nep-geo New Economics Papers
on Economic Geography
Issue of 2006‒03‒05
nine papers chosen by
Vassilis Monastiriotis
London School of Economics

  1. Is there an urban wage premium in Italy? By Sabrina Di Addario; Eleonora Patacchini
  2. The private and social return to schooling in Italy By Antonio Ciccone; Federico Cingano; Piero Cipollone
  3. Production or consumption? Disentangling the skill-agglomeration connection By Guido de Blasio
  4. Patterns of Specialization and Concentration in a Polarized Country: the case of Italian Regions By Fazia Pusterla; Laura Resmini
  5. Integrated urban ugrading for the poor : the experience of Ribeira Azul, Brazil By Baker, Judy L.
  6. The Structure and Evolution of Industrial Clusters: Transactions, Technology and Knowledge Spillovers By Simona Iammarino; Philip McCann
  7. Are the markets for factories and offices integrated? Evidence from Hong Kong? By Charles Ka Yui Leung; Peiling Wei; Siu Kei Wong
  8. Evidence and implications of zipf’s law for integrated economies By Bowen, H.; Munandar, H.; Viaene, J.M.
  9. House Prices in Australia - 1970 to 2003 - Facts and Explanations By Peter Abelson; Roselyne Joyeux; George Milunovich; Demi Chung

  1. By: Sabrina Di Addario (Bank of Italy, Economic Research Department); Eleonora Patacchini (University of Rome La Sapienza)
    Abstract: We analyze empirically the impact of urban agglomeration on Italian wages. Using micro-data from the Bank of Italy's Survey of Household Income and Wealth for the years 1995, 1998, 2000 and 2002 on more than 22,000 employees distributed in 242 randomly drawn local labor markets (30 percent of the total), we test whether the structure of wages varies with urban scale. We find that every additional 100 employees per square kilometer (100,000 inhabitants) in the local labor market raises earnings by 0.4-0.6 percent (0.1 percent) and that employees working in large cities earn, on average, 2-3 percent higher wages than those in the rest of the economy. The application of spatial data analysis techniques enables us to state that this effect is present only in the large cities surrounded by low-populated areas. We also find that urbanization does not affect returns to experience and that it reduces returns to education and to tenure with current firm, while providing a premium to managers, worker supervisors, and office workers.
    Keywords: Wage Differentials, Urbanization, Agglomeration Externalities, Population Clustering, Spatial Autocorrelation
    JEL: R12 J31
    Date: 2006–01
  2. By: Antonio Ciccone (ICREA and Universitat Pompeu Fabra); Federico Cingano (Bank of Italy); Piero Cipollone (Bank of Italy)
    Abstract: We estimate the private (individual) and social return to schooling in Italy and four macro regions. Our estimates take into account the effects of schooling on employment and wages as well as the key features of the Italian tax and social insurance system. We find that the individual return to schooling compares favorably to the return to financial assets (especially in the South). At the social level, the available infrastructure-capital data indicates that the return to schooling exceeds that to infrastructures in the South.
    Keywords: Education, Regional Development, Wages, Employment probability
    JEL: I2 J31 O18 R11
    Date: 2006–01
  3. By: Guido de Blasio (Bank of Italy, Economic Research Department)
    Abstract: To explain the concentration of human capital in cities, urban theory conjectures that the metropolitan scale provides two sources of returns for the more educated; production benefits, both in terms of wages and non-monetary gains, and consumption benefits. By exploiting a unique survey on Italian workers that records information for the two sources of returns, this paper quantifies their respective roles. The findings show that skilled workers enjoy higher consumption amenities in larger cities. They benefit from the local public goods, such as transportation, health and schooling services, the shopping possibilities, and the cultural consumption potentials made possible by the urban location of cinemas, theaters, and museums. On the other hand, the more educated do not receive benefits on the production side. Their wages do not reflect a premium, and the returns to education and experience are not higher than elsewhere. Moreover, urban skilled workers do not change jobs more readily than elsewhere and do not appear to be more satisfied of their jobs. The estimates imply that in the largest metropolitan areas the value of the consumption amenities can be as high as 50% of the rents or 16-17% of the wages.
    Keywords: cities, human capital
    JEL: R0
    Date: 2006–01
  4. By: Fazia Pusterla; Laura Resmini (ISLA, Universita' Bocconi, Milano)
    Abstract: In this paper, we utilize firm-level data on foreign firm manufacturing plants in four Central and Eastern European Countries, in order to trace their location and estimate the determinants of their choice processes. At this purpose, we use a nested logit model as developed by McFadden (1974). Several reasons explain the need for mapping FDI. First of all, this would help to understand the real competitiveness of regions and countries in providing location advantages able to complement MNEs’ organisational and internalisation advantages. Secondly, it would directly show the distribution of the benefits usually associated with FDI. Finally, an understanding of FDI location decisions is important for policy makers who believe that MNEs may offer a positive contribution to the economic development of disadvantage areas and thus correct potential regional imbalances. Main results show that sector specific factors affect the choice of final location. These unobserved characteristics influence both the determinants and the structure of MNEs location choice process.
    Keywords: foreign direct investment, location choice, transition countries
    JEL: F23 R38
    Date: 2005–06
  5. By: Baker, Judy L.
    Abstract: This study looks at the experience of integrated urban upgrading in a low-income neighborhood of Salvador, Bahia, Brazil. Infrastructure and social investments have been made in the community through a government program, with community participation playing a major role in the design and implementation. This approach is now perceived to be highly successful in terms of its implementation and positive impact on living conditions, and will provide the basis for a major state-wide program. This paper analyzes the lessons learned from the experience, with implications for scaling up as well as applications for other urban upgrading programs. Among the key issues looked at are: (1) what has worked well with the integrated urban upgrading approach and what has not; (2) how cost-effective the interventions were; (3) institutional arrangements given the multi-sectoral approach; and (4) sustainability issues of financing, tenure security, the prevention of further slum expansion, operations and maintenance, environmental sustainability, and job creation, and how they will impact on the poor over time. Key findings point to the importance of community participation, clear roles and responsibilities in institutional arrangements, the need for strong local government participation, and the high costs and challenges of providing housing for the poor.
    Keywords: Health Monitoring & Evaluation,Housing & Human Habitats,Urban Slums Upgrading,Urban Services to the Poor,Public Sector Economics & Finance
    Date: 2006–03–01
  6. By: Simona Iammarino (SPRU, University of Sussex); Philip McCann (University of Reading)
    Abstract: In this paper we investigate the relationship between location patterns, innovation processes and industrial clusters. In order to do this we extend a transactions costs-based classification of industrial clusters into a knowledge-based taxonomy of clusters, along the lines suggested by a critical revision of the main assumptions underlying most of the existing literature on spatially defined clusters. Our arguments show that the transactions costs approach and the innovation and technological change framework are broadly consistent, and that real insights into the microfoundations, nature, and evolution of clusters can be provided by these classification systems.
    Keywords: industrial clusters, firm location, innovation processes, cluster classification
    JEL: O31 O33 R3 D8
    Date: 2006–02–27
  7. By: Charles Ka Yui Leung; Peiling Wei; Siu Kei Wong
    Abstract: Due to the relocation of manufacturing facilities from Hong Kong to Mainland China, it is widely believed that some vacant private factories have been used as offices in Hong Kong. Yet there is no direct and systematic evidence to support this speculation. In fact, according to MacGregor and Schwann (2003), industrial and commercial real estate shares some common features. Our research attempts to investigate empirically the price and volume relationship between industrial and commercial real estate, using both aggregate and disaggregate data from the industrial and commercial property markets in Hong Kong. The study was built on the observation that economic restructuring and geographical distance will affect the substitutability (and thus the correlation) of different types of property, and utilizes commonly used time series techniques for analysis. Policy implications are discussed.
    Keywords: aggregation bias, geographical distance, industrial real estate, substitutability
    JEL: G12 L80 R30
    Date: 2006–02
  8. By: Bowen, H.; Munandar, H.; Viaene, J.M.
    Abstract: This paper considers the distribution of output and productive factors among members of a fully integrated economy (FIE) in which there is free mobility of goods and factors among members and whose members share the same technology. We first demonstrate that, within an FIE, each member’s share of total FIE output and its shares of total FIE stocks of productive factors will be equal. If economic policies are largely harmonized across FIE members then this “equal-share” property implies that the growth in any member’s shares of FIE output and factor stocks can be taken to be a random outcome. Building on Gabaix’s (1999) result for the distribution of city sizes we argue that, if output and factor shares among FIE members evolve as geometric Brownian motion with a lower bound, then the limiting distribution of these shares will exhibit Zipf’s law. We empirically examine for Zipf’s law for the distribution of output and factor shares across two (presumably) integrated economies: the 51 U.S. states and 14 European Union (E.U.) countries. Our empirical findings strongly support Zipf’s law with respect to the distribution of output, physical capital and human capital among U.S. states and among E.U. countries. These findings imply that models used to characterize the growth of members within an FIE should embody a key assumption: that the underlying growth process of shares is random and homogeneous across FIE members.
    Keywords: growth, economic integration, Zipf’s law
    JEL: E13 F15 F21 F22 O57
    Date: 2006–02–23
  9. By: Peter Abelson (Department of Economics, Macquarie University); Roselyne Joyeux (Department of Economics, Macquarie University); George Milunovich (Department of Economics, Macquarie University); Demi Chung (Department of Accounting and Finance, Macquarie University)
    Abstract: This paper describes and explains changes in real house prices in Australia from 1970 to 2003. In the first part of the paper, we develop a national index of real house prices. We then discuss the main factors that determine real house prices and some previous attempts to model Australian house prices. We develop and estimate a long-run equilibrium model that shows the real economic determinants of house prices and a short-run asymmetric error correction model to represent house price changes in the short run. Consistent with economic theory, we find that in the long run real house prices are related significantly and positively to real income and to the rate of inflation as represented by the consumer price index. They are also related significantly and negatively to the unemployment rate, mortgage rates, equity prices, and the housing stock. Employing our short-run asymmetric error correction model, we find that there are significant lags in adjustment to equilibrium. When real house prices are rising at more than 2 per cent per annum the housing market adjusts to equilibrium in four quarters. When real house prices are static or falling, the adjustment process takes six quarters.
    JEL: G12 R31
    Date: 2005–05

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