nep-geo New Economics Papers
on Economic Geography
Issue of 2007‒10‒27
thirteen papers chosen by
Vassilis Monastiriotis
London School of Economics

  1. Footloose capital and productive public services By Pasquale Commendatore; Ingrid Kubin; Carmelo Petraglia
  2. Mapping the european regional educational distribution: educational attainment and inequality By Andrés Rodríguez-Pose; Vassilis Tselios
  4. Was Postwar Suburbanization "White Flight"? Evidence from the Black Migration By Leah Platt Boustan
  5. Localization Economies and Establishment Scale: A Dartboard Approach By Octávio Figueiredo; Paulo Guimarães; Douglas Woodward
  6. Cross-border M&As and the changing economic geography of Europe By Andrés Rodríguez-Pose; Hans-Martin Zademach
  8. Do Political Parties Matter? Evidence from U.S. Cities By Fernando Ferreira; Joseph Gyourko
  9. Space and time in macroeconomic panel data: young workers and state-level unemployment revisited By Christopher L. Foote
  10. Regional economic conditions and the variability of rates of return in commercial banking By Frederick Furlong; John Krainer
  11. Office Space Supply Restrictions in Britain: The Political Economy of Market Revenge By Cheshire, Paul; Hilber, Christian A. L.
  12. Shifting Death to their Alternatives: The Case of Toll Motorways. By Daniel Albalate
  13. Explaining the size distribution of cities: X-treme economies By Berliant, Marcus; Watanabe, Hiroki

  1. By: Pasquale Commendatore (University of Naples 'Federico II', Italy); Ingrid Kubin (Department of Economics, Vienna University of Economics & B.A.); Carmelo Petraglia (University of Naples 'Federico II', Italy)
    Abstract: We analyse in a Footloose Capital productive public services provided by a central government aiming at reducing regional disparities. Two countervailing effects occur – one upon productivity and another upon local demand – the relative strength of which depends upon the financing scheme. Only if the “rich” region contributes sufficiently to the financing of the public services in the “poor” region, the poor region will actually gain. In studying these questions we pay particular attention to the dynamic adjustment processes and to the role of trade freeness.
    JEL: H4 R1 R12 F12
    Date: 2007–10
  2. By: Andrés Rodríguez-Pose (London School of Economics); Vassilis Tselios (London School Of Economics)
    Abstract: The geography of education, especially at subnational level, is a huge black box. Basically nothing is known about the distribution of educational attainment and inequality across regions in Europe. This paper addresses this gap in the literature by mapping educational attainment and inequality in 102 regions in western Europe, using data extracted from the European Community Household Panel (ECHP) covering more than 100,000 individuals over the period 1995-2000. The results of this Exploratory Spatial Data Analysis (ESDA) reveal a strong correlation between levels of educational attainment and inequality across regions in Europe. Regions with similar educational conditions tend to cluster, often within national borders. In addition a North-South and an urban-rural dimension is evident. Northern regions and large European metropoli have not only the most educated labour force, but also the lowest levels of inequality. Educational inequality seems to be, in any case, a fundamentally within region phenomenon. 90 percent of the educational inequality in Europe takes place among individuals living in the same region.
    Keywords: educational attainment; educational inequality; regions; exploratory spatial data analysis; Europe; urbanisation; EU North-South divide
    Date: 2007–09–24
  3. By: George Grantham
    Abstract: Owing to the high cost of transporting farm produce before the railway age, the land-intensiveness of European mixed farming caused both production and consumption of foodstuffs and intermediate farm inputs in the steady state to be highly dispersed, a spatial configuration offering weak inducement to reorganize farm structure or to invest available labour and capital with a view to increasing output. In such conditions the most common cause of rising agricultural productivity was spatial concentration of demand, which raised the demand price of farm produce and farm inputs within the privileged space bounded by discontinuities in the cost of land transport. The ultimate cause of observed changes in agricultural productivity before the nineteenth century must therefore be sought outside the farming sector in the development of markets for tradable manufactures, tradable services, and the economies of scale in their provision that supported spatial concentration of population.
    JEL: B10 N53 N74 N93 O18 Q13 R12 R14 R40
    Date: 2007–09
  4. By: Leah Platt Boustan
    Abstract: Residential segregation across jurisdiction lines generates disparities in public services and education by race. The distinctive American pattern -- in which blacks live in the center city and whites in the suburban ring -- was enhanced by black migration from the rural South from 1940-1970. I show that urban whites responded to this black influx by relocating to the suburbs and rule out the indirect effect on urban housing prices as a cause. Black migrants may have been attracted to areas already undergoing suburbanization. I create an instrument for changes in urban diversity that predicts black migrant flows from southern states and assigns these flows to northern cities according to established settlement patterns. The best causal estimates imply that "white flight" explains around 20 percent of suburban growth in the postwar period.
    JEL: J61 N12 R23
    Date: 2007–10
  5. By: Octávio Figueiredo (Universidade do Porto and CEMPRE, Portugal); Paulo Guimarães (University of South Carolina); Douglas Woodward (University of South Carolina)
    Abstract: This paper reexamines the relationship between geographic concentration of an industry (localization) and establishment scale. We use an approach that builds on Ellison & Glaeser’s (1997) dartboard location model to measure localization. Contrary to Holmes & Stevens’s (2002) pioneering analysis based on employment location quotients, but in line with the predictions that follow from Alfred Marshall’s concept of localization economies, we find evidence that plants located in areas where an industry exhibits concentration in excess are smaller than plants in the same industry outside such areas.
    Keywords: dartboard location model, localization, establishment scale
    JEL: R12 R39 L11
    Date: 2007–09
  6. By: Andrés Rodríguez-Pose (London School of Economics); Hans-Martin Zademach (University of Munich)
    Abstract: This paper investigates the patterns of corporate mergers and acquisitions (M&As) involving firms located in the EU25 as well as in the four EFTA countries between 1998 and 2003. It first uncovers the \'cross-border balance\' of M&As across European states, before identifying, through quantitative multiple regression analysis and insights from qualitative, interview-based research, the extent to which the spatial perspective sheds light onto the factors that may explain the detected levels and patterns of corporate takeovers across Europe. The results indicate that the traditional motives of access to new and core markets, the effects of geographical proximity, and the internalisation of \'localised capabilities\' (proxied by a skilled and innovative labour pool) represent the key drivers of European M&As. Institutional factors, such as European integration, assessments of country risk, or language barriers, as well as structural factors (e.g. unemployment or education) appear to be - at least at the intra-European scale - less influential.
    Keywords: mergers & acquisitions; theory of the firm; spatial proximity; agglomeration economies; localised capabilities; economic integration; Europe
    Date: 2007–09–24
  7. By: Jorge E, Mendoza
    Abstract: The present study focuses on the anaysis of the economic growth of the Latin American countries from 1950 to 2000 The metogodology of analysis is bases in spatial econometric estimates and the Moran Index. The results showed conditional convergence from 1950 to 1975, and both absolute and conditional divergence from 1980 to 2000.
    Keywords: Convergence; Latin America
    JEL: O38 O16 O54 O11
    Date: 2007
  8. By: Fernando Ferreira; Joseph Gyourko
    Abstract: We examine whether partisan political differences have important effects on policy outcomes at the local level using a new panel data set of mayoral elections in the United States. Applying a regression discontinuity design to deal with the endogeneity of the mayor's party, we find that party labels do not affect the size of government, the allocation of spending or crime rates, even though there is a large political advantage to incumbency in terms of the probability of winning the next election. The absence of a strong partisan impact on policy in American cities, which is in stark contrast to results at the state and federal levels of government, appears due to certain features of the urban environment associated with Tiebout sorting. In particular, there is a relatively high degree of household homogeneity at the local level that appears to provide the proper incentives for local politicians to be able to credibly commit to moderation and discourages strategic extremism.
    JEL: H7 R38
    Date: 2007–10
  9. By: Christopher L. Foote
    Abstract: A provocative paper by Shimer (2001) finds that state-level youth shares and unemployment rates are negatively correlated, in contrast to conventional assumptions about demographic effects on labor markets. This paper updates Shimer's regressions and shows that this surprising correlation essentially disappears when the end of the sample period is extended from 1996 to 2005. This shift does not occur because of a change in the underlying economy during the past decade. Rather, the presence of a cross-sectional (that is, spatial) correlation in the state-level data sharply reduces the precision of the earlier estimates, so that the true standard errors are several times larger than those originally reported. Using a longer sample period and some controls for spatial correlation in the regression, point estimates for the youth-share effect on unemployment are positive and close to what a conventional model would imply. Unfortunately, the standard errors remain very large. The difficulty of obtaining precise estimates with these data illustrates a potential pitfall in the use of regional panel data for macroeconomic analysis.
    Keywords: Unemployment
    Date: 2007
  10. By: Frederick Furlong; John Krainer
    Abstract: We develop new techniques to assess the relationship between commercial bank performance and the economic conditions in the markets in which they operate. In the analysis, we allow for heterogeneity in the responses of banks to regional economic conditions. We find a statistically significant relationship between bank performance and shocks to the regional markets in which they operate. We find that region-specific shocks have a significant and persistent effect on the cross-sectional variance of bank performance in the market. That is, shocks affecting average performance of banks in a region also tend to increase the dispersion of their performance. We demonstrate that this effect is due to heterogeneity in the banks' exposures to their regional economies. Moreover, by allowing for this heterogeneity, we find that systematic responses to regional economic effects are notably more important in explaining the variation in bank performance than suggested by analysis in which responses are constrain to be the same for all banks.
    Keywords: Banks and banking ; Bank profits
    Date: 2007
  11. By: Cheshire, Paul; Hilber, Christian A. L.
    Abstract: Office space in Britain is the most expensive in the world and regulatory constraints are the obvious explanation. We estimate the ‘regulatory tax’ for 14 British office locations from 1961 to 2005. These are orders of magnitude greater than estimates for Manhattan condominiums or office space in continental Europe. Exploiting the panel data, we provide strong support for our hypothesis that the regulatory tax varies according to whether an area is controlled by business interests or residents. Our results imply that the cost of the 1990 change converting commercial property taxes from a local to a national basis – transparently removing any fiscal incentive to permit local development – exceeded any plausible rise in local property taxes.
    Keywords: Land use regulation; regulatory costs; business taxation; office markets.
    JEL: H3 Q15 J6 R52
    Date: 2007–04–18
  12. By: Daniel Albalate (Grup de Recerca en Polítiques Públiques i Regulació Econòmica(PPRE), Institut de Recerca d'Economia Aplicada (IREA), Departament de Política Econòmica, Universitat de Barcelona.)
    Abstract: A renewed interest on the use of tolls for funding motorways and regulating their demands has been recovered in the last years. However, less attention has been put to the road safety effects derived from this policy. Although toll motorways show quality levels equal or above free motorways, charging users for the use of better infrastructure shifts some traffic to their low quality adjacent alternatives. In the present study we test whether charging for the use of the better road might negatively affect road safety in the worst adjacent road. The results confirm our hypothesis opening a new concern.
    Keywords: Road Safety, Tolls, Motorways and Transportation
    JEL: H23 I18 R48
    Date: 2007–10
  13. By: Berliant, Marcus; Watanabe, Hiroki
    Abstract: The methodology used by theories to explain the size distribution of cities is contrived in that it takes an empirical fact and works backward to first obtain a reduced form of a model, then pushes this reduced form back to assumptions on primitives. The induced assumptions on consumer behavior, particularly about their ability to insure against the city-level productivity shocks in the model, are untenable. With either self insurance or insurance markets, and either an arbitrarily small cost of moving or the assumption that consumers do not perfectly observe the shocks to firms' technologies, the agents will never move. Equilibrium implies a uniform distribution of agents. Even without these frictions, our analysis yields another equilibrium with insurance that gives exactly the same utility level to consumers as the equilibrium studied in the literature, but where consumers never move. Thus, insurance is a substitute for movement. Even aggregate shocks are insufficent to generate consumer movement, since consumers can borrow and save. We propose an alternative class of models, involving extreme risk against which consumers will not insure. Instead, they will move.
    Keywords: Zipf's Law; Gibrat's Law; Size Distribution of Cities; Extreme Value Theory
    JEL: R12
    Date: 2007–10–24

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