nep-geo New Economics Papers
on Economic Geography
Issue of 2008‒10‒07
twenty-two papers chosen by
Vassilis Monastiriotis
London School of Economics

  1. Market Access, Regional Price Level and Wage Disparities: The German Case By Reinhold Kosfeld; Hans-Friedrich Eckey
  2. Agglomeration and crossborder infrastructure By Diego Puga
  3. Returns to Scale for EU Regional Manufacturing By Alvaro Angeriz; John McCombie; Mark Roberts
  4. The Economics of Place-Making Policies By Edward L. Glaeser; Joshua D. Gottlieb
  5. Regional Knowledge base and productivity growth: the evidence of italian manufacturing By Quatraro Francesco
  6. Spatial Interaction, Spatial Multipliers, and Hospital Competition By Lee Mobley; Ted Frech; Luc Anselin
  7. Labour Productivity in Auckland Firms By David C. Maré
  8. 308 Billion Euros into the Sand? The Debacle of the EU's Regional Policy [308 Milliarden Euro in den Sand? Zum Debakel der EU-Regionalpolitik] By Tausch, Arno
  9. Attractiveness and agglomeration of automotive industry in Morocco and Tunisia: A comparative analysis (In French) By Jean-Bernard LAYAN (GREThA-GRES); Yannick LUNG (GREThA-GRES)
  10. An exploration of local R&D spillovers in France By Jacques MAIRESSE (CREST-ENSAE, UNU-MERIT & NBER); Benoît MULKAY (LEREPS-GRES)
  11. The Extension of Clusters: Differences-in-Difference Evidence from the Bavarian State-Wide Cluster Policy By Oliver Falck; Stephan Heblich; Stefan Kipar
  12. "Trade and Location with Land as a Productive Factor" By Pfluger, Michael; Takatoshi Tabuchi
  13. Geographic Equity in Hospital Utilization: Canadian Evidence Using a Concentration-Index Approach By Jeremiah Hurley; Michel Grignon; Li Wang; Tara McGrath
  14. The impact of the residential sphere on the territorial development (In French) By Michel CABANNES (GREThA-GRES)
  15. Do smart cities grow faster? By de la Garza, Adrián G.
  16. Competition for Private Capital and Central Grants: The Case of Japanese Industrial Parks By Shun-ichiro Bessho; Kimiko Terai
  17. Economic-Environmental Impact Analysis Based on a Bi-region Interregional I-O Model for Vietnam, between HoChiMinh City (HCMC) and the rest of Vietnam (ROV), 2000 By Bui Trinh; Francisco T. Secretario; Kim Kwangmun; Le Ha Thanh; Pham Huong Giang
  18. Compilation of an Multi-Region Inter-Regional Input-Output Framework Table for The Vietnam’s Economy By Bui Trinh; Duong Manh Hung; Francisco T. Secretario; Kwang Moon Kim
  19. Industrial districts, innovation and I-district effect: territory or industrial specialization? By Rafael Boix Domenech
  20. Decentralization, economic development, and growth in Turkish provinces By Tosun, Mehmet Serkan; Yilmaz, Serdar
  21. The Construction of Neighbourhoods and its Relevance for the Measurement of Social and Ethnic Segregation: Evidence from Denmark By Anna Piil Damm; Marie Louise Schultz-Nielsen
  22. Cost-benefit analysis of transport investments in distorted economies By Edward Calthrop; Bruno De Borger; Stef Proost

  1. By: Reinhold Kosfeld (University of Kassel, Institut of Economics, 34127 Kassel, Germany); Hans-Friedrich Eckey (University of Kassel, Department of Economics, 34127 Kassel, Germany)
    Abstract: In this paper we use the NEG framework of the Helpman model to investigate the spatial distribution of wages across German labour market regions under different assumptions. As the assumptions of equal regional price level and equal real wages are strongly rejected for the German economy, standard approaches may fail to reveal the role of market access in explaining regional wage disparities. In part substantial changes occur when market potential is measured with the aid of regional price levels. With the so-called price index approach, the importance of market access in explaining regional wage differentials is clearly revealed. When controlling for heterogeneity of labour force and spatial dependence, the relationship still remains highly significant. From the price index approach, limited demand linkages of reasonable reach are inferred.
    Keywords: New Economic Geography, market access, wage disparities, regional price levels
    JEL: R11 R12 R15
    Date: 2008
  2. By: Diego Puga (IMDEA)
    Abstract: This paper deals with the effects of crossborder transport infrastructure in the presence of agglomeration economies. Crossborder infrastructure is more likely to increase than to decrease inequalities between and within regions, and has not helped regional convergence in Europe. Underinvestment due to spillovers, coordination failures, and the inadequacy of networks originally designed for national markets provide a role for supranational institutions. Hubandspoke networks tend to increase urban primacy while crossborder transport connections tend to reduce it. Improvements in transport and communication allow firms to separate innovation, management and production, increasing efficiency and urban interdependence.
    Keywords: transport; crossborder infrastructure; agglomeration; urban specialization
    JEL: R40 R12
    Date: 2008–06–24
  3. By: Alvaro Angeriz; John McCombie; Mark Roberts
    Abstract: Recent theoretical advances have emphasised the importance of localised increasing returns to scale in understanding both the regional growth and agglomeration processes. However, considerable empirical controversy still exists over whether returns to scale are constant or increasing. Consequently, this study aims to provide some new estimates of the degree of returns to scale for EU regional manufacturing. It does so within the framework of the Verdoorn law. Unlike previous studies, issues of specification of fundamental importance to recent theoretical developments are brought to attention. Overall, the paper concludes that localised increasing returns in EU regional manufacturing are substantial.
    Keywords: increasing returns, Verdoorn law, manufacturing, productivity growth, spatial econometrics
    JEL: O18 O33 R11
    Date: 2008–08
  4. By: Edward L. Glaeser; Joshua D. Gottlieb
    Abstract: Should the national government undertake policies aimed at strengthening the economies of particular localities or regions? Agglomeration economies and human capital spillovers suggest that such policies could enhance welfare. However, the mere existence of agglomeration externalities does not indicate which places should be subsidized. Without a better understanding of nonlinearities in these externalities, any government spatial policy is as likely to reduce as to increase welfare. Transportation spending has historically done much to make or break particular places, but current transportation spending subsidizes low-income, low-density places where agglomeration effects are likely to be weakest. Most large-scale place-oriented policies have had little discernable impact. Some targeted policies such as Empowerment Zones seem to have an effect but are expensive relative to their achievements. The greatest promise for a national place-based policy lies in impeding the tendency of highly productive areas to restrict their own growth through restrictions on land use.
    JEL: D0 H0 R0
    Date: 2008–10
  5. By: Quatraro Francesco (University of Turin)
    Abstract: This paper empirically analyzes the effects of regional knowledge base on differential growth rates. Beyond the traditional view of knowledge as an homogenous asset, it considers further characteristics that qualify its heterogeneous features. The results of the empirical estimations provide support to the idea that knowledge characteristics are fare more important than knowledge capital. The check for spatial dependence suggests that crossregional externalities exert additional triggering effects on productivity growth, but without debasing the effects of knowledge. Important policy implications stem from the analysis, in that regional innovation strategies ought to be carefully coordinated so as to reach a higher degree of internal coherence and exert positive effects on productivity.
    Date: 2008–09
  6. By: Lee Mobley (RTI International); Ted Frech (University of California, Santa Barbara); Luc Anselin (Arizona State University)
    Abstract: The hospital competition literature demonstrates that estimates of the effect of local market structure on competition are sensitive to geographic market definition. Our spatial lag approach effects smoothing of the explanatory variables across the discrete market boundaries. This approach results in robust estimates of the impact of market structure on hospital pricing, which can be used to estimate the full effect of changes in prices inclusive of spillovers that cascade through the neighboring hospital markets. In markets where concentration is relatively high before a proposed merger, we demonstrate that OLS estimates can lead to the wrong antitrust policy conclusion while the more conservative lag estimates do not.
    Keywords: spatial econometrics, spatial lag model, spatial multiplier, spatial spillovers, hospital antitrust, hospital competition, strategic pricing, Nash bargaining,
    Date: 2008–06–01
  7. By: David C. Maré (Motu Economic and Public Policy Research)
    Abstract: This paper examines labour productivity in Auckland, New Zealand's largest city, using microdata from Statistics New Zealand's Prototype Longitudinal Business Database. It documents a sizeable productivity premium in Auckland, around half of which is due to industry composition. There is a cross sectional correlation between productivity and employment density, reflecting differences in both physical productivity and prices. This correlation is evident both within Auckland, and comparing Auckland with other areas. The relationship between changes in density and changes in productivity is less strong. The relationship between productivity and overall or own-industry employment density varies across industries, suggesting that the nature and extent of agglomeration benefits varies. Overall, localisation effects appear stronger than urbanisation, with productivity being more strongly related to own-industry density than to overall density.
    Keywords: Labour productivity, Urban premium, Agglomeration
    JEL: L25 R12 R3
    Date: 2008–09
  8. By: Tausch, Arno
    Abstract: With a budget of 308 billion euros, the EU structural funds are alongside agriculture (418 billion euros) the largest item of the EU budget. 12 percent of the funds, according to the Court of Accountability of the European Parliament end up in wrong channels, and in the international press critical voices abound. There is also increasing doubt about the social efficiency of the EU's regional program among professional economists, like Dall'Erba and Heidenreich. Our politometric analysis on the basis of the Info Regio data provided by the Commission shows that in each enlargement wave, the rich regions benefitted more than the poor ones, and that important predictors of regional convergence - like balancing work and family life - are not at all being properly taken into account by the Commission - in both analytical as well as practical political terms.
    Keywords: Economic integration; International Relations and International Political Economy; Social Security and Public Pensions; Regional Economic Activity Growth; Development; and Changes; Size and Spatial Distributions of Regional Economic Activity
    JEL: F15 H55 F5 R12 R11
    Date: 2008–09–18
  9. By: Jean-Bernard LAYAN (GREThA-GRES); Yannick LUNG (GREThA-GRES)
    Abstract: The paper proposes a comparative analysis of the development of the automotive industry in Morocco and Tunisia. In its first part, it analyses the convergence in the forms of international integration, oriented towards a subcontracting towards European Union, which leads to competition and also complementarities between these two countries. The role of multinational firms and governmental policies is discussed. Location of these automotive activities is analyzed in Part 2 to evaluate the agglomeration factors and the limits of spatial concentration.
    Keywords: Automotive industry - European Union - Regional integration - Mediterranean Area - Multinational Firms - Morocco - Tunisia
    JEL: L62 F14 F23 N67 N87
    Date: 2008
    Abstract: This paper is an attempt to assess the existence and magnitude of local research spillovers in France. We rely on the model of an extended production function (Cobb-Douglas and Translog) with both local and neighborhood R&D capital stocks. We estimate this model on 312 employment areas as of 1999, first for the whole economy, then separately for five large manufacturing industries. We find estimates of R&D capital elasticities with respect to productivity which are significant and plausible both within own-area and across neighboring areas, as well as within own-industry but not across different industries.
    Keywords: Productivity, R&D, Local R&D Spillovers, Spatial Econometrics
    JEL: O30 O32 O47 C21
    Date: 2008
  11. By: Oliver Falck (Ifo Institute for Economic Research); Stephan Heblich (Max Planck Institute of Economics); Stefan Kipar (Ifo Institute for Economic Research)
    Abstract: If one cluster increases local competitiveness, can politicians, by interlinking clusters, achieve an even better effect at the state level? To answer this question, the paper analyzes the "Cluster Initiative" introduced in 1999 by the Bavarian State Government. The purpose of the initiative was to create a Bavarian-wide innovation network in support of state-wide knowledge flows. Using a difference- in-differences approach, we find that introducing the Bavarian-wide cluster policy increased the likelihood of innovation by a firm in the targeted industry by 4 to 7 percentage points. However, this effect is mainly driven by large firms' increased likelihood to innovate.
    Keywords: Difference-in Difference, Cluster Policy, Regional Policy
    JEL: R38 R11 O32
    Date: 2008–09–25
  12. By: Pfluger, Michael (Faculty of Economics, University of Passau, DIW Berlin and IZA); Takatoshi Tabuchi (Faculty of Economics, University of Tokyo)
    Abstract: This paper is motivated by the fact that, contrary to its importance in practice, the role of land for production has received no attention in the new trade theory and the new economic geography. We set up a simple monopolistic competition model and we show that, due to the factor proportions effect which emerges when land is used as a productive factor besides labor, a number of tenets of the new trade and geography literature no longer hold. We also show that in order to explain the stylised facts, notably that wages are higher in larger locations, land-use for production and housing has to be taken into account. Our analysis furthermore implies that market-size based agglomeration forces are too weak to overcome the very strong congestion force associated with competition for land, unless the consumers desire of variety (as expressed by a low elasticity of substitution) is very strong. This suggests that further agglomeration forces have to be invoked to explain the agglomeration of economic activity observed in the real world.
    Date: 2008–09
  13. By: Jeremiah Hurley (Department of Economics, Centre for Health Economics and Policy Analysis, Department of Clinical Epidemiology and Biostatistics, McMaster University); Michel Grignon (Department of Economics, Centre for Health Economics and Policy Analysis, Department of Health, Aging and Society, McMaster University); Li Wang (Centre for Health Economics and Policy Analysis, Department of Clinical Epidemiology and Biostatistics, McMaster University); Tara McGrath (Accelerated Economics Training Program, Government of Canada)
    Abstract: Distance-related geographic barriers challenge the ability of health systems to allocate health care resources equitably according to need. The paper adapts the concentration-index approach, commonly used for measuring income-related equity, to assess distance-related equity in hospital utilization in the province of Ontario, Canada. The analysis is based on individual-level data from the Canadian Community Health Survey, which provides information on respondents’ hospital utilization, health status, demographic, socio-economic status and location, merged with data on Ontario hospitals, and a geo-coded measure of each respondent’s distance to the nearest general acute-care hospital. We find no evidence of a relationship between distance to the nearest hospital and either the probability of hospitalization or the annual number of hospital nights. Supplementary analyses provide insight into hypothesized pathways between distance and hospitalization. Although having a regular medical doctor is positively associated with distance to the nearest hospital, controlling for this does not affect the estimated distance-hospitalization relationship. Both the size and occupancy rate of the nearest hospital are correlated with distance and are strongly related to the probability of hospitalization, but again controlling for these factors did not affect the estimated relationship between hospital use and distance to the nearest hospital. We do, however, find a strong positive gradient between the probability of hospitalization and distance to the nearest large hospital. This gradient is driven by the fact that, for most of those far from a large hospital, the nearest hospital is small with a low occupancy rate. Calculation of the distance-related horizontal inequity index confirms no distance-related inequity in hospital utilization when distance is measured to the nearest hospital of any size; however, when distance is instead measured to the nearest large hospital, we observe large, pro-distance inequity. These distance-use relationships are not captured by traditional geographic measures based on measures of urbanization/ruralness.
    Keywords: hospital utilization, equity, geography
    Date: 2008
  14. By: Michel CABANNES (GREThA-GRES)
    Abstract: The residential sphere is developing according to householders localization and revenue. The sphere division (residential, productive and public) is difficult to apply because the frontiers are blurred, but it is useful to take into account new economic evolutions.\r\nThe residential sphere share is growing quickly in the global employment in France since 1990 to the detriment of the of the productive sphere share. This movement exists also in all regions and in numerous employment areas. It is explained by internal factors (productivity, consumption structure) and external factors (international competition). This economy is more important in the South and in the West of France which are more attractive for households. \r\nThe residential sphere contributes to economic development by numerous employment creations and best ability to resist to globalisation shocks; it leads often to reduction of inequality between territories. But this contribution is limited because productivity growth, wage level and job quality are lowest than in productive sphere. Residential growth cannot be generalized and his future depends of the continuity of growth of householders mobility and public and social budgets. \r\n
    Keywords: residential sphere, Productive sphere; employment, territories, development
    JEL: R2 L84
    Date: 2008
  15. By: de la Garza, Adrián G.
    Abstract: Previous studies have found a strong positive correlation between human capital, measured as the share of the adult population with a college degree, and population growth in metropolitan statistical areas (MSA) in the U.S. In this paper, I corroborate that the human capital-growth connection is indeed statistically significant, although much weaker than previously thought. The evidence suggests that the main reason behind this bias lies on endogeneity issues that have not been thoroughly addressed in the literature. In particular, omitting lagged MSA growth in regressions of current MSA growth on human capital overestimates the impact of skills by 100 per cent. Given that past growth has been shown to be one of the main drivers of current MSA growth (Glaeser 1994a), omitting the former variable in growth-education regressions would bias our human capital estimates upwards. Upon further examination, however, I show that MSA-specific fixed effects explain away the alleged impact of past on current growth. This suggests that the individual characteristics of the city that made it grew in the first place, and not lagged MSA growth per se, are what drives future MSA growth. Yet, even after accounting for these MSA-specific fixed effects, the impact of human capital on MSA growth does not disappear: my estimates suggest that a decadal increase of 10 per cent in the share of the adult population with a college degree translates into a rise of between 3 and up to 5 per cent in the MSA population growth rate during the same period. Finally, instrumental variable regressions strongly support the direction from skills to growth, abating potential reverse causality concerns.
    Keywords: human capital; urban growth; skills; education; population changes
    JEL: J24 N34 R11
    Date: 2008–09
  16. By: Shun-ichiro Bessho (Department of Economics, Hitotsubashi University); Kimiko Terai (Hosei University)
    Abstract: We construct a simple model of fiscal competition taking `rent-seeking' behavior of local governments into account and estimate a policy reaction function based on the model. We consider the scale of public input as each local government's policy tool. Local autonomies' method of seeking central grants often takes the form of personnel exchange with central government. Our estimation of the policy reaction function suggests that such personnel exchange has an effect on the development of industrial parks.
    Keywords: Business area development; Policy competition; Rent-seeking, Spatial model
    JEL: H11 H54 H76 H77 R53
    Date: 2008–09
  17. By: Bui Trinh (I-O research Consultant, General Statistics Office, Vietnam); Francisco T. Secretario (I-O Research Consultant, Philippines); Kim Kwangmun (Toyohashi University of Technology, Japan); Le Ha Thanh (Hanoi National Economic University, Vietnam); Pham Huong Giang (Hanoi National Economic University, Vietnam)
    Abstract: <p>From time to time, Input - Output model systems have been applied in estimating economic - environment linkages. Further, the economic interregional input output model system can be applied in analysis impacts on residuals generated by interregional economic activities.</p><p>In this paper will processed with case study of HoChiMinh City and Rest of Vietnam based on inter-regional input - output approach.</p><p>The first part of this paper presents the conceptual and accounting framework of the IRIO model in inter-regional economic impact analysis. In this paper, special attention is paid of the Miyazawa system in the decomposition of the economic multiplier effects. For the purpose of this study, the IO model is being extended to be able to measure economic-environmental linkages.</p><p>The second part is a case study for HoChiMinh City based on the 2000 IRIO table. The objective of this study is to measure the inter-regional, inter-industrial interdependencies as well as the consequent environmental effects of pollution emissions due to economic activities. An analysis of the empirical results on the economic-environmental multipliers is shown in the last part of this case study.</p>
    Keywords: Input-Output; Multi-interregional; Vietnam
    Date: 2008
  18. By: Bui Trinh (Member of AREES); Duong Manh Hung (Vietnam General Statistical Office - Ministry of Planning and Investment, Vietnam); Francisco T. Secretario (Member of AREES); Kwang Moon Kim (Member of AREES, Japan)
    Abstract: This paper presents a technique on compiling multi-regional input-output framework. The main objective of the research is to provide an adequate & reliable I-O database that could effectively serve as bases in the conduct of intra-regional as well as inter-regional economic and environmental studies. We also show the result of the research as annex in this paper.
    Keywords: Input-Output; Multi-interregional; Vietnam
    Date: 2008
  19. By: Rafael Boix Domenech (Departament d'Economia Aplicada, Universitat Autonoma de)
    Abstract: The I-district effect hypothesis establishes the existence of highly intense innovation in Marshallian industrial districts due to the presence of external localization economies. However, industrial districts are characterized by specific manufacturing specializations in such a way that this effect could be due to these dominant specializations. The objective of this research is to test whether the effect is explained by the conditions of the territory or by the industrial specialization and to provide additional evidence of the existence and causes of the highly intense innovation in industrial districts (I-district effect). The estimates for Spain of a fixed effects model interacting territory and industry suggest that the high innovative performance of industrial districts is maintained across sectors whereas the industrial specialization behaves differently depending on the type of local production system in which it is placed. The I-district effect is related to the conditions of the territory more than to the industrial specialization. The territory is a key variable in explaining the processes of innovation and should be considered a basic dimension in the design of innovation and industrial policies.
    Keywords: industrial districts, innovation, external economies, district effect
    JEL: O14 O31 R12
    Date: 2008–06
  20. By: Tosun, Mehmet Serkan; Yilmaz, Serdar
    Abstract: There have been important developments in the decentralization of the government structure in Turkey since the early 1980s. This paper examines economic development and growth in Turkish provinces. Although there is a rich literature on the economic effects of government decentralization from both developed and developing countries, these effects have not been examined widely in the context of Turkish local governments. The authors first describe changes since the early 1980s and recent reform efforts. They then provide an empirical analysis of the effects of decentralization in Turkish provinces using cross-sectional and panel data approaches. The panel dataset consists of 67 provinces from 1976 to 2001. The analysis examines whether variations in local decentralization across these provinces and across time have had a significant impact on economic development and growth in those provinces. The findings suggest a weak negative economic effect of decentralization through a number of municipalities per capita. However, the findings do not show any significant impact from the creation of new provinces by separation from the existing ones.
    Keywords: Municipal Financial Management,Economic Theory&Research,Regional Governance,Intergovernmental Fiscal Relations and Local Finance Management,Public Sector Management and Reform
    Date: 2008–09–01
  21. By: Anna Piil Damm; Marie Louise Schultz-Nielsen (Department of Economics, Aarhus School of Business, University of Aarhus; The Rockwool Foundation Research Unit)
    Abstract: In this paper we propose a model for constructing neighbourhoods based on georeferenced data and administrative data. The 431,233 inhabited hectare cells in Denmark are clustered into 9,404 small and 2,296 large neighbourhoods, inhabited on average in 2004 by 572 and 2,343 persons respectively. The priorities in the clustering process are to obtain neighbourhoods that are unaltered over time, delineated by physical barriers, compact, homogeneous in terms of type of housing and ownership, relatively small, homogeneous in terms of number of inhabitants,and comprised of a contiguous cluster of cells. To illustrate the importance of detailed neighbourhood information we compare social and ethnic segregation measured by Isolation and Dissimilation indices on the levels of municipalities and of small neighbourhoods. Our findings demonstrate substantial variation in the residential mix in neighbourhoods within a given municipality, and thus show the importance of having information on a more detailed geographical level than that of the municipality.
    Keywords: I3, J61, R2
    Date: 2008–09
  22. By: Edward Calthrop; Bruno De Borger; Stef Proost
    Abstract: This paper deals with costs-benefit analysis of investment in transport infrastructure. Its contribution is twofold. Firstly, we develop a general equilibrium model to explore the impact of a small budgetary-neutral investment in transport infrastructure in a second-best setting, where other markets in the economy are distorted by taxes or external costs. The model incorporates different transport modes that are used both for intermediate inputs (freight) and for final consumption (passenger travel). An intuitive operational expression for the net economic benefit of an investment is derived that depends on the way the investment is financed. This expression generalizes recent findings in the literature. Secondly, we illustrate the results numerically using a small example. Our findings show that both the specific financing instrument used and the labour market consequences may have large implications for the net benefits of transport investments. Significant errors may be made in limiting cost-benefit analysis to transport markets only.
    Keywords: cost-benefit analysis, transport investments, marginal cost of funds..
    JEL: H23 H43 H54 R13 R42
    Date: 2008–07

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