nep-geo New Economics Papers
on Economic Geography
Issue of 2008‒01‒19
seven papers chosen by
Vassilis Monastiriotis
London School of Economics

  1. Infrastructure and the Location of Foreign Direct Investment A Regional Analysis By Castro, Lucio
  2. Do Agglomeration Economies Reduce the Sensitivity of Firm Location to Tax Differentials? By Marius BRÜLHART; Mario JAMETTI; Kurt SCHMIDHEINY
  3. Location and R&D alliances in the European ICT industry By Rajneesh Narula; Grazia D. Santangelo
  4. Regional and National Industrial Policies in Italy, 1950s-1993. Where Did the Subsidies Flow?" By Anna Spadavecchia
  5. The Impact of Immigration on the Geographic Mobility of New Zealanders By David C. Maré; Steven Stillman
  6. Spatial Concentration in Institutional Investment in the UK: Some comparisons between the Retail and Office Sectors By Peter Byrne; Stephen Lee
  7. On the Regional Incidence of Public Investment in Highways in the USA By Alfredo M. Pereira; Jorge M. Andraz

  1. By: Castro, Lucio
    Abstract: In the 1990’s, Argentina became a top destination for FDI to developing countries. The geographical distribution of FDI inflows was, however, highly uneven. In parallel, the spatial allocation of public infrastructure greatly mirrored these regional disparities. What were the determinants of FDI location? What was the role of public infrastructure? This paper attempts to answer these questions using spatial econometric techniques for a panel of regional and FDI data of the Argentine provinces. Results suggest that space matters for FDI location, indicating some competition effects in FDI inflows between neighbouring provinces. Paved roads seem also matter but other proxies of infrastructure do not seem to be that important. According to our results, a 10% increase in paved roads per capita augments FDI between 17% and 33% in the average host regional economy. Extending the network of paved roads in neighbouring regions would increase FDI between 12% and 14% but results are not robust.
    Keywords: Foreign Direct Investment; Infrastructure; Spatial Econometrics; Economic Geography
    JEL: H54 F23 F21 C01
    Date: 2007–11
    Abstract: Low corporate taxes can help attract new .firms. This is the main mechanism underpinning the standard "race-to-the-bottom" view of tax competition. A recent theoretical literature has qualified this view by formalizing the argument that agglomeration forces can reduce firms' sensitivity to tax differentials across locations. We test this proposition using data on firm startups across Swiss municipalities. We find that, on average, high corporate income taxes do deter new firms, but that this relationship is significantly weaker in the most spatially concentrated sectors. Location choices of firms in sectors with an agglomeration intensity at the twentieth percentile of the sample distribution are estimated to be twice as responsive to a given difference in local corporate tax burdens as firms in sectors with an agglomeration intensity at the eightieth percentile. Hence, our analysis confirms the theoretical prediction: agglomeration economies can neutralize the impact of tax differentials on firms' location choices.
    Keywords: firm location; agglomeration economies; local taxation; count models; Switzerland
    JEL: R3 H32
    Date: 2007–12
  3. By: Rajneesh Narula (Department of Economics, University of Reading Business School); Grazia D. Santangelo (Facoltà di Scienze Politiche, Università degli Studi di Catania)
    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, R&D location, strategy, co-location, knowledge flows
    JEL: D23 F23 O18 O32 R3
    Date: 2007
  4. By: Anna Spadavecchia (Department of Management, University of Reading)
    Abstract: This paper compares the magnitude and distribution of regional subsidies to Southern industry to those of subsidies available in the country as a whole through the national industrial policy. The comparison highlights the fact that from the second half of the 1970s, industry located in the most prosperous region of Italy, the North-West, was the main beneficiary of subsidised credit. These findings refine our understanding of the regional policy for Southern Italy and the reasons for its limited achievements. Moreover, the redirection of subsidies away from the South cast doubts on the extent of the Italian government’s commitment to its programme of regional development.
    Keywords: Regional policy; Industrial policy; Regional pattern of government spending
    JEL: R58 H50 N94
    Date: 2007
  5. By: David C. Maré (Motu Economic and Public Policy Research); Steven Stillman (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 ‘area-analysis’ 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 nonmigrants 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 R23
    Date: 2007–11
  6. By: Peter Byrne (Department of Real Estate & Planning, University of Reading); Stephen Lee
    Abstract: Geographic diversity is a fundamental tenet in portfolio management.  Yet there is evidence from the US that institutional investors prefer to concentrate their real estate investments in favoured and specific areas as primary locations for the properties that occupy their portfolios.  The little work done in the UK draws similar conclusions, but has so far focused only on the office sector; no work has examined this issue for the retail sector.  This paper therefore examines the extent of real estate investment concentration in institutional Retail portfolios in the UK at two points in time; 1998 and 2003, and presents some comparisons with equivalent concentrations in the office sector.  The findings indicate that retail investment correlates more closely with the UK urban hierarchy than that for offices when measured against employment, and is focused on urban areas with high populations and large population densities which have larger numbers of retail units in which to invest.
    Keywords: Retail, Institutional Investment, Spatial Concentration
    Date: 2007
  7. By: Alfredo M. Pereira (Department of Economics, College of William and Mary); Jorge M. Andraz (Faculdade de Economia, Universidade do Algarve)
    Abstract: The objective of this paper is to investigate the regional incidence of the aggregate effects of public investment in highways in the US taking into consideration the possible existence of regional spillovers. The empirical results are based on VAR estimates at both the aggregate and state levels using private output, employment, and investment, as well as different measures of public investment. Empirical results allow us to establish several stylized facts. First, public investment in highways affects private sector variables positively at the aggregate level as well as in most states. Second, overall, the spillover effects of public investment in highways are at least 80% of the total effects for all private sector variables. Third, the spillovers have a clear geographical pattern in that they tend to be more important in western states and the corridor between the Great Lakes and the Gulf Coast. Fourth, we find that relative to their share of the US private sector variables, the biggest beneficiaries of public investment in highways tend to be the largest states in the country. This suggests that public investment in highways has contributed to concentration of private sector activity in the largest states.
    Keywords: public investment, highway investment, regional spillovers
    JEL: C32 H54 R53
    Date: 2008–01–14

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