nep-geo New Economics Papers
on Economic Geography
Issue of 2008‒11‒11
24 papers chosen by
Vassilis Monastiriotis
London School of Economics

  1. On the impact of labor market matching on regional disparities By THARAKAN, Jo; TROPEANO, Jean-Philippe
  2. Spatial Patterns of Office Employment in the New York Region By Fuerst, Franz
  3. Industrial Agglomeration and Wage Inequality in China By Li, Yao
  4. Space-time patterns of urban sprawl, a 1D cellular automata and microeconomic approach By CARUSO, Geoffrey; PEETERS  , Dominique; CAVAILHES, Jean; ROUNSEVELL, Mark
  5. Transportation, freight rates, and economic geography By BEHRENS, Kristian; PICARD, Pierre M.
  6. City Beautiful By Carlino, Gerald A.; Saiz, Albert
  7. Does urban sprawl increase the costs of providing local public services? Evidence from Spanish municipalities By Albert Solé-Ollé; Miriam Hortas-Rico
  8. Agglomeration, tax competition, and fiscal equalization By Matthias Wrede
  9. Why is Chinese Regional Output Diverging? By Westerlund, Joakim; Edgerton, David
  10. Dynamic Proximities – Changing Relations by Creating and Bridging Distances By Max-Peter Menzel
  11. The Identification of Regional Industrial Clusters Using Qualitative Input-Output Analysis By Mirko Titze; Matthias Brachert; Alexander Kubis
  12. The Spatial Random Effects and the Spatial Fixed Effects Model. The Hausman Test in a Cliff and Ord Panel Model By Mutl, Jan; Pfaffermayr, Michael
  13. Agglomeration and growth: the effects of commuting costs By Antonio Accetturo
  14. The Apple Doesn't Fall Far From the Tree: Location of Start-Ups Relative to Incumbents By Oliver Falck; Michael Fritsch; Stephan Heblich
  15. Capital liberalization, industrial agglomeration and wage inequality By Li, Yao
  16. Transformation of a Woodworking and Furniture Industrial District in Kampala, Uganda: Dichotomous Development of SME Cluster and Large Firm Sector By Yoshida, Eiichi
  17. A Fresh Scrutiny on Openness and Per Capita Income Spillovers in Chinese Cities: A Spatial Econometric Perspective By Sélin Ozyurt
  18. Getting Into Networks and Clusters: Evidence on the GNSS composite knowledge process in (and from) Midi-Pyrénées By Jérôme Vicente; Pierre-Alexandre Balland; Olivier Brossard
  19. Does Geography Matter for the Clean Development Mechanism? By Yongfu Huang; Terry Barker
  20. Urban economic (re)development after declining base industries: a comparison between Emmen (NL) and Durham, North Carolina (USA) By Gerrit van der Pol
  21. Economy – wide multipliers extended by the inter-regional demographic-economic modeling (IRDEM) By Bui Trinh; Nguyen Duc Thanh; Francisco T. Secretario; Francisco T. Secretario
  22. Are Mixed Neighborhoods Always Unstable? Two-Sided and One-Sided Tipping By David Card; Alexandre Mas; Jesse Rothstein
  23. The Determinants of Regional Migration in Great Britain: A Duration Approach By Andrews, Martyn J.; Clark, Ken; Whittaker, William
  24. Housing market spillovers : evidence from an estimated DSGE model By Matteo Iacoviello; Stefano Neri

  1. By: THARAKAN, Jo (Université catholique de Louvain (UCL). Center for Operations Research and Econometrics (CORE)); TROPEANO, Jean-Philippe
    Abstract: We propose a model where imperfect matching between firms and workers on local labor markets leads to incentives for spatial agglomeration. We show that the occurrence of spatial agglomeration depends on initial size differences in terms of both number of workers and firms. Allowing for dynamics of workers' and firms' location choices, we show that the spatial outcome depends crucially on different dimensions of agents' mobility. The effect of a higher level of human capital on regional disparities depends on whether it makes workers more mobile or more specialized on the labor market.
    Keywords: economic geography, local labor market, regional disparities, human capital.
    JEL: J61 J42 R12
    Date: 2008–08
  2. By: Fuerst, Franz
    Abstract: This study analyzes the regional spatial dynamics of the New York region for a period of roughly twenty years and places the effects of the 9/11 terrorist attacks in the context of longer-term regional dynamics. The analysis reveals that office-using industries are still heavily concentrated in Manhattan despite ongoing decentralization in many of these industries over the last twenty years. Financial services tend to be highly concentrated in Manhattan whereas administrative and support services are the least concentrated of the six major office-using industry groups. Although office employment has been by and large stagnant in Manhattan for at least two decades, growth of output per worker has outpaced the CMSA as well as the national average. This productivity differential is mainly attributable to competitive advantages of office-using industries in Manhattan and not to differences in industry composition. Finally, the zip-code level analysis of the Manhattan core area yielded further evidence of the existence of significant spillover effects at the small-scale level.
    Keywords: agglomeration economies; office employment; spatial concentration measures; employment data; industry composition urban economics
    JEL: R3 R12
    Date: 2006–07
  3. By: Li, Yao
    Abstract: This paper estimates nonlinear structural wage equations derived from NEG model with data on 327 cities in China. The estimation results show that the variation of wage level across cities in China is associated with proximity to large markets. The estimated elasticity of substitution of China is smaller than those of the other countries studied in previous research. It indicates that with the same increase of sub-regional market size, China may suffer more serious regional inequality problems. My estimation shows that although increased agglomeration can increase each city’s wage level, it may also increase the wage gap between large and small cities.
    Keywords: New Economic Geography; Wage Inequality; Elasticity of Substitution
    JEL: O24 F12 R12
    Date: 2008–05
  4. By: CARUSO, Geoffrey (Université catholique de Louvain (UCL). Center for Operations Research and Econometrics (CORE)); PEETERS  , Dominique (Université catholique de Louvain (UCL). Center for Operations Research and Econometrics (CORE)); CAVAILHES, Jean; ROUNSEVELL, Mark
    Abstract: We present a theoretical model of residential growth that emphasizes the path-dependent nature of urban sprawl patterns. The model is founded on the monocentric urban economic model and uses a cellular automata (CA) approach to introduce endogenous neighbourhood effects. Households are assumed to both like and dislike the density of their neighbourhood, and trade-off this density with housing space consumption and commuting costs. Discontinuous spatial patterns emerge from that trade-off, with the size of suburban clusters varying with time and distance to the centre. We use space-time diagrams inspired from 1D elementary CA to visualize changes in spatial patterns through time and space, and undertake sensitivity analyses to show how the pattern and timing of sprawl are affected by neighbourhood preferences, income level, commuting costs or by imposing a green belt.
    Keywords: urban sprawl, open space, neighbourhood externalities, cellular automata, residential dynamics.
    JEL: C61 C63 D62 R14 R21
    Date: 2008–07
  5. By: BEHRENS, Kristian; PICARD, Pierre M. (Université catholique de Louvain (UCL). Center for Operations Research and Econometrics (CORE))
    Abstract: We investigate the role of the transport sector in structuring the location of economic activity within two-region economic geography models of the footloose capital and core-periphery types. In our setting, competitive carriers offer transport services for shipping manufactured goods across regions and freight rates are determined endogenously to clear transport markets. Each carrier commits to the maximum capacity for a round-trip and thus faces a simple logistic problem: there are costs associated with 'returning empty', and those costs increase the freight rates charged to manufacturing firms. Since demand for transport services depends on the spatial distribution of economic activity, agglomeration in one region raises freight rates to serve foreign markets, thus generating an additional dispersion force. We show that a more equal equilibrium distribution of firms prevails when freight rates are endogenously determined than when they are exogenous and that multiple equilibria (including partial agglomeration) usually coexist.
    Keywords: transport sector, freight rates, economic geography, trade.
    JEL: F12 R12
    Date: 2008–07
  6. By: Carlino, Gerald A. (Federal Reserve Bank of Philadelphia); Saiz, Albert (Wharton School, University of Pennsylvania)
    Abstract: The city beautiful movement, which in the early 20th Century advocated city beautification as a way to improve the living conditions and civic virtues of the urban dweller, had languished by the Great Depression. Today, new urban economic theory and policymakers are coming to see the provision of consumer leisure amenities as a way to attract population, especially the highly skilled and their employers. However, past studies have only provided indirect evidence of the importance of leisure amenities for urban development. In this paper we propose and validate the number of leisure trips to MSAs as a measure of consumer revealed preferences for local leisure-oriented amenities. Population and employment growth in the 1990s was about 2 percent higher in an MSA with twice as many leisure visits: the third most important predictor of recent population growth in standardized terms. Moreover, this variable does a good job at forecasting out-of-sample growth for the period 2000–2006. "Beautiful cities" disproportionally attracted highly-educated individuals, and experienced faster housing price appreciation, especially in supply-inelastic markets. Investment by local government in new public recreational areas within an MSA was positively associated with higher subsequent city attractiveness. In contrast to the generally declining trends in the American central city, neighborhoods that were close to "central recreational districts" have experienced economic growth, albeit at the cost of minority displacement.
    Keywords: internal migration, amenities, urban population growth
    JEL: J11 J61 R23
    Date: 2008–10
  7. By: Albert Solé-Ollé (IEB, Universitat de Barcelona.); Miriam Hortas-Rico (IEB, Universitat de Barcelona.)
    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: 2008–11
  8. By: Matthias Wrede (Faculty of Business Administration and Economics, Philipps Universitaet Marburg)
    Abstract: This paper analyzes the impact of fiscal equalization on asymmetric tax competition when positive agglomeration externalities are present. It shows that equalization of standardized tax revenue improves the spatial allocation of capital provided that agglomeration externalities are sufficiently strong.
    Keywords: Agglomeration, tax competition, fiscal equalization
    JEL: R12 H71 H73
    Date: 2008
  9. By: Westerlund, Joakim (Department of Economics, Lund University); Edgerton, David (Department of Economics, Lund University)
    Abstract: In a recent paper Pedroni and Yao (2006) present strong evidence suggesting that Chinese regional output is diverging, a result that fies in the face of the current opinion of Chinese policymakers. This paper provides an in-depth analysis of the reasoning behind this finding. Our main result is that the divergence does exist, even when new data and more advanced methods of analysis are used. We also find that it has both an idiosyncratic and a common component. Hence, the increased output inequalities observed at the regional level is due to both region-specific disparities and to disparities between clubs of regions.
    Keywords: China; Output convergence; Panel unit root tests; Common factor
    JEL: C32 C33 O53 R11
    Date: 2008–10–29
  10. By: Max-Peter Menzel
    Abstract: The analysis of qualitative regional change requires an approach that is able to cope with these changes from a relational perspective. While the proximity concept explains the spatiality of relations at a particular point in time and describes them in terms of proximity and distance, a dynamic proximity concept must explain how these distances are both bridged and created. Three different dynamics are elaborated: a cognitive dynamic that changes through learning, a network dynamic that changes when connections are made and a spatial dynamic that changes whenever actors move in space. Proximity dimensions are constructed using these three dynamics. It is argued that bridging distances is the crucial process in changing relations and that bridging distance in one dimension requires proximities in other dimensions. Implications for regional development are derived.
    Keywords: proximity, network, cognitive distance, regional change
    Date: 2008–10
  11. By: Mirko Titze; Matthias Brachert; Alexander Kubis
    Abstract: The ‘cluster theory’ has become one of the main concepts promoting regional competitiveness, innovation, and growth. As most studies focus on measures of concentration of one industrial branch in order to identify regional clusters, the appropriate analysis of specific vertical relations within a value-adding chain is developing in this discussion. This paper tries to identify interrelated sectors via national input-output tables with the help of Minimal Flow Analysis by Schnabl (1994). The regionalization of these national industry templates is carried out with the allocation of branch-specific production values on regional employment. As a result, the paper shows concentrations of vertical clusters in only 27 of 439 German NUTS-3 regions.
    Date: 2008–11
  12. By: Mutl, Jan (Department of Economics and Finance, Institute for Advanced Studies, Vienna, Austria); Pfaffermayr, Michael (Department of Economics, University of Innsbruck, Innsbruck, Austria and Austrian Institute of Economic Research, Vienna, Austria and CESIFO, Germany)
    Abstract: This paper studies the spatial random effects and spatial fixed effects model. The model includes a Cliff and Ord type spatial lag of the dependent variable as well as a spatially lagged one-way error component structure, accounting for both heterogeneity and spatial correlation across units. We discuss instrumental variable estimation under both the fixed and the random effects specification and propose a spatial Hausman test which compares these two models accounting for spatial autocorrelation in the disturbances. We derive the large sample properties of our estimation procedures and show that the test statistic is asymptotically chi-square distributed. A small Monte Carlo study demonstrates that this test works well even in small panels.
    Keywords: Spatial econometrics, Panel data, Random effects estimator, Within estimator, Hausman test
    JEL: C21 C23
    Date: 2008–10
  13. By: Antonio Accetturo (Bank of Italy, Regional Economic Research Staff, Milan Branch)
    Abstract: We present a model of industrial location and endogenous growth with congestion costs. According to the interplay between knowledge spillovers and commuting costs, we are able to obtain both a Krugman-type and a bell-shaped agglomeration outcome. In the first case, the economy experiences a permanent income inequality in the steady state and income divergence in the transitional dynamics. In the second case, we observe an enlargement of the industrial core of the economy with a strong catching up by the periphery. Welfare analysis shows that congestion create (in the bell-shaped agglomeration case) a negative welfare effect on peripheral unskilled workers and renders the agglomerated equilibrium Pareto inferior to dispersion.
    Keywords: Congestion, Endogenous Growth, Migration
    JEL: R11 O11
    Date: 2008–09
  14. By: Oliver Falck (Ifo Institute for Economic Research); Michael Fritsch (University of Jena, School of Economics and Business Administration, Max Planck Institute of Economics, and German Institute for Economic Research (DIW)); Stephan Heblich (Max Planck Institute of Economics, Entrepreneurship, Growth, and Public Policy Group)
    Abstract: New firm location decisions, relative to incumbents may be based on a choice between two types of advantages: natural advantages or those that arise from social embeddedness, the latter of which may particularly include knowledge spillovers. We analyze the relative importance of geographically bounded location factors based on data from 103 manufacturing industries across 327 West German and 111 East German districts. Our micro-geographic analysis reveals that the two parts of the country vary in their pattern of new firm location. In East Germany, only 5 percent of the industries reveal start-up localization patterns beyond what natural advantages would suggest compared to 40 percent in West Germany.
    Keywords: Entrepreneurship, Location Decision, Natural Advantages, Local Knowledge Spillovers
    JEL: L26 R11 O18
    Date: 2008–11–03
  15. By: Li, Yao
    Abstract: This paper sets up a new economic geography model with diminishing marginal returns and examines the effect of capital liberalization on industrial agglomeration and wage inequality. The simulation results indicate that for the country with strict capital controls, capital liberalization can help reduce wage difference between countries in both nominal and real terms. It is also shown that when both comparative advantage and agglomeration are in effect, low trading costs does not necessarily cause the catastrophic agglomeration in the country with the larger market as most other NEG models predict.
    Keywords: New Economic Geography; Capital Liberalization; Trade Costs
    JEL: O24 F12 R12
    Date: 2007–12
  16. By: Yoshida, Eiichi
    Abstract: Clustering small manufacturers are believed to attain various types of collective efficiency. A woodworking and furniture SME district in Uganda has created a learning environment for artisans to start up their own workshops. In the district workers can access various managerial information including business skills and input materials easily than outside. Hence it attracted new entrants to follow and district growth continued. On contrary large firms are locating separately and dispersedly from SME district and have a negative image to SME. This dichotomy has been created partly through spatial division of two sectors and partly through policy favouritism toward large firms. Clustering small manufacturers are believed to attain various types of collective efficiency. A woodworking and furniture SME district in Uganda has created a learning environment for artisans to start up their own workshops. In the district workers can access various managerial information including business skills and input materials easily than outside. Hence it attracted new entrants to follow and district growth continued. On contrary large firms are locating separately and dispersedly from SME district and have a negative image to SME. This dichotomy has been created partly through spatial division of two sectors and partly through policy favouritism toward large firms.
    Keywords: SME, Cluster, Agglomeration, Incubation, Woodworking, Furniture, Uganda, Kampala
    JEL: D10 Q12 R10
    Date: 2008–10
  17. By: Sélin Ozyurt
    Abstract: This paper investigates openness and per capita income spillovers over 367 Chinese cities in the year 2004. Per capita income is modelled as dependent on investment, physical and social infrastructure, human capital, governmental policies and openness to the world. Our empirical analysis improves substantially the previous research in several respects: Firstly, by extending the data set to prefecture-level, it tackles the aggregation bias. Secondly, the introduction of recently developed explanatory spatial data analysis (ESDA) and spatial regression techniques allows to address misspecification issues due to spatial dependence. Thirdly, the endogeneity problem in the regression is taken into consideration through the use of generalised method of moments (GMM) estimator. Our major findings are in Chinese cities, physical and social infrastructure development, human capital and investment could be recognised as major driving sources of per capita income (i), whereas, the government expenditure ratio exerts a negative impact on per capita GDP level (ii). Our empirical findings also yield evidence on the existence of FDI and foreign trade spillovers in China (iii). These findings are robust to a number of alternative spatial weighting matrix specifications.
    Date: 2008–11
  18. By: Jérôme Vicente; Pierre-Alexandre Balland; Olivier Brossard
    Abstract: This paper aims to contribute to the empirical identification of clusters by proposing methodological issues based on network analysis. We start with the detection of a composite knowledge process rather than a territorial one stricto sensu. Such a consideration allows us to avoid the overestimation of the role played by geographical proximity between agents, and grasp its ambivalence in knowledge relations. Networks and clusters correspond to the complex aggregation process of bi or n-lateral relations in which agents can play heterogeneous structural roles. Their empirical reconstitution requires thus to gather located relational data, whereas their structural properties analysis requires to compute a set of indexes developed in the field of the social network analysis. Our theoretical considerations are tested in the technological field of GNSS (Global Satellite Navigation Systems). We propose a sample of knowledge relations based on collaborative R&D projects and discuss how this sample is shaped and why we can assume its representativeness. The network we obtain allows us to show how the composite knowledge process gives rise to a structure with a peculiar combination of local and distant relations. Descriptive statistics and structural properties show the influence or the centrality of certain agents in the aggregate structure, and permit to discuss the complementarities between their heterogeneous knowledge profiles. Quantitative results are completed and confirmed by an interpretative discussion based on a run of semi-structured interviews. Concluding remarks provide theoretical feedbacks.
    Keywords: Knowledge, Networks, Economic Geography, Cluster, GNSS
    JEL: O32 R12
    Date: 2008–10
  19. By: Yongfu Huang (4CMR, Department of Land Economy, University of Cambridge); Terry Barker (4CMR, Department of Land Economy, University of Cambridge)
    Abstract: Under the Kyoto Protocol, the Clean Development Mechanism (CDM) is designed to serve the dual purposes of allowing the industrialised countries to earn credits by investing in project activities that reduce greenhouse gas (GHG) emissions, while contributing to sustainable development in developing countries via the flows of technology and capital. The fact that the geographic distribution of CDM projects is highly uneven motivates this research into whether certain geographic endowments matter for the CDM development. This research suggests that CDM credit flows in a country is positively affected by those in its neighbouring countries. Countries with higher absolute latitudes and elevations tend to initiate more CDM projects, whereas countries having richer natural resources do not seem to undertake more CDM projects. This finding sheds light on the geographic determinants of uneven CDM development across countries, and has implications for developing countries in terms of international cooperation and national capacity building to effectively access the CDM
    Keywords: Clean Development Mechanism; Geography; Natural Resources; Spatial Dependence
    Date: 2008
  20. By: Gerrit van der Pol
    Date: 2008–10–07
  21. By: Bui Trinh (Du Hang kenh, Haiphong, Vietnam); Nguyen Duc Thanh (Director of CEPR – Economic University under Hanoi National University); Francisco T. Secretario (I/O expert of ADB, Philippine); Francisco T. Secretario (I/O expert of ADB, Philippine)
    Abstract: <p> This paper attempts to measure the extent of inter-regional economic interdependence between primary and redistribution incomes. This means that any change in final demand for goods and services in one region does not only lead to the change in output and income in that region but also leads to the change in redistribution income in that region as well as in the other regions. The change in income redistribution in the other regions is due to their changes in output and income, which, in turn, induces impacts on the final demands (household consumption and capital formation) and so on. A vicious cycle of intra- and inter-spatial economic flows can thus be observed.</p><p>Demonstrate In the demographic-economic model presented by Miyazawa (1976), income from redistribution is treated as exogenous and it therefore appears as an exogenous variant. The difference of this study is that income received from redistribution is treated as endogenous variant. So, in this model, the totality of production income is not only induced by production income but also by redistribution of income among institutional units, intra-regionally and inter-regionally.</p>
    Keywords: Input-Output; Multi-interregional; Vietnam
    Date: 2008
  22. By: David Card; Alexandre Mas; Jesse Rothstein
    Abstract: A great deal of urban policy depends on the possibility of creating stable, economically and racially mixed neighborhoods. Many social interaction models – including the seminal Schelling (1971) model – have the feature that the only stable equilibria are fully segregated. These models suggest that if home-buyers have preferences over their neighborhoods' racial composition, a neighborhood with mixed racial composition is inherently unstable, in the sense that a small change in the composition sets off a dynamic process that converges to either 0% or 100% minority share. Card, Mas, and Rothstein (2008) outline an alternative "one-sided" tipping model in which neighborhoods with a minority share below a critical threshold are potentially stable, but those that exceed the threshold rapidly shift to 100% minority composition. In this paper we examine the racial dynamics of Census tracts in major metropolitan areas over the period from 1970 to 2000, focusing on the question of whether tipping is "two-sided" or "one-sided". The evidence suggests that tipping behavior is one-sided, and that neighborhoods with minority shares below the tipping point attract both white and minority residents.
    JEL: H0 R2 R31
    Date: 2008–11
  23. By: Andrews, Martyn J. (University of Manchester); Clark, Ken (University of Manchester); Whittaker, William (University of Manchester)
    Abstract: Using data from the first fourteen waves of the British Household Panel Survey, we estimate a discrete duration model of interregional migration in Great Britain. By exploiting retrospective information on residency we control for late entry as well as unobserved heterogeneity. We find considerable duration dependence in region of residence in the raw data, most but not all of which disappears when controlling for observable and unobservable differences between individuals. Older workers are less likely to switch region while the better educated are more mobile. There are also some differences between males and females in their likelihood to migrate.
    Keywords: regional labour markets, panel data, hazard, duration, migration
    JEL: C14 C23 C41 J24 J61 R23
    Date: 2008–10
  24. By: Matteo Iacoviello (Boston College, Department of Economics); Stefano Neri (Banca d'Italia, Research Department)
    Abstract: We study sources and consequences of fluctuations in the housing market. The upward trend in real housing prices of the last 40 years can be explained by slow technological progress in the housing sector. Over the business cycle, housing demand and housing technology shocks explain one-quarter each of the volatility of housing investment and housing prices. Monetary factors explain 20 percent, but they played a bigger role in the housing cycle at the turn of the century. We show that the housing market spillovers are non-negligible, concentrated on consumption rather than business investment, and have become more important over time.
    Keywords: Housing, Wealth E¤ects, Bayesian Estimation, Two-sector Models
    JEL: E32 E44 E47 R21 R31
    Date: 2008–10

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