nep-geo New Economics Papers
on Economic Geography
Issue of 2008‒01‒05
twenty-two papers chosen by
Vassilis Monastiriotis
London School of Economics

  1. Convergence, Patenting Activity and Geographic Spillovers: A Spatial Econometric Analysis for European Regions By Karine Pellier
  2. The Economics Approach to Cities By Edward L. Glaeser
  4. Opening Economy and Regional Development - Comparative Advantage and Agglomeration Forces as Location Factors in Finland (in Finnish with an English abstract/summary) By Mika Widgrén; Markku Kotilainen; Nuutti Nikula; Ville Kaitila
  5. Regional Industrial Dominance, Agglomeration Economies, and Manufacturing Plant Productivity By Joshua Drucker; Edward Feser
  6. Bayesian Model Averaging in the Context of Spatial Hedonic Pricing: An Application to Farmland Values By Geerte Cotteleer; Tracy Stobbe; G. Cornelis van Kooten
  7. A new look into the evolution of clusters literature. A bibliometric exercise By Sara C. Santos Cruz; Aurora A.C. Teixeira
  8. La concentrazione geografica dell'industria in Italia: 1971-2001 By Roberto Basile; Marianna Mantuano
  9. Agglomeration and Endogenous Absorptive Capacities: Hotelling Revisited By Caroline Hussler; Andre Lorentz; Patrick Ronde
  10. Urban growth and transportation By Gilles Duranton; Matthew A. Turner
  11. GIS and geographically weighted regression in stated preferences analysis of the externalities produced by linear infrastructures By Giaccaria Sergio; Frontuto Vito
  12. Arbitrage in Housing Markets By Edward L. Glaeser; Joseph Gyourko
  14. Are Interregional Wage Differentials in Russia Compensative? By Aleksey Oshchepkov
  16. Trends in regional specialisation in Australia By Robert Dixon; John Freebairn
  17. Short-term effects of new universities on regional innovation By Cowan, Robin; Zinovyeva, N.
  18. Geographical Agglomeration in Australian Manufacturing By Anne Leahy; Alfons Palangkaraya; Jongsay Yong
  19. The international specialization pattern of the Italian local economic systems: Concentration or diversification? By Alessia Amighini; Marinella Leone; Roberta Rabellotti
  20. From cities to productivity and growth in developing countries By Gilles Duranton
  21. Did the Death of Distance Hurt Detroit and Help New York? By Edward L. Glaeser; Giacomo A.M. Ponzetto
  22. Is Accra a superstar city ? By Mathema, Ashna S.; Buckley, Robert M.

  1. By: Karine Pellier
    Abstract: In this paper, we investigate the impact of geographical spillovers in the patenting activity and convergence process for a sample of 131 European regions over the 1981-2001 period. Using spatial econometrics methods (Anselin, 1988, 2001), we detect spatial autocorrelation and heterogeneity in the regional distribution of patent applications to the European Patent Office. Then, we include successively these spatial effects in a convergence analysis. A first specifcation taking into account the spatial dependence reveals a global convergence process between European regions as also a positive effect of geographical spillovers on this convergence process. Secondly, the spatial heterogeneity is taking into account by a specification with two spatial regimes, a "Core-Periphery" type. Finally, ours results show that the global convergence process is hiding disparities and different convergence processes for the two regimes. Only regions that belong to the "Core" of the EU are converging.
    Date: 2007–12
  2. By: Edward L. Glaeser
    Abstract: The economic approach to cities relies on a spatial equilibrium for workers, employers and builders. The worker's equilibrium implies that positive attributes in one location, like access to downtown or high wages, are offset by negative attributes, like high housing prices. The employer's equilibrium requires that high wages be offset by a high level of productivity, perhaps due to easy access to customers or suppliers. The search for the sources of productivity differences that can justify high wages is the basis for the study of agglomeration economies which has been a significant branch of urban economics in the past 20 years. The builder's equilibrium condition pushes us to understand the causes of supply differences across space that can explain why some places have abundant construction and low prices while others have little construction and high prices. Since the economic theory of cities emphasizes a search for exogenous causes of endogenous outcomes like local wages, housing prices and city growth, it is unsurprising that the economic empirics on cities have increasingly focused on the quest for exogenous sources of variation. The economic approach to urban policy emphasizes the need to focus on people, rather than places, as the ultimate objects of policy concern and the need for policy to anticipate the mobility of people and firms.
    JEL: R0
    Date: 2007–12
  3. By: Tiiu Paas; Andres Kuusk; Friso Schlitte; Andres Võrk
    Abstract: The paper estimates equations for regional income convergence in selected EU countries and their NUTS 3 level regions during the European Union pre-enlargement period (1995–2002), using both spatial and non-spatial approaches. There has been absolute income convergence between regions in both the groups of countries looked at, the countries of the EU15, or the old member states, and the new member states or NMS. When national effects are included in convergence equations using country dummies, no evidence of regional income convergence can be observed. The results of the analysis assert the importance of regional policies in inhibiting the increase of regional income disparities and improving conditions for income growth, particularly within the new member states.
    Date: 2007
  4. By: Mika Widgrén; Markku Kotilainen; Nuutti Nikula; Ville Kaitila
    Abstract: ABSTRACT : The study examines the developments in production structures in Finnish regions and the differences in regional income levels and the causes that affect them in an integrating global economy as well as the challenges facing regional policies. The increasing openness of the world economy, the increasing competition it causes and its effect on Finland’s regions is the central task of this study. We combine the classical theory of international trade based on comparative advantage about the specialisation of countries with the approach of the new economic geography and agglomeration forces about the specialisation of regions inside countries. The study is a pioneer in Finland because similar analysis of regional production structures and specialisation has not been done before. We find that the so-called agglomeration forces drive the location of production in Finland. These regional agglomeration forces are the economic size of the region and closeness to markets (so-called market potential), distance between companies producing intermediate and final products, scale effects, and the educational level and R&D activities. Centralisation of production also requires that workforce is willing to relocate and that the productivity growth in core areas is faster than on average. Because labour mobility is such a central requirement for production agglomeration the study also examines migration within Finland in the past 50 years. For regional policies the conclusion of the study is that agglomeration forces should not be constrained if they lead to and are caused by faster productivity growth in core regions. In Finland there are significant differences in public sector services per capita in different regions so that regions with low wage and tax revenues have more public sector services in per capita terms than the core regions. This means that it is very hard to stop migration flows using the community tax equalisation scheme.
    Keywords: regional economy, agglomeration forces, comparative advantage, new economic geography
    JEL: R12 R15 R38
    Date: 2007–12–21
  5. By: Joshua Drucker; Edward Feser
    Abstract: In a seminal article, Benjamin Chinitz (1961) focused attention on the effects that industry size, structure, and economic diversification have on firm performance and regional economies. He also raised a related but conceptually distinct question that has been overlooked since: how does the extent to which a regional industry is concentrated in a single or small number of firms impact the performance of other local firms within that industry? He suggested that such regional industrial dominance may impact input prices, limit capital accessibility, deter entrepreneurial activity, and reduce the regional availability of agglomeration economies such as specialized labor and supply pools In this paper, we use an establishment-level production function to quantify the links between industrial dominance, agglomeration economies, and firm performance. We consider two questions. First, do greater levels of regional industrial dominance lead to lower economic performance by small, dominated manufacturing plants? Second, are small plants in dominated regional industries more limited in capturing regional agglomeration benefits and therefore do they face rigidities in deploying production factors to maximum advantage? Our results suggest that regional industrial organization does influence productivity but that the effect tends to be a direct one, rather than an indirect effect via its influence on agglomeration economies.
    Date: 2007–12
  6. By: Geerte Cotteleer; Tracy Stobbe; G. Cornelis van Kooten
    Abstract: Since 1973, British Columbia created an Agricultural Land Reserve to protect farmland from development. In this study, we employ GIS-based hedonic pricing models of farmland values to examine factors that affect farmland prices. We take spatial lag and error dependence into explicit account. However, the use of spatial econometric techniques in hedonic pricing models is problematic because there is uncertainty with respect to the choice of the explanatory variables and the spatial weighting matrix. Bayesian model averaging techniques in combination with Markov Chain Monte Carlo Model Composition are used to allow for both types of model uncertainty.
    Keywords: Bayesian model averaging, Markov Chain Monte Carlo Model Composition, spatial econometrics, hedonic pricing, GIS, urban-rural fringe, farmland fragmentation
    JEL: R11 R15 C50 R14
    Date: 2007–11
  7. By: Sara C. Santos Cruz (CETE, Faculdade de Economia, Universidade do Porto); Aurora A.C. Teixeira (INESC Porto; CEMPRE, Faculdade de Economia, Universidade do Porto)
    Abstract: In the contemporary globalising knowledge-based economies, local clusters have become crucial elements of regional development, assuming a significant role in both academic and political fields. Although there is an intuitive awareness about the raising importance of the theoretical debate on clusters, there is a substantial lack of empirical support of its precise magnitude and evolution. Moreover, the majority of literature surveys on clusters are exclusively qualitative-based. Aiming at filling this gap, the main purpose of this paper is to provide a quantitative survey of the cluster literature, using bibliometric techniques based on articles. Based on a throughout analysis of all abstracts of articles on clusters published in journals indexed on the Econlit and EBSCO databases, covering the period 1962-2007, our research show that besides their importance in academic fields, the role of clusters has also been widely acknowledged in political spheres. In parallel with the increasing interest in the ‘local’, there has been, as well, an emergent body of literature on global networks and clusters. Moreover, on the basis of the recent boom on clusters literature stands the emergent themes of ‘local networks and social approaches’ and ‘knowledge-based theories’. Literature associated to ‘regional and national innovation systems’ and to ‘institutional approaches’ (local enrooted cultures, governance and customs) has been object of a particular dynamism since the 1990s. Despite the evidence of a clear positive correlation between journals ‘quality’ and formal related research, the evolution of the literature on clusters continues to be mostly appreciative led.
    Keywords: Clusters, Industrial Clusters, Industrial Location; Bibliometrics
    JEL: L22 R3 R10 R12 C89
    Date: 2007–12
  8. By: Roberto Basile (ISAE - Institute for Studies and Economic Analyses); Marianna Mantuano (ISAE - Institute for Studies and Economic Analyses)
    Abstract: In this work we analyze the spatial distribution of manufacturing industries in Italy using data on the number of employees in the local units localized in the Local labour Systems, as revealed by the decennial censuses from 1971 to 2001. We use the Exploratory Spatial Data Analysis, which integrates synthetic measures of concentration and of spatial dependence with nonparametric techniques for the density estimation. With regards to the total manufacturing activity, the results suggest the existence of a hierarchical model, centered between Piedmont and Lombardy, in 1971, and a more complex polycentric model in 2001. At sectoral level, the findings also highlight a strong heterogeneity in the dynamics of geographic concentration.
    Keywords: Concentration, Italy, Exploratory Spatial Data Analysis.
    JEL: R12 C14
    Date: 2007–12
  9. By: Caroline Hussler (RECITS - Universite de Technologie de Belfort Montbeliard; BETA - Univeriste Louis Pasteur); Andre Lorentz (Max Planck Institute of Economics, Evolutionary Economics Group, Jena); Patrick Ronde (GRAICO - Universite de Haute Alsace)
    Abstract: This paper proposes a theoretical model of spatial duopoly, where the location, on the one hand, and the absorptive capacity of ï¬rms as function of their internal R+D investment, on the other hand, endogenously determine the maximum level of knowledge spillovers ï¬rms might absorb. Our goal is to test whether this new modelling of spillovers affects the traditional outcomes in terms of ï¬rms location choices . We solve a three-stage game, where ï¬rms choose their geographical location, prior to their level of internal R+D expenditures, and ï¬nally compete in prices. We found that, at the optimum, ï¬rms choose the same level of internal R+D and set the same price, independently of their location. Moreover, ï¬rms locate symmetrically and tends to agglomerate in the center of the market as the transportation costs increase, knowledge spillovers being in that case maximum.
    Keywords: Spatial Agglomeration, Endogenous Spillovers, Absorptive Capacity, Non-Cooperative Game
    JEL: O33 R12 L13
    Date: 2007–12–18
  10. By: Gilles Duranton; Matthew A. Turner
    Abstract: We estimate the effects of major roads and public transit on the growth of major cities in the US between 1980 and 2000. We find that a 10% increase in a city’s stock of roads causes about a 2% increase in its population and employment and a small decrease in its share of poor households over this 20 year period. We also find that a 10% increase in a city’s stock of large buses causes about a 0.8% population increase and a small increase in the share of poor households over this period. To estimate these effects we rely on an instrumental variables estimation which uses a 1947 plan of the interstate highway system and an 1898 map of railroads as instruments for 1980 roads.
    Keywords: urban growth, transportation, public transport, instrumental variables
    JEL: L91 N70 R11 R49
    Date: 2007–12–19
  11. By: Giaccaria Sergio (University of Turin); Frontuto Vito (University of Turin)
    Abstract: The paper uses Contingent Valuation to investigate the externalities from linear infrastructures, with a particular concern for their dependence on characteristics of the local context within which they are perceived. We employ Geographical Information Systems and a spatial econometric technique, the Geographic Weighted Regression, integrated in a dichotomous choice CV in order to improve both the sampling design and the econometric analysis of a CV survey. These tools are helpful when local factors with an important spatial variability may have a crucial explanatory role in the structure of individual preferences. The Geographic Weighted Regression is introduced, beside GIS, as a way to enhance the flexibility of a stated preference analysis, by fitting local changes and highlighting spatial non-stationarity in the relationships between estimated WTP and explanatory variables. This local approach is compared with a standard double bounded contingent valuation through an empirical study about high voltage transmission lines. The GWR methodology has not been applied before in environmental economics. The paper shows its significance in testing the consistency of the standard approach by monitoring the spatial patterns in the distribution of the WTP and the spatial stability of the parameters estimated in order to compute the conditional WTPs.
    Date: 2007–12
  12. By: Edward L. Glaeser; Joseph Gyourko
    Abstract: Urban economists understand housing prices with a spatial equilibrium approach that assumes people must be indifferent across locations. Since the spatial no arbitrage condition is inherently imprecise, other economists have turned to different no arbitrage conditions, such as the prediction that individuals must be indifferent between owning and renting. This paper argues the predictions from these non-spatial, financial no arbitrage conditions are also quite imprecise. Owned homes are extremely different from rental units and owners are quite different from renters. The unobserved costs of home owning such as maintenance are also quite large. Furthermore, risk aversion and the high volatility of housing pries compromise short-term attempts to arbitrage by delaying home buying. We conclude that housing cannot be understood with a narrowly financial approach that ignores space any more than it can be understood with a narrowly spatial approach that ignores asset markets.
    JEL: R21
    Date: 2007–12
  13. By: Sotiropoulou, Eleni-Christina
    Abstract: Modern countryside is increasingly becoming a place ‘utilised’ by city dwellers, a phenomenon particularly observable in Greece, where distances are relatively small and relations between villages and cities remain strong. The case of two Greek villages, where tourism has played a leading part in their social and economic recovery, will help us understand, through a conflict analysis, the way in which different expectations and aspirations expressed by various groups of local actors, concerning the use of rural space, determine the development and social organisation of rural areas.
    Keywords: tourism; appropriation conflicts; use of rural space
    JEL: R1 L83
    Date: 2007–11
  14. By: Aleksey Oshchepkov
    Abstract: Interregional differentials in nominal wages in the Russian Federation are huge compared to other countries. Using the NOBUS micro-data and a methodology based on the estimation of the wage equation augmented by aggregate regional characteristics, we show that these differentials have a compensative nature. Russian workers receive wage compensations for living in regions with a higher price level and worse non-pecuniary characteristics, such as a relatively low life expectancy, a high level of air pollution, poor medical services and a colder climate. After adjusting for these regional characteristics, the relative ranking of regions in terms of average wages changes considerably. Moreover, regional nominal wages become positively correlated with interregional migration flows. According to our estimates, half of the interregional wage variation between workers with similar productive characteristics should be considered to be compensative. These results support the view that the best policy reaction to the current high interregional wage differentials should be the removal of migration barriers and a reduction in migration costs. In general, our results show that wage compensations for regional disamenities along with differences in employment composition are able to account for about three fourths of the observed interregional variation in wages.
    Keywords: compensating differentials, regional wages, wage equation, interregional migration, transition, Russia
    JEL: J3 J6 P2 R1 R2
    Date: 2007
  15. By: Galdini, Rossana
    Abstract: Urban tourism is in full expansion due to world-wide urbanisation and internationalisation of our societies. New economic impulse created by investments in urban regeneration, and improving the quality of life, produces different consequences. This paper tries to examines the benefits and costs which tourism has on host environments, economies and societies and analyses the strategic conditions which can assist cities to revitalise their territory, through a coherent tourism policy. An Italian case study, Genoa is used to illustrate some of these impact issues. Genoa, after a deep crisis, has regained a new identity and its role in the Italian economic and social system. The paper provides a critical approach of how places of cultural significance are transformed into places of consumption by investigating the relationship between culture as a resource for identity and culture as an economic resource.
    Keywords: urban tourism; regeneration; culture; environment; sustainability
    JEL: R0 L83
    Date: 2007–11
  16. By: Robert Dixon; John Freebairn
    Abstract: No Abstract
    Date: 2007
  17. By: Cowan, Robin (UNU-MERIT); Zinovyeva, N. (BETA, Université Louis Pasteur)
    Abstract: This paper analyzes empirically the channels through which university research affects industry innovation. We examine how the opening of new science, medicine and engineering departments in Italy during 1985-2000 affected regional innovation systems. We find that creation of a new university department increased regional innovation activity 3-4 years later. On average, an opening of a new department in a region has led to a ten percent change in the number of patents filed by regional firms. Given that this effect occurs within the first half decade of the appearance of a new department, it cannot be ascribed to improvements in the quality and quantity of graduates. At the same time, traditional measures of academic research activity can explain only around 30 percent of this effect.
    Keywords: Innovation, Academic Research, R&D, Universities, University-Industry Linkages, Technology Transfer, Regional Innovation Systems.
    JEL: O31 O32 O33 I23
    Date: 2007
  18. By: Anne Leahy (Melbourne Institute of Applied Economic and Social Research, The University of Melbourne); Alfons Palangkaraya (Melbourne Institute of Applied Economic and Social Research, The University of Melbourne); Jongsay Yong (Melbourne Institute of Applied Economic and Social Research, The University of Melbourne)
    Abstract: This paper investigates the geographic agglomeration of establishments in the Australian manufacturing industries during the period of 1994{1997. We find that although the agglomeration of Australian manufacturing has doubled during the period, it is still not as agglomerated as those in other developed economies such as the United States, the United Kingdom, France and Ireland. We also find that industries which receive higher assistance tend to be more agglomerated. However, there is no statistically significant evidence that the extent of the reduction in assistance due to trade liberalisation between 1994 and 1997 was associated with a further decrease in agglomeration. In terms of establishment dynamics, we ¯nd a significant increase in agglomeration but no evidence that establishment entry-exit patterns are correlated with agglomeration.
    Keywords: Agglomeration; Australian Manufacturing; Industry assistance; Trade liberalisation; Entry and exit.
    JEL: R11 R12
    Date: 2007–03
  19. By: Alessia Amighini; Marinella Leone; Roberta Rabellotti (SEMEQ Department - Faculty of Economics - University of Eastern Piedmont)
    Abstract: We study the evolution of specialization patterns of the Italian provinces over 1995-2005 by analyzing the dynamics of the sectoral distribution of the Balassa index of revealed comparative advantages for several manufacturing sectors. Our results show that behind a relatively stable distribution of national comparative advantages over time, there are wide variations in local performances: only a few provinces strengthened their specialization patterns over the last decade, while the majority of them slightly weakened their specialization patterns. We also find a higher average degree of persistence for district provinces, but no systematic differences between provinces with and without industrial districts. We find a variety of behaviour for provinces with industrial districts in the footwear, textiles and clothing and machinery industries: a few of them are concentrating on their past comparative strengths, while many others are changing their specialization patterns.
    Keywords: trade specialization; Balassa comparative advantage; Italian provinces
    JEL: F14 R11
    Date: 2007–12
  20. By: Gilles Duranton
    Abstract: This paper reviews the evidence about the effects of urbanisation and cities on productivity and economic growth in developing countries using a consistent theoretical framework. Just like in developed economies, there is strong evidence that cities in developing countries bolster productive efficiency. Regarding whether cities promote self-sustained growth, the evidence is suggestive but ultimately inconclusive. These findings imply that the traditional agenda of aiming to raise within-city efficiency should be continued. Furthermore, reducing the obstacles to the reallocation of factors and activities, and more generally promoting the movement of human capital and goods across cities may have significant positive dynamic effects as well static ones.
    Keywords: Cities in developing countries, growth, urbanisation
    JEL: O18 R11
    Date: 2007–12–19
  21. By: Edward L. Glaeser; Giacomo A.M. Ponzetto
    Abstract: Urban proximity can reduce the costs of shipping goods and speed the flow of ideas. Improvements in communication technology might erode these advantages and allow people and firms to decentralize. However, improvements in transportation and communication technology can also increase the returns to new ideas, by allowing those ideas to be used throughout the world. This paper presents a model that illustrates these two rival effects that technological progress can have on cities. We then present some evidence suggesting that the model can help us to understand why the past thirty-five years have been kind to idea-producing places, like New York and Boston, and devastating to goods-producing cities, like Cleveland and Detroit.
    JEL: R0
    Date: 2007–12
  22. By: Mathema, Ashna S.; Buckley, Robert M.
    Abstract: A recent study of house price behavior in U.S. cities by Gyourko, Mayer, and Sinai (2006) raises questions about so-called superstar cities in which housing is so inelastically supplied that it becomes unaffordable, as higher-income families outbid residents. We consider the case of Accra, Ghana, in this light, estimating the elasticity of housing supply and discussing the implications for growth and income distribution. There is not a great deal of data available to examine trends in Accra, so our method is indirect. First, we use a variant of the traditional monocentric city model to calculate the elasticity of Accra ' s housing supply relative to those of other similarly-sized African cities. This suggests that housing supply responsiveness is much higher elsewhere. This muted supply responsiveness is consistent with the observed higher housing prices. Second, we estimate a number of traditional housing demand equations and reduced form equations. Placing a number of restrictions on the equations allows us to infer Accra ' s housing supply elasticity. Taken together, our approaches suggest that lower-income families in Accra have such poor housing conditions because the market is extremely unresponsive to demand. Although the outcomes we have traced-high housing prices and low quality-are not unusual relative to the other developed country superstar cities, they are extreme. The welfare costs are considerable, so much so that in addition to direct housing market effects, these policies also appear to have potentially significant implications for the achievement of more equitable growth.
    Keywords: Economic Theory & Research,Housing & Human Habitats,Banks & Banking Reform,,Public Sector Management and Reform
    Date: 2007–12–01

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