nep-geo New Economics Papers
on Economic Geography
Issue of 2008‒12‒01
ten papers chosen by
Vassilis Monastiriotis
London School of Economics

  1. Measuring the Value of a Moscow Apartment A Spatial Approach to the Hedonic Pricing of Attributes By Alexandre Repkine
  2. Urban Growth Drivers and Spatial Inequalities: Europe - a case with geographically sticky people By Paul Cheshire; Stefano Magrini
  3. Who are the brokers of knowledge in regional systems of innovation? A multi-actor network analysis By Martina Kauffeld-Monz; Michael Fritsch
  4. Econometric estimation of Armington import elasticities for regional CGE models of the Chicago and Illinois economies By Soo Jung Ha, Hewings, Geoffrey, and Turner, Karen; Geoffrey Hewings; Karen Turner
  5. Going NUTS: The Effect of EU Structural Funds on Regional Performance By Becker, Sascha O.; Egger, Peter H.; von Ehrlich, Maximilian; Fenge, Robert
  6. Are Mixed Neighborhoods Always Unstable?: Two-Sided and One Sided Tipping By David Card; Alexandre Mas; Jesse Rothstein
  8. The Stability of Downtown Parking and Traffic Congestion By Arnott, Richard; Inci, Eren
  9. The Relative Efficiency of Automatic and Discretionary Industrial Aid By Kim Swales
  10. Equity Fund Ownership and the Cross-Regional Diversification of Household Risk By Becker, Sascha O.; Hoffmann, Mathias

  1. By: Alexandre Repkine
    Abstract: In this paper we explore spatial effects in a hedonic price function framework for a large sample of apartments in Moscow. We find strong evidence of both spatial lag and spatial autocorrelation. Our results are robust across both the spatial model specifications and the choice of the spatial weight matrices. The fact that the quality attributes’ shadow prices we estimate are not much different from the OLS (ML) estimates suggests that spatial effects are orthogonal to the quality characteristics. One interesting finding is that an increase in the kitchen area contributes much more significantly to the apartment’s price compared a marginal increase in the living area, which is reflecting the traditional role kitchen has been playing in the Russian households as a dining and communication area. House type, time needed to walk to the nearest subway station and subway time to the city center are other important apartment attributes. Methodologically, we believe our study is demonstrating the need to develop spatial econometric techniques for application in the environment where both types of spatial effects are simultaneously present.
    Keywords: spatial models, housing market, hedonic price functions
    JEL: C21 R12 R21
    Date: 2008–10–25
  2. By: Paul Cheshire (London School of Economics); Stefano Magrini (Department of Economics, University Of Venice Cà Foscari)
    Abstract: We try to combine theory with empirical analysis to investigate the drivers of spatial growth processes, welfare and disparities in a context in which people are markedly immobile. Drawing on two of our recent papers (Cheshire and Magrini, 2006 and 2008), we review the evidence on the drivers of differential urban growth in the EU both in terms of population and output growth. The main conclusion from our findings is that one cannot reasonably maintain the assumption of full spatial equilibrium in a European context. This has a number of wider implications. It suggests that i. differences in real incomes in Europe - and more generally where populations are relatively immobile - are likely to persist and indicate real differences in welfare; ii. there is no evidence of a unified European urban system but rather of a set of national systems; iii. there are significant but theoretically consistent, differences in the drivers of population compared to economic growth.
    Keywords: Growth, urban system, spatial equilibrium
    JEL: O18 R11 R13
    Date: 2008
  3. By: Martina Kauffeld-Monz (Institute for Urban Science and Structural Policy (IfS Berlin), Germany.); Michael Fritsch (Friedrich Schiller University Jena, German Institute for Economic Research (DIW-Berlin), and Max Planck Institute of Economics, Jena, Germany.)
    Abstract: The discussion on regional innovation systems emphasizes the duality of local and global links. While the former enable effective knowledge exchange between regional actors, the latter are considered to provide regional systems with knowledge diverse to their knowledge base. Our empirical analysis of 18 German regional innovation networks highlights the importance of public research organizations for inter-regional knowledge exchange. The broker and gatekeeper function of public research organizations may be particularly important in lagging regions that typically suffer from a lack of large firms who often assume the role of "gatekeepers of knowledge".
    Keywords: Regional systems of innovation, innovation networks, knowledge broker, gatekeeper
    JEL: D83 D85 L14
    Date: 2008–22–24
  4. By: Soo Jung Ha, Hewings, Geoffrey, and Turner, Karen (Department of Economics, University of Strathclyde); Geoffrey Hewings (Regional Economics Applications Laboratory, University of Illinois, US); Karen Turner (Department of Economics, University of Strathclyde)
    Abstract: Our current research program is concerned with developing regional and interregional computable general equilibrium models for Chicago and the Midwest respectively. One of the main concerns associated with regional CGE modeling is determination of the empirical parameters of models, particularly elasticities and share parameters. A common problem is the lack of appropriate regional data for econometric estimation. Consequently, it is important to identify key parameters that are likely to be important in determining quantitative results and prioritise these for estimation where appropriate data are available. In this paper we focus on estimating regional trade (import) substitution parameters, both because these will generally be important in analysis for regional economies, which tend to be more open than national economies, and also because one of the main areas of our current research is to model the pollution content of trade flows between regions and the impacts on pollution ‘trade balances’ in response to changes in activity. While our work will eventually encompass the five Midwest states of Illinois, Indiana, Michigan, Ohio and Wisconsin, our first step in the process of parameter estimation for our intended suite of regional and interregional CGE models is to estimate commodity import elasticities for the Illinois economy (to be applied also to our single region Chicago model, in the absence of appropriate data for region-specific estimation at that level). We apply a model where we take account of market size and distance in estimating the substitutability between commodities produced in Illinois and other US states.
    Keywords: general equilibrium model, regional modelling, import elasticity
    JEL: C68 R13 F10
    Date: 2008–10
  5. By: Becker, Sascha O.; Egger, Peter H.; von Ehrlich, Maximilian; Fenge, Robert
    Abstract: The European Union (EU) provides grants to disadvantaged regions of member states to allow them to catch up with the EU average. Under the Objective 1 scheme, NUTS2 regions with a GDP per capita level below 75% of the EU average qualify for structural funds transfers from the central EU budget. This rule gives rise to a regression-discontinuity design that exploits the discrete jump in the probability of EU transfer receipt at the 75% threshold. Additional variability arises for smaller regional aggregates - so-called NUTS3 regions - which are nested in a NUTS2 mother region. Whereas some relatively rich NUTS3 regions may receive EU funds because their NUTS2 mother region qualifies, other relatively poor NUTS3 regions may not receive EU funds because their NUTS2 mother region does not qualify. We find positive growth effects of Objective 1 funds, but no employment effects. A simple cost-benefit calculation suggests that Objective 1 transfers are not only effective, but also cost-efficient.
    Keywords: Structural funds; Regional growth; Regression discontinuity design; Quasi-randomized experiment
    Date: 2008–11
  6. By: David Card (UC Berkeley); Alexandre Mas (UC Berkeley); Jesse Rothstein (Princeton University)
    Abstract: A great deal of urban policy depends on the possibly 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 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 metropolitian 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.
    Date: 2008–07
  7. By: Esposti, Roberto
    Abstract: This paper aims at analysing the recent CAP reform from the perspective of the current general and strategic objectives of the EU as defined by the Lisbon Strategy. A critical appraisal of the CAP impact in terms of regional growth is carried out. Firstly from a strictly conceptual and methodological point of view, then by analysing more in detail how CAP reform (of both Pillar I and II) might have actually affected the role of the CAP in promoting (or hindering) regional growth and, therefore, convergence. Empirical evidence provided by the different available methodologies has progressively emerged in the very last years. Though a conclusive answer on the impact of the reform can not be drawn, it still emerges that the role of CAP design and implementation in affecting regional growth and convergence is usually underestimated and often neglected in the discussions about the future of the CAP. At the same time, however, this role is not univocal and strongly case-specific, as it substantially differs across regions according to their socio-economic structure and how reforms are jointly implemented.
    Keywords: Common Agricultural Policy, Regional Growth and Convergence, Lisbon Strategy, Agricultural and Food Policy, Community/Rural/Urban Development, Q180, R110, O410,
    Date: 2008–11–14
  8. By: Arnott, Richard; Inci, Eren
    Abstract: In classical traffic flow theory, there are two velocities associated with a given level of traffic flow. Following Vickrey, economists have termed travel at the higher speed congested travel and at the lower speed hypercongested travel. Since the publication of Walters' classic paper (1961, Econometrica 29, 676-699), there has been an on-going debate concerning whether a steady-state hypercongested equilibrium can be stable. For a particular structural model of downtown traffic flow and parking, this paper demonstrates that a steady-state hypercongested equilibrium can be stable. Some other sensible models of traffic congestion conclude that steady-state hypercongested travel cannot be stable, and that queues develop to ration the demand in steady states. Thus, we interpret our result to imply that, when steady-state demand is so high that it cannot be rationed through congested travel, the trip price increase necessary to ration the demand may be generated either through the formation of steady-state queues or through hypercongested travel, and that which mechanism occurs depends on details of the traffic system.
    Keywords: traffic congestion; cruising for parking; on-street parking; hypercongestion
    JEL: L91 R41
    Date: 2008–11–27
  9. By: Kim Swales (Department of Economics, University of Strathclyde)
    Abstract: For the last two decades, the primary instruments for UK regional policy have been discretionary subsidies. Such aid is targeted at “additional” projects - projects that would not have been implemented without the subsidy - and the subsidy should be the minimum necessary for the project to proceed. Discretionary subsidies are thought to be more efficient than automatic subsidies, where many of the aided projects are non-additional and all projects receive the same subsidy rate. The present paper builds on Swales (1995) and Wren (2007a) to compare three subsidy schemes: an automatic scheme and two types of discretionary scheme, one with accurate appraisal and the other with appraisal error. These schemes are assessed on their expected welfare impacts. The particular focus is the reduction in welfare gain imposed by the interaction of appraisal error and the requirements for accountability. This is substantial and difficult to detect with conventional evaluation techniques.
    Keywords: discretionary subsidies, appraisal error, accountability, cost benefit analysis
    JEL: R13 R38 R58 D61
    Date: 2008–11
  10. By: Becker, Sascha O.; Hoffmann, Mathias
    Abstract: We explore the link between portfolio home bias and consumption risk sharing among Italian regions using aggregated household level information on consumption, income and portfolio holdings. We propose to use data on equity fund ownership to proxy for regional home bias: equity funds are typically diversified at the national or international level and will therefore provide interregional diversifiation. In assessing the impact of equity fund ownership on interregional risk sharing we distinguish between two dimensions: variation in the share of equity funds in fund-holder's wealth (the intensive margin) and variation in the fraction of households that hold funds (the extensive margin). We find that equity fund ownership is an important determinant of interregional risk sharing. First, diversification incentives qualitatively line up with actually observed portfolio choices: fund holders in regions where households are particularly exposed to region-specific labor income risk hold a larger fraction of their wealth in (out-of-region) funds. Secondly, for a region as a whole, risk sharing increases in both the intensive and the extensive margins of diversification and the two margins reinforce each other. The marginal effect of wider equity fund participation seems particularly strong, suggesting that policies aimed at increasing equity market participation could help foster better interregional risk sharing.
    Keywords: consumption risk sharing; regional home bias; Survey of Household Income and Wealth; labor income risk; portfolio choice; stock market partici pation
    Date: 2008–11

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