nep-geo New Economics Papers
on Economic Geography
Issue of 2007‒12‒08
eight papers chosen by
Vassilis Monastiriotis
London School of Economics

  1. Related variety and regional growth in Italy By Christian Le Bas; Parimal Patel
  2. Regional Wage Differentials: Static And Dynamic Approaches By João Pereira; Aurora Galego
  3. Spatial Linkages in International Financial Markets By Viviana Fernández
  4. Economic and political determinants of urban expansion: Exploring the local connection By Albert Solé-Ollé; Elisabet Viladecans-Marsal
  5. Innovation and Imitation Across Jurisdictions By Amihai Glazer; Hiroki Kondo
  6. Open Space Purchases, House Prices, and the Tax Base By Donald , Vandegrift; Michael, Lahr
  7. Regional returns to physical capital: are they conditioned by educational attainment? By Enrique Lopez-Bazo; Rosina Moreno
  8. Gravity and Information: Heterogeneous Firms, Exporter Networks and the 'Distance Puzzle' By Sebastian Krautheim

  1. By: Christian Le Bas (Institut des Sciences de l'Homme); Parimal Patel (SPRU, University of Sussex)
    Date: 2007–12–06
  2. By: João Pereira (Universidade de Évora – Departamento de Economia); Aurora Galego (Universidade de Évora – Departamento de Economia)
    Abstract: This work aims at studying regional wage differentials both in a static and in a dynamic perspective. Previous studies have typically studied this issue using the Blinder and Oaxaca static decomposition. This approach does not provide clear information about the sources explaining the change in regional wage differentials along the years. To overcome this problem this study also uses Junh, Murphy and Pierce (1991,1993) decomposition. We analyse the case of Portugal for 1995 and 2002. Our results show that, although there are small changes in the interregional wage inequality, particularly between the region of Lisboa and the other regions, there are important and counteracting factors shaping this outcome. In fact, Lisboa has reinforced its position as the region with more qualified workers, but the gap in unobserved characteristics has decreased.
    Keywords: Regions, Wage Differentials, Wage Gap Decompositions
    JEL: J31 J38 J49
    Date: 2007
  3. By: Viviana Fernández
    Abstract: Spatial dependency has been broadly studied in several research areas, such as environmental criminology, economic geography, environmental sciences, and urban economics. However, it has been essentially overlooked in other subfields of economics and in the field of finance as a whole. A key element at stake is the definition of contiguity. In the context of financial markets, defining a metric distance is not a simple matter. In this article, we explore the notion of spatial dependency in a panel of 126 Latin American firms from Brazil, Chile, and Mexico over the period 1997-2006. Firstly, we formulate a spatial version of the capital asset pricing model (S-CAPM), which accounts for alternative measures of distance between firms, such as market capitalization, the market-to-book, enterprise value-to-EBITDA, and the debt ratios. Secondly, we analyze the potential existence of spatial linkages in investment and dividend decisions. We conclude that there may be contemporaneous linkages in firms’ decisions of such ratios, which may be indicative of some strategic behavior.
    Date: 2007–11–29
  4. By: Albert Solé-Ollé (Institut d'Economia de Barcelona (IEB); Universitat de Barcelona (UB)); Elisabet Viladecans-Marsal (Institut d'Economia de Barcelona (IEB); Universitat de Barcelona (UB))
    Abstract: We examine the economic and political determinants of decisions taken by local governments regarding the amount of new land to be assigned for development. The analysis draws on a massive database, which includes more than 2,000 Spanish municipalities during the 1999-2003 term-of-office. The increase in developable land in this period is explained using a wide set of variables that capture the specific traits of each municipality in 1999. The variables were selected following a review of recommendations made in the literature on urban growth controls and by taking into account other factors that might be considered specific to Spain. Our results show that urban expansion is influenced by a variety of factors. Thus, the communities found to be expanding most: (i) are rich, (ii) have more new housing purchasers, (iii) are in a weak financial position, (iv) are controlled by parties to the right of the political spectrum, (v) have a low electoral turnout and local government bodies that do not face serious electoral competition, and (vi) have more land but a lower proportion of environmentally valuable land.
    Keywords: Land-use regulations, urban growth controls, political economy
    JEL: H7 Q15 R52
    Date: 2007
  5. By: Amihai Glazer (Department of Economics, University of California-Irvine); Hiroki Kondo (Department of Economics, Shinshu University)
    Abstract: We consider cities which can increase the income of landowners or of capital owners by improving the quality of public services. The improvement can come from innovation or from imitation. We find that when cities aim to benefit landowners, too many cities innovate; but too few cities innovate when the city aims to benefit capital owners. Redistribution across cities can ameliorate these inefficiencies.
    Keywords: Tax competition; Innovation; Interjurisdictional differences
    JEL: R13 H73
    Date: 2007–11
  6. By: Donald , Vandegrift; Michael, Lahr
    Abstract: This paper examines the effect of public acquisitions of open space on house prices and the municipal tax base. While a series of studies show that open space acquisitions raise values of nearby properties, no research to date appears to focus upon the effect of open space acquisitions upon local tax base. Existing studies focus on the effect of open space acreage on house prices. We examine the effect of open space expenditures on house prices at the municipal level. We find that a one-dollar increase in open space expenditures per housing unit is associated with average house prices that are about $13 higher and with a tax base that is about $15 lower per acre. Open space expenditures per housing unit also show a consistent positive effect on the percentage change in house prices over the period 1995-2000. However, we find no statistically significant effect from open space expenditures on the percentage change in the tax base over the period 1995-2000. Local funding (rather than state funding) for open space has a smaller impact on house prices but the effect is significant only in some specifications. Despite the negative effect of open space purchases on the tax base, we find that higher open space expenditures are associated with lower tax rates. In addition, we find that while higher tax rates are associated with a lower tax base, a larger tax base does depress tax rates. The percentage change in the general property tax rate over the period 1995-2000 shows a significant negative effect on the percentage change in the tax base per acre over the period.
    Keywords: Open Space; Tax Base; Municipality; Tax Rate
    JEL: H4 H2 R51 R52
    Date: 2007–09–24
  7. By: Enrique Lopez-Bazo (Faculty of Economics, University of Barcelona); Rosina Moreno (Faculty of Economics, University of Barcelona)
    Abstract: This paper provides novel empirical evidence of the indirect effect of educational attainment on regional economic growth, through its influence on the profitability of investment in physical capital. We test the hypothesis that the regional heterogeneity of the return to physical capital can be directly related to the existing heterogeneity in the educational attainment of workers. The results for the Spanish case support our hypothesis that the higher the educational attainment of workers the greater the returns on investment in physical capital. In fact, this effect seems to be sufficiently strong to have counterbalanced the traditional mechanism of decreasing returns to capital accumulation.
    Keywords: returns to capital, human capital, productivity, cost system
    JEL: J24 O11 O47 R11
    Date: 2007–12
  8. By: Sebastian Krautheim
    Abstract: Distance effects in empirical gravity equations appear to be too high to be explained by transport costs alone. Moreover, despite the strong and ongoing reduction of transport costs, the estimated coefficients are rather increasing than decreasing over the last six decades. To address the two dimensions of this 'distance puzzle', this paper proposes a model of international trade in which heterogeneous firms create informational networks to reduce their fixed costs of exporting. Since the variable trade cost (distance) affects the number of exporters, which in turn affects the available information, the fixed cost of exporting is endogenously increasing in distance. The model thus delivers higher predictions for the level of distance effects and, in addition, a quality improvement of the networks over time implies increasing distance elasticities. Major implications of the model regarding the effects of firm heterogeneity and market structure on distance effects are supported by existing empirical evidence. An empirical gravity equation is used to estimate the effect of exporter networks on distance coefficients. In the light of the results the empirical findings on the role of distance on international trade appear considerably less puzzling.
    Keywords: gravity, heterogeneous firms, networks, trade costs, distance, information
    JEL: F10 F12 D85
    Date: 2007

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