  6. By: Harald Uhlig
    Abstract: Fifteen years after German reunification, the facts about slow regional convergence have born out the prediction of Barro (1991), except that migration out of East Germany has not slowed down. I document that in particular the 18-29 year old are leaving East Germany, and that the emigration has accelerated in recent years. To understand these patterns, I provide an extension of the standard labor search model by allowing for migration and network externalities. In that theory, two equilibria can result: one with a high networking rate, high average labor productivity, low unemployment and no emigration (“West Germany”) and one with a low networking rate, low average labor productivity, high unemployment and a constant rate of emigration (“East Germany”). The model does not imply any obviously sound policies to move from the weakly networked equilibrium to the highly networked equilibrium.
    Keywords: German reunification, labor market search, network externalities, migration, regional economics
    JEL: E20 E24 J6 J1
    Date: 2006–02
  7. By: Fabio Sabatini (University of Rome La Sapienza)
    Abstract: This paper carries out an empirical assessment of the relationship between social capital and the quality of economic development in Italy. The analysis draws on a dataset collected by the author including about two hundred variables representing different aspects of economic development and four “structural” dimensions of social capital. The quality of development is measured through human development and indicators of the state of health of urban ecosystems, public services, gender equality, and labour markets, while social capital is measured through synthetic indicators representing strong family ties, weak informal ties, voluntary organizations, and political participation. The quality of development exhibits a strong positive correlation with bridging weak ties and a negative correlation with strong family ties. Particularly, the analysis shows a strong correlation between informal ties and an indicator of “social well-being” (synthesizing gender equality, public services and labour markets) and between voluntary organizations and the state of health of urban ecosystems. Active political participation proves to be irrelevant in terms of development and well-being. Finally, the role of public spending for education, health care, welfare work, and the environment protection is analysed, revealing a scarce correlation both with social capital and development indicators.
    Keywords: Social capital, Social networks, Public spending, Economic development, Human development, Principal component analysis
    JEL: O15 O18 R11 Z13
    Date: 2006–01
  8. By: Andre de Palma (Université de Cergy-Pontoise, ENPC and Member of Institut Universitaire de France, THEMA, 33,); Lindsey Robin (Department of Economics, University of Alberta); Proost Stef (K.U.Leuven-Center for Economic Studies; UCL - CORE)
    Abstract: This article introduces the contributions of this special issue on modelling of urban road pricing and its implementation. The issue focuses on the design of urban road pricing schemes, and their spatial and temporal impacts, using quantitative transport (and land use) models. The policy implications of road pricing, including welfare and equity aspects, are studied for Paris, Brussels and Oslo using state of the art planning models. The issue is completed with a study of public acceptability and the upcoming road-pricing trial in Stockholm, and a review paper on the history of thought and future prospects of road pricing.
    Keywords: urban transport planning models, road pricing, transport policy implementation, earmarking, efficiency, equity, acceptability
    JEL: D62 R41 R48 R52
    Date: 2005–08
  9. By: Pobochy Serguey; Yudashkina Galina
    Abstract: This paper estimates regional features of the electricity sector regulation in Russia. We use panel data for 77 Russian regions during 1998–2003. Our analysis is based on the interest-group theory of regulation. The objective of the project is to estimate the influence of regional energy company, consumers, and governor on regulation policy in the region. Empirical analysis shows that governors' elections are accompanied by tariffs' decrease. We found that during 1999–2001 there was a gap between federal and regional regulation, and that energy-intensive enterprises choose the strategy to buy electricity from federal wholesale market, but not to bargain with regional regulator about low tariffs. Based on our analysis we conclude that it is necessary to separate social and economic parameters of regulation. Economic requirements call for the change of pricing method to "rate of return" approach that will stimulate monopolist to increase efficiency. Social requirements should incorporate in regulation mechanisms of taking into account the poverty level in a given region.
    Keywords: Russia, Russian regions, electricity sector, regulation, interest-group theory, regional governors, panel data analysis
    JEL: L94 L51
    Date: 2006–02–13
  10. By: Dunkerley Fay (K.U.Leuven-Center for Economic Studies); Andre de Palma (Université de Cergy-Pontoise, ENPC and Member of Institut Universitaire de France, THEMA, 33,); Proost Stef (K.U.Leuven-Center for Economic Studies; UCL - CORE)
    Abstract: In this paper we study the problem of a city with access to two subcentres selling a differentiated product. The first subcentre has low free flow transport costs but is easily congested (near city centre, access by road). The second one has higher free flow transport costs but is less prone to congestion (ample public transport capacity, parking etc.). Both subcentres need to attract customers and employees by offering prices and wages that are sufficiently attractive to cover their fixed costs. In the absence of any government regulation, there will be an asymmetric duopoly game that can be solved for a Nash equilibrium in prices and wages offered by the two subcentres. This solution is typically characterised by excessive congestion for the nearby subcentre. We study the welfare effects of a number of stylised policies by setting up a general model and illustrating the model using competition between airports as an example. The first stylised policy is to extend the congested road to subcentre 1. This policy will not necessarily lead to less congestion as more customers will be attracted by the lower transport costs. The second policy option is to add congestion pricing (or parking pricing etc.) for the congested subcentre. This will decrease its profit margin and attract more customers. The third policy is acceptable for politicians: providing a direct subsidy to the remote subcentre, reducing its marginal costs. This policy will again ease the congestion problem for the nearby subcentre but will do this in a very costly way.
    Keywords: duopoly, imperfect competition, congestion, general equilibrium, airport competition
    JEL: L13 D43 R41 R13
    Date: 2005–12
  11. By: Jorge Durán (Universidad de Alicante); Charles Figuieres (INRA); Alexandra Rillaers (Universidad de Alicante)
    Abstract: We explore an economy with two regions and independent local administrations. Local governments collect taxes to finance public education, but once educated agents can choose to migrate to the other region. The Nash equilibrium of the long-run game between the two governments is compared to a golden rule-type social optimum. Preliminary results show that the Nash equilibrium will result in over- or under-investment depending on the extent to which public education is subject to congestion.
    Keywords: Successive generations, Public education, Federal and local government, Fiscal games.
    JEL: E13 O41 I29
    Date: 2004–11
  12. By: Proost Stef (K.U.Leuven-Center for Economic Studies; UCL - CORE); De Borger Bruno (University of Antwerp)
    Abstract: This paper studies pricing and investment decisions on a congested transport corridor where the elements of the corridor are controlled by different governments. A corridor can be an interstate highway or railway line or an inter-modal connection. We model the simplest corridor: two transport links in series where each of the links is controlled by a different government. Each link is used by transit as well as by local traffic; both links are subject to congestion. We consider a two stage non-cooperative game where both governments strategically set capacity in the first stage and play a pricing game in the second stage. Three pricing regimes are distinguished: (i) differentiated tolls between local and transit transport, (ii) one uniform toll on local and transit traffic, and (iii) only the local users can be tolled. Numerical analysis illustrates all theoretical insights. A number of interesting results are obtained. First, transit tolls on the network will be inefficiently high. If only local traffic can be tolled, however, the Nash equilibrium tolls are inefficiently low. Second, raising the toll on transit through a given country by one euro raises the toll on the whole trajectory by less than one euro. Third, higher capacity investment in a given region not only reduces optimal tolls in this region under all pricing regimes but it also increases the transit tolls on the other link of the corridor. Fourth, capacities in the different regions are strategic complements: when one country on the corridor increases transport capacity, it forces the other country to do the same. Fifth, we find interesting interactions between optimal capacities and the set of pricing instruments used: capacity with differentiated tolls is substantially higher than in the case of uniform tolls but overall welfare is lower. Finally, if transit is sufficiently important, it may be welfare improving not to allow any tolling at all, or to only allow the tolling of locals if this does not lead to capacity reductions.
    Keywords: congestion pricing, transport investment, transit traffic
    JEL: H23 H71 R41 R48
    Date: 2006–02
  13. By: Saveyn Bert (K.U.Leuven-Center for Economic Studies)
    Abstract: This paper considers a metropolitan area where residents can commute between several jurisdictions. These residents show NIMBY behavior (Not-In-My-Backyard). They try to preserve their living quality by pushing the polluting economic activity to the neighboring jurisdictions and keep their labor income as commuters. This induces a race-to-the-top among jurisdictions. Fiercer competition due to a higher number of jurisdictions intensifies this race-to-the-top; whereas commuting costs, pollution taxes, payroll taxes and bigger jurisdictions increase the incentive for more pollution.
    Keywords: Commuting, NIMBY, interjurisdictional competition, environmental federalism
    JEL: H Q R
    Date: 2006–02
  14. By: Ivan Arribas (Universitat de València); J.E. Vila (Universitat de València); J.L. Cervera (Devstat)
    Abstract: In this paper we present a theoretic two-stage model for retailers location and consumers purchase decision. Retailers decision problem is formalized in terms of a zero-sum game, whose payoffs refers to retailers' market share and consumers decision problem is formalized in terms of a discrete choice model, based on random utilities. The theoretical models provide forecasting of equilibrium market shares and the locations to be chosen by retailers, in terms of the geographic distribution of the underlying location space (constituencies of the town), population distribution and characteristics (types) of the consumers.
    Keywords: Hotelling, Industrial Organization, Choice Model
    Date: 2004–06
  15. By: Francisco J. André (Universidad Pablo de Olavide de Sevilla); M. Alejandro Cardenete Flores (Universidad Pablo de Olavide de Sevilla)
    Abstract: Since policy makers usually pursue several conflicting objectives, policy making can be understood as a multicriteria decision problem. Following the methodological proposal in André and Cardenete (2005), we use multiobjective programming in connection with a computable general equilibrium model to represent optimal policy making and to get so-called efficient policies in an application to a regional economy (Andalusia, Spain). We illustrate the solution of two bicriteria problems (unemployment vs. inflation and growth vs. unemployment) from which we get a new reading of two classical results: the Phillips curve and the Okun law. Finally, we enlarge the scope of the exercise by solving a problem with five objectives and discuss the efficient solutions that can be obtained in this context.
    Keywords: Public Policy, Multicriteria Decision Making, Computable General Equilibrium Model, Efficient Policy.
    JEL: C61 C68 D78
    Date: 2006
  16. By: Saveyn Bert (K.U.Leuven-Center for Economic Studies)
    Abstract: This paper studies the income effects of environmental policy in jurisdictions with a common labor market and a heterogeneous population (workers and polluters). A jurisdiction unilaterally improves its local environmental quality, using a subsidy, an environmental tax or command-and-control. In a closed economy, workers and polluters have some kind of a "natural ranking" of instruments for a given environmental objective. We find that commuting across jurisdictions may upset this "natural ranking" of environmental instruments. Further, we see that this inter-jurisdictional commuting exports pollution and the costs of environmental policy, possibly causing strategic behavior.
    Keywords: Environmental Instrument Choice, Commuting, Interest Groups
    JEL: Q52 R23
    Date: 2006–02
  17. By: Helga De Doncker (National Bank of Belgium, Microeconomic Information Department)
    Abstract: Since 1 June 2003 the file of the Central Office for Credits to Private Individuals has recorded information relating to all consumer credits and mortgage loans contracted by natural persons for private purposes, as well as any payment defaults resulting from these loans. This registration aims to strengthen the means of preventing the excessive indebtedness of private individuals. In this paper the data of this unique and quasi exhaustive database are thoroughly analysed. Based on the information for the registered credit contracts and the registered persons, firstly a general description of the structure and characteristics of the Belgian private credit market is given. Further, the paper investigates borrowing and payment behavior according to debtor characteristics. The study finds that borrowing patterns, especially as credit portfolio composition is concerned, clearly diverge according to age and residence. Furthermore, striking differences were found for the percentage of loan defaults if these variables were taken into account. In particular, the paper comes to the conclusion that loan defaults aggregated at the regional level show remarkably strong correlations with economic and demographic factors.
    Keywords: credit bureau, consumer credits, mortgage loans, loan payment defaults
    JEL: D14 D18 G21 G22 G29 R29
    Date: 2006–01
  18. By: Sergio Vergalli (University of Brescia)
    Abstract: In this paper, we present a theoretical model that, implementing the pioneering work of Burda (1995), based on the Real Option Theory, investigates the roots of the migration dynamics. In the model the decision to migrate of each individual depends not only on the wage differential, but also on a U-shaped benefit function of a community of homogeneous ethnic individuals, modelled according to the "theory of clubs". The theoretical results are able to give an explanation to the observable "jumps" in the migration flows and to describe how the trigger for entry can change depending on the dimension of the district. The analysis of the results also sheds light on the dynamics of the districts’ development: some possible rigidities in the adjustment of the district dimension, as regards the optimal levels, could magnify the hysteresis process.
    Keywords: Migration, Real option, Theory of clubs, Network effect
    JEL: F22 H49 O15 R23
    Date: 2006–01
  19. By: Paul Latreille (University of Wales Swansea); David H. Blackaby (University of Wales Swansea); Philip D. Murphy (University of Wales Swansea); Nigel O'Leary (University of Wales Swansea); Peter J. Sloane (University of Wales Swansea and IZA Bonn)
    Abstract: The U.K. government has recently committed itself to an ambitious 80 per cent employment rate target. Recognising that achieving this aspiration will require significant numbers of the economically inactive to (re-)engage with the labour market, the government has enacted various policy reforms seeking to encourage those on the fringes of the labour market to do so. The present paper uses unique survey data to examine three factors relevant to these issues, namely the desire to work, minimum acceptable wages and the distance the inactive are prepared to travel to work for a given minimum acceptable wage offer.
    Keywords: economic inactivity, reservation wages, travel-to-work distances
    JEL: J21 J22 J31
    Date: 2006–02

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