nep-geo New Economics Papers
on Economic Geography
Issue of 2008‒07‒05
nineteen papers chosen by
Vassilis Monastiriotis
London School of Economics

  1. How Differences in Property Taxes within Cities Affect Urban Sprawl? By Song, Yan; Zenou, Yves
  2. On Measuring the Complexity of Urban Living By Lubna Hasan
  3. The Bright and Dark Side of Cooperation for Regional Innovation Performance By Tom Broekel; Andreas Meder
  4. Endogenous Job Destruction and Job Matching in Cities By Zenou, Yves
  5. Is a DFM Well-Suited in Forecasting Regional House Price Inflation? By Sonali Das; Rangan Gupta; Alain Kabundi
  6. Is There Increasing Regional Specialisation within the General Process of Deindustrialisation? By Kurt Geppert; Martin Gornig; Anna Lejpras
  7. The Enable Program in the European Entrepreneurship Policy Context By David B. Audretsch; Heike Grimm
  8. Inference Based on Alternative Bootstrapping Methods in Spatial Models with an Application to County Income Growth in the United States By Daniel C. Monchuk; Dermot J. Hayes; John Miranowski
  9. Exploring Differences in Expenditure for the Functionally Impaired: Neighborhood Interaction and the Federal Structure By Birkelöf, Lena
  10. Are Shrinking and Leisure Substitutable? An Empirical Test of Efficiency Wages Based on Urban Economic Theory By Ross, Stephen L.; Zenou, Yves
  11. Social Interactions and Labor Market Outcomes in Cities By Zenou, Yves
  12. Multi-level Governance: The General Model and the Italian Experience By Bagarani, Massimo; Zampino, Simona
  13. Exclusionary Policies in Urban Development, How under-servicing of migrant households affects the growth and composition of Brazilian cities By Leo Feler; J. Vernon Henderson
  14. Street Vendors : Urban Problem and Economic Potential By Harlan Dimas
  15. Labour pooling as a source of agglomeration: An empirical investigation By Henry G. Overman; Diego Puga
  16. Identifying Regional and Sectoral Dynamics of the Dutch Staffing Labour Cycle By Ard den Reijer
  17. Predicting Downturns in the US Housing Market: A Bayesian Approach By Rangan Gupta; Sonali Das
  18. A Study of Residential Housing Demand in India By Bandyopadhyay, Arindam; Kuvalekar, S V; Basu, Sanjay; Baid, Shilpa; Saha, Asish
  19. Economic Geography and Wages in Brazil: Evidence from Micro-Data By Thibault Fally; Rodrigo Paillacar; Cristina Terra

  1. By: Song, Yan (University of North Carolina at Chapel Hill, USA); Zenou, Yves (Research Institute of Industrial Economics (IFN))
    Abstract: This article attempts a formal analysis of the connection between the differentiated property tax rates within urban areas and urban spatial pattern in U.S. cities. We first develop a duocentric-city model where the Central Business District (CBD) is located at the origin while the Suburban Business District (SBD) is at the other end of the city. We show that the ratio between the property tax in the suburbs and in the center has an ambiguous impact on the size of the city. We then test this model empirically to determine this sign by using a dataset of effective property tax rates we developed using GIS techniques for central cities and suburbs in 445 urbanized areas. The empirical analysis estimates the link between these two variables by controlling for variables such as population, income, agricultural rent, commuting cost, climate, crime, and employment structure. Results from the empirical analyses suggest that a lower property tax rate in the suburbs in comparison to the central city is associated with more expansive urban growth and greater level of decentralization of population and employment.
    Keywords: Central City; Suburbs; Urban Sprawl; Urban Decentralization; Differentiated Property Tax
    JEL: H30 H71 R14
    Date: 2008–06–19
  2. By: Lubna Hasan (Pakistan Institute of Development Economics, Islamabad)
    Abstract: This paper explores the concept of city ranking as a way to measure the dynamics and complexities of urban life. These rankings have various dimensions and uses. Both the context in which these rankings are done and their nature have changed considerably over time. These rankings face many methodological and measurement problems. A review of major city rankings and the related literature is carried out to suggest a framework for the ranking of Pakistani cities.
    Keywords: Quality of Life, Cities, Urbanisation
    JEL: R12 O18 R23
    Date: 2008
  3. By: Tom Broekel (Department of Economic Geography, Faculty of Geosciences, Utrecht University, The Netherlands); Andreas Meder (School of Economics and Business Administration, Friedrich Schiller University Jena, Germany)
    Abstract: Studies analyzing the importance of intra- and inter-regional cooperation for regional innovation performance are mainly of qualitative nature and focus strongly on the positive effects that high levels of cooperation can yield. For the case of the German labor market regions and the Electrics + Electronics industry the paper provides a quantitative-empirical analysis taking into account the possibility of negative effects related to regional lock-in, lock-out, and cooperation overload situations. Using conditional nonparametric frontier techniques and cooperation behavior measures we ï¬nd positive as well as substantial negative effects of cooperation with the latter being induced by excessive and unbalanced cooperation behavior.
    Keywords: regional innovation performance, cooperation, lock-out, lock-in, cooperation overload
    JEL: R12 O18 O31
    Date: 2008–06–26
  4. By: Zenou, Yves (Research Institute of Industrial Economics (IFN))
    Abstract: We propose a spatial search-matching model where both job creation and job destruction are endogenous. Workers are ex ante identical but not ex post since their job can be hit by a technological shock, which decreases their productivity. They reside in a city and commuting to the job center involves both pecuniary and time costs. Thus, workers with high wages are willing to live closer to jobs to save on time commuting costs. We show that, in equilibrium, there is a one-to-one correspondence between the productivity space and the urban location space. Workers with high productivities and wages reside close to jobs, have low commuting costs and pay high land rents. We also show that higher commuting costs and higher unemployment benefits lead to more job destruction.
    Keywords: Job Search; Commuting Costs; Wage Distribution; Urban Land Use
    JEL: D83 J41 J64 R14
    Date: 2008–06–19
  5. By: Sonali Das (LQM, CSIR, Pretoria); Rangan Gupta (Department of Economics, University of Pretoria); Alain Kabundi (Department of Economics and Econometrics, University of Johannesburg)
    Abstract: This paper uses the Dynamic Factor Model (DFM) framework, which accommodates a large cross-section of macroeconomic time series for forecasting regional house price inflation. As a case study, we use data on house price inflation for five metropolitan areas of South Africa. The DFM used in this study contains 282 quarterly series observed over the period 1980Q1-2006Q4. The results, based on the Mean Absolute Errors of one- to four-quarters-ahead out of sample forecasts over the period of 2001Q1 to 2006Q4, indicate that, in majority of the cases, the DFM outperforms the VARs, both classical and Bayesian, with the latter incorporating both spatial and non-spatial models. Our results, thus, indicate the blessing of dimensionality.
    Keywords: Dynamic Factor Model, VAR, BVAR, Forecast Accuracy
    JEL: C11 C13 C33 C53
    Date: 2008–06
  6. By: Kurt Geppert; Martin Gornig; Anna Lejpras
    Abstract: Trade theory and economic geography suggest that the removal of trade barriers is likely to bring about more economic specialisation and potentially more diverse development paths between countries and regions. Thus, the deepening and extending European integration should be accompanied by an increasing regional specialisation. In contrast, our results for the period from 1995 to 2004 show considerably declining differences in the share of manufacturing in total value added across nations and regions of the EU. The decrease in sectoral specialisation is accompanied by a strong and almost uniform process of deindustrialisation. However, this trend is slowing down and manufacturing shares appear to be gradually approaching lower limits. These bounds are specific according to national affiliation and settlement types of regions.
    Keywords: Regional specialisation, deindustrialisation, EU, nonlinear modelling
    JEL: R11 O14 O18
    Date: 2008
  7. By: David B. Audretsch (Max Planck Institute of Economics, Jena, and Indiana University); Heike Grimm (University of Erfurt)
    Abstract: This article discusses the Lisbon Agenda from the perspective of entrepreneurship policy. After a brief overview of the events leading up to the development of the Lisbon Agenda, the authors describe the goals and content of this policy framework as well as of the Structural Funds. Using examples of initiatives toward implementation at the local level, the authors illustrate the necessity to promote entrepreneurship in order to foster economic growth in communities and regions. We assess how the new European growth policy became translated into an action plan realized through structural funds and community initiatives and demonstrate that a greater focus on entrepreneurship policy could strengthen the Lisbon Strategy and aid in the achievement of its goals.
    Keywords: Lisbon Agenda, Entrepreneurship Policy, Regional Development, Economic Development
    JEL: O52 M13 O18 R58
    Date: 2008–06–25
  8. By: Daniel C. Monchuk; Dermot J. Hayes (Center for Agricultural and Rural Development (CARD); Food and Agricultural Policy Research Institute (FAPRI)); John Miranowski
    Abstract: This study examines correlates with aggregate county income growth across the 48 contiguous states from 1990 to 2001. Since visual inspection of the variable to be explained shows a clear spatial relationship and to control for potentially endogenous variables, we estimate a two-stage spatial error model. Given the lack of theoretical and asymptotic results for such models, we propose and implement a number of spatial bootstrap algorithms, including one allowing for heteroskedasticity, to infer parameter significance. Among the results of a comparison of the marginal effects in rural versus non-rural counties, we find that outdoor recreation and natural amenities favor positive growth in rural counties, densely populated rural areas enjoy stronger growth, and property taxes correlate negatively with rural growth.
    Keywords: county income growth, rural development, spatial bootstrapping.
    Date: 2008–06
  9. By: Birkelöf, Lena (Department of Economics, Umeå University)
    Abstract: The purpose of this paper is to study the determinants of the differences in expenditure on services for functionally impaired individuals among municipalities in Sweden. Expenditure per capita differs greatly across municipalities, even when accounting for the nature of the service. A spatial autoregressive model is used to test whether the decisions on the expenditure level in a neighboring municipality affect the municipality’s own expenditure. The results show that a positive spatial interaction exists among neighbors. However, when controlling for level differences among counties the spatial interaction coefficient becomes negative although not significantly determined. Therefore, the positive interaction first found can be interpreted either as a result of differences in the way county councils diagnose individuals or due to interaction or mimicking among neighbors belonging to the same county council.
    Keywords: Local Public Expenditures; Spatial Econometrics; Functional Impairment
    JEL: H72 I18 R12
    Date: 2008–06–27
  10. By: Ross, Stephen L. (University of Connecticut); Zenou, Yves (Research Institute of Industrial Economics (IFN))
    Abstract: Recent theoretical work has examined the spatial distribution of unemployment using the efficiency wage model as the mechanism by which unemployment arises in the urban economy. This paper extends the standard efficiency wage model in order to allow for behavioral substitution between leisure time at home and effort at work. In equilibrium, residing at a location with a long commute affects the time available for leisure at home and therefore affects the trade-off between effort at work and risk of unemployment. This model implies an empirical relationship between expected commutes and labor market outcomes, which is tested using the Public Use Microdata sample of the 2000 U.S. Decennial Census. The empirical results suggest that efficiency wages operate primarily for blue collar workers, i.e. workers who tend to be in occupations that face higher levels of supervision. For this subset of workers, longer commutes imply higher levels of unemployment and higher wages, which are both consistent with shirking and leisure being substitutable.
    Keywords: Efficiency Wage; Leisure; Urban Unemployment
    JEL: J41 R14
    Date: 2008–06–19
  11. By: Zenou, Yves (Research Institute of Industrial Economics (IFN))
    Abstract: We develop a model where information about jobs is essentially obtained through friends and relatives, i.e. strong and weak ties. Workers commute to a business center to work and to interact with other people. We find that housing prices increase with the level of social interactions in the city because information about jobs is transmitted more rapidly and, as a result, individuals are more likely to be employed and to be able to pay higher land rents. We also show that, under some conditions, workers using more their weak ties than strong ties to find a job receive a higher wage. We finally demonstrate that workers living far away from jobs pay lower housing prices but experience higher unemployment rates than those living close to jobs because they mainly rely on their strong ties to obtain information about jobs.
    Keywords: Weak Ties; Labor Market; Social Networks; Land Rent
    JEL: A14 J60 R14
    Date: 2008–06–19
  12. By: Bagarani, Massimo; Zampino, Simona
    Abstract: During the last twenty years, the introduction of the principle of subsidiarity and the identification of regions as political entities for the coordination of structural expenditure at the local level have led to the adoption of the principle of multi-level governance (MLG), on which principle EU government action is still based. The principle is based on the notion that the spread of governing practices (governance) across various institutions, and hence jurisdictions, results in a greater efficiency of allocation and an improved regulatory capacity compared to what more centralized governmental models are capable of yelding. According to this view, multi-level forms of government are better able to identify the effects of external economies which arise from the supply of public goods at different territorial levels. In other words, a multi-level governmental model enables, more so than other models, these external economies to be internalized and, at the same time, complex and heterogeneous demand from the local populations to be met through territorial intervention policies. Within this framework we will describe the multi level governance (MLG) model adopted from all the Countries of the EU, which constitutes the basis for national and local Public Administrations’ actions in the field of the social and economic development policy addressed to the disadvantaged areas of the Communitarian territory. We will present: a theoretical description of the model MLG in its different categories; the category adopted as a target by the EU with its specific characteristics, and the way those characteristics determine, in terms of operating consequences, the definition of objectives, responsibilities and roles. With reference to the Italian case, we will also describe the practical effects of the MLG model both on the communitarian and national funds governance.
    Keywords: Regional development, fiscal decentralization, multi-level governance, panel data
    JEL: C23 O47 R11 R58
    Date: 2008–06–23
  13. By: Leo Feler; J. Vernon Henderson
    Abstract: Localities in developed countries often restrict construction and population growth through regulations governing land usage, lot sizes, building heights, and frontage requirements. In developing countries, such policies are less effective because of the existence of unregulated, informal housing markets. Cities in developing countries that seek to limit in-migration must also discourage entry into informal housing by providing low levels of public services to this sector. In this paper, we analyze the causes of slums, using data from Brazilian urban areas. We develop a model of the decisions that localities make to affect in-migration and find evidence that localities act strategically. Richer and larger localities in an urban area reduce provision of water and sewerage connections to the smaller houses in which poorer migrants would live to discourage the in-migration of these poorer migrants and deflect them to other localities. We also find that under-servicing smaller houses reduces the population growth rate of localities. Not only does it reduce the in-migration of low-educated households, it seems that, because of negative externalities, such under-servicing also reduces the growth rate of higher-educated households.
    JEL: D7 H7 J6 O15 O54 R5
    Date: 2008–06
  14. By: Harlan Dimas (School of Economics-Faculty of Economics Padjadjaran University)
    Abstract: Of the many trials faced by city managers in developing countries, one of the most challenging is undoubtedly the Street Vendors (SV) problem. They are a perpetual problem for street and sidewalk users in most Indonesian cities. Their spill-over business onto roadways is the source of traffic congestion. Their informal setting and business refuse (garbage) cause unsightly urban vista. However there is now a gradual shift of perspectives that focus on their economic potentials, offering a smart city manager a host of development opportunities. Hence the current policy of harassment and elimination of SV, as practiced by most municipalities in Indonesia, is counter productive at best and inhuman at worst. This paper discusses the roots of the SV phenomenon (found to be mostly economics) and suggests several SV management solutions sampled from best practices from around the world.
    Keywords: Street Vendors Management, Economic Policy, Best Practices, Local (Urban) Economic Development
    JEL: P25
    Date: 2008–06
  15. By: Henry G. Overman; Diego Puga
    Abstract: We provide empirical evidence on the role of labour market pooling in determining the spatial concentration of UK manufacturing establishments. This role arises because large concentrations of employment iron out idiosyncratic shocks and improve establishments\' ability to adapt their employment to good and bad times. We measure the likely importance of labour pooling by calculating the fluctuations in employment of individual establishments relative to their sector and averaging by sector. Our results show that sectors whose establishments experience more idiosyncratic volatility are more spatially concentrated, even after controlling for a range of other industry characteristics that include a novel measure of the importance of localized intermediate suppliers.
    Keywords: labour market pooling; spatial concentration
    JEL: R30
    Date: 2008–06–23
  16. By: Ard den Reijer
    Abstract: This study analyses the dynamic characteristics of staffing employment across di¤erent business sectors and across different geographical regions in the Netherlands. We analyse a micro data set of the market leader of the Dutch staffing employment market, Randstad. We apply the dynamic factor model to extract common information out of a large data set and to isolate business cycle frequencies with the aim of forecasting economic activity. We identify regions and sectors whose cyclical developments lead the staffing labour cycle at the country level. The second question is then which model specification can best exploit the identified leading indicators at the disaggregate level to forecast the country aggregate? The dynamic factor model turns out to outperform univariate benchmark forecasting models by exploiting the substantial temporal variation of the staffing labour market at the disaggregate level.
    Keywords: staffing labour; dynamic factor model; disaggregate forecasting
    JEL: C31 C53 J44 J63
    Date: 2007–11
  17. By: Rangan Gupta (Department of Economics, University of Pretoria); Sonali Das (LQM, CSIR, Pretoria)
    Abstract: This paper estimates Bayesian Vector Autoregressive (BVAR) models, both spatial and non-spatial (univariate and multivariate), for the twenty largest states of the US economy, using quarterly data over the period 1976:Q1 to 1994:Q4; and then forecasts one-to-four quarters ahead real house price growth over the out-of-sample horizon of 1995:Q1 to 2006:Q4. The forecasts are then evaluated by comparing them with the ones generated from an unrestricted classical Vector Autoregressive (VAR) model and the corresponding univariate variant the same. Finally, the models that produce the minimum average Root Mean Square Errors (RMSEs), are used to predict the downturns in the real house price growth over the recent period of 2007:Q1 to 2008:Q1. The results show that the BVARs, in whatever form they might be, are the best performing models in 19 of the 20 states. Moreover, these models do a fair job in predicting the downturn in 18 of the 19 states, however, they always under-predict the size of the decline in the real house price growth rate – an indication of the need to incorporate the role of fundamentals in the models.
    Keywords: BVAR Model; BVAR Forecasts; Forecast Accuracy; SBVAR Model; SBVAR Forecasts; VAR Model; VAR Forecasts
    JEL: E17 E27 E37 E47
    Date: 2008–06
  18. By: Bandyopadhyay, Arindam; Kuvalekar, S V; Basu, Sanjay; Baid, Shilpa; Saha, Asish
    Abstract: The empirical research on housing market in India is scarce due to the paucity of information. The monograph on “A Study of Residential Housing Demand in India” is the outcome of a Study conducted by the National Institute of Bank Management (NIBM) for National Housing Bank (NHB) and partially addresses advice of Reserve Bank of India to NHB on studying the housing and real estate sector. This study provides exhaustive empirical research and detailed analysis (both micro and macro level) of current status and future growth potential of housing industry in India, its back-ward and forward linkages, financing structure and nature of underlying risk in the housing market in India.
    Keywords: Housing Demand Estimation; Micro & Macro Analysis; Default Risk; Financial Institutions
    JEL: G2 P25 G32 E6 R21 G21
    Date: 2008–04–01
  19. By: Thibault Fally (PSE – Paris School of Economics); Rodrigo Paillacar (CES – Université de Paris 1); Cristina Terra (THEMA – Université de Cergy-Pontoise, EPGE – Fundação Getulio Vargas)
    Abstract: This paper estimates the impact of market and supplier access on wage disparities across Brazilian states, incorporating the control of individual characteristics to the new economic geography methodology. We estimate market and supplier access disaggregated by industry, and we compute separately access to international and internal markets. We find a strong correlation between market access and wages differentials, even after controlling for individual characteristics, firm productivity, the source of market access (international, national or local), and using instrumental variables. Furthermore, market access turns out to be more important than supplier access.
    Date: 2008

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