nep-geo New Economics Papers
on Economic Geography
Issue of 2007‒03‒17
nineteen papers chosen by
Vassilis Monastiriotis
London School of Economics

  1. Do Regional Economies Need Regional Coordination? By Edward L. Glaeser
  2. A Model of Sequential City Growth By Cuberes, David
  3. Compact or Spread-Out Cities: Urban Planning, Taxation, and the Vulnerability to Transportation Shocks By François Gusdorf; Stéphane Hallegatte
  4. Horizontal Interaction on Local Councils' Expenditures. Evidence from Italy By Barbara ERMINI; Raffaella SANTOLINI
  5. Comparative urban institutions and intertemporal externality: a revisit of the Coase conjecture By Deng, Feng
  6. Locational Drivers of FDI in MENA Countries: A Spatial Attempt By Hisarciklilar, Mehtap; Kayam, Saime Suna; Kayalica, Ozgur
  7. Is Urban Decay Bad? Is Urban Revitalization Bad Too? By Jacob L. Vigdor
  8. Residential segregation and unemplyment : the case of Brussels By DUJARDIN Claire; SELOD Harris; THOMAS Isabelle
  9. Sin City? By Gautier, Pieter A; Svarer, Michael; Teulings, Coen N
  10. Is the Regulation of the Transport Sector Always Detrimental to Consumers? By Behrens, Kristian; Gaigné, Carl; Thisse, Jacques-François
  11. Discrete choice models with capacity constraints: an empirical analysis of the housing market of the greater Paris region By André de Palma; Nathalie Picard; Paul Waddell
  12. Road Traffic Congestion and Public Information: An Experimental Investigation By Anthony Ziegelmeyer; Frédéric Koessler; Kene Boun My; Laurent Denant-Boèmont
  13. Schools and Location: Tiebout, Alonso, and Government Policy By Eric A. Hanushek; Kuzey Yilmaz
  14. Myths and Realities of Long-run Development: A Look at Deeper Determinants By Hasan, Lubna Hasan
  15. A Comparative Analysis of Productivity Change in Italian and Portuguese Airports By Carlos Pestana Barros; Nicolas Peypoch
  16. Density and Dispersion: The Co-Development of Land use and Rail in London By David Levinson
  17. The Harris-Todaro Hypothesis By Khan, M. Ali Khan
  18. The Orderliness Hypothesis: Does Population Density Explain the Sequence of Rail Station Opening in London? By David Levinson
  19. Geographical Constraints to Growth in Bolivia By Lykke E. Andersen; Osvaldo Nina

  1. By: Edward L. Glaeser
    Date: 2007–03–14
  2. By: Cuberes, David
    Abstract: There is strong evidence showing that in most countries cities develop sequentially, with the initially largest city being the first to grow. This paper presents a growth model of optimal city size that rationalizes this particular growth pattern. Increasing returns to scale is the force that favors agglomeration of resources in a city, and convex costs associated with the stock of installed capital represent the congestion force that limits city size. The key to generate sequential growth is the assumption of irreversible investment in physical capital. The presence of a positive external effect of aggregate city capital on individual firms makes the competitive equilibrium inefficient.
    Keywords: cities; Gibrat's law; increasing returns; congestion costs
    JEL: R12 O4 R11
    Date: 2007–02–16
  3. By: François Gusdorf (CIRED); Stéphane Hallegatte (Centre International de Recherche sur l'Environnement et le Développement Ecole Nationale de la Météorologie)
    Abstract: This paper shows that cities made more compact by transportation taxation are more robust than spread-out cities to shocks in transportation costs. Such a shock, indeed, entails negative transition effects that are caused by housing infrastructure inertia and are magnified in low-density cities. Distortions due to a transportation tax, however, have in absence of shock detrimental consequences that need to be accounted for. The range of beneficial tax levels can, therefore, be identified as a function of the possible magnitude of future shocks in transportation costs. These taxation levels, which can reach significant values, reduce city vulnerability and prevent lock-ins in under-optimal situations.
    Keywords: Urban transportation, Housing, Inertia, Vulnerability, Transportation Taxation
    JEL: R21 R48 H23 H31
    Date: 2007–02
  4. By: Barbara ERMINI (Universita' Politecnica delle Marche, Dipartimento di Economia); Raffaella SANTOLINI (Universita' Politecnica delle Marche, Dipartimento di Economia)
    Abstract: This paper seeks for public spending interdependence among jurisdictions within some Italian local councils. We find significant positive interaction among spending of neighboring local councils both at the level of total expenditure and also for different subcategories. However, this result applies only when spatial dependence is analyzed among geographically contiguous jurisdictions different criteria of proximity do not give rise to any substantial form of interaction among local governments. Attempts to identifying the source of this interaction seem to refuse yardstick competition hypothesis. Fiscal spill-overs among jurisdictions appear as a more plausible explanation; we also find evidence that local councils partnerships fail to effectively internalize these spill-overs. Finally, commuting affects spatial interdependence among jurisdictions.
    Keywords: local councils partnerships, local public expenditures, spatial econometrics, spill-overs, strategic interaction, yardistick competition
    JEL: C31 D71 D72 H72 H73
    Date: 2007–02
  5. By: Deng, Feng
    Abstract: Coase originally formulated his conjecture about intertemporal price competition in the context of a land market, but it has been applied almost exclusively to non-spatial markets. This paper revisits the Coase Conjecture in the context of land development and urban institutions. I compare four institutional arrangements based on the combination of land tenure options and local governance forms: private/rental, public/rental, private/owner and public/owner. The two-period model developed in this paper shows that homeownership may result in more land development than leasehold. Numeric examples suggest (1) public/owner, i.e., the common form of government providing collective goods, may be efficient for more uniform distribution of consumer; (2) rentals can be desirable for “poor” communities; (3) private/owner, such as CID (Common Interest Development) and condominium, is more efficient for “rich” communities; (4) restrictive zoning reduces social surplus, and “rich” community may adopt more restrictive measures. These results may help explain why public institutions are dominant in urban setting and why most private communities are small and located in the suburbs.
    Keywords: monopoly; durability; bundling; land; local collective good; public good; private community; urban institutions
    JEL: P48 H41 L22 H77 R52 L12
    Date: 2003
  6. By: Hisarciklilar, Mehtap; Kayam, Saime Suna; Kayalica, Ozgur
    Abstract: This study aims to analyze the locational drivers of FDI, with an emphasis on the role of market potential in MENA countries. Considering that the market does not necessarily comprise of the host economy but also trade opportunities in the region and in the rest of the world, this study distinguishes the country-specific, regional and trade-related market potential of the host MENA country in attracting FDI. It also examines the neighboring effects in locational choice. Using a panel of 18 countries covering the 1980-2001 time period, the model is estimated by Maximum Likelihood estimation method incorporating the possible spatial autocorrelation in the disturbances. The results imply that FDI in the MENA region is market oriented; as well as aiming at the domesic market in the host economy, it also utilises trade opportunities within the region.
    Keywords: Foreign Direct Investment; market potential; MENA region; spatial econometrics
    JEL: R12 F23 F21 C23
    Date: 2006–05
  7. By: Jacob L. Vigdor
    Abstract: Many observers argue that urban revitalization harms the poor, primarily by raising rents. Others argue that urban decline harms the poor by reducing job opportunities, the quality of local public services, and other neighborhood amenities. While both decay and revitalization can have negative effects if moving costs are sufficiently high, in general the impact of neighborhood change on utility depends on the strength of price responses to neighborhood quality changes. Data from the American Housing Survey are used to estimate a discrete choice model identifying households' willingness-to-pay for neighborhood quality. These willingness-to-pay estimates are then compared to the actual price changes that accompany observed changes in neighborhood quality. The results suggest that price increases associated with revitalization are smaller than most households' willingness to pay for neighborhood improvements. The results imply that, in general, neighborhood revitalization is more favorable than neighborhood decline.
    JEL: D1 R21 R31
    Date: 2007–03
  8. By: DUJARDIN Claire; SELOD Harris; THOMAS Isabelle
    Abstract: This paper investigates the causal effects of the spatial organization of Brussels on unemployment propensities. Using Census data at the individual level, we estimate the unemployment probability of young adults while taking into account personal, household and neighbourhood characteristics. We solve the endogeneity of residential locations by restricting our sample to young adults residing with their parents, and evaluate the potential remaining bias by conducting a sensitivity analysis. Our results suggest that residing in a deprived neighbourhood significantly increases a youngster probability of being unemployed, a result which is quite robust to the presence of both observed and unobserved parental covariates.
    Keywords: neighbourhood effects, residential segregation, unemployment, endogeneity bias, sensitivity analysis
    JEL: J64 R14
    Date: 2007–03
  9. By: Gautier, Pieter A; Svarer, Michael; Teulings, Coen N
    Abstract: Is moving to the countryside a credible commitment device for couples? We investigate whether lowering the arrival rate of potential alternative partners by moving to a less populated area lowers the dissolution risk for a sample of Danish couples. We find that of the couples who married in the city, the ones who stay in the city have significant higher divorce rates. Similarly, for the couples who married outside the city, the ones who move to the city are more likely to divorce. This correlation can be explained by both a causal and a sorting effect. We disentangle them by using the timing-of-events approach. In addition we use information on father’s location as an instrument. We find that the sorting effect dominates. Moving to the countryside is therefore not a cheap way to prolong relationships.
    Keywords: city; dissolution; mobility; search
    JEL: J12 J64
    Date: 2007–03
  10. By: Behrens, Kristian; Gaigné, Carl; Thisse, Jacques-François
    Abstract: The aim of this paper is to qualify the claim that regulating a competitive transport sector is always detrimental to consumers. We show indeed that, although transport deregulation is beneficial to consumers as long as the location of economic activity is fixed, this is no longer true when, in the long run, firms and workers are freely mobile. The reason is that the static gains due to less monopoly power in the transport sector may well map into dynamic dead-weight losses because deregulation of the transport sector leads to more inefficient agglomeration. This latter change may, quite surprisingly, increase consumer prices in some regions, despite a more competitive transport sector. Transport deregulation is shown to map into aggregate consumer welfare losses and more inequality among consumers in the long run.
    Keywords: economic geography; imperfect competition; interregional trade; transport deregulation; transport sector
    JEL: F12 F16 R12 R49
    Date: 2007–03
  11. By: André de Palma (University of Cergy-Pontoise, THEMA, France and Ecole Nationale des Ponts et Chaussée, France. Member of the Institut universitaire de France); Nathalie Picard (University of Cergy-Pontoise, THEMA, France and INED); Paul Waddell (University of Washington at Seattle, Department of Urban Design and Planning)
    Abstract: Discrete choice models are based on the idea that each user can choose both freely and independently from other users in a given set of alternatives. But this is not the case in several situations. In particular, limitations and interactions can occur when the number of available products of one type is smaller than the total demand for this type. As a consequence, some individuals can be denied their preferred choice. We develop a methodology to address those constraints and we apply it to residential location choice, where our empirical data suggest that availability constraints may bias actual choices. The analysis provides some theoretical developments and elaborates an iterative procedure for estimating demand in the presence of capacity constraints. The empirical application relies on the location choice model developed and estimated in [6] for Ile de France (Paris region) and generalizes it to integrate capacity constraints.
    Keywords: Residential location, constrained Logit, capacity constraints, sampling, Ilede- France
    JEL: C35 R21 R31
    Date: 2007
  12. By: Anthony Ziegelmeyer (Max Planck Institute of Economics, Strategic Interaction Group, Jena (Germany)); Frédéric Koessler (THEMA, University of Cergy-Pontoise (France)); Kene Boun My (BETA-Theme, CNRS, Louis Pasteur University, Strasbourg (France)); Laurent Denant-Boèmont (CREM, University of Rennes 1 (France))
    Abstract: This paper reports two laboratory studies designed to study the impact of public information about past departure rates on congestion levels and travel costs. Our experimental design is based on a discrete version of Arnott, de Palma, and Lindsey’s (1990) bottleneck model where subjects have to choose their departure time in order to reach a common destination. Experimental treatments in our first study differ in terms of the level of public information on past departure rates and the relative cost of delay. In all treatments, congestion occurs and the observed travel costs are quite similar to the predicted ones. In other words, subjects’ capacity to coordinate does not seem to be affected by the availability of public information on past departure rates or by the relative cost of delay. This seemingly absence of treatment effects is confirmed by our finding that a parameter-free reinforcement learning model best characterizes individual behavior. The number of experimental subjects taking the role of drivers is four times larger in our second study than in our first study. We observe that coordination failures in our congestion situation do not become more severe when the number of drivers increases.
    Keywords: Travel behavior; Congestion; Information in intelligent transportation systems; Laboratory experiments.
    JEL: C91 C92 D83 R40 R41
    Date: 2007
  13. By: Eric A. Hanushek; Kuzey Yilmaz
    Abstract: An important element in considering school finance policies is that households are not passive. Instead they respond to policies with a combination of modified residential choice and political choice of tax levels. The highly stylized decision models of most existing analyses, however, lead to conerns about the policy evaluations. In our general equilibrium model of residential location and community choice, households base optimizing decisions on commuting costs, school quality, and land rents. With both centralized and decentralized employment, the resulting equilibrium has heterogeneous communities in terms of income and tastes for schools. This model is used to analyze a series of conventional policy experiments, including school district consolidation, district power utilization, and different equalization devices. The important conclusion is that welfare falls for all families with the restrictions in choice that are implied by these approaches.
    JEL: H4 I2 R1 R51
    Date: 2007–03
  14. By: Hasan, Lubna Hasan
    Abstract: It has long been realised that factor accumulation and technological development are only proximate causes of economic development, and focus has now shifted to investigating the ‘deeper determinants’ of economic growth. Two such forces are highlighted in literature: institutions and geography. However, it remains controversial as to which of these two is the more important. The “Institutions school” assigns primal importance to institutions, whereas the “Geography school” considers geographical factors as the primary determinant of economic performance of countries. This paper reviews the debate surrounding these “deeper determinants” of economic performance. It reviews the work of these two schools of thought and their interpretation of the long-run development. The paper then examines the evidence provided by the respective schools in favour of their hypotheses. It concludes in favour of the Institutions hypothesis as the Geography school does not provide a consistent story of long-run development.
    Keywords: Institutions; Geography; Long-run Development; Determinants of Growth
    JEL: O10 R10 P51 N00
    Date: 2006
  15. By: Carlos Pestana Barros; Nicolas Peypoch
    Abstract: In this paper, we analyze efficiency and productivity of Italian and Portuguese airports, by using the directional distance function and the Luenberger productivity indicator. The key advantage of this approach is that both input contraction and output expansion are considered. The model generates efficiency scores, ranking the airports in the sample. We conclude that inputs and outputs play a major role in airports efficiency. According to this methodology, it can be stated that some Italian and Portuguese airports are efficient and that productivity increased in most of the cases.
    Keywords: Italian and Portuguese airports; Luenberger productivity indicator.
  16. By: David Levinson (Nexus (Networks, Economics, and Urban Systems) Research Group, Department of Civil Engineering, University of Minnesota)
    Abstract: This paper examines the changes that occurred in the rail network and density of population in London during the nineteenth and twenti- eth centuries. It aims to disentangle the Óchicken and eggÓ problem of which came first, network or land development, through a set of statisti- cal analyses using clearly distinguishing events by order. Using a panel of data representing the 33 boroughs of London over each decade from 1871 to 2001, the research finds that there is a positive feedback effect between population density and network density. Additional rail stations (either underground or surface) are positive factors leading to subsequent increases in population in the suburbs of London, while additional popu- lation density is a subsequent factor in deploying more rail. These effects differ in central London, where the additional accessibility produced by rail led to commercial development and led to a depopulation. There are also few differences in the effects associated with surface rail stations and underground stations, as the underground was able to get into central London in a way that surface rail could not. However the two networks were weak (and statistically insignificant) substitutes for each other in the suburbs, but the density of surface rail stations was a complement to the Underground in the center, though not vice versa.
    Keywords: Transport, land use, London Underground, London railways, network growth, induced demand, induced supply
    JEL: R42 R31 R21 N73 N74
    Date: 2007–02
  17. By: Khan, M. Ali Khan
    Abstract: The Harris-Todaro hypothesis replaces the equality of wages by the equality of ‘expected’ wages as the basic equilibrium condition in a segmented but homogeneous labour market, and in so doing it generates an equilibrium level of urban unemployment when a mechanism for the determination of urban wages is specified. This article reviews work in which the Harris-Todaro hypothesis is embedded in canonical models of trade theory in order to investigate a variety of issues in development economics. These include the desirability (or the lack thereof) of foreign investment, the complications of an informal sector, and the presence of clearly identifiable ethnic groups.
    Keywords: Harris-Todaro; Wages; Labour Economics; Labour Market; Rural to Urban Migration
    JEL: J3
    Date: 2007
  18. By: David Levinson (Nexus (Networks, Economics, and Urban Systems) Research Group, Department of Civil Engineering, University of Minnesota)
    Abstract: Network growth is a complex phenomenon; some researchers have suggested that it occurs in an orderly or rational way, based on the size of places that are connected. This paper examines the order in which stations were added to the London surface rail and Underground rail networks in the 19th and 20th centuries, testing to what extent that order was correlated with population density. While population density is an important factor in explaining order, this research shows that other factors are at work. The network itself helps to reshape land uses, and a network that may have been well ordered at one time, may drift away from order as activities relocate.
    Keywords: Transport and land use, London Underground, network growth, railways
    JEL: R42 R31 R21 N73 N74
    Date: 2007–02
  19. By: Lykke E. Andersen (Institute for Advanced Development Studies); Osvaldo Nina (Banco Central de Bolivia)
    Abstract: This paper seeks to test to which extent geographical constraints can be blamed for Bolivia’s poor growth performance during the last three decades. Although geographical characteristics are too stable to explain the dramatic fluctuations in growth rates over time in Bolivia, there are at least four factors that contribute to changing the importance of those characteristics over time: 1) internal migration, 2) infrastructure investments, 3) change in export partners, and 4) change in export products. The results show that Bolivia is indeed adjusting in all 4 dimensions in order to reduce the importance of geographical constraints, but not nearly fast enough.
    Keywords: Geography, Development, Bolivia
    JEL: Q56 R11
    Date: 2007–03

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