nep-geo New Economics Papers
on Economic Geography
Issue of 2006‒09‒30
fifteen papers chosen by
Vassilis Monastiriotis
London School of Economics

  1. Long term evolution of the size distribution of Portuguese cities By Ana Paula Delgado; Isabel Maria Godinho
  2. The Regional Dimension of Knowledge Transfers - A Behavioral Approach By Tom Brökel; Martin Binder
  3. Location, Location, Location! A Classroom Demonstration of the Hotelling Model By Lisa R. Anderson; Jessica Holmes; Mark Jeffreys; Dan Lass; Jack Soper
  4. Enlargement and the EU Periphery: The Impact of Changing Market Potential By Marius Brülhart; Matthieu Crozet; Pamina Koenig
  5. Do Migrants Follow Market Potentials? An Estimation of a New Economic Geography Model By Matthieu Crozet
  7. EU Enlargement and the Internal Geography of Countries By Matthieu Crozet; Pamina Koenig
  8. Behaviors and housing inertia are key factors in determining the consequences of a shock in transportation costs By François Gusdorf; Stéphane Hallegatte
  9. Poverty Is No Crime: Measuring Poverty in Russian Regions By Irina Denisova; Marina Kartseva
  10. Housing Satisfaction, Homeownership and Housing Mobility: A Panel Data Analysis for Twelve EU Countries By Luis Diaz-Serrano
  11. How does the down-payment constraint affect the UK housing market? By Andrew Benito
  12. A spatial analysis of the XIII Italian Legislature By Massimiliano Landi; Riccardo Pelizzo
  13. The Determinants of U. S. State Economic Growth: A Less Extreme Bounds Analysis By W. Robert Reed
  14. The Impact on Rent from Tenant and Landlord Characteristics and Interaction By Erling Røed Larsen and Dag Einar Sommervoll
  15. Una Evaluación Geográfica de la Política de Educación Media Superior de la Ciudad de México By Cervantes, Laura; Vilalta y Perdomo, Carlos J.

  1. By: Ana Paula Delgado (CEDRES, Faculdade de Economia do Porto, Universidade do Porto); Isabel Maria Godinho (CEDRES, Faculdade de Economia do Porto, Universidade do Porto)
    Abstract: In this paper we study the evolution of the Portuguese urban system from 1864 to 2001. We apply the rank-size model and use rank-size estimates to describe the evolution of city-size hierarchy. NonParetian behavior of the distribution is examined by adding a quadratic term to the basic equation of the model. Our results enhance two different processes in the evolution of urban system: until the middle of the twentieth century urban growth was accompanied by population concentration in the largest cities; afterwards growth benefits middle size cities, reinforced in the last decades by heavy population losses in the two largest cities. From the association between the characteristics and evolving pattern of city size distribution and the spatial pattern of urban growth, it appears that the nonParetian behavior of city size distribution in the last decades can be linked to the particular growth process of cities located in the proximity of the central cities of the two metropolitan areas of mainland Portugal. In order to obtain a better understanding of the dynamics of the Portuguese urban system we examine the movements in the ranking of cities, through a Markov chain process. We also analyse the existence of spatial correlation in the process of urban hierarchy restructuring.
    Keywords: Urban hierarchy, rank-size distribution, urban growth, Markov processes
    JEL: O18 R11 R12
    Date: 2006–09
  2. By: Tom Brökel; Martin Binder
    Abstract: Innovations are inherently connected to knowledge transfers. The need of face-to-face contacts to transfer tacit knowledge is commonly argued to cause a regional dimension of innovative activities. The paper presents an alternative explanation based on a model of boundedly rational actors who search for knowledge. It is shown that a regional dimension exists in these processes that results from a regional bias in an actor’s search activities. Social embeddedness, a shared regional identity and limited spatial mobility foster this bias. We argue that insights from research on these topics can help to define the geographic size of a region.
    Keywords: Regional Economics, Innovation, Knowledge Transfers, Tacit Knowledge, Bounded Rationality Length 31 pages
    JEL: B52 D83 O31 R12
    Date: 2006–09
  3. By: Lisa R. Anderson (Department of Economics, College of William and Mary); Jessica Holmes (Department of Economics, Middlebury College); Mark Jeffreys (Behavioral Science Department and Integrated Studies Department, Utah Valley State College); Dan Lass (Department of Resource Economics, University of Massachusetts); Jack Soper (Department of Economics and Finance, John Carroll University)
    Abstract: Why are car dealerships concentrated in the same location? Why do "diamond districts" and "garment districts" emerge in large cities? This commonly observed clustering of competitors is a source of intrigue for many undergraduates; their intuition tells them that firms should locate away from close rivals in order to avoid competing for the same customers. This paper outlines a classroom experiment that complements the standard theoretical discussion of Hotelling's (1929) spatial competition model and provides students with a deeper understanding of the intuition behind competitive clustering. The experiment places the student in the role of the street vendor who must choose his or her optimal location in a "linear city." Like Hotelling's vendors, each student chooses the most profitable location for his or her cart, taking into account the locations of competitors and the transportation costs and distribution of potential customers. Students are also faced with the two-stage decision that introduces a Hotelling location-price model. The experiment can be implemented in any size class, with very little preparation. It is well-suited for courses in microeconomics, industrial organization, game theory, experimental economics, public choice, and urban economics and can also be incorporated into management, geography and political science courses.
    Keywords: classroom experiment, location choice
    JEL: A22 C22 C90 D21 L10
    Date: 2006–09–18
  4. By: Marius Brülhart (HEC - LAUSANNE - École des HEC, Université de Lausanne Département d'économétrie et économie politique - [Université de Lausanne]); Matthieu Crozet (TEAM - Théories et Applications en Microéconomie et Macroéconomie - [CNRS : UMR8059] - [Université Panthéon-Sorbonne - Paris I]); Pamina Koenig (TEAM - Théories et Applications en Microéconomie et Macroéconomie - [CNRS : UMR8059] - [Université Panthéon-Sorbonne - Paris I], CREST - Centre de Recherche en Économie et Statistique - [INSEE] - [ École Nationale de la Statistique et de l'Administration Économique])
    Abstract: We study the impact of changing relative market access in an enlarged EU on the economies of incumbent Objective 1 regions. First, we track the impact of external opening on internal spatial configurations in a three-region economic geography model. External opening gives rise to potentially offsetting economic forces, but for most parameter configurations it is found to raise the locational attractiveness of the region that is close to the external market. Then, we explore the relation between market access and economic activity empirically, using data for European regions, and we simulate the impact of EU enlargement on Objective 1 regions. Our predicted market-access induced gains in regional GDP and manufacturing employment are up to seven times larger in regions proximate to the new accession countries than in “interior” EU regions. We also find that a future Balkans enlargement could be particularly effective in reducing economic inequalities among the EU periphery, due to the positive impact on relative market access of Greek regions.
    Keywords: New economic geography, Market potential, EU enlargement, Objective 1 regions
    Date: 2006–09–19
  5. By: Matthieu Crozet (TEAM - Théories et Applications en Microéconomie et Macroéconomie - [CNRS : UMR8059] - [Université Panthéon-Sorbonne - Paris I])
    Abstract: New Economic Geography models describe a cumulative process of spatial agglomeration: Firms tend to cluster in locations with good access to demand, and similarly, workers are drawn to regions where market potential is high because the price index is lower there. This paper provides an empirical assessment of this forward linkage that relates labour migrations to the geography of production through real wage differentials. In the spirit of Hanson (1998), we use bilateral migration data for five European countries over the 1980s and 1990s to perform quasi-structural estimations of a new economic geography model derived from Krugman (1991). The results show strong evidence in favor of this model. As expected, migrants do follow market potential. Moreover, we provide estimates for all key parameters of the model. These estimates suggest that a sudden emergence of a core-periphery pattern is unlikely within European countries: centripetal forces are too limited in geographical scope, and mobility costs are too high.
    Keywords: Agglomeration, economic geography, European regions, migration.
    Date: 2006–09–19
  6. By: Andersson, Martin (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology); Johansson, Börje (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology)
    Abstract: This paper introduces a model where new products are introduced by entrepreneurs or innovating firms in a quasi-temporal setting. Market conditions are characterized by monopolistic competition between varieties belonging to the same product group, where varieties can become obsolete over time and hence disappear from demand. Firms that innovate have to make an R&D investment, and a firm’s decision to export a variety to a given market is associated with a market channel investment. The model is used to predict export behavior by firms in different regional milieus, and these predictions are compared with observations from a rich data set describing export activities of Swedish firms. The data set contains firm level information about export flows, where the flow of each variety is associated with the exporting firm’s location, export value, price and destination. In the empirical analysis we examine how the arrival of innovation ideas varies across regions and how this variation depends on regional characteristics.
    Keywords: location; entrepreneurship; innovation; exports; diversity
    JEL: F12 O31 R11 R12
    Date: 2006–09–22
  7. By: Matthieu Crozet (TEAM - Théories et Applications en Microéconomie et Macroéconomie - [CNRS : UMR8059] - [Université Panthéon-Sorbonne - Paris I]); Pamina Koenig (TEAM - Théories et Applications en Microéconomie et Macroéconomie - [CNRS : UMR8059] - [Université Panthéon-Sorbonne - Paris I], CREST - Centre de Recherche en Économie et Statistique - [INSEE] - [ École Nationale de la Statistique et de l'Administration Économique])
    Abstract: This paper focuses on the relation between trade openness and the location of economic<br />activity in a country. The problematic lies in the context of the EU enlargement process and of<br />its impact on the location of economic activity inside each of the accessing countries. We develop a new economic geography model based on the original Krugman (1991) model, and show that trade liberalization will foster agglomeration of economic activity in the location that has the lowest-cost access to foreign markets. Our results thus differ from Krugman and Livas's (1996) conclusions. We expect the CEECs' economies to shift economic activity towards EU markets. We provide empirical evidence of this result focusing on the post-1991 Romanian urban system.
    Keywords: economic integration; urban concentration; agglomeration; CEECs
    Date: 2006–09–20
  8. By: François Gusdorf (CIRED - Centre international de recherche sur l'environnement et le développement - [CIRAD : UMR56][CNRS : UMR8568] - [Ecole des Hautes Etudes en Sciences Sociales][Ecole Nationale des Ponts et Chaussées][Ecole Nationale du Génie Rural des Eaux et des Forêts]); Stéphane Hallegatte (CIRED - Centre international de recherche sur l'environnement et le développement - [CIRAD : UMR56][CNRS : UMR8568] - [Ecole des Hautes Etudes en Sciences Sociales][Ecole Nationale des Ponts et Chaussées][Ecole Nationale du Génie Rural des Eaux et des Forêts])
    Abstract: This paper investigates the consequences of a sudden increase in transportation costs when households behaviors and buildings inertia are accounted for. A theoretical framework is proposed, capturing the interactions between behaviors, transportation costs and urban structure. It is found that changes in households consumption and housing choices reduce significantly the long-term adverse effects of a shock in transportation costs. Indeed, the shock translates, over the long-run, into a more concentrated housing that limits households utility losses and maintains landowners' income. But, because of buildings inertia, the shock leads first to a long transition, during which the adjustment is constrained by a suboptimal housing-supply structure. Then, households support larger losses than in the final stage, though lower than with no adjustment at all, and landowners experience a large decrease in their aggregate income and an important redistribution of wealth. Negative transitional effects grow as the shock becomes larger. Thus, behaviors and buildings inertia are key factors in determining the vulnerability to transportation price variability and to the introduction of climate policies. Our policy conclusions are that: (i) if a long-term increase in transportation costs is unavoidable because of climate change or resource scarcity, a smooth change, starting as early as possible, must be favored; and (ii) fast-growing cities of the developing world can reduce their future vulnerability to shocks in transportation costs through the implementation of policies that limit urban sprawl.
    Keywords: City, Housing, Transportation
    Date: 2006–09–20
  9. By: Irina Denisova (CEFIR/New Economic School); Marina Kartseva
    Abstract: Fighting poverty is on the top of Russia’s political agenda. The scope of poverty as well as the poverty profile is still an open question, however. The question is even more open with respect to the Russian regions. One could expect that being a heterogeneous country, Russia’s regional poverty profiles are also heterogeneous. We measure poverty in Russia’s regions using absolute poverty notion, official regional subsistence levels and consumption-based approach. We also draw regional poverty profiles by identifying the factors which influence poverty rates and poverty gaps. The exercise is based on NOBUS database – a nationally and regionally (for 46 regions) representative survey of 45000 households done in April-May 2003. We find that poverty rates vary significantly – up to threefold difference - across regions. The list of factors that influence poverty rate and poverty gap in regions are similar, with variation in relative weights of the factors. The former conforms with other studies on poverty in Russia that conclude that there are no major differences in determinants of transitory or persistent poverty. Some interesting insights in regional-specific patterns of poverty are found.
    Keywords: poverty, Russian regions, poverty rate, poverty profile, NOBUS
    Date: 2005–09
  10. By: Luis Diaz-Serrano (Universitat Rovira i Virgili and IZA Bonn)
    Abstract: We investigate the determinants of housing satisfaction in twelve EU countries. To do so, we use panel data covering the period 1994-2001, which allows us to control for individual heterogeneity. We carry out separate estimates on the determinants of housing satisfaction for homeowners and for renters and observe that: i) the tenure status is critical in determining the level of housing satisfaction; ii) housing satisfaction acts as trigger event of housing mobility, and; iii) dissatisfied renters are more likely to move than their homeowners counterparts. Our results also allow us to conclude that self-reported housing satisfaction is a meaningful variable able to explain individual’s objective economic behavior, since it is able to anticipate movements in the households’ demand for housing.
    Keywords: housing satisfaction, random-effects, fixed-effects, housing mobility, homeownership
    JEL: D1 R0 J0
    Date: 2006–09
  11. By: Andrew Benito
    Abstract: A house purchase typically requires a deposit (or down-payment) and so a significant amount of cash. This paper considers the empirical implications of this borrowing constraint for the housing market. It shows that, at the aggregate level, models of the housing market that incorporate the constraint are consistent with the following stylised facts: i) a positive correlation between house price inflation and transactions; ii) greater volatility of former owner-occupiers' house price inflation than for first-time buyers; iii) the presence of first-time buyers in the market falls with the rate of change of house prices; and iv) house prices are more sensitive to the incomes of the young. The paper then exploits variation across local housing markets in the rate of change in house prices and considers how leverage affects the response of the rate of change of house prices to shocks. The evidence, based on data for 147 district-level housing markets for the period 1993-2002, suggests that a large incidence of households with high levels of leverage (loan to value ratios) raises the sensitivity of house prices to a shock. This is also consistent with the down-payment constraint model of the housing market.
  12. By: Massimiliano Landi (School of Economics and Social Sciences, Singapore Management University); Riccardo Pelizzo (School of Economics and Social Sciences, Singapore Management University)
    Abstract: We present a spatial map of the Italian House during the XIII Leg-islature obtained by applying the Poole and Rosenthal methodology to roll call data. We obtain coordinates for almost all the 650 MPs that were on the House's °oor at the time, and we aggregate them according to parties. We ¯nd that voting patters generate basically a two dimensional political space. The ¯rst dimension represents loyalty to either the ruling coalition or the opposing one. The second dimension may describe differences at the constitutional level. This finding is consistent with the exceptional case of the party Northern League, which at the time did not belong to either coalition, and presented itself as a northern and anti-system party. Last, we compute the average dispersion of party coordinates along each dimension and compare them with the Rice index of cohesion, the agreement index (which takes into account abstention), and one other index we construct to account for absence from voting. We ¯nd that absence is significantly correlated with the dispersion of parties along the second dimension. We use this to motivate the importance of further analysis on the massive absence in Italian Parliament from voting sessions.
    Date: 2005–11
  13. By: W. Robert Reed (University of Canterbury)
    Abstract: This study investigates U.S. state economic growth from 1970-1999. I innovate on previous studies by developing a new approach for addressing "model uncertainty" issues associated with estimating growth equations. My approach borrows from the "extreme bounds analysis" (EBA) approach of Leamer (1985), while also addressing concerns raised by Granger and Uhlig (1990), Salai-Martin (1997) and others that not all specifications are equally likely to be true. I then apply this approach to identify "robust" determinants of state economic growth. My analysis confirms the importance of productivity characteristics of the labor force and industrial composition of a state's economy. I also find that policy variables such as (i) size and structure of government and (ii) taxation are "robust" and economically important determinants of state economic growth.
    Keywords: Growth, U. S. State Economic Growth, State Fiscal Policy, Economic Development, Taxes, Model Selection, SIC, AIC, AICc, Extreme Bounds Analysis
    JEL: H10 H20 H30 H70 R11 R58 C51
    Date: 2006–02–02
  14. By: Erling Røed Larsen and Dag Einar Sommervoll (Statistics Norway)
    Abstract: Owner-occupied housing services and rented housing services are often considered close substitutes, and both house price and rental price indices rely on regressions based on dwelling and location characteristics. However, while such characteristics are exhaustive in the owner's market, they cannot capture the additional complexity of rental markets. This paper offers a theoretical framework and an empirical analysis of additional factors that affect rent. The factors comprise three categories: Landlord characteristics, tenant characteristics, and characteristics of the landlord-tenant interaction. We analyze a novel data set sampled from the Norwegian rental market and obtain substantial improvements in explanatory power by including information on tenant and landlord characteristics and interaction. While variation in geographical variables explains 17 percent of the variation in monthly rent; variation in hedonic variables explain only 12 percent. Variation in tenant and landlord characteristics and interaction explains as much as 15 percent of rent variation. The full model captures 44 percent of rent variation and offers insights into the monetary values of landlord type, market mediation, tenure length, tenant type, and services. This additional explanatory power accentuates the difference between the owner's and renter's market, and the results come with ramifications for the general understanding of the rental market, for construction of rental indices, and for the assumption of a rental-equivalence principle in CPI-construction.
    Keywords: hedonic regression; housing market; landlord; rent; rental index; rental market; tenant.
    JEL: C21 D12 R21
    Date: 2006–08
  15. By: Cervantes, Laura; Vilalta y Perdomo, Carlos J. (Tecnológico de Monterrey, Campus Ciudad de México)
    Abstract: En este trabajo presentamos una evaluación geográfica de la política de las preparatorias creadas y administradas por el gobierno de la ciudad de México. La revisión teórica y evaluación estadística realizadas nos ha permitido (1) construir relaciones explicativas útiles entre varios conceptos de teorías urbanas provenientes de escuelas divergentes, y de disciplinas diferentes, y a la vez (2) hacer una demostración empírica del incumplimiento de uno de los objetivos geográficos de esta política de la ciudad de México.
    Date: 2006–04

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