nep-geo New Economics Papers
on Economic Geography
Issue of 2007‒04‒14
eleven papers chosen by
Vassilis Monastiriotis
London School of Economics

  1. Regional versus individual aspects of the digital divide in Germany By Schleife, Katrin
  2. Migration and Regional Convergence: An Empirical Investigation for Turkey By Kirdar, Murat; Saracoglu, Sirin
  3. Unemployment duration in Germany : individual and regional determinants of local job finding, migration and subsidized employment By Arntz, Melanie; Wilke, Ralf A.
  4. Sources of Regional Income Disparity in Rural Vietnam: Oaxaca-Blinder Decomposition By Takahashi, Kazushi
  5. Still searching for the wage curve : evidence from Germany and Italy By Ammermueller, Andreas; Lucifora, Claudio; Origo, Federica; Zwick, Thomas
  6. Success breeds success locally : a tale of incubator firms By Inci, Eren
  7. The use of permanent contracts across Spanish regions: Do regional wage subsidies work? By Yolanda Rebollo Sanz; Jose Ignacio García Pérez
  8. Myths and Realities of Long-run Development: A Look at Deeper Determinants By Lubna Hasan
  9. Moving to high quality of life By Jordan Rappaport
  10. Trade and Agglomeration: the Strategic use of Protection Revisited By Thede, Susanna
  11. Structural Change under New Labour By Ken Coutts; Andrew Glyn; Bob Rowthorn

  1. By: Schleife, Katrin
    Abstract: This paper analyzes the regional dimension of the German digital divide. It considers the impact of regional characteristics on differences in the share of Internet use between German counties. In addition, it studies the influence of regional factors as well as individual characteristics on the individual probability of becoming a new Internet user. Based on two large data sets, SOEP and INKAR, the analyses show that it is not the rusticity of a region itself that explains regional differences in Internet use. The results rather indicate that it is the different composition of the population between rural and urban areas that accounts for the regional digital divide.
    Keywords: digital divide, Internet use, regional differences
    JEL: O18 O33 R20
    Date: 2006
  2. By: Kirdar, Murat; Saracoglu, Sirin
    Abstract: The standard growth model predicts that allowing for labor mobility across regions would increase the speed of convergence in per capita income levels and that migration has a negative causal impact on regional growth rates. Although the empirical literature has uncovered some evidence for the former implication, the latter has not been verified empirically. This paper provides empirical evidence for the negative causal impact of migration on provincial growth rates in a developing country with a high level of internal migration that is characterized by unskilled labor exiting rural areas for urban centers. We utilize an instrumental variables estimation method with an instrument unique to the country examined, and we also control for provincial fixed effects.
    Keywords: Regional convergence; Regional growth; Internal migration; Fixed effects; IV estimation
    JEL: O40 R23
    Date: 2007–04
  3. By: Arntz, Melanie; Wilke, Ralf A.
    Abstract: Recent labor market reforms in Germany aim, among other things, at reducing unemployment by restricting passive unemployment measures, emphasizing local labor market policies and re-structuring public employment services. This paper uses extensive individual administrative and regional aggregate data to explore the extent to which these factors are likely to contribute to the shortening of unemployment duration. For this purpose, we estimate a semi-parametric duration model with three competing exit states. Our results suggest that changes in the unemployment compensation system rather than local employment policies and administrative restructuring efforts meet expected labor market outcomes. In addition, determinants of the length of unemployment vary across exit states.
    Keywords: competing-risk, labor market policy, individual and regional data
    JEL: J61 J64 J68
    Date: 2006
  4. By: Takahashi, Kazushi
    Abstract: This paper investigates determinants of regional income disparity in rural Vietnam, with special emphasis placed on the roles of human capital and land. We apply a decomposition method, suggested by Oaxaca and Blinder. We found that returns to assets rather than endowments, especially those of human capital, are one of the leading factors to account for income differences across regions. We also found that substantial improvements of returns to human capital in the Red River delta region are a driving force to catch up with Mekong River delta region. Unexpectedly, differences in land endowment do not strongly correlate with regional income disparity because better access to land in a region was partially offset by lower returns.
    Keywords: Income inequality, Human capital, Land, Vietnam, Income distribution, Human resources
    JEL: D31 I32 O12
    Date: 2007–03
  5. By: Ammermueller, Andreas; Lucifora, Claudio; Origo, Federica; Zwick, Thomas
    Abstract: This paper investigates the functioning of regional labour markets in Italy and Germany for different employee groups. In the light of high and persistent differences in unemployment and wage rates between the North and South of Italy and the West and East of Germany, we first derive theoretical hypotheses on group specific correlations between regional unemployment and individual wages. Using micro data on hourly wages properly matched to local unemployment rates, we specify and empirically test different wage equations. On the basis of our results, we find no evidence for the existence of a “wage curve” in Italy. In the case of Germany, results are quite sensitive to the model specification and the employee group considered. In both countries, the reaction of wages to local unemployment varies significantly along the wage distribution, being more sensitive around the median quantiles. We conclude that there is no uniform wage curve and call for a differentiated analysis for various groups, taking into account the respective institutional setting.
    Keywords: wage curve, local labour markets, quantile regressions
    JEL: J3 J6 R1
    Date: 2007
  6. By: Inci, Eren
    Abstract: This paper focuses on the pre-establishment period of start-ups in industrial districts. The industrial architecture is what I call a "rationed agglomeration" in which some entrepreneurs gather around an established firm while other entrepreneurs in the same business stand alone. In a rationed agglomeration, I analyze the e¤ects of relations between established firms, network entrepreneurs, and local financiers on the market prices of loans. I show that such relations improve the match of capital to ideas in the network even though the overall distribution of capital to ideas remains unchanged. This suggests that success breeds success in the networks of established firms. The existence of networks overturns the claim that there are no motives to engage in information gathering in a simple market regime with information asymmetries. In particular, I show that there are market incentives for established firms to decrease the information gap between network entrepreneurs and local financiers.
    Keywords: agglomeration, entrepreneur, dispersion, innovation, local financiers, networks, regional economies, project financing, signaling, start-up
    JEL: D82 G20 L26 R12
    Date: 2006
  7. By: Yolanda Rebollo Sanz (Department of Economics, Universidad Pablo de Olavide); Jose Ignacio García Pérez (Department of Economics, Universidad Pablo de Olavide)
    Abstract: This paper evaluates the effect of regional wage subsidies to foster permanent employment for a sample of temporary and unemployed Spanish workers. We study the transition into permanent employment using a new dataset based on administrative Social Security registers named “La Muestra Continua de Vidas Laborales”, which is used for the first time to carry out policy evaluation exercises in the Spanish labor market. This dataset offers important advantages with respect to the Labour Force Survey, given it offers the complete labor history of the worker. Moreover, since we have individual, regional and time variation in our policy measure, we can apply a difference-in-differences estimator to identify the average treatment effect of this policy. Though, these regional policies have been implemented for almost ten years, as far as we know, this is the first attempt to evaluate them. Our main results are that, in average terms, this policy has positive but small effects on the transition rate into permanent employment either from a temporary contract or from unemployment. The incidence of these subsidies, however, is larger when the worker is in a temporary contract. It is also larger for young females while for old male workers do not have any effect. Measured at the average wage subsidy (5100 Euros) the total change in the entrance probability from a temporary to a permanent contract is around 26% for young women, 24% for middle age ones and 22% for middle age men, the most benefited workers. Nevertheless, since the transition rates to permanent contracts at the same firm are pretty low these relative changes hardly generate a change in the transition probability from a temporary to a permanent contract at the same firm. For instance, in the case of young women the estimated transition probability growths from 0.064% to 0.075% while for middle age men it changes from 0.039% to 0.041%.
    Keywords: Difference-in-Differences, Evaluation Analysis, Wage Subsidies, Competing Riks
    JEL: J38 J68
    Date: 2007–04
  8. By: Lubna Hasan (Pakistan Institute of Development Economics, Islamabad)
    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, Deeper Determinants of Growth
    JEL: O10 O43 N00 P51 R11
    Date: 2006
  9. By: Jordan Rappaport
    Abstract: The U.S. population has been migrating to places with high perceived quality of life. A calibrated general-equilibrium model shows that such migration follows from broad-based technological progress. Rising national wages increase demand for consumption amenities. Under a baseline parameterization, a place with amenities for which individuals would pay 5 percent of their income grows 0.3 percent faster than an otherwise identical place. Productivity is shown to be a decreasingly important determinant of local population. The faster growth of high-amenity places is considerably strengthened if they have low initial equilibrium population density underpinned by low relative productivity. Places with identical amenities asymptotically converge to an identical population density, regardless of their relative productivity levels. An implication is that the high growth rates of high-amenity localities should eventually taper off.>
    Keywords: Consumption (Economics) ; Quality of life
    Date: 2007
  10. By: Thede, Susanna (Department of Economics, Lund University)
    Abstract: The purpose of this paper is to examine whether the strategic motive for protection present in trade and agglomeration models, in the so-called new economic geography framework, is sensitive to the standard assumption that there is a sole agglomeration industry. We first investigate unilateral trade policy effects on the international production and trade pattern and the resulting national welfare levels in a new economic geography model including several agglomeration industries. The strategic use of trade policy is then examined by identifying optimal policy positions as well as equilibrium policy strategies in a Nash policy game between the trade partners. Our results show that the strategic use of protection and the resulting "tariff war" outcome prevalent in standard trade and agglomeration models is sensitive to the inclusion of several agglomeration industries. Specifically, trade liberalising policies are optimal and free trade equilibria result from the Nash game unless there is a too wide industry gap in agglomeration economies. Our results show that the case for free trade can be directly attributed to either a relatively strong direct policy impact on national real income (working through raised import prices and reduced import volumes) or similar agglomeration economies in the two industries. The results of this paper jointly suggest that the stark argument for the strategic use of protection present in standard new economic geography models can be attributed to overemphasised gains from agglomeration and/or the lack of industries with similar agglomeration economies.
    Keywords: New economic geography; input-output linkages; strategic trade policy; Nash policy game.
    JEL: F12 F13 R12 R13
    Date: 2007–04–04
  11. By: Ken Coutts; Andrew Glyn; Bob Rowthorn
    Abstract: The decline in the importance of tradeable goods production in providing employment has continued in the past decade; distribution, public services and business and financial services all provide more jobs than tradeable goods. Manufacturing output has stagnated under New Labour despite rapid growth of expenditure on manufactures. The result has been a sharp deterioration in the trade balance in manufactures. However the current account has only been in modest deficit shielded by additional net exports from finance and business services, higher earnings on overseas investments and an improvement in the terms of trade. The North of the country lost more industrial jobs than the South, but since 2000 the North has seen a greater expansion of jobs in public services and also finance and business services. Combined with a slower growth of population this has implied that the employment rate has actually risen in the North as compared to the South - a striking reversal of a long running trend. The government has taken a relaxed attitude to the decline in manufacturing over the past decade and has played down the importance of deliberate policies to bring jobs to the most affected regions. Paradoxically the major reason for the recent narrowing of the regional employment gap in recent years has been the very rapid expansion of jobs linked directly to public spending.
    Keywords: Deindustrialisation, North-South Divide, Public Sector Jobs, Balance of Payments
    JEL: O14 O19 O52 R11
    Date: 2007

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