nep-geo New Economics Papers
on Economic Geography
Issue of 2008‒09‒13
sixteen papers chosen by
Vassilis Monastiriotis
London School of Economics

  1. Agglomeration and Growth : Cross-Country Evidence By Marius BRÜLHART; Federica SBERGAMI
  2. Spatial specialization and farm-nonfarm linkages By Deichmann, Uwe; Shilpi, Forhad; Vakis, Renos
  3. Does urban sprawl increase the costs of providing local public services? Evidence from Spanish municipalities By Albert Solé-Ollé; Miriam Hortas Rico
  5. New Evidence on Gibrat’s Law for Cities By González-Val, Rafael; Lanaspa, Luis; Sanz, Fernando
  6. The Emergence of Regional Policy in Bulgaria: regional problems, EU influences and domestic constraints By Vassilis Monastiriotis
  7. Additive Hedonic Regression Models with Spatial Scaling Factors: An Application for Rents in Vienna By Wolfgang Brunauer; Stefan Lang; Peter Wechselberger; Sven Bienert
  8. Public Spending Patterns: the regional allocation of public investment in Greece by political period. By Yannis Psycharis
  9. Local Social Capital and Geographical Mobility: A Theory By David, Quentin; Janiak, Alexandre; Wasmer, Etienne
  10. Active Transport, Public Transportation, and Obesity in Metropolitan Areas of the United States. By Thomas K. Tiemann; Paul Miller; Erika Lamanna
  11. Determinants of land use changes: a spatial multinomial probit approach By Olivier Parent; Raja Chakir
  12. The Foreclosure-House Price Nexus: Lessons from the 2007-2008 Housing Turmoil By Charles W. Calomiris; Stanley D. Longhofer; William Miles
  13. A Choice Modelling Approach for Assessment of Use and Quasi-Option Values in Urban Planning for Areas of Environmental Interest By Elisabetta Strazzera; Elisabetta Cherchi; Silvia Ferrini
  14. Housing Busts and Household Mobility By Fernando Ferreira; Joseph Gyourko; Joseph Tracy
  15. Migration, sorting and regional inequality : evidence from Bangladesh By Shilpi, Forhad
  16. Regional household and poverty effects of Russia's accession to the world trade organization By Rutherford, Thomas; Tarr, David

  1. By: Marius BRÜLHART; Federica SBERGAMI
    Abstract: We investigate the impact of within-country spatial concentration of economic activity on country-level growth, using cross-section OLS and dynamic panel GMM estimation. Agglomeration is measured alternatively through measures of urbanization and through indices of spatial concentration based on data for sub-national regions. Across estimation techniques, data sets and variable definitions, we find evidence that supports the "Williamson hypothesis": agglomeration boosts GDP growth only up to a certain level of economic development. The critical level is estimated at some USD 10,000, corresponding roughly to the current per-capita income level of Brazil or Bulgaria. This implies that the tradeoff between national growth and inter-regional equality may gradually lose its relevance.
    Keywords: economic growth; agglomeration; urbanization; dynamic panel estimation
    JEL: O4 R11 R12
    Date: 2008–04
  2. By: Deichmann, Uwe; Shilpi, Forhad; Vakis, Renos
    Abstract: Using individual level employment data from Bangladesh, this paper presents empirical evidence on the relative importance of farm and urban linkages for rural nonfarm employment. The econometric results indicate that high return wage work and self-employment in nonfarm activities cluster around major urban centers. The negative effects of isolation on high return wage work and on self-employment are magnified in locations with higher agricultural potential. The low return nonfarm activities respond primarily to local demand displaying no significant spatial variation. The empirical results highlight the need for improved connectivity of regions with higher agricultural potential to urban centers for nonfarm development in Bangladesh.
    Keywords: Transport Economics Policy&Planning,Rural Poverty Reduction,Crops&Crop Management Systems,Labor Policies
    Date: 2008–04–01
  3. By: Albert Solé-Ollé (Universitat de Barcelona & IEB); Miriam Hortas Rico (Universitat de Barcelona & IEB)
    Abstract: This paper examines the impact of urban sprawl, a phenomenon of particular interest in Spain, which is currently experiencing this process of rapid, low-density urban expansion. Many adverse consequences are attributed to urban sprawl (e.g., traffic congestion, air pollution and social segregation), though here we are concerned primarily with the rising costs of providing local public services. Our initial aim is to develop an accurate measure of urban sprawl so that we might empirically test its impact on municipal budgets. Then, we undertake an empirical analysis using a cross-sectional data set of 2,500 Spanish municipalities for the year 2003 and a piecewise linear function to account for the potentially nonlinear relationship between sprawl and local costs. The estimations derived from the expenditure equations for both aggregate and six disaggregated spending categories indicate that low-density development patterns lead to greater provision costs of local public services.
    Keywords: Urban sprawl, local public spending.
    JEL: H1 H72 R51
    Date: 2008
  4. By: Jason P. Brown; Raymond J.G.M. Florax; Kevin T. McNamara (Department of Agricultural Economics, College of Agriculture, Purdue University)
    Abstract: The paper starts with a discussion of a conceptual model of location factors in U.S. manufacturing investment at the state level. The purpose of the paper is to test the relative importance of growth factors influencing investment and whether or not they have changed in importance over time. These factors include agglomeration, market structure, labor, infrastructure, and fiscal policy. A better understanding of investment flows in the manufacturing sector will help determine how growth factors have changed over time and which economic development policies may be most appropriate at targeting the sector. The analysis covers the time period 1994 to 2006 for the 48 contiguous states, with data taken from the Annual Survey of Manufactures, the Bureau of Economic Analysis, and the Bureau of Labor Statistics. Panel methods are used to test for fixed effects due to heterogeneity across states. Spatial panel methods with time effects are used for determination and specification of spatial and temporal effects. Empirical results are consistent across the empirical models put forth. Results suggest that market demand remains one of the most important location factors of manufacturing investment. Investment also goes to states with more productive labor and localized agglomeration of manufacturing activity.
    Keywords: manufacturing, investment, location factors
    JEL: L60 R11 R30
    Date: 2008
  5. By: González-Val, Rafael; Lanaspa, Luis; Sanz, Fernando
    Abstract: The aim of this work is to test empirically the validity of Gibrat’s Law in the growth of cities, using data for all the twentieth century of the complete distribution of cities (without any size restrictions) in three countries: the US, Spain and Italy. On considering the distribution of cities, we find a tendency to divergence. However, this fact does not impede, whether from an empirical or a theoretical point of view, that city size distribution can be adequately approximated with a lognormal distribution. Also, the conclusions which can be obtained as to fulfilment or not of Gibrat’s Law depend, first, on the sample size and, second, on the size of the cities being considered (large or small), which means that the results of any study which does not use all the distribution will be relative.
    Keywords: Gibrat’s Law; city size distribution; urban growth
    JEL: C14 R00
    Date: 2008–09–05
  6. By: Vassilis Monastiriotis
    Abstract: In most of the European transition economies regional policy is a relatively new phenomenon, given the absence of a coherent framework for such policy during the Communist era. In Southeast Europe in particular, regional policy was slow to develop also in the transition period. This was in many respects due to the relative hysteresis of the transition process in the region but also to other particularities related to the ethnic conflicts and a generally slower European association process. Regional policy in Bulgaria has for all analytical purposes been notably absent in the 1990s and only started shaping up mainly as a response to EU pressures and requirements. This was despite the significant problems of disparity and backwardness faced by many regional and local economies of the country – and the trend of widening inequality associated with the processes of transition and fast economic growth. Nevertheless (or, as a consequence), the emerging regional policy framework in Bulgaria reflects strongly the EU influence and shows little sensitivity to, and appreciation of, the main regional and spatial problems that policy in the country should be addressing. This paper addresses the structure and effectiveness of the emerging regional policy in Bulgaria by evaluating the nature of regional disparities in the country, examining the development of regional policy, and discussing the role played by the EU (through its accession conditionality, its own regional policy and its pre-accession aid) for these developments. This analysis provides useful conclusions regarding the strengths and weaknesses of Bulgaria’s regional policy and helps highlight the main challenges for the future design of regional policy in the country, in its new phase of development as a full EU member.
    Keywords: Regional disparities and policy, Bulgaria, Transition, EU accession.
    Date: 2008–06
  7. By: Wolfgang Brunauer; Stefan Lang; Peter Wechselberger; Sven Bienert
    Abstract: We apply additive mixed regression models (AMM) to estimate hedonic price equations. Non-linear effects of continuous covariates as well as a smooth time trend are modeled non-parametrically through P-splines. Unobserved district-specific heterogeneity is modeled in two ways: First, by location specific intercepts with the postal code serving as a location variable. Second, in order to permit spatial variation in the nonlinear price gradients, we introduce multiplicative scaling factors for nonlinear covariates. This allows highly nonlinear implicit price functions to vary within a regularized framework, accounting for district-specific spatial heterogeneity. Using this model extension, we find substantial spatial variation in house price gradients, leading to a considerable improvement of model quality and predictive power.
    Keywords: Hedonic regression, submarkets, multiplicative spatial scaling factors, semiparametric models, P-splines
    Date: 2008–08
  8. By: Yannis Psycharis
    Abstract: The spatial dispersion of public investment constitutes one of the principal elements and also one of the key issues concerning a country’s strategic regional development. Public investment expenditure represents in part the ‘social wage’ citizens receive, while at the same time it generates external economies for the productive sectors of the economy. Using a dataset that includes total outlays by all central, regional and local authorities, this paper traces the distribution of public investment in Greek prefectures (NUTS 3) over the period 1976-2005. It seeks to highlight the spending pattern governments of that period had followed, to compare the changes (if any) between different periods, and to explain whether redistribution of national wealth or other factors, including political ones, could be contributing to explaining the pattern and its temporal changes.
    Keywords: Public investment, regional analysis, territorial public expenditure.
    Date: 2008–05
  9. By: David, Quentin (ECARES, Free University of Brussels); Janiak, Alexandre (University of Chile); Wasmer, Etienne (Sciences Po, Paris)
    Abstract: In this paper, we attempt to understand the determinants of mobility by introducing the concept of local social capital. Investing in local ties is rational when workers anticipate that they will not move to another region. Reciprocally, once local social capital is accumulated, incentives to move are reduced. Our model illustrates several types of complementarity leading to multiple equilibria (a world of local social capital and low mobility vs. a world of low social capital and high propensity to move). It also shows that local social capital is systematically negative for mobility, and can be negative for employment, but some other types of social capital can actually raise employment.
    Keywords: European unemployment, geographical mobility, social capital
    JEL: J2 J61 Z1
    Date: 2008–08
  10. By: Thomas K. Tiemann (Department of Economics, Elon University); Paul Miller (Department of Health and Human Performance, Elon University); Erika Lamanna (Department of Economics, Elon University)
    Abstract: There is a well established relationship between exercise and weight in individuals. Recently, relationships between less urban sprawl and more leisure exercise and between certain urban characteristics usually associated with less sprawl and exercise for transportation have been found. This paper completes the less-sprawl-more exercise for transportation-lower weight sequence by finding that counties in metropolitan areas where more people complete their journey to work by walking, biking, or taking public transportation have fewer people who are overweight.
    JEL: I18 R10
    Date: 2008–07
  11. By: Olivier Parent; Raja Chakir
    Abstract: Changes in land use patterns impact significantly environmental conditions as well as economic and social welfare. These changes are influenced by socio-economic as well as pedo-climatic factors. A good understanding of how these factors influence land use patterns would provide new dimensions to policy making and public policy evaluation. To this end, we propose a Spatial Multinomial Probit model to examine the determinants of land use change, at the parcel level, in the French D´epartement du Rhones from 1992 to 2003. It is based on an economic model that assumes that landowners have a choice between 4 land use categories for a given parcel at a given date: (1) agricultural, (2) forest, (3) urban and (4) no use. Each landowner compares costs and benefits associated with each parcel and each class and chooses the optimal land use to maximize his/her profit. We propose a Spatial Multinomial Probit model that allows for covariates and spatial dependence, and we use these features to explore the relative importance of factors that drive landowners to choose a specific land use category. Our findings suggest the presence of spatial patterns, implying that the decision to choose land use for a given parcel of land is strongly influenced by nonobserved factors in neighboring parcels. Moreover, results confirm that interdependencies among land use alternatives, accounted for in the spatial multinomial probit model by the correlation structure, are required for the estimation of land use decision.
    Date: 2008
  12. By: Charles W. Calomiris; Stanley D. Longhofer; William Miles
    Abstract: Despite housing's importance to the economy and worries about recent financial and economic turmoil traceable to housing market difficulties, little has been written on how distress in the housing market, measured by foreclosures, affects home prices, or how these variables interact with other macroeconomic or housing variables such as employment, housing permits or sales. Employing a panel VAR model to examine quarterly state-level data, our paper is the first to systematically analyze these interactions. There is substantial regional variation across states, which facilitates our ability to identify linkages among variables. Importantly, price-foreclosure linkages work in both directions; foreclosures have a significant, negative effect on home prices, while an increase in prices alleviates distress by lowering foreclosures. Similarly, employment and foreclosures have mutually negative effects on each other. The impact of foreclosures on prices, while negative and significant, is quite small in magnitude. We demonstrate this by simulating house price changes in response to extreme foreclosure shocks. Even under extremely pessimistic scenarios for foreclosure shocks, average U.S. house prices, as measured by the comprehensive OFHEO house price index (which we argue is the most reliable and useful measure of house prices to use for our purposes), likely would decline only slightly or remain essentially flat in response to foreclosures like those predicted for the 2008-2009 period. This suggests that home prices are quite sticky, and that fears of a major fall in house prices, with all of its attendant negative macroeconomic consequences, typically are not warranted even in extreme foreclosure circumstances.
    JEL: R21 R31
    Date: 2008–09
  13. By: Elisabetta Strazzera (University of Cagliari); Elisabetta Cherchi (DIT and CIREM, University of Cagliari); Silvia Ferrini (DEPFID, University of Siena, CSERGE and University of East Anglia)
    Abstract: This study adopts a discrete choice modelling methodology to evaluate individuals’ preferences over planning alternatives for an urban site of environmental interest. Since such projects involve some uncertainty and irreversibility, a special attention is devoted to the estimation of the quasi-option values which are associated to project development. Two distinct measures for the quasi-option value are estimated, and both coefficients indicate that the public places a significant value on reduction of the possibility of adverse irreversible effects: a more prudent development strategy is valued about four times more than a procedure that provides a lesser hedge against undesired outcomes. Furthermore, the study involved elicitation of intertemporal preferences over projects with different time spans, and estimation of the implicit discount rates: the values obtained seem high if compared to standard discount rates applied to public projects, but not far from current interest rates on consumption.
    Keywords: Urban Planning, Environmental Values, Choice Modelling, Use Values, Quasi-option Values, Discounting
    JEL: C35 Q51 R41
    Date: 2008–07
  14. By: Fernando Ferreira; Joseph Gyourko; Joseph Tracy
    Abstract: Using two decades of American Housing Survey data from 1985-2005, we estimate the impact on household mobility of owners having negative equity in their homes and of rising mortgage interest rates. We find that both lead to lower, not higher, mobility rates over time. The impacts are economically large, with mobility being almost 50 percent lower for owners with negative equity in their homes. This does not imply that current worries about defaults and owners having to move from their homes are entirely misplaced. It does indicate that, in the past, the lock-in effects of these two factors were dominant over time. Our results cannot simply be extrapolated to the future, but policy makers should begin to consider the consequences of lock-in and reduced household mobility because they are quite different from those associated with default and higher mobility.
    JEL: R0 R21 R23
    Date: 2008–09
  15. By: Shilpi, Forhad
    Abstract: Using household level data from Bangladesh, this paper examines the differences in the rates of return to household attributes over the entire welfare distribution. The empirical evidence uncovers substantial differences in returns between an integrated region contiguous to the country's main growth centers, and a less integrated region cut-off from those centers by major rivers. The evidence suggests that households with better observed and unobserved attributes (such as education and ability) are concentrated in the integrated region where returns are higher. Within each region, mobility of workers seems to equalize returns at the lower half of the distribution. The natural border created by the rivers appears to hinder migration, causing returns differences between the regions to persist. To reduce regional inequality in welfare in Bangladesh, the results highlight the need for improving connectivity between the regions, and for investing in portable assets of the poor (such as human capital).
    Keywords: Population Policies,Access to Finance,Rural Poverty Reduction,Poverty Lines,Debt Markets
    Date: 2008–05–01
  16. By: Rutherford, Thomas; Tarr, David
    Abstract: This paper develops a seven-region comparative static computable general equilibrium model of Russia to assess the impact of accession to the World Trade Organization on these seven regions (the federal okrugs) of Russia. In order to assess poverty and distributional impacts, the model includes ten households in each of the seven federal okrugs, where household data are taken from the Household Budget Survey of Rosstat. The model allows for foreign direct investment in business services and endogenous productivity effects from additional varieties of business services and goods, which the analysis shows are crucial to the results. National welfare gains are about 4.5 percent of gross domestic product in the model, but in a constant returns to scale model they are only 0.1 percent. All deciles of the population in all seven federal okrugs can be expected to significantly gain from Russian World Trade Organization accession, but due to the capacity of their regions to attract foreign direct investment, households in the Northwest region gain the most, followed by households in the Far East and Volga regions. Households in Siberia and the Urals gain the least. Distribution impacts within regions are rather flat for the first nine deciles; but the richest decile of the population in the three regions that attract a lot of foreign investment gains significantly more than the other nine representative households in those regions.
    Keywords: Economic Theory&Research,Emerging Markets,Access to Finance,Debt Markets,Investment and Investment Climate
    Date: 2008–03–01

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