nep-geo New Economics Papers
on Economic Geography
Issue of 2006‒05‒13
twenty papers chosen by
Vassilis Monastiriotis
London School of Economics

  1. Raising Urban Productivity or Attracting People? Different Causes, Different Consequences By Stefano Magrini; Paul Cheshire
  2. Does Venture Capital Investment Really Require Spatial Proximity? An Empirical Investigation By Michael Fritsch; Dirk Schilder
  3. Regional Economic Performance in New Zealand: How Does Auckland Compare? By Geoff Lewis; Steven Stillman
  4. R&D Accessibility and Regional Export Diversity R&D Accessibility and Regional Export Diversity R&D Accessibility and Regional Export Diversity By Karlsson, Charlie; Johansson, Sara
  5. Product Differentiation or Spatial Monopoly? The Market Areas of Austrian Universities in Business Education By Gunther Maier
  6. Innovation, Knowledge and Regional Economic Performances: Regularities and Differences in the EU By Alessandro STERLACCHINI
  7. A Spatial Model of Growth: Taking Technology Seriously By Zuoquan Zhao
  8. Incorporating Transportation Network Structure in Spatial Econometric Models of Commodity Flows By LeSage, James P.; Polasek, Wolfgang
  9. Airport City Limits: A Critical Assessment of the Redevelopment of Berlin's Flughafen Schönefeld By Rawley Vaughan
  10. Efficiency and seasonality in the UK housing market, 1991-2001 By Leslie Rosenthal
  11. Transit in Washington, D.C.: Current Benefits and Optimal Level of Provision By Nelson, Peter; Bagliano, Andrew; Harrington, Winston; Safirova, Elena; Lipman, Abram
  12. Cities in Canadian Federalism By Enid Slack
  14. Spatial aggregation of local likelihood estimates with applications to classification By Denis Belomestny; Vladimir Spokoiny
  15. MSA Location and the Impact of State Taxes on Employment and Population: A Comparison of Border and Interior MSA's By William H. Hoyt; J. William Harden
  16. Will consolidation improve sub-national governments ? By Gurley, Tami; Fox, William F.
  17. Labour Market Segmentation, Flexibility and Precariousness in the Italian North East By Giuseppe Tattara; Marco Valentini
  18. Home Ownership, Job Duration and Wages By Jakob Roland Munch; Michael Rosholm; Michael Svarer
  19. The Effects of Local Labour Market Conditions on Welfare Program Participation By Pan, S; Jensen, Helen H.; Fuller, Wayne A
  20. The Diffusion of the Internet and the Geography of the Digital Divide in the United States By Shane Greenstein; Jeff Prince

  1. By: Stefano Magrini (Department of Economics, University Of Venice Cà Foscari); Paul Cheshire (Department of Geography and Environment, London School of Economics)
    Abstract: This paper investigates growth differences in the urban system of the EU12 over the last decades of the 20th Century. Models in which growth of real GDP p.c. and rates of population growth are the dependent variables are compared. This suggests that it makes sense to model GDP growth in a European context. The analysis supports the conclusion that systems of urban governance are significantly related to economic growth, as is the distribution of highly skilled human capital and R&D activity. In addition, evidence is found supporting the conclusion that integration shocks in the EU favour core areas but when all else is controlled for peripheral regions experienced a systematic positive growth differential. Careful testing for spatial dependence reveals that national borders are significant barriers to adjustment but we can resolve such problems by including a set of variables designed to reflect spatial economic adjustment mechanisms where cities are densely packed so their economies interact. Models of population growth show some similar results but interesting and revealing differences. Strong evidence is found that there are substantial national border effects impeding the emergence of a full spatial equilibrium across the EU’s urban system. Better climate is the single most significant variable but only when expressed relative to the national (not EU) mean. As with economic growth, there are significant national border effects in patterns of spatial dependence. Concentrations of human capital and R&D, however are if anything negatively associated with attracting population – a finding which parallels the finding that a better climate relative to the national mean is associated with slower rather than faster growth of real GDP per capita.
    Keywords: growth; cities; local public goods; human capital; convergence; territorial competition
    JEL: H41 H73 O18 R11 R50
    Date: 2006
  2. By: Michael Fritsch; Dirk Schilder
    Abstract: We examine the role of spatial proximity for Venture Capital (VC) investments in Germany. The main database is a survey of 85 personal interviews with representatives of different types of financial institutions. The analysis shows that spatial proximity is far less important for VC investments than is often believed. For example, the results indicate that syndication is partly used as an alternative to spatial proximity. Telecommunication does not work as a substitute for face-to-face contact. On the whole, regional proximity is not a dominant factor in VC partnerships. Therefore, the absence of VC firms in a region does not appear to cause a severe regional equity gap.
    Keywords: Venture Capital, spatial proximity, start-up financing
    JEL: G24 O16 D21 M13 R12
    Date: 2006–05
  3. By: Geoff Lewis; Steven Stillman (The Treasury)
    Abstract: In this study we investigate Auckland’s economic performance relative to other large cities in New Zealand, to medium-sized urban centres and to small towns and rural areas. Measures of regional economic performance are not well developed in New Zealand and there is a relative lack of official data at the regional level. Previous measures developed by two non-governmental organisations have suggested that Auckland is “underperforming” relative to other regions in New Zealand. However, neither of these measures satisfactorily capture productivity performance by areas that are classified according to the density of economic activity that takes place within them. We use data from the annual New Zealand Income Survey to examine hourly earnings and other measures of labour productivity and utilisation for a number of regional areas. Our results tell a fairly consistent story. Auckland and Wellington have the highest levels of productivity performance based on almost all measures of earnings. In particular, both have significantly higher average levels of labour income, and wage rates than the three other comparison areas. Auckland has also experienced stronger growth in wages, in particular for wage/salary workers, than other regions. Our findings cast doubt on the hypothesis that Auckland has been a productivity underperformer within New Zealand. In fact, Auckland appears to be a relatively good performer and this is consistent with agglomeration economies being at work in New Zealand’s largest urban concentration. However, because we limited our investigations to within New Zealand we are not able to say how Auckland’s productivity performance compares to innovative, high-skill cities in other countries. Given New Zealand’s overall poorer performance in labour productivity and the rather modest wage rate growth that we find even for Auckland, it is unlikely to have been as good.
    Keywords: regional economic performance, Auckland, productivity, New Zealand
    JEL: R12 R20 J24
    Date: 2005–11
  4. By: Karlsson, Charlie (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology); Johansson, Sara (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology)
    Abstract: This paper examines the influence of accessibility to R&D on the regional diversity in Swedish export. A theoretical model with fixed R&D cost predicts that spatial knowledge spillovers generates external economies of scale in R&D activities and these external effects increase the innovative capacity in regions that have high accessibility to R&D. The model implies that the effects of R&D on regional export performance are reflected by the size of the export base rather than by the export volumes. The empirical analysis focus on three different indicators of export diversity; the number of exported goods, the number of exporting firms and the number of export destinations. The hypothesis that regional accessibility to R&D facilities in the private business sector, on the one hand, and university research departments on the other hand, increases the export diversity in regions is tested in cross-regional regression models. Since knowledge cannot be regarded as a spatially trapped resource the empirical analysis includes two measures of R&D accessibility; intra-regional and inter-regional. The empirical results indicate that the three indicators of regional export diversity are positively affected by the intra-regional accessibility to company R&D in commodity groups that have a relatively high R&D-intensity in production. Inter-regional accessibility to company R&D has significant positive impacts on the number of export goods and the number of export destinations also in less R&D-intensive industries. In the case of university R&D, the empirical results are weaker, in particular in the case of intra-regional accessibility. Yet, the inter-regional accessibility to university R&D has a significant positive impact on the number of export goods and the number of export destinations in the majority of commodity groups
    Keywords: Export diversity; knowledge; accessibility
    JEL: F12 R11 R12
    Date: 2006–05–04
  5. By: Gunther Maier
    Date: 2006
  6. By: Alessandro STERLACCHINI (Universita' Politecnica delle Marche, Dipartimento di Management ed Organizzazione Aziendale)
    Abstract: This paper examines how the recent economic performance - jointly measured by the level and growth rate of per capita GDP - of 151 developed European regions has been affected by their innovation and knowledge base. A regression analysis is carried out by using as a main explanatory variable a composite indicator extracted from a comprehensive set of innovation and education variables. The above relationship is controlled for structural characteristics and allowed to vary across EU countries. The results point to a highly significant economic impact of innovation and knowledge which, however, is not homogeneous among countries and regions.
    Keywords: innovation and knowledge, regional economic performance
    JEL: O18 O33 R11
    Date: 2006–05
  7. By: Zuoquan Zhao
    Abstract: This paper attempts to develop a spatial model of economic growth in which technology and externalities are assumed to be accountable for production in geographical space. Linking externalities to the extent of intensity of production across locations in continuous space, we introduce spatial range into the production function for technological, human, and physical capitals. Our model argues that the long-run growth rate of an economy is determined not just by the growth rates of the three factors of production but by their rates of change in spatial range over the territory of the economy. In other words, spatial intensity and accumulation matter for growth. Our model is consistent with studies on knowledge spillovers, geographical agglomeration, urban and regional growth, and trade. The primary policy implication of our model is the significance of establishing efficient mechanisms or channels that promote innovation, diffusion, trade, and factor mobility over the territory of an economy. It is not as if we always have it everywhere, but there is a process in which knowledge is being created all the time in different places, and is then being diffused. This evolving distribution should be reflected in a model of production, if it is to describe an entire economy in which different people know different things. As a consequence, the idea of an aggregate production function becomes very dubious, unless a new variable is introduced, representing the distribution and diffusion of new knowledge.
    Date: 2006–05
  8. By: LeSage, James P. (Department of Economics, University of Toledo); Polasek, Wolfgang (Department of Economics and Finance, Institute for Advanced Studies, Vienna, Austria)
    Abstract: We introduce a regression-based gravity model for commodity flows between 35 regions in Austria. We incorporate information regarding the highway network into the spatial connectivity structure of the spatial autoregressive econometric model. We find that our approach produces improved model fit and higher likelihood values. The model accounts for spatial dependence in the origin-destination flows by introducing a spatial connectivity matrix that allows for three types of spatial dependence in the origins to destinations flows. We modify this origin-destination connectivity structure that was introduced by LeSage and Pace (2005) to include information regarding the presence or absence of a major highway/train corridor that passes through the regions. Empirical estimates indicate that the strongest spatial autoregressive effects arise when both origin and destination regions have neighboring regions located on the highway network. Our approach provides a formal spatial econometric methodology that can easily incorporate network connectivity information in spatial autoregressive models.
    Keywords: Commodity flows, Spatial autoregression, Bayesian, Maximum likelihood, Spatial connectivity of origin-destination flows
    JEL: R1 R41 L92 C21
    Date: 2006–05
  9. By: Rawley Vaughan
    Date: 2006–05–03
  10. By: Leslie Rosenthal (Keele University, Department of Economics)
    Abstract: This paper considers the informational efficiency of the UK owner-occupied housing market over the period 1991-2001. Original small-area, monthly, house price index series are developed from raw housing transactions observations for a number of UK counties and cities. These series are then tested for characteristics indicative of weak market efficiency and seasonality. The major conclusions drawn are that there exists little evidence to support notions of inefficiency in these markets for this period.
    Keywords: Housing Markets; Market efficiency; Seasonality.
    JEL: R31 R20 R10
    Date: 2004–06
  11. By: Nelson, Peter (Resources for the Future); Bagliano, Andrew; Harrington, Winston (Resources for the Future); Safirova, Elena (Resources for the Future); Lipman, Abram
    Abstract: The discrepancy between transit’s large share of local transportation resources and its generally low share of local trips has raised questions about the use of scarce transportation funds for this purpose. We use a regional transport model consistent with utility theory and calibrated for the Washington, D.C., metropolitan area to estimate the travel benefits of the local transit system to transit users and the congestion-reduction benefits to motorists. We find that (i) rail transit generates congestion-reduction benefits that exceed rail subsidies; (ii) the combined benefits of rail and bus transit easily exceed local transit subsidies generally; (iii) the lowest-income group receives a disproportionately low share of the transit benefits, both in absolute terms and as a share of total income; and (iv) for practical purposes, the scale of the current transit system is about optimal.
    Keywords: transit, transit subsidies, external transit benefits
    JEL: R40 R41
    Date: 2006–04–10
  12. By: Enid Slack (International Tax Program, Rotman School of Management, University of Toronto)
    Abstract: We consider the place of cities, particularly large cities, in Canadian federalism from several perspectives. Although by most measures the current fiscal condition of Canadian cities seems fairly good, we argue that beneath this happy picture lies a less happy reality. Owing to the limited and relatively inelastic revenue base to which even the largest cities have access, the underlying basis of Canada’s urban prosperity is being eroded, with potentially damaging implications for national well-being over the long run. In an important sense, the roots of this problem lie in the fact that cities do not have any real role or voice in Canada’s federal structure. Since neither role nor voice is likely to be bestowed on them in the near future, however, we conclude by laying out a series of less fundamental actions that all levels of government have to undertake if they wish to maintain not only the present reputation of Canada’s big cities as ‘a nice place to live’ but also, more fundamentally, the urban dynamic that evidence around the world suggests increasingly underpins economic growth.
    Keywords: cities, local fiscal conditions, intergovernmental fiscal relations, Canada
    JEL: H77 H11 R51
    Date: 2006–05
  13. By: Johansson, Börje (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology); Lööf, Hans (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology)
    Abstract: This paper examines systematically the importance of location versus a vector of firm attributes on firms’ innovation engagements. The various factors that can influence a firm’s innovation efforts are divided into (i) firm location, reflecting the regional milieu, and (ii) firm attributes such as corporate structure, nature of the knowledge production, type of industry and a set of specific firm characteristics. The study is based on information about 2, 094 individual Swedish firms, where a firm may be non-affiliated or belong to a group (multi-firm enterprise), domestically or foreign owned. The study concludes that the propensity to be innovative differs between the five macro-region investigated. Among innovative firms, however, the R&D intensity as well as most other innovation-activity characteristics remain invariant with regard to location, when controlling for the skill composition, physical capital intensity, industry, corporate structure firm, size and market extension
    Keywords: Functional regions; innovation systems; corporate structure; R&D
    JEL: C21 G34 L22 O33
    Date: 2006–05–04
  14. By: Denis Belomestny; Vladimir Spokoiny
    Abstract: This paper presents a new method for spatially adaptive local likelihood estimation which applies to a broad class of nonparametric models, including the Gaussian, Poisson and binary response models. The main idea of themethod is given a sequence of local likelihood estimates (``weak´´ estimates),to construct a new aggregated estimate whose pointwise risk is of order of the smallest risk among all ``weak´´ estimates. We also propose a new approach towards selecting the parameters of the procedure by providing the prescribed behavior of the resulting estimate in the simple parametric situation. We establish a number of important theoretical results concerning the optimality of the aggregated estimate. In particular, our ``oracle´´ results claims that its risk is up to some logarithmic multiplier equal to the smallest risk for the given family of estimates. The performance of the procedure is illustrated by application to the classification problem. A numerical study demonstrates its nice performance in simulated and real life examples.
    Keywords: adaptive weights, local likelihood, exponential family, classification
    JEL: C13 C14
    Date: 2006–04
  15. By: William H. Hoyt (Department of Economics, Gatton School of Business and Economics, and Martin School of Public Policy and Administration, University of Kentucky); J. William Harden
    Abstract: We examine the impact of state taxation on employment by focusing on county employment in metropolitan statistical areas (MSA). However, we make a distinction between the impacts of state taxation on employment in metropolitan areas that are wholly contained within a single state and metropolitan areas that consist of counties in more than a single state. We make this distinction because, as we argue in the paper, the impacts of state taxes on both employment and population may be very different in metropolitan areas that border states and those that do not. We expect there to be differences both because the cost of avoiding state taxes, that is, mobility costs, might be lower along borders and also because along borders employees need not reside in the same state in which they are employed. Thus, while in general we believe that employment should be more responsive to taxes in border MSA’s, for some taxes, specifically taxes imposed on households, employment might be less responsive as households rather than firms can move to avoid these taxes. Because both the location of employment and residence are affected, and possibly differentially so, by state taxes, we jointly estimate the impacts that taxation may have on employment and population. Our results indicate that there are differences in the responsiveness of both employment and population to both tax and spending variables between border and interior jurisdictions. We also find that the impact of neighboring state taxes have differential effects on employment and population. That there are significant differences in the response to taxation and different type of taxes in border and interior counties suggests state-level estimates of the impacts of taxation may suffer from significant aggregation bias.
    Date: 2005–05
  16. By: Gurley, Tami; Fox, William F.
    Abstract: Local government size varies dramatically around the world. In Sudan, Cote d ' Ivoire, and the United Kingdom, municipalities average more than 125,000 people. Those in many European countries have less than 10,000 people. Countries often consider consolidation of local governments as a means to lower service delivery costs, improve service quality, enhance accountability, improve equity, or expand participation in government. The authors review a number of theoretical arguments and empirical findings concerning the size of sub-national governments. Countries should not presume that amalgamation will solve problems because benefits and costs are situation specific. Success depends on many factors, including getting incentives right for the various players and managing the transition properly. The effects on costs must be examined in terms of all changes occurring with consolidation, including geographic size. Size economies appear service specific and are most likely to result for infrastructure intensive services such as water and sewerage. Size economies are less likely for services such as education that are provided in numerous small production units near the population. Also, the potential for savings depends on other factors, such as willingness to eliminate redundant workers. Consolidation reduces the potential for local government competition, which appears to enhance service quality but not necessarily overall government size. There is some evidence that citizens are more willing to be involved in larger governments, but trust may fall with government size. Larger governments can improve regional planning by handling problems with a broader geographic perspective and giving the government more influence with national policymakers.
    Keywords: Urban Slums Upgrading,Municipal Financial Management,Public & Municipal Finance,Urban Economics,Education for the Knowledge Economy
    Date: 2006–05–01
  17. By: Giuseppe Tattara (Department of Economics, University Of Venice Cà Foscari); Marco Valentini (Department of Statistics, University Of Venice Cà Foscari)
    Abstract: Official Italian statistics undervalue the presence of short-term labour contracts. A more careful account of short term labour contracts more than doubles the official figures ranking Italy among the countries with a large amount of temporary work. Temporary labour contracts represent half of the total yearly labour flows and doubled in recent years in France, Italy and Spain in an attempt to avoid labour market rigidities imposed by the employment national legislations. But temporary contracts have larger potential costs. Very little is known about temporary workers in Italy and it is therefore important to improve our understanding of their career opportunities and to asses the impact of this form labour market flexibility. A succession of temporary jobs can push workers towards more permanent forms of employment, so that worse conditions received during the temporary contract period are compensated for by better conditions in the future. But people working for short spells can be also considered as an extreme case of outsiders, who receive low wages and have worse conditions compared to permanent workers, and this situation may last for their entire working life. In the nineties the divide between movers (non tenure workers) and stayers has increased and a considerable quota of the work force is deemed to never stabilize.
    Keywords: Regional Labour Markets; Temporary work; Tenure; Segmentation.
    JEL: J21 J44 R23
    Date: 2006
  18. By: Jakob Roland Munch (University of Copenhagen, CEBR and EPRU); Michael Rosholm (University of Aarhus and IZA Bonn); Michael Svarer (University of Aarhus)
    Abstract: We investigate the impact of home ownership on individual job mobility and wages in Denmark. We find that home ownership has a negative impact on job-to-job mobility both in terms of transition into new local jobs and new jobs outside the local labour market. In addition, there is a clear negative effect of home ownership on the unemployment risk and a positive impact on wages. These results are robust to different strategies for correcting for the possible endogeneity of the home owner variable.
    Keywords: home ownership, job mobility, duration model
    JEL: J6 R2
    Date: 2006–05
  19. By: Pan, S; Jensen, Helen H.; Fuller, Wayne A
    Abstract: A fractional imputation method is applied to Iowa administrative data to deal with a problem of missing data. The effects of local labour market conditions and mobility of household heads on Family Investment Program (FIP) participation are evaluated. Results show that mobility increases the opportunity for employment and decreases the FIP participation rate for low-income families. An increase in predicted unemployment rates decreases labour force participation and increases programme participation; an increase in unpredicted unemployment rates increases labour force participation and decreases programme participation. Overall, the effects are relatively larger in rural areas than in nonrural areas in Iowa.
    Keywords: welfare, labour, imputation methods, missing data
    JEL: J2
    Date: 2005–10–20
  20. By: Shane Greenstein; Jeff Prince
    Abstract: This paper analyses the rapid diffusion of the Internet across the United States over the past decade for both households and firms. We put the Internet's diffusion into the context of economic diffusion theory where we consider costs and benefits on the demand and supply side. We also discuss several pictures of the Internet's physical presence using some of the current main techniques for Internet measurement. We highlight different economic perspectives and explanations for the digital divide, that is, unequal availability and use of the Internet.
    JEL: O3 L8 R0
    Date: 2006–05

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