nep-geo New Economics Papers
on Economic Geography
Issue of 2008‒09‒20
seventeen papers chosen by
Vassilis Monastiriotis
London School of Economics

  1. Start-ups, New Business Employment, and the Effects on Incumbents: Who Contributes the Larger Share? By Michael Fritsch; Florian Noseleit
  2. Knowledge Production in Nanomaterials: An Application of Spatial Filtering to Regional Systems of Innovation By Roberto Patuelli; Christoph Grimpe
  3. Do domestic firms benefit from geographic proximity with FDI? Evidence from the privatization of the Czech glass industry By Elisa Gaelotti
  4. Regional Institutional Environment and Swedish Regional New Firm Formation By Nyström, Kristina
  5. Monocentric analysis of restricting the budget share of housing alone or with transportation By Nicolas Coulombel
  6. Entrepreneurship and Innovation in Functional Regions By Karlsson, Charlie; Johansson, Börje; Stough, Roger
  7. Agglomeration, Vertical Specialization, and the Strength of Industrial Linkages By Jan Kranich
  8. Testing for spatial autocorrelation: the regressors that make the power disappear By Martellosio, Federico
  9. Tools for spatial density estimation By Maurizio Pisati
  10. Further Analysis of the Zipf Law: Does the Rank-Size Rule Really Exist? By Fungisai Nota; Shunfeng Song
  11. Cluster Innovation Along the Industry Lifecycle By Andreas Eisingerich; Oliver Falck; Stephan Heblich; Tobias Kretschmer
  12. Technological and geographical proximity effects on knowledge spillovers:evidence from us patent citations By Luigi Aldieri
  13. Is Entrepreneurship the Salvation for Enhanced Economic Growth? By Nyström, Kristina
  14. Financial Geographies and Emerging Markets in Europe By Karreman, B.
  15. The use of permanent contracts across Spanish regions: Do regional wage subsidies work? By Yolanda F. Rebollo; J. Ignacio Pérez
  16. Science and Technology-based Regional Entrepreneurship in the Netherlands: Building Support Structures for Business Creation and Growth Entrepreneurship By Hulsink, W.; Suddle, K.; Hessels, S.J.A.
  17. Tradeoffs among Free-flow Speed, Capacity, Cost, and Environmental Footprint in Highway Design By Chen Feng Ng; Kenneth Small

  1. By: Michael Fritsch (Friedrich Schiller University Jena, School of Economics and Business Administration); Florian Noseleit (Friedrich Schiller University Jena, School of Economics and Business Administration)
    Abstract: We investigate the effects that new business formation has on employment in incumbent firms and compare it to the development in the start-ups. The analysis is performed for West German regions over the 1984-2002 period. It shows that the employment effects of new businesses on the incumbents are significantly positive. Moreover, we find indication that these effects on incumbents are considerably larger than the employment that is directly generated in the start-ups. We draw conclusions for policy and for further research.
    Keywords: Entrepreneurship, new business formation, regional development, direct and indirect effects
    JEL: L26 M13 O1 O18 R11
    Date: 2008–09–10
  2. By: Roberto Patuelli (Centre for European Economic Research (ZEW), Mannheim, Germany; Katholieke Universiteit Leuven, Belgium; University of Zurich, Switzerland and The Rimini Centre for Economic Analysis, Italy); Christoph Grimpe (Centre for European Economic Research (ZEW), Mannheim, Germany; Katholieke Universiteit Leuven, Belgium; University of Zurich, Switzerland)
    Abstract: Nanomaterials are seen as a key technology for the 21st Century, and much is expected of them in terms of innovation and economic growth. They could open the way to many radically new applications, which would form the basis of innovative products. In this context, it seems all the more important for regions to put their own innovation systems in place, and to ensure that they offer a suitable location for such activities in order to benefit from the expected growth. Many regions have already done so by establishing ‘science parks’ and ‘nanoclusters’. As nanomaterials are still in their infancy, both public research institutes and private businesses could play a vital role in the process. This paper investigates what conditions and configurations allow a regional innovation system to be competitive in a cutting-edge technology like nanomaterials. We analyse European Patent Office data at the German district level (NUTS-3) on applications for nanomaterial patents, in order to chart the effects of localised research and development (R&D) in the public and private sector. We estimate two negative binomial models in a knowledge production function framework and include a spatial filtering approach to adjust for spatial effects. Our results indicate that there is a significant positive effect of both public and private R&D on the production of nanomaterial patents. Moreover, we find a positive interaction between them which hints at the importance of their co-location for realising the full potential of an emerging technology like nanomaterials.
    Keywords: nanotechnology, innovation, patents, Germany, spatial autocorrelation, spatial filtering
    JEL: L60 O32
    Date: 2008–01
  3. By: Elisa Gaelotti (Institute of Economic Studies, Faculty of Social Sciences, Charles University, Prague, Czech Republic)
    Abstract: This paper analyzes the effects of geographical proximity and agglomeration of FDIs (foreign direct investments) on domestic firms in the privatized glass sector in the Czech Republic. The motivation for this research is based on the scant evidence in Central and Eastern Europe of the effects of geographical proximity and agglomeration on the productivity of domestic firms. This study aims to explain how spillovers are transferred from FDIs to domestic firms. The econometrical analysis, using original panel data from 1990 to 2006, provides evidence that the agglomeration of FDIs has a negative and significant effect on the productivity of domestic firms in the glass sector at a 5% level. The effect of geographical proximity to FDIs is significant at a 10% level but not in all models. The results support the importance of geographic proximity and agglomeration of FDIs and conform with the evidence that shows that FDIs have produced negative spillovers on domestic firms in transition countries.
    Keywords: Foreign direct investments, agglomeration economies, panel data, regional location, Czech Republic, glass industry
    JEL: C23 F21 F23 L61 O18 R12
    Date: 2008–09
  4. By: Nyström, Kristina (Division of Economics KTH and Ratio Institute)
    Abstract: This paper uses an institutional approach to investigate the relationship between the regional institutional environment and regional new firm formation. The importance of perceived attitudes regarding private enterprises, local taxes, political majority, the size of the government sector and perceived rules and bureaucracy on new firm formation in 286 Swedish municipalities are investigated. The empirical findings show that perceived positive attitudes toward private enterprises and political governance by a right bloc majority tend to have positive effects on regional new firm formation. A large local government sector, on the other hand, tends to have negative effects on regional new firm formation. The paper also explore if the effect of different aspects of regional institutional environment on new firm formation are similar across industries. The pattern in the private service sector industries is most similar to the overall pattern in the economy, while the only variable reflecting the regional institutional environment that influences new firm formation in manufacturing industries is perceived rules and bureaucracy.
    Keywords: institutions; new firm formation; regions
    JEL: L26 R11
    Date: 2008–09–09
  5. By: Nicolas Coulombel (LVMT - Laboratoire Ville, Mobilité, Transports - INRETS - Université Paris-Est - Ecole Nationale des Ponts et Chaussées)
    Abstract: Considering the prolonged rise of energy price and the still elevated housing prices, the policy to limit the share of housing expenses in the households’ budget, so as to secure their solvability, has been criticized. Supposedly, it induces people to get farther from the city center in search for cheaper housing prices, but with subsequent increased transportation costs that are often disregarded during the house search process. Therefore, to improve the well-being of households, it has been advocated to set a constraint on the share of both housing and transportation expenditure. The paper is purported to analyze and compare the effects of the two policies in terms of: 1. Well-being of the households; 2. Land-use: city size and density curve; 3. Solvability of the households; 4. Transportation costs. The analysis is carried out within the classical monocentric model of urban economics. After setting a general analysis, an applied model is specified to capture the effects of each policy in straightforward formulae. It is shown that constraining housing expenses may increase the well-being of households. Besides, both policies prove effective in reducing urban sprawl and hereby energy consumption. Thus the choice of the optimal policy will depend on the local authority’s objectives.
    Keywords: monocentric model, urban economics, housing expenses, transportation expenses, housing policy
    Date: 2008–08–31
  6. By: Karlsson, Charlie (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology); Johansson, Börje (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology); Stough, Roger (George Mason University)
    Abstract: The purpose of this paper is to discuss the role of entrepreneurship and innovations for economic development in functional regions and in doing that highlighting the different conditions offered for entrepreneurship and innovations in functional regions of various sizes. In conclusion, the conditions for entrepreneurship and innovations vary substantially between functional regions, since the necessary knowledge resources tend to be local and to cluster in certain regions and not others. Functional regions with a high capacity to generate new ideas, create knowledge, organizational learning and innovations are characterized as learning regions. Large functional regions offer a large market potential and a superior accessibility to knowledge and knowledge resources and they will further develop their creative capabilities due to an accumulation of innovative and entrepreneurial knowledge.
    Keywords: Entrepreneurship; Innovations; Regional development; R&D; Knowledge Sources; Knowledge Flows; Knowledge Creation
    JEL: D21 M13 R10
    Date: 2008–09–09
  7. By: Jan Kranich (Leuphana Universität Lüneburg)
    Abstract: This paper picks up the seminal model of Venables (1996) and provides a quantifying concept for the sectoral coherence in vertical-linkage models of the New Economic Geography. Based upon an alternative approach to solve the model and to determine critical trade cost values, this paper focuses on the interdependencies between agglomeration, specialization and the strength of vertical linkages. A central concern is the idea of an ’industrial base,’ which is attracting linked industries but is persistent to relocation. As a main finding, the intermediate cost share and substitution elasticity basically determine the strength of linkages. Thus, these parameters affect how strong the industrial base responds to changes in trade costs, relative wages and market size.
    Keywords: New Economic Geography, Vertical Linkages
    JEL: F12
    Date: 2008–09
  8. By: Martellosio, Federico
    Abstract: We show that for any sample size, any size of the test, and any weights matrix outside a small class of exceptions, there exists a positive measure set of regression spaces such that the power of the Cliff-Ord test vanishes as the autocorrelation increases in a spatial error model. This result extends to the tests that define the Gaussian power envelope of all invariant tests for residual spatial autocorrelation. In most cases, the regression spaces such that the problem occurs depend on the size of the test, but there also exist regression spaces such that the power vanishes regardless of the size. A characterization of such particularly hostile regression spaces is provided.
    Keywords: Cliff-Ord test; point optimal tests; power; spatial error model; spatial lag model; spatial unit root.
    JEL: C12 C21
    Date: 2008–09
  9. By: Maurizio Pisati (University of Milano-Bicocca)
    Abstract: The purpose of this talk is to illustrate the main features and applications of two new Stata programs for spatial density estimation: spgrid and spkde. The spgrid program generates two-dimensional arrays of evenly spaced points spanning across any regular or irregular study region specified by the user. In turn, the spkde program carries out spatial kernel density estimation based on reference points generated by spgrid.
    Date: 2008–09–11
  10. By: Fungisai Nota (Department of Economics, Wartburg College); Shunfeng Song (Department of Economics, University of Nevada, Reno)
    Abstract: The widely-used Zipf law has two striking regularities: excellent fit and close-to-one exponent. When the exponent equals to one, the Zipf law collapses into the rank-size rule. This paper further analyzes the Zipf exponent. By changing the sample size, the truncation point, and the mix of cities in the sample, we found that the exponent is close to one only for some selected sub-samples. Using the values of estimated exponent from the rolling sample method, we obtained an elasticity of the exponent with respect to sample size.
    Keywords: Zipf law; Rank-size rule; Rolling sample method
    JEL: C1 R1
    Date: 2008–09
  11. By: Andreas Eisingerich (Tanaka Business School, Imperial College London); Oliver Falck (Ifo Institute for Economic Research and CESifo); Stephan Heblich (Max Planck Institute of Economics); Tobias Kretschmer (Institute for Communication Economics, LMU Munich)
    Abstract: Industrial clusters develop regionally along the industry's lifecycle and typically exist over many product generations. In order to maintain their innovativeness, they have to develop and adjust along the industry lifecycle. We conduct 142 depth face-to-face interviews in clusters across two continents to examine the drivers of a cluster's innovativeness along the industry lifecycle. The results from our interviews suggest that the impact of key drivers of cluster innovativeness change depending on the stage of a cluster's underlying industry lifecycle. Classifying clusters as either being adolescent (information technology, biotechnology) or mature (automotive, chemicals), our regression analyses show a changing influence of cluster patterns along the industry lifecycle on a firm's innovativeness. Specifically, we analyze the impact of interorganizational network strength, openness, university collaboration, and intrapreneurship on radical innovation across adolescent and mature clusters. Implications for research and policy makers are discussed.
    Keywords: Cluster, Industry Lifecycle, Innovation
    JEL: O18 R12 L6
    Date: 2008–09–11
  12. By: Luigi Aldieri (University of Naples Parthenope & Université Libre de Bruxelles, DULBEA-CERT)
    Abstract: The purpose of this paper is to investigate the pattern of knowledge flows as indicated by patent citations. In order to compute the technological proximity, we have followed the methodology developed by Jaffe (1986), where a technological vector is based on the distribution of patents of each firm across technology classes. As far as the geographic proximity is concerned, we have used the latitude and the longitude coordinates of the city in which each firm is located. The empirical results suggest that the effects of proximity variables on knowledge flows are rather differentiated.
    Keywords: Innovation, Knowledge Spillovers, Technology Transfer, Patent Citations.
    JEL: F1 F2 O3
    Date: 2008–09
  13. By: Nyström, Kristina (Division of Economics KTH and Ratio Institute)
    Abstract: During the last decades, enhancing entrepreneurship has emerged as commonly used policy- measure in order to improve economic growth. However, is it true that entrepreneurship unambiguously can be claimed to improve economic growth? This paper intends to review the empirical evidence on the relationship between entrepreneurship on three measures of economic growth, employment, productivity and aggregate economic growth. The review shows that the studies that find no positive relationship between entrepreneurship and productivity growth have studied a relatively short period. Most studies that have studied a longer period (about ten years) provide rather clear evidence on the positive relationship between entrepreneurship and growth. Regarding the relationship between entrepreneurship and employment growth, the empirical evidence to some extent point in different directions. However, it must be concluded that in the long run there seems to be a positive relationship. A majority of the studies on the relationship between entrepreneurship and aggregate economic growth find a positive relationship. Studies that find a negative relationship usually employ non-harmonised self-employment rates as the measure of entrepreneurship.
    Keywords: entrepreneurship; economic growth; productivity; employment
    JEL: L26 R11
    Date: 2008–09–09
  14. By: Karreman, B. (Erasmus Research Institute of Management (ERIM), RSM Erasmus University)
    Abstract: This study examines the contemporary financial geographies in Central and Eastern Europe and argues how these may affect the established European finacial centre network in the future. As the development of the financial sector in Europe’s emerging markets is largely dependent on foreign investments, explicit attention is directed to determine which emerging centres exhibit sufficient power to attract multinational financial service firms. In addition, it is empirically assessed form which locations these investments are controlled. The results show a distinct spatial order of financial centres organized around three main city clusters: a ‘south-east’ cluster controlled by Athens, a ‘central-east’ cluster around Vienna and a ‘Baltics’ cluster directed from Copenhagen and Stockholm. Based on the results it is argued that these centres of control, with Vienna in particular, may enhance their competitiveness as a financial centre due to their strategic position in the growing markets of Central and Eastern Europe.
    Keywords: multinational banks;parent-subsidiary links;financial centres;city clusters;Central and Eastern Europe
    Date: 2008–09–01
  15. By: Yolanda F. Rebollo (Universidad Pablo de Olavide); J. Ignacio Pérez (Centro de Estudios Andaluces)
    Abstract: This article evaluates the effectiveness of regional wage subsidies to foster permanent employment using information gathered from the “Muestra Continua de Vidas Laborales”. This dataset, which is used here for the first time as a source for evaluating Spanish labour market policy, offers a complete employment history for each individual, with no aggregation bias. The policy analyzed consists of a one-time subsidy offered by some Spanish regions for new permanent contracts signed for certain fixed-term employees and unemployed workers. Because our policy variable presents individual, regional and temporal variation, we apply a triple difference estimator to identify the average treatment effect of this policy. We conclude that the outflow into permanent employment of eligible workers improves only minimally under this policy. Nevertheless, the incidence is relatively greater for temporary workers than for unemployed ones and is also larger for younger and middle-aged female workers. lassification-JEL: J38, J68
    Keywords: Difference-in-difference-in-difference, Causal Evaluation Analysis, Regional Wage Subsidies
    Date: 2008
  16. By: Hulsink, W.; Suddle, K.; Hessels, S.J.A. (Erasmus Research Institute of Management (ERIM), RSM Erasmus University)
    Abstract: In this contribution we develop a theoretical framework derived from the national system of innovation literature and the subsequent criticisms voiced by regional scientists and industry/technology experts who emphasize the importance of the intermediate subnational and sectoral levels to analysing science- and technology-based regional entrepreneurship in the Netherlands. The national system of innovation of the Netherlands, and its specifics and peculiarities, and the country’s general entrepreneurship policy, and the most important policy and support initiatives are subsequently discussed. Based on a desire to overcome the knowledge paradox between fundamental research and market needs and on the recognition that the Netherlands lags behind other countries when it comes to innovative entrepreneurship, various changes and initiatives were recently introduced in the Netherlands. The impression is of an overambitious national government with numerous programmes, schemes and agencies involved, sometimes working with each other but at other times separately as well, and its effectiveness can be questioned. Serious paperwork and preparation is involved in the participation in most programes and, together with the complexity of these programmes and policies, small and young entrepreneurs are neither informed, ready or well-equipped; some of them are not even interested in participating in those schemes.
    Keywords: system of innovation;science & technology policy;the Netherlands;regional entrepreneurship;high-growth entrepreneurship;universities;knowledge transfer
    Date: 2008–08–05
  17. By: Chen Feng Ng (Department of Economics, California State University at Long Beach); Kenneth Small (Department of Economics, University of California-Irvine)
    Abstract: This paper investigates differentiated design standards as a source of capacity additions that are more affordable and have smaller aesthetic and environmental impacts than expressways. We consider several tradeoffs, including narrow versus wide lanes and shoulders on an expressway of a given total width, and high-speed expressway versus lower-speed arterial. We quantify the situations in which off-peak traffic is sufficiently great to make it worthwhile to spend more on construction, or to give up some capacity, in order to provide very high off-peak speeds even if peak speeds are limited by congestion. We also consider the implications of differing accident rates. The results support expanding the range of highway designs that are considered when adding capacity to ameliorate urban road congestion.
    Keywords: Highway design; Capacity; Free-flow speed; Parkway
    JEL: L91 R42
    Date: 2008–08

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