nep-geo New Economics Papers
on Economic Geography
Issue of 2007‒05‒12
twenty-two papers chosen by
Vassilis Monastiriotis
London School of Economics

  1. Search, Wage Posting and Urban Spatial Structure By Zenou, Yves
  2. A theoretical framework for Evolutionary Economic Geography: Industrial dynamics and urban growth as a branching process By Koen Frenken; Ron A. Boschma
  3. Economic Geography and the Evolution of Networks By Johannes Gluckler
  4. Has concentration evolved similarly in manufacturing and services? A sensitivity analysis. By Jenifer Ruiz-Valenzuela; Rosina Moreno-Serrano; Esther Vaya-Valcarce
  5. Complexity Thinking and Evolutionary Economic Geography By Ron Martin; Peter Sunley
  6. About the economic study of regional indicators By Mourao, Paulo
  7. Inter-Regional Output Spillovers of Policy Shocks in China By Nicolaas Groenewold; Guoping Lee; Anping Chen
  8. Location and R&D Alliances in the European ICT Industry By Rajneesh Narula; Grazia D. Santangelo
  9. Regional macroeconomic determinants of Mexican migration By Mendoza, Jorge Eduardo
  10. The geographical processes behind innovation: A Europe-United States comparative analysis By Riccardo Crescenzi; Andrés Rodríguez-Pose; Michael Storper
  11. Speed and car used regulation in urban areas : Paris and Lyon case studies By Marie-Hélène Massot; Jimmy Armoogun; Patrick Bonnel; David Caubel
  12. Defining housing market areas using commuting and migration algorithms.Catalonia (Spain) as an applied case study. By Vicente Royuela; Miguel Vargas
  13. Robust Correlates of County-Level Growth in the U.S. By Higgins, Matthew; Young, Andrew; Levy, Daniel
  14. Economía Urbana y calidad de vida. Una revisión del estado del conocimiento en España By Vicente Royuela; Diona Lambiri; Bianca Biagi
  15. Inter-Regional Trade and Lobbying By Sergei Guriev; Evgeny Yakovlev; Ekaterina Zhuravskaya
  16. The Effect of Three-rate Property Taxation on Housing Construction By Teemu Lyytikäinen
  17. Exploring Evolutionary Economic Geographies By Jürgen Essletzbichler; David L. Rigby
  18. A model of spatial arbitrage with transport capacity constraints and endogenous transport prices By Andrew Coleman
  19. The Impact of Immigration on the Geographic Mobility of New Zealanders By Steven Stillman; David C. Maré
  20. When Are Ghettos Bad? Lessons from Immigrant Segregation in the United States By David M. Cutler; Edward L. Glaeser; Jacob L. Vigdor
  21. Fiscal decentralisation, efficiency, and growth By Andrés Rodríguez-Pose; Sylvia A. R. Tijmstra; Adala Bwire
  22. The economics of truck toll lanes By André de Palma; Moez Kilani; Robin Lindsey

  1. By: Zenou, Yves
    Abstract: We develop an urban-search model in which firms post wages. When all workers are identical, the Diamond paradox holds, i.e. there is a unique wage in equilibrium even in the presence of search and spatial frictions. This wage is affected by spatial and labour costs. When workers differ according to the value imputed to leisure, we show that, under some conditions, two wages emerge in equilibrium. The commuting cost affects the land market but also the labour market through wages. Workers' productivity also affects housing prices and this impact can be positive or negative depending on the location in the city. One important aspect of our model is that, even with positive search costs, wage dispersion prevails in equilibrium, a feature not possible in the non-spatial model.
    Keywords: Diamond paradox; search frictions; spatial compensation; urban land-use; wage dispersion
    JEL: D83 J64
    Date: 2007–05
  2. By: Koen Frenken; Ron A. Boschma
    Abstract: We propose a framework that specifies the process of economic development as an evolutionary branching process of product innovations. Each product innovation provides a growth opportunity for an existing firm or a new firm, and for an existing city or a new city. One can then obtain both firm size and city size distributions as two aggregates resulting from a single evolutionary process. Gains from variety at the firm level (economies of scope) and the urban level (Jacobs externalities) provide the central feedback mechanism in economic development generating strong path dependencies in the spatial concentration of industries and the specialisation of cities. Gains from size are also expected, yet these are ultimately bounded by increasing wages. The contribution of our framework lies in providing a micro-foundation of economic geography in terms of the interplay between industrial dynamics and urban growth. The framework is sufficiently general to investigate systematically a number of stylised facts in economic geography, while at the same time it is sufficiently flexible to be extended such as to become applicable in more specific micro-contexts. A number of extensions related to the concepts of knowledge spillover and lock-in, are also discussed.
    Keywords: evolutionary economic geography, urban growth, firm growth, Zipf, branching, innovation
    JEL: B25 B52 L11 L25 R0 R1 R12
    Date: 2007–03
  3. By: Johannes Gluckler
    Abstract: An evolutionary perspective on economic geography requires a dynamic understanding of change in networks. This paper explores theories of network evolution for their use in geography and develops the conceptual framework of geographical network trajectories. It specifically assesses how tie selection constitutes the evolutionary process of retention and variation in network structure and how geography affects these mechanisms. Finally, a typology of regional network formations is used to discuss opportunities for innovation in and across regions.
    Keywords: evolution, network trajectory, evolutionary economic geography, social network analysis, innovation
    Date: 2007–04
  4. By: Jenifer Ruiz-Valenzuela (Faculty of Economics, University of Barcelona); Rosina Moreno-Serrano (Faculty of Economics, University of Barcelona); Esther Vaya-Valcarce (Faculty of Economics, University of Barcelona)
    Abstract: Our first objective is to compare the degree of concentration in manufacturing and services, with special emphasis on its evolution in these two sectors, using a sensitivity analysis for different concentration indices and different geographic units of analysis: municipalities and local labour systems of Catalonia in 1991 and 2001. Most concentration measures fail to consider the space in which a particular municipality is located. Our second objective is to overcome this problem by applying two different techniques: by using a clustering measure, and by analysing whether the location quotients computed for each municipality and sector present some kind of spatial autocorrelation process. We take special account of the differences in patterns of concentration according to the technological level of the sectors.
    Keywords: Geographic concentration, Manufacturing, Services, Local Labour Systems, Spatial Econometrics.
    JEL: L60 L80 R12
    Date: 2007–04
  5. By: Ron Martin; Peter Sunley
    Abstract: Thus far, most of the work towards the construction of an evolutionary economic geography has drawn upon a particular version of evolutionary economics, namely the Nelson-Winter framework, which blends Darwinian concepts and metaphors (especially variety, selection, novelty and inheritance) and elements of a behavioural theory of the firm. Much less attention has been directed to an alternative conception based on complexity theory, yet in recent years complexity theory has increasingly been concerned with the general attributes of evolutionary natural and social systems. In this paper we explore the idea of the economic landscape as a complex adaptive system. We identify several key notions of what is being called the new ‘complexity economics’, and examine whether and in what ways these can be used to help inform an evolutionary perspective for understanding the uneven development and adaptive transformation of the economic landscape.
    Keywords: complexity theory, evolution, economic landscape, networks, emergence, regional adaptation
    JEL: B52 O18 R11 R12
    Date: 2007–04
  6. By: Mourao, Paulo
    Abstract: What is an indicator? Seemingly, the solution is so clear that it can deceive us, economists and other social scientists. This work aims at enlightening the answer to the suggested question, discussing the methodological dimensions of the economic indicators – since the phase of production until the phase of readings, highlighting the context of the regional economic indicators.
    Keywords: Indicator; Regional Economics; Scientific Methodology
    JEL: H11 R13 R15
    Date: 2006
  7. By: Nicolaas Groenewold (UWA Business School, University of Western Australia); Guoping Lee (School of Economics and Finance, Xi'an Jiaotong University); Anping Chen (School of Economics and Finance, Xi'an Jiaotong University)
    Abstract: In China inter-regional per capita output disparities are large and persistent and increasingly a matter for policy concern at the highest levels of government. Interregional spillovers are an important ingredient in the design of regional development policy. Yet little is known about the direction, magnitude and timing of output spillovers from one region to another. In this paper we focus on spillovers from policy shocks. We use a conventional three-region disaggregation of the Chinese economy and extend existing literature by explicitly introducing policy variables into a VAR model of regional outputs. We find that both policy variables have significant and positive effects on output in each of the regions when entered separately. In the short run both policy variables have a greater effect on the coastal region than on the other two and the effect in the central region is larger than in the western region, giving some credence to the common presumption that at least part of the expenditure boosts in the poorer inland regions find their way to the coastal provinces. These results are generally confirmed when we use the whole model to simulate the effects over time of the policy shocks. A shock to the coastal region not only has no beneficial spillovers to the other regions but actually depresses the output of the inland provinces. This is also true of a shock to the central region which comes at the expense of the western region. Only the western region has consistent positive spillovers on the other regions; looked at another way, a boost to the western region is shifted partially to the other regions.
    Date: 2006
  8. By: Rajneesh Narula; Grazia D. Santangelo
    Abstract: This paper shows empirically that in an intra-industry oligopolistic scenario the location of a firm’s innovative activities plays an important role in determining its partner selection in R&D alliances. Such a role is mainly attributed to a strategic use of R&D alliances as a means to limit knowledge flows and protect competences, rather than to promote knowledge flows. By drawing on a novel dataset matching alliances and patent data for the European ICT industry, the econometric analysis shows that partners’ prior co-location (at both national and sub-national regional level), previous ties and technological overlap matter in the choice of partner, while common nationality has a negative impact on alliance formation.
    Keywords: Alliances; strategy; efficiency; R&D location
    JEL: D23 F23 O18 O32 R3
    Date: 2007
  9. By: Mendoza, Jorge Eduardo
    Abstract: This article estimates the macroeconomic determinants of Mexican migration to the U.S.A., using information on the regional economic characteristics of the Mexican states, in a context of economic integration with the U.S. economy. A cross sectional database at the regional level is used to estimate a weighted least squares regression. The results show that the ratio of the U.S.A.’s PIB to Mexico’s states PIB showed a positive effect on migration,suggesting regional economic determinants for migration. In this case, the PIB per cápita had a negative effect, which implies that the poorest states experienced incentives for migration. Additionally, state unemployment rates and permanent migrant stocks exhibited a positive effect on the rates of migration growth at the state level in Mexico, supporting the approaches that consider those variables as factors for migration. The variables reflecting the impact of economic liberalization were not conclusive, although foreign direct investment exhibited a positive coefficient with respect to migration growth.
    Keywords: 1. international migration; 2. macroeconomics; 3. regional economics; 4. labor mobility; 5. employment.
    JEL: J61 F22 J01
    Date: 2006
  10. By: Riccardo Crescenzi (Università degli studi Roma Tre); Andrés Rodríguez-Pose (London School of Economics); Michael Storper (London School of Economics)
    Abstract: The United States and European Union differ significantly in terms of their innovative capacity: the former have been able to gain and maintain world leadership in innovation and technology while the latter continues to lag. Notwithstanding the magnitude of this innovation gap and the political emphasis placed upon it on both sides of the Atlantic, very little systematic comparative analysis has been carried out on its causes. The empirical literature has emphasised the structural differences between the two continents in the quantity and quality of the major \'inputs\' to innovation: R&D investments and human capital. The very different spatial organisation of innovative activities in the EU and the US – as suggested by a variety of contributions in the field of economic geography – could also influence innovative output. This paper analyses and compares a wide set of territorial processes that influence innovation in Europe and the United States. The higher mobility of capital, population, and knowledge in the US not only promotes the agglomeration of research activity in specific areas of the country but also enables a variety of territorial mechanisms to fully exploit local innovative activities and (informational) synergies. In the European Union, in contrast, imperfect market integration, and institutional and cultural barriers across the continent prevent innovative agents from maximising the benefits from external economies and localised interactions, but compensatory forms of geographical process may be emerging in concert with further European integration.
    Date: 2007–04–27
  11. By: Marie-Hélène Massot (LVMT - Laboratoire Ville, Mobilité, Transports - [INRETS] - [Université de Marne la Vallée] - [Ecole Nationale des Ponts et Chaussées]); Jimmy Armoogun (DEST - Département Economie et Sociologie des Transports - [INRETS]); Patrick Bonnel (LET - Laboratoire d'économie des transports - [CNRS : UMR5593] - [Université Lumière - Lyon II] - [Ecole Nationale des Travaux Publics de l'Etat]); David Caubel (LET - Laboratoire d'économie des transports - [CNRS : UMR5593] - [Université Lumière - Lyon II] - [Ecole Nationale des Travaux Publics de l'Etat])
    Abstract: Improvements in individual mobility conditions for drivers in the Paris conurbation (higher speed and lower cost of individual mobility) have contributed to the reduction of urban areas density and have led to dominant use of the car and a dramatic reduction in walking and cycling, while the use of public transport has remained roughly constant. The car now highly dominated the other transport modes in many places including the Paris metropolitan area. As a consequence of a car domination, a great part of the public opinion claims a reduction of a car use and the development of alternative forms of transport. The aim of this study is to determine whether those claims are consistent with the actual present car traffic speeds. More precisely, our aim was to try to answer some questions: have car drivers a good appreciation of a car speed performance? How many are car's drivers who could save time by using other modes of transport? What can be expected from a drastic growth of the public transport supply and/or from a reduction of the car speed in order to reduce the car usage and consequently the car traffic flows. This paper presents our methodology and the major results obtained through numerical simulation based on Paris and Lyon conurbations figures.
    Keywords: Individual daily mobility ; Modal transfer ; Transport modelling ; Traffic management ; Traffic simulation ; car use restriction ; public transport
    Date: 2007–04–30
  12. By: Vicente Royuela (Faculty of Economics, University of Barcelona); Miguel Vargas (Faculty of Economics and Business, Diego Portales University.)
    Abstract: In the literature on housing market areas, different approaches can be found to defining them, for example, using travel-to-work areas and, more recently, making use of migration data. Here we propose a simple exercise to shed light on which approach performs better. Using regional data from Catalonia, Spain, we have computed housing market areas with both commuting data and migration data. In order to decide which procedure shows superior performance, we have looked at uniformity of prices within areas. The main finding is that commuting algorithms present more homogeneous areas in terms of housing prices.
    Date: 2007–04
  13. By: Higgins, Matthew; Young, Andrew; Levy, Daniel
    Abstract: Higgins et al. (2006) report several statistically significant partial correlates with U.S. per capita income growth. However, Levine and Renelt (1992) demonstrate that such correlations are hardly ever robust to changing the combination of conditioning variables included. We ask whether the same is true for the variables identified as important by Higgins et al. Using the extreme bounds analysis of Levine and Renelt, we find that the majority of the partial correlations can be accepted as robust. The variables associated with those partial correlations stand solidly as variables of interest for future studies of U.S. growth.
    Keywords: Economic Growth; Conditional Convergence; Extreme Bounds Analysis; County-Level Data;
    JEL: O40 R11 O51 H50 O47 O18 H70 O11
    Date: 2007–05–04
  14. By: Vicente Royuela (Grup de Recerca d'Anàlisi Quantitativa Regional (AQR), Institut de Recerca en Economia Aplicada (IREA), Departament d'Econometria, Estadística i Economia Espanyola, Universitat de Barcelona); Diona Lambiri (Department of Economics CSpREE, School of Business, University of Reading); Bianca Biagi (Dipartimento di Economia, Impresa e Regolamentazione e CRENoS Università di Sassari)
    Abstract: Quality of life is increasingly becoming a concept researched empirically and theoretically in the field of economics. In urban economics in particular, this increasing interest stems mainly from the fact that quality of life affects urban competitiveness and urban growth: research shows that when households and businesses decide where to locate, quality of life considerations can play a very important role. The purpose of the present paper is to examine the way economic literature and urban economic literature in particular, have adopted quality of life considerations in the economic thinking. Moreover, it presents the ways various studies have attempted to capture the multidimensional nature of the concept, and quantify it for the purposes of empirical research. Additionally we focus on the state of the art in Spain. Looking at the experiences in the last years we see very important possibilities of developing new studies in the field.
    Keywords: Economia urbana, Qualitat de vida
    Date: 2006–12
  15. By: Sergei Guriev (New Economic School (NES), Center for Economic and Financial Research (CEFIR), Center for Economic Policy Research (CEPR)); Evgeny Yakovlev (University of California, Berkeley); Ekaterina Zhuravskaya (New Economic School (NES), Center for Economic and Financial Research (CEFIR), Center for Economic Policy Research (CEPR))
    Abstract: In a federation, local policies with inter-regional spillovers depend on the extent and the nature of local capture. Local lobbyists who have multi-regional scope internalize inter-jurisdictional externalities to a larger extent than the lobbyists with interests in a single region. In particular, multi-regional industrial groups lobby for lower interregional trade barriers than local industrial lobbies. The results are based on a simple model, case-study evidence, and econometric analysis of micro-level panel data from Russia. Controlling for firm-level fixed effects, the performance of firms increases with an increase in the number of neighboring regions captured by multiregional groups. The paper has implications for international trade: lobbying by multinationals should lead to lower protectionism compared to lobbying by national corporations.
    JEL: P26 D78 F15 F23
    Date: 2007–04
  16. By: Teemu Lyytikäinen
    Abstract: This paper examines the effect on housing construction of taxing undeveloped residential land at a higher rate than developed land. In 2001, Finnish municipalities were allowed to levy an extra property tax on undeveloped land zoned for housing. The aim of the reform was to encourage housing construction. As of 2007, almost 30 percent of municipalities had implemented the new three-rate tax system with different tax rates on land pre development, land post development and buildings. The remaining municipalities have a two-rate system with a uniform land tax and a building tax. A theoretical model of decisions by landowners under the Finnish-type three-rate system suggests that pre-development land tax ought to lead to faster development, but also the density of development may be affected. Municipality-level panel data for the period 1998?2006 are used in this study to estimate the effect of the predevelopment tax on housing starts. Fixed-effects Poisson estimations suggest that adopting the three-rate property tax system increased single-family housing starts annually by roughly 10 percent on average. The size of new single-family units is not affected. However, the results for all housing starts provide some evidence that development density might have decreased, attenuating the effect of faster development.
    Date: 2007–05–03
  17. By: Jürgen Essletzbichler; David L. Rigby
    Abstract: Evolutionary approaches in economics have gathered increasing support over the last 25 years. Despite an impressive body of literature, economists are still far from formulating a coherent research paradigm. The multitude of approaches in evolutionary economics poses problems for the development of an evolutionary economic geography. For the most part, evolutionary economic geography imports selective concepts from evolutionary biology and economics and applies those concepts to specific problems within economic geography. We discuss a number of problems with this approach and suggest that a more powerful and appealing alternative requires the development of theoretically consistent models of evolutionary processes. This paper outlines the contours of an evolutionary model of economic dynamics where economic agents are located in different geographical spaces. We seek to show how competition between those agents, based on the core evolutionary principles of variety, selection and retention, may produce distinct economic regions sharing properties that differentiate them from competitors elsewhere. These arguments are extended to illustrate how the emergent properties of economic agents and places co-evolve and lead to different trajectories of economic development over space.
    Keywords: evolutionary economics, economic geography, Generalized Darwinism, biological metaphors, self-organization
    Date: 2007–04
  18. By: Andrew Coleman (Reserve Bank of New Zealand)
    Abstract: This article solves a high frequency model of price arbitrage incorporating storage and trade when the amount of trade is limited by transport capacity constraints. In equilibrium there is considerable variation in transport costs, because transport costs rise when the demand to ship goods exceeds the capacity limit. This variation is necessary to attract shipping capacity into the industry. In turn, prices in different locations differ by a time varying amount. Thus while the law of one price holds, it holds because of endogenous variation in transport costs.
    JEL: F15 N71 L92
    Date: 2007–03
  19. By: Steven Stillman (Motu Economic and Public Policy Research); David C. Maré (Motu Economic and Public Policy Research)
    Abstract: This paper uses data from the New Zealand Census to examine how the supply of recent migrants in particular skill groups affects the geographic mobility of the New Zealand-born and earlier migrants. We identify the impact of recent migration on mobility using the 'areaanalysis' approach, which exploits the fact that immigration is spatially concentrated, and thus a change in the local supply of migrants in a particular skill group should have an impact on the mobility of similarly skilled non-migrants in that local labour market. Overall, our results provide little support for the hypothesis that migrant inflows displace either the NZ-born or earlier migrants with similar skills in the areas that new migrants are settling. If anything, they suggest that there are positive spillovers between recent migrants and other individuals that encourage individuals to move to or remain in the areas in which similarly skilled migrants are settling. Thus, it appears unlikely that internal mobility moderates any potential impacts of immigration on labour or housing markets in New Zealand.
    Keywords: Immigration; Mobility; New Zealand; Labour Market Areas
    JEL: J61 R
    Date: 2007–04
  20. By: David M. Cutler; Edward L. Glaeser; Jacob L. Vigdor
    Abstract: Recent literature on the relationship between ethnic or racial segregation and outcomes has failed to produce a consensus view of the role of ghettos; some studies suggest that residence in an enclave is beneficial, some reach the opposite conclusion, and still others imply that any relationship is small. This paper presents new evidence on this relationship using data on first-generation immigrants in the United States. Using average group characteristics as instruments for segregation, controlling for individual characteristics and both metropolitan area and country-of-origin fixed effects, we estimate impacts of residential concentration that vary with group human capital levels. Residential concentration can be beneficial, but primarily for more educated groups. The mean impact of residential concentration varies across measures, which may illuminate some of the causal mechanisms relating segregation to outcomes.
    JEL: J15 R2
    Date: 2007–05
  21. By: Andrés Rodríguez-Pose (London School of Economics); Sylvia A. R. Tijmstra (London School of Economics); Adala Bwire (London School of Economics)
    Abstract: Much of the recent worldwide trend towards devolution has been driven by the belief that fiscal decentralization is likely to have a positive effect on government efficiency and economic growth. It is generally assumed that the transfer of powers and resources to lower tiers of government allows for a better matching of public policies to local needs and thus for a better allocation of resources. These factors, in turn, are expected to lead to an improvement in regional economic performance, if subnational authorities shift resources from current to capital expenditures in search of a better response to local needs. This paper tests these assumptions empirically by analysing the evolution of subnational expenditure categories and regional growth in Germany, India, Mexico, Spain, and the USA. We find that, contrary to expectations, decentralisation has coincided in the sample countries with a relative increase in current expenditures at the expense of capital expenditures, which has been associated with lower levels of economic growth in countries where devolution has been driven from above (India and Mexico), but not in those where it has been driven from below (Spain). The paper hypothesises that the differences in legitimacy between the central or federal government and subnational governments in top-down and bottom-up processes of devolution may be at the origin of the diverse capacity to deliver greater allocative and productive efficiency and, eventually, greater economic growth by devolved governments.
    Keywords: devolution; fiscal decentralisation; subnational expenditure; economic growth; Germany; India; Mexico; Spain; United States
  22. By: André de Palma (Université de Cergy-Pontoise, ENPC, CORE and Member of the Institut Universitaire de France, THEMA); Moez Kilani (Université de Sousse, Sousse, TUNISIA); Robin Lindsey (Department of Economics, University of Alberta, Edmonton, Alberta, CANADA)
    Abstract: Truck-only lanes and tollways have been promoted as a way to combat road congestion, enhance safety and reduce pavement damage. This paper explores one aspect of truck lanes by considering whether there are advantages in separating cars and trucks. The benefits of vehicle separation are found to depend on several factors: the relative volumes of cars and trucks, the congestion delay and safety hazards that each type of vehicle imposes, values of travel time for cars and trucks, and lane capacity indivisibilities. The optimal assignment of vehicles to lanes can be supported using tolls that are differentiated by vehicle type and route. By contrast, lane access restrictions generally cannot support the optimum and may provide no benefit at all.
    Keywords: truck-only facilities, segregation, congestion, accidents, marginal-cost pricing
    JEL: R41 R48
    Date: 2007

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