nep-geo New Economics Papers
on Economic Geography
Issue of 2008‒04‒15
twenty-one papers chosen by
Vassilis Monastiriotis
London School of Economics

  1. The Effectiveness of Objective 1 Structural Funds in the EU 15: New Empirical Evidence from NUTS 3 Regions By Martin Falk; Franz Sinabell
  2. Can information asymmetry cause agglomeration? By Berliant, Marcus; Kung, Fan-chin
  3. What do we know about spatial entry? By Nicolas Debarsy; Marcus Dejardin
  4. World City Network Expansion 2000-2004. An appraisal of the determinants of connectivity growth among world cities By Renato Aristides Orozco Pereira
  5. Do creative industries cluster? Mapping Creative Local Production Systems in Italy By Luciana Lazzeretti; Rafael Boix Domenech; Francesco Capone
  6. Individual Contacts, Collective Patterns. Prato 1975-97, a story of interactions. By Fioretti, Guido
  7. Who Needs Agglomeration? Varying Agglomeration Externalities and the Industry Life Cycle By Frank Neffke; Martin Svensson Henning; Ron Boschma; Karl-Johan Lundquist; Lars-Olof Olander
  8. Rural to Urban Migration: A District Level Analysis for India By Mitra, Arup; Murayama, Mayumi
  9. The Nexus of Income and Size Distribution of Chinese Cities, 1984 - 2003 By Chun- Yu Ho; Dan Li
  10. Regional disparities in mortality by heart attack: evidence from France By Laurent Gobillon; Carine Milcent
  11. Use of Elective Surgery in Public hospitals:Modeling Access-Cost Quality Trade-offs in a Spatial Framework By Anurag Sharma; Anthony Harris; Jeff Richardson
  12. Rockets and Reindeer - the history of the Swedish innovation system for space and its spatial dimensions By Sörlin, Sverker; Wormbs, Nina
  13. Productivity and Proximity By Don Webber; Paul White
  14. Urban Inequality and Political Recruitment Networks By Strömblad, Per; Myrberg, Gunnar
  15. Innovation and the geographical and functional dimensions of outsourcing: An empirical investigation based on Italian firm level data By Lucia Cusmano; Maria Luisa Mancasi; Andrea Morrison
  16. Trade Costs and Provincial Heterogeneity in Italy By Michele Fratianni; Francesco Marchionne
  17. Testing for Random Effects and Spatial Lag Dependence in Panel Data Models By Badi H. Baltagi; Long Liu
  18. In what circumstances is investment in HSR worthwhile? By De Rus, G.; Nash, C.A.
  19. Regional Labour Market Disparities in an Enlarged European Union By Peter Huber
  20. What Drives the Productive Efficiency of a Firm? - the importance of industry, location, R&D, and size By Badunenko, Oleg; Fritsch, Michael; Stephan, Andreas
  21. A Note on the Excess Entry Theorem in Spatial Models with Elastic Demand By Yiquan Gu; Tobias Wenzel

  1. By: Martin Falk (WIFO); Franz Sinabell (WIFO)
    Abstract: Based on a sample of 1,084 European regions (EU 15) over the period 1995-2004, we estimate the determinants of regional growth of GDP per capita, allowing for both spatial lag and spatial error dependence. We find that robust LM tests can not reject the null hypothesis of no spatial dependence when country dummy variables are included in the growth equation. OLS and robust regression methods show that population density and industry share are significantly and positively related to economic growth. Regions that received EU structural funds have a significantly higher growth of GDP per capita, but the effect is only marginally significant. Blinder-Oaxaca decompositions reveal that the growth differential between Objective 1 regions and the remaining regions is solely due to the difference in the characteristics and not to differences in the coefficients. Finally, we find that the added value gained in Objective 1 regions is much lower than the resources that have been allocated to them.
    Keywords: regional growth, EU structural funds, Objective 1 funding, spatial dependence, urbanisation
    Date: 2008–02–20
  2. By: Berliant, Marcus; Kung, Fan-chin
    Abstract: The modern literature on city formation and development, for example the New Economic Geography literature, has studied the agglomeration of agents in size or mass. We investigate agglomeration in sorting or by type of worker, that implies agglomeration in size when worker populations differ by type. This kind of agglomeration can be driven by asymmetric information in the labor market, specifically when firms do not know if a particular worker is of high or low skill. In a model with two types and two regions, workers of different skill levels are offered separating contracts in equilibrium. When mobile low skill worker population rises or there is technological change that favors high skilled workers, integration of both types of workers in the same region at equilibrium becomes unstable, whereas sorting of worker types into different regions in equilibrium remains stable. The instability of integrated equilibria results from firms, in the region to which workers are perturbed, offering attractive contracts to low skill workers when there is a mixture of workers in the region of origin.
    Keywords: Adverse Selection; Agglomeration
    JEL: R13 D82 R12
    Date: 2008–04–01
  3. By: Nicolas Debarsy (CERPE - FUNDP-University of Namur, FNRS); Marcus Dejardin (CERPE - FUNDP-University of Namur)
    Abstract: In his oft-cited "What do we know about entry?", Paul Geroski (1995) gave a survey of empirical works on this central topic regarding industrial organization and, more precisely, market dynamics. Surprisingly, his article remains silent on the spatial dimension of these dynamics. This paper gives first accessory support to some of the Geroski's a-spatial observations with reference to firm entries and exits of a selection of retail and consumer service industries in Belgium over the 1998-2001 period. More important is the proposed application of the Exploratory Spatial Data Analysis (ESDA) that has been developed for in-depth exploring of spatial datasets. Evidences are collected at highly disaggregated geographical and industrial levels. They do not only contribute to a better understanding of the geographical patterns of the industries, but they lead to interesting observations regarding industrial organization and market dynamics by examining the space-time structures of entries and exits. These observations may be considered as an opening tribute towards a spatial extension of what Geroski has presented as stylized facts in his 1995 article.
    Keywords: entry, exit, spatial interactions, local market, ESDA
    JEL: L11 L80 R12
    Date: 2008–03–27
  4. By: Renato Aristides Orozco Pereira
    Abstract: The term “globalization” has long been vented indiscriminately everywhere with few being capable to either define or measure it. Cities are said to be at the forefront of the “works of globalization” by becoming coordinating centers for the transnational activities of multinational corporations. Ultimately, they become tied up to each other, as those activities require information inputs from different regions of the world. The article uses the advanced corporate service firms’ location patterns to measure the linkages between cities. As social, economical, cultural and political information about the cities flow through the firms’ network of branch offices, a highly connected city provides better corporate servicing to businessman wanting to do business elsewhere. By calculating the total connectivity of each city to the rest of the world, as well as total presence of global service firms within these cities, in the years 2000 and 2004, we produce a measure of the connectivity growth in the period. In a second moment, we use a linear regression model to test hypothesis concerning the determinants of connectivity growth in those cities. Results show us that connectivity growth in a city, in case of firm’s network expansion, display a “rich-get-rich” behavior on which well connected cities became even more connected. Furthermore, connectivity growth is responsive to competition, agglomeration economies, infrastructure, trade openness, human capital and the overall economic level of the country. Some of the variables behave differently according to the service firms’ sector being analyzed. In particular, we scrutinize the role of human capital as a determinant of connectivity growth in the management and banking sector, and interpret the results as a function of whether the sector is skilled-labor intensive (management) or capital intensive (banking).
    Keywords: Globalization, World City Network, Interlock Network Model, Global City Model, Economic Geography, GaWC
    Date: 2008–04
  5. By: Luciana Lazzeretti (Dept. of Business Economics, University of Florence); Rafael Boix Domenech (Departament d'Economia Aplicada, Universitat Autonoma de Barcelona); Francesco Capone (Dept. of Business Economics, University of Florence)
    Abstract: An important debate on the role of creativity and culture as factors of local economic development is distinctly emerging. Despite the emphasis put on the theoretical definition of these concepts, it is necessary to strengthen comparative research for the identification and analysis of the kind of creativity embedded in the territory as well as its determinants. Creative local production systems are identified in Italy and Spain departing from local labour markets as territorial units, and focusing on two different kinds of creative industries: traditional cultural industries (publishing, music, architecture and engineering, performing arts) and technology-related creative industries (R&D, ICT, advertising). The results suggest the existence of different patterns of concentration of creative industries in both countries and the concentration of creative industries in the
    Keywords: creative industries, creative local systems, agglomeration economies
    JEL: L22 R12 L82
    Date: 2008–03
  6. By: Fioretti, Guido
    Abstract: This article presents an agent-based model (ABM) of an Italian textile district where thousands of small firms specialize in particular phases of fabrics production. It is an empirical model because it reconstructs the communications between firms when they arrange production chains. In their turn, production chains reflect into the pattern of road traffic in the geographical areas where the district extends. It is a methodological model because it aims to show that ABMs can be used to reconstruct a web of movements in geographical space. ABMs are proposed as a tool for Hägerstrand’s “time-geography”.
    Keywords: Industrial districts; Industrial clusters; Agent-based models; Prato
    JEL: R30 C63 R49
    Date: 2008–03–15
  7. By: Frank Neffke; Martin Svensson Henning; Ron Boschma; Karl-Johan Lundquist; Lars-Olof Olander
    Abstract: In this paper, the changing roles of agglomeration externalities during different stages of the industry life cycle are investigated. A central argument is that agglomeration externalities vary with mode of competition, innovation intensity, and characteristics of learning opportunities in industries. Following the Industry Life Cycle perspective, we distinguish between young and mature industries, and investigate how these benefit from MAR, Jacobs’ and Urbanization externalities. The empirical analysis builds on a Swedish plant level dataset that covers the period of 1974-2004.The outcomes of panel data regression models show that the benefits industries derive from their local environment are strongly associated with their stage in the industry life cycle. Whereas MAR externalities increase with the maturity of industries, Jacobs’ externalities decline when industries are more mature. This is in line with the hypothesis that young industries operate in an environment dominated by rapid product innovation and low levels of standardization. Hence, it pays off when knowledge can be sourced locally from many different sources, but there is still little scope for specialization benefits. Mature industries, in contrast, are associated with lower innovation intensities and a focus on cost saving process innovations. Therefore, there are major benefits to be derived from specialization, whereas knowledge spillovers from different industries are less relevant. The distinction between the product competition in young industries and price competition in mature industries is reflected in our finding that high regional factor costs are detrimental to mature industries, but not to young industries. This can also be related to the finding that high quality living environments, attractive for highly paid employees, are important to young industries. Overall, the outcomes stress that industrial life cycles have to be taken into account in the analysis of agglomeration externalities.
    Keywords: agglomeration externalities, industry life cycle, urbanization, Sweden
    Date: 2008–04
  8. By: Mitra, Arup; Murayama, Mayumi
    Abstract: Based on the recent census data this paper analyses the district level rural to urban migration rates (both intra-state and the inter-state) among males and females separately. Both the rates are closely associated irrespective of whether the migrants originate from the rural areas within the state or outside the state. This would suggest that women usually migrate as accompanists of the males. Though many of the relatively poor and backward states actually show large population mobility, which is primarily in search of a livelihood, the mobility of male population is also seen to be prominent in the relatively advanced states like Maharashtra and Gujarat. Rapid migration of rural females within the boundaries of the states is, however, evident across most of the regions. The social networks, which play an important role in the context of migration are prevalent among the short distance migrants and tend to lose their significance with a rise in the distance between the place of origin and destination though there are some exceptions to this phenomenon. Besides the north-south divide in the Indian context is indeed a significant phenomenon with a few exceptions of metropolitan cities. As regards the effect of factors at the place of destination, prospects for better job opportunities are a major determinant of male migration. Low castes and minority groups tend to pull migration through network effects. Among females also these effects are evident though with the inclusion of the male migration rate they become less significant. Finally the paper brings out the policy implications.
    Keywords: Rural-to-urban migration, Poverty, India, 2001 census, Gender, Population movement
    JEL: J61 R23
    Date: 2008–03
  9. By: Chun- Yu Ho (Department of Economics, Boston University); Dan Li (Department of Economics, Boston University)
    Abstract: We estimate the distribution dynamics of city income and size in China during 1984-2003 using stochastic kernel. Our results show that intra-distribution mobility are significant in both income and size and provide evidences on China experienced internal brain drain.
    Keywords: City Income, City Size, Distribution Dynamics, Kernel Density, China
    JEL: O15 O18 R11
    Date: 2007–09
  10. By: Laurent Gobillon; Carine Milcent
    Abstract: This paper studies the determinants of the regional disparities in the mortality of patients treated in a hospital for a heart attack in France. These determinants can be some differences in patient characteristics, treatments, hospital charateristics, and local healthcare market structure. We assess their importance with an exhaustive administrative dataset over the 1998-2003 period using a stratified duration model. The raw disparities in the propensity to die within 15 days between the extreme regions reaches 80%. It decreases to 47% after controlling for the patient characteristics and their treatments. In fact, a variance analysis shows that innovative treatments play an important role. Remaining regional disparities are significantly related to the local healthcare market structure. The more patients are locally concentrated in a few large hospitals rather than many small ones, the lower the mortality.
    Date: 2008
  11. By: Anurag Sharma (Centre for Health Economics, Monash University); Anthony Harris (Centre for Health Economics, Monash University); Jeff Richardson (Centre for Health Economics, Monash University)
    Abstract: The overall objective of the paper is to model and econometrically analyze the impact of access costs (travel time to hospital) and quality of health care on the utilization of elective health services in public hospitals. We argue that patients might face a trade-off between better perceived quality of care and access costs. The extant literature has not yet developed a common framework which explicitly incorporates the quality and access trade-off. The first aim of this paper is to help fill this gap. We propose a stylized model where GPs and Specialists act as gatekeepers, waiting times act as a rationing device; and perception of quality and access costs contributes to the choice of hospital for treatment. A secondary objective of the paper is to explore econometric approaches to simultaneously deal with access cost quality tradeoff and its effect on patient flows across regions. The geographic access costs lead to interaction between regions which is termed as spatial dependence. This is econometrically tested by applying spatial regression techniques focussing on spatial panel models recently proposed but not yet been widely applied to health economics. The results show that spatial effects especially the geographic neighborhood effects significantly affect the hospital utilization rates at a regional level. Travel time is found to have significant and negative effect on hospital utilization for some Diagnostic categories. The effect of quality of care (measured by the rate of adverse events) is negative and significant for one category of separations. However the effect is quantitatively small. We do not find any evidence of trade-off between quality and travel time for all category of separations. Policy implications are discussed..
    Date: 2008–03
  12. By: Sörlin, Sverker (Royal Institute of Technology); Wormbs, Nina (Royal Institute of Technology)
    Abstract: Given the strength of the Swedish air force and the role of state procurement in industrial expansion, so called development pairs, the size and direction of the non-military but relatively large Swedish space activity raises questions. The purpose of this article is to investigate the historic reasons for Swedish space activities, i.e. research and technology development, with focus on the early period. The relative weight of different policy areas has changed considerably over time. In our analysis the space sector in Sweden has adapted to a multilevel, multi-policy situation and has been instrumental in shaping a science and technology based social innovation system with focus on the Kiruna region.
    Keywords: innovation systems; Sweden; innovation policy; system evolution
    JEL: N00 O25 O30
    Date: 2008–04–02
  13. By: Don Webber (School of Economics, University of the West of England, Bristol); Paul White (Department of Mathematics and Statistics, University of the West of England, Bristol, UK)
    Abstract: Abstract: Papers examining a developed nation’s labour productivity frequently ignore spatial effects. We present empirical results indicating that geographical proximity matters for plant-level productivity.
    Keywords: distance; labour productivity
    JEL: C21 R32
    Date: 2008–03
  14. By: Strömblad, Per (Institute for Futures Studies); Myrberg, Gunnar (Uppsala University)
    Abstract: This paper provides evidence of segregation-generated differences in political recruitment networks. By taking explicit account of social-geographical differentiation in the urban landscape, we evaluate—in prior work largely neglected—contextual effects on requests for participation. Consistent with previous research, we find that those activists who try to convince others to participate in political life systematically use a set of selection criteria when deciding whom to approach. However, using recent data based on a sample of inhabitants of Swedish cities and properties of their neighborhoods, we also show that the degree of (aggregate-level) social exclusion negatively influences (individual-level) recruitment efforts. This contextual effect stems both from the disproportional population composition as such in residential areas, and from recruiters’ rational avoidance of areas marked by high levels of social exclusion. We conclude that these logics jointly reinforce urban inequalities regarding the chances for ordinary citizens to be invited to political life.
    Keywords: political recruitment; political recruiters; contextual effects; Civic Voluntarism Model; statistical discrimination
    JEL: I39 J19
    Date: 2008–02
  15. By: Lucia Cusmano; Maria Luisa Mancasi; Andrea Morrison
    Abstract: The paper investigates the diversified patterns of outsourcing in the Lombardy region and relates them to the probability of introducing product and process innovation. Based on a large firm-level survey, we show that outsourcing processes are strongly regionally embedded and that offshoring is still a limited phenomenon. Outsourcing strategies are shown to have a positive impact on firms’ innovation. In particular, the outsourcing of service activities contributes the most to innovation, thus suggesting that firms successfully pursue core strengthening strategies. Our econometric estimates show that both geographical and organizational proximity matter. Indeed, the positive association of services with innovation is strongly related to their regional dimension, which points toward the importance of local user-producer relationships. When outsourcing crosses national borders, keeping the outsourced activities at least loosely connected to the firm appears critical, as offshoring to non affiliated firms has a clear negative impact on innovation.
    Keywords: Product Innovation, Process Innovation, Outsourcing, Offshoring
    JEL: D21 F23 L22 L23 O31 O32 O33
    Date: 2008–03
  16. By: Michele Fratianni (Department of Business Economics and Public Policy, Indiana University Kelley School of Business); Francesco Marchionne (Universita Politecnica delle Marche,)
    Abstract: We test the hypothesis that higher economic development is associated with lower trade costs. Using different methods to control for multilateral resistance, we apply two alternative gravity equations (GE). In the first, we estimate total exports from 103 Italian provinces to 188 countries over the period 1995-2004. In the second, we estimate sectoral exports and then construct provincial trade cost elasticities. Italian provinces are heterogeneous with respect to trade costs. The two versions of GE are qualitatively the same but quantitatively different suggesting that other factors than trade costs are at play, possibly agglomeration externalities.
    Keywords: trade costs, heterogeneity, distance, gravity equation
    JEL: F10 F14 O52 R12
    Date: 2008–02
  17. By: Badi H. Baltagi (Center for Policy Research, Maxwell School, Syracuse University, Syracuse, NY 13244-1020); Long Liu
    Abstract: This paper derives a joint Lagrande Multiplier (LM) test which simultaneously tests for the absence of spatial lag dependence and random individual effects in a panel data regression model. It turns out that this LM statistic is the sum of two standard LM statistics. The first one tests for the absence of spatial lag dependence ignoring the random individual effects, and the second one tests for the absence of random individual effects ignoring the spatial lag dependence. This paper also derives two conditional LM tests. The first one tests for the absence of random individual effects without ignoring the possible presence of spatial lag dependence. The second one tests for the absence of spatial lag dependence without ignoring the possible presence of random individual effects.
    Keywords: Panel data; spatial lag dependence; Lagrange Multiplier tests; random effects
    JEL: C12 C23
    Date: 2008–03
  18. By: De Rus, G.; Nash, C.A.
    Abstract: The case for building new High Speed Rail (HSR) infrastructure depends its the capacity to generate social benefits which compensate for the construction, maintenance and operation costs. Decisions to invest in this technology have not always been based on sound economic analysis. A mix of arguments, besides time savings –strategic considerations, environmental effects, regional development and so forth– have often been used with inadequate evidence to support them. We have explored under what conditions net welfare gains can be expected from new HSR projects. In this paper we use some simplifying assumptions with the aim of obtaining a benchmark: the minimum level of demand from which a positive social net present value could be expected when new capacity does not provide additional benefits beyond time savings from diverted and generated demand.
    Keywords: public investmest; infrastructure; cost-benefit analysis; transport; high speed rail.
    JEL: R40 D61
    Date: 2007–12
  19. By: Peter Huber (WIFO)
    Abstract: We characterise regional labour market problems in the EU 27 using disaggregate data on regional employment, unemployment and participation rates, by gender and 10-year age groups at the NUTS-2 level. We ask whether accession changed disparities in regional labour market conditions and to what degree the structure of employment, unemployment and participation rates in the 12 new member countries differs from the EU 15. We find that aggregate labour market disparities are comparable between the two country groups but that there are important structural differences. Performing a principle components analysis we find that five principal components (four of which are associated with the structure of employment and participations rates) explain around 90 percent of the variance in the data. Cluster analysis suggests that new member countries regions are most similar in structural labour market characteristics to many German and French NUTS-2 regions. Regression analysis suggests that the correlates of aggregate regional employment and unemployment rates between the two groups do not differ dramatically but that there may be some differences with respect to employment rates of individual demographic groups.
    Keywords: Regional labour market disparities
    Date: 2008–02–20
  20. By: Badunenko, Oleg (DIW Berlin); Fritsch, Michael (Friedrich Schiller University Jena, Max Planck Institute of Economics Jena and DIW); Stephan, Andreas (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology)
    Abstract: This paper investigates the factors that explain the level and dynamics of manufacturing firm productive efficiency. In our empirical analysis, we use a unique sample of about 39,000 firms in 256 industries from the German Cost Structure Census over the years 1992-2005. We estimate the efficiencies of the firms and relate them to firm-specific and environmental factors. We find that (1) about half the model’s explanatory power is due to industry effects, (2) firm size accounts for another 20 percent, and (3) location of headquarters explains approximately 15 percent. Interestingly, most other firm characteristics, such as R&D intensity, outsourcing activities, or the number of owners, have extremely little explanatory power. Surprisingly, our findings suggest that higher R&D intensity is associated with being less efficient, though higher R&D spending increases a firm’s efficiency over time.
    Keywords: Frontier analysis; determinants of efficiency; firm performance; industry effects; regional effects; firm size
    JEL: D24 L10 L25
    Date: 2008–04–02
  21. By: Yiquan Gu; Tobias Wenzel
    Abstract: This paper revisits the excess entry theorem in spatial models à la Vickrey (1964) and Salop (1979) while relaxing the assumption of inelastic demand. Using a demand function with a constant demand elasticity, we show that the number of firms that enter a market decreases with the degree of demand elasticity.We find that the excess entry theorem does only hold when demand is sufficiently inelastic. Otherwise, there is insufficient entry. In the limiting case of unit elastic demand, the market is monopolized. We point out when and how a public policy can be desirable and broaden our results with a more general transportation cost function.
    Keywords: Elastic demand, spatial models, excess entry theorem
    JEL: L11 L13
    Date: 2007–12

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