nep-geo New Economics Papers
on Economic Geography
Issue of 2009‒01‒24
sixteen papers chosen by
Vassilis Monastiriotis
London School of Economics

  1. That’s Entertainment - scale and scope economies in the location and clustering of the entertainment economy By Florida, Richard; Mellander, Charlotta; Stolarick, Kevin
  2. A Spatial-Dependence Continuous-Time Model for Regional Unemployment in Germany By Johan H.L. Oud; Henk Folmer; Roberto Patuelli; Peter Nijkamp
  3. Zipf's Law for Cities in the Regions and the Country By Giesen, Kristian; Suedekum, Jens
  4. Creative Destruction and Regional Productivity Growth: Evidence from the Dutch Manufacturing and Services Industries By Niels Bosma; Erik Stam; Veronique Schutjens
  6. Poolability and Aggregation Problems of Regional Innovation Data: An Application to Nanomaterial Patenting By Roberto Patuelli; Andrea Vaona; Christoph Grimpe
  7. Industrial Clusters and the Knowledge Based Economy : from open to distributed structures ? By Frédéric Rychen; Jean-Benoît Zimmermann
  8. Agglomeration and inequality across space: What can we learn from the European experience? By Rosella Nicolini
  9. Clean Evidence on Face-to-Face: Why Experimental Economics is of Interest to Regional Economists By Björn Frank
  10. Growth of Villages in China, 1990-2002 By Hiroshi Sato
  11. “Ripple Effects” and Forecasting Home Prices In Los Angeles, Las Vegas, and Phoenix By Rangan Gupta; Stephen M. Miller
  12. Regional Measures of Human Capital in the European Union By Dreger, Christian; Erber, Georg; Glocker, Daniela
  13. Identifying Agglomeration Spillovers: Evidence from Million Dollar Plants By Michael Greenstone; Richard Hornbeck; Enrico Moretti
  14. Evaluating Implications of Agricultural Policies in a Rural Region ;through a CGE Analysis By Andrea BONFIGLIO
  15. Hail to the Chief: Assessing the Economic Impact of Presidential Inaugurations on the Washington, D.C. Local Economy By Robert Baumann; Bryan Engelhardt; Victor Matheson
  16. Municipal preferences for state imposed amalgamations: An empirical study based on the 1952 municipal reform in Sweden By Hanes, Niklas; Wikström, Magnus; Wångmar, Erik

  1. By: Florida, Richard (Martin Prosperity Institute); Mellander, Charlotta (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology); Stolarick, Kevin (Martin Prosperity Institute)
    Abstract: It is argued that the introduction of new technology is leading toward the decentralization of the production and consumption of creative products and industries. But creative industries and workers may benefit from being around large markets, access to shared labor, network interactions and economies of scale as well as scope. We hypothesize that the combined effects of scale and scope economies shape significant geographic concentration of the entertainment industry. We test for this using data for 297 U.S. metropolitan areas from 1970-2000 for the entertainment industry overall and its key sub-segments. The findings indicate show that the entertainment industry is concentrated in New York and Los Angeles which significantly outperform other large regions. We further note the rise of one or two highly specialized locations in individual segments of the entertainment industry such as Nashville in music or Las Vegas for dancers. We also find some dispersal of entertainment activity to smaller centers. We conclude that the entertainment industry is characterized by a biurificated spatial structure – with concentration driven by the conjoined effects of scale and scope economies growing at the very top (among the very largest city-regions) and dispersal growing at the bottom.
    Keywords: Entertainment; agglomeration; economies of scale; economies of scope
    JEL: R11 R12 Z11
    Date: 2009–01–15
  2. By: Johan H.L. Oud (Radboud University Nijmegen, The Netherlands); Henk Folmer (University of Groningen and University of Wageningen, The Netherlands); Roberto Patuelli (University of Lugano, Switzerland and The Rimini Centre for Economic Analysis, Italy); Peter Nijkamp (VU University Amsterdam, The Netherlands)
    Abstract: This paper analyzes patterns of regional labour market development in Germany over the period 2000-2003 by means of a spatial-dependence continuous-time model. (Spatial) panel data are routinely modelled in discrete time. However, there are compelling arguments for continuous time modelling of (spatial) panel data. Particularly, most social processes evolve in continuous time such that analysis in discrete time is an oversimplification, gives a distorted representation of reality and leads to misinterpretation of estimation results. The most compelling reason for continuous time modelling is that, in contrast to discrete time modelling, it allows for adequate modelling of dynamic adjustment processes (see, for example, Special Issue 62:1, 2008, of Statistica Neerlandica). We introduce spatial dependence in a continuous time modelling framework and apply the unified framework to regional labour market development in Germany. The empirical results show substantial autoregressive effects for unemployment and population development, as well as a negative effect of unemployment development on population development. The reverse effect is not significant. Neither are the effects of the development of regional average wages and of the manufacturing sector on the development of unemployment and population.
    Keywords: Continuous time modelling, structural equation modelling, spatial dependence, panel data, disattenuation, measurement errors, Germany.
    JEL: C33 E24 O18 R11
    Date: 2008–01
  3. By: Giesen, Kristian (University of Duisburg-Essen); Suedekum, Jens (University of Duisburg-Essen)
    Abstract: The salient rank-size rule known as Zipf's law is not only satisfied for Germany's national urban hierarchy, but also for the city size distributions in single German regions. To analyze this phenomenon, we build on the insights by Gabaix (1999) that Zipf's law follows from a stochastic growth process. In particular, Gabaix shows that if the regions follow Gibrat's law, we should observe Zipf at both the regional and the national level. This theory has never been addressed empirically. Using non-parametric techniques we find that Gibrat's law holds in each German region, irrespective of how "regions" are defined. In other words, Gibrat's law and therefore Zipf's law tend to hold everywhere in space.
    Keywords: city size distributions, city growth, Zipf's law, Gibrat's law, rank-size rule
    JEL: R11 O4
    Date: 2009–01
  4. By: Niels Bosma (Urban and Regional research Centre Utrecht (URU), Utrecht University, Utrecht, The Netherlands); Erik Stam (Tjalling Koopmans Institute, Utrecht School of Economics, Utrecht University, Utrecht, The Netherlands; Centre for Technology Management, University of Cambridge, Cambridge, United Kingdom; Scientific Council for Government Policy (WRR), The Hague, The Netherlands; Max Planck Institute of Economics - Entrepreneurship, Growth and Public Policy group, Jena, Germany); Veronique Schutjens (Urban and Regional research Centre Utrecht (URU), Utrecht University, Utrecht, The Netherlands)
    Abstract: Do firm entry and exit improve the competitiveness of regions? If so, is this a universal mechanism or is it contingent on the type of industry or region in which creative destruction takes place? This paper analyses the effect of firm entry and exit on the competitiveness of regions, measured by total factor productivity (TFP) growth. Based on a study across 40 regions in the Netherlands over the period 1988-2002, we find that firm entry is related to productivity growth in services, but not in manufacturing. The positive impact found in services does not necessarily imply that new firms are more efficient than incumbent firms; high degrees of creative destruction may also improve the efficiency of incumbent firms. We also find that the impact of firm dynamics on regional productivity in services is higher in regions exhibiting diverse but related economic activities.
    Keywords: firm entry, firm exit, turbulence, regional competitiveness, total factor productivity
    JEL: L10 M13 O18 R11
    Date: 2009–01–12
  5. By: Wolfgang Polasek (IHS, Austria and The Rimini Centre of Economic Analisys, Italy); Richard Sellner (IHS, Austria)
    Abstract: Completing data that are collected in disaggregated and heterogeneous spatial units is a quite frequent problem in spatial analyses of regional data. Chow and Lin (1971) (CL) were the rst to develop a uni ed framework for the three problems (interpolation, extrapolation and distribution) of predicting disaggregated times series by so-called indicator series. This paper develops a spatial CL procedure for disaggregating cross-sectional spatial data and compares the Maximum Likelihood and Bayesian spatial CL forecasts with the naive pro rata error distribution. We outline the error covariance structure in a spatial context, derive the BLUE for the ML estimator and the Bayesian estimation procedure by MCMC. Finally we apply the procedure to European regional GDP data and discuss the disaggregation assumptions. For the evaluation of the spatial Chow-Lin procedure we assume that only NUTS 1 GDP is known and predict it at NUTS 2 by using employment and spatial information available at NUTS 2. The spatial neighborhood is de ned by the inverse travel time by car in minutes. Finally, we present the forecast accuracy criteria comparing the predicted values with the actual observations.
    Date: 2008–01
  6. By: Roberto Patuelli (University of Lugano, Switzerland and The Rimini Centre for Economic Analysis, Italy); Andrea Vaona (University of Lugano, Switzerland and Kiel Institute for the World Economy, Germany); Christoph Grimpe (ZEW Centre for European Economic Research, Germany and Catholic University of Leuven, Belgium and University of Zurich, Switzerland)
    Abstract: Research and development (R&D) in the field of nanomaterials is expected to be a major driver of innovation and economic growth. In this respect, many countries, as national systems of innovation, have established support programs offering subsidies for industry- and government-funded R&D. Consequently, it is of great interest to understand which factors facilitate the creation of new technological knowledge. The existing literature has typically addressed this question by employing a knowledge production function based on firm-, regional- or even country-level data. Estimating the effects for the entire national system of innovation, however, implicitly assumes poolability of regional data. We apply our reasoning to Germany, which has well-known – and wide – regional disparities, for example between the former East and West. Based on analyses at the level of NUTS-3 regions, we find different knowledge production functions for the East and the West. Moreover, we investigate how our results are affected by the adoption of alternative aggregation levels. Our findings have implications for further research in the field, that is, a careful evaluation of poolability and aggregation is required before estimating knowledge production functions at the regional level. Policy considerations are offered as well.
    Keywords: nanotechnology, patents, poolability, Germany, spatial autocorrelation
    JEL: L60 O32 R11 R12
    Date: 2008–01
  7. By: Frédéric Rychen (LEST - Laboratoire d'économie et de sociologie du travail - CNRS : UMR6123 - Université de Provence - Aix-Marseille I - Université de la Méditerranée - Aix-Marseille II, IDEP - Institut d'Économie Publique - GREQAM); Jean-Benoît Zimmermann (GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - Université de la Méditerranée - Aix-Marseille II - Université Paul Cézanne - Aix-Marseille III - Ecole des Hautes Etudes en Sciences Sociales - CNRS : UMR6579)
    Abstract: During the recent years, clusters have been at the heart of a vast literature supposed to bring new arguments and perspectives to local development preoccupations. Two complementary factors are stressing for firms and territories the importance of governing the interactions of industrial actors: the globalisation of the economy and the technology and the emergence of a knowledge based economy. In local systems, agents are mostly connected with agents situated in their spatial proximity, while these local networks, as open systems, benefit from the long distance connections that some of their members are able to activate. Co-location of actors in a geographical proximity by itself is not a sufficient condition for co-ordination but can contribute to its efficiency, provided the existence of other shared dimensions among agents: organic level, representations, projects, ... As far as efficiency and performances of "classical" clusters are not only the result of the intensity and quality of internal but also external interactions and coordination, into which extent can we still consider the relevance of interaction structures restricted to bounded geographical areas? In this paper we turn our attention to the way industrial actors take into account the question of the local-global articulation for the strategic building of their own ego-network, that is the set of links they may build in order to achieve efficient interactions with partners and competitors. Thus interfaces between local and global relationships are a key feature that can be achieved through different approaches. To this aim we introduce the two concepts of knowledge gatekeeper and temporary proximity that appear as providing alternative approaches of actors partnering, likely to provide a better flexibility in the local-global trade-off. We will then present the basic form of the ego-networks on which the individual firm is able to build her relational neighbourhood. This raises the question of the combination of individual ego-networks into a consistent networked structure into which local networks are articulated by the way of local-global interfaces. On this basis we present a typology of the basic new forms of clustering where time and space can be alternatively and complementarily combined in order to achieve more flexibility and costs reduction of the localisation game.
    Keywords: Industry ; territory ; globalisation ; knowledge based economy ; local-global ; knowledge gatekeeper ; temporary proximity ; clusters ; network ; structure
    Date: 2009–01–15
  8. By: Rosella Nicolini (Departament d'Economia Aplicada, Universitat Autonoma de Barcelona)
    Abstract: The purpose of this contribution is to draw a picture of the (uneven) distribution of economic activities across the states of the European Union (EU) and the consequences entailed by it. We will briefly summarize the most salient and recent contributions. Then, in the light of the economic geography theory, we will discuss the economic and social advantages and disadvantages associated with a core– periphery structure. In this sense, particular attention will be addressed to the EU financial system of Structural Funds and the effects they produced. Finally, we will formulate some suggestions, relying on the EU experience, that could be of interest to the current Brazilian regional policy.
    Keywords: Core-periphery structure, Inequality, EU policies, Brazil
    JEL: O54 R12 R58
    Date: 2008–12
  9. By: Björn Frank (University Kassel, Nora-Platiel-Str. 4, 34109 Kassel, Germany)
    Abstract: The notion of face-to-face contacts has recently become very popular in regional economics and in economic geography. This is the most obvious way to explain why firms still locate in proximity to others after the "death of distance", i.e., the shrinking costs for transportation, especially transportation of messages' pure information content. While this is intuitive, controlled laboratory experiments provide much more direct and reliable evidence on the importance of face-to-face contacts. They tackle the question what personal contacts are good for, and in which cases their effects are negligible. To the best of my knowledge, regional economists and geographers are not aware of this new and developing string of literature; it is the purpose of this paper to survey and to organize the relevant experimental research with a special focus on its importance for regional economics. However, the paper might also serve to alert more experimentalists to the importance of their work for current regional science, of which they seem not to be aware either.
    Keywords: Cooperation, death of distance, face-to-face, localized spillovers, trust
    JEL: C90 D83 R19
    Date: 2009
  10. By: Hiroshi Sato
    Abstract: This paper examines the economic and noneconomic determinants of growth disparity among Chinese villages between 1990 and 2002. By estimating a growth equation, first, we confirm a significant positive effect of the initial level of human capital, as well as the initial condition of physical infrastructure. Second, social capital measured by the degree of stable social relations at the village level is also a significant growth-promoting factor. The policy implications of our findings are that public policy promoting social stability in rural areas should be strengthened, as well as increasing financial support for rural education and infrastructure construction, especially in lower income regions.
    Keywords: regional disparity, growth regression, social capital, rural China
    JEL: D31 O18 R11
    Date: 2009–01
  11. By: Rangan Gupta (Department of Economic, University of Pretoria); Stephen M. Miller (College of Business, University of Las Vegas, Nevada)
    Abstract: We examine the time-series relationship between housing prices in Los Angeles, Las Vegas, and Phoenix. First, temporal Granger causality tests reveal that Los Angeles housing prices cause housing prices in Las Vegas (directly) and Phoenix (indirectly). In addition, Las Vegas housing prices cause housing prices in Phoenix. Los Angeles housing prices prove exogenous in a temporal sense and Phoenix housing prices do not cause prices in the other two markets. Second, we calculate out-of-sample forecasts in each market, using various vector autoregessive (VAR) and vector error-correction (VEC) models, as well as Bayesian, spatial, and causality versions of these models with various priors. Different specifications provide superior forecasts in the different cities. Finally, we consider the ability of theses time-series models to provide accurate out-of-sample predictions of turning points in housing prices that occurred in 2006:Q4. Recursive forecasts, where the sample is updated each quarter, provide reasonably good forecasts of turning points.
    Keywords: Ripple effect, Housing prices, Forecasting
    JEL: C32 R31
    Date: 2009–01
  12. By: Dreger, Christian (DIW Berlin); Erber, Georg (DIW Berlin); Glocker, Daniela (DIW Berlin)
    Abstract: The accumulation of the human capital stock plays a key role to explain the macroeconomic performance across regions. However, despite the strong theoretical support for this claim, empirical evidence has been not very convincing, probably because of the low quality of the data. This paper provides a robustness analysis of alternative measures of human capital available at the level of EU NUTS1 and NUTS2 regions. In addition to the univariate measures, composite indicators based on different construction principles are proposed. The analysis shows a significant impact of construction techniques on the quality of indicators. While composite indicators and labour income measures point to the same direction of impact, their correlation is not overwhelmingly high. Moreover, popular indicators should be applied with caution. Although schooling and human resources in science and technology explain some part of the regional human capital stock, they cannot explain the bulk of the experience.
    Keywords: human capital indicators, regional growth
    JEL: I20 O30 O40 O52
    Date: 2009–01
  13. By: Michael Greenstone (Massachusetts Institute of Technology and NBER, USA); Richard Hornbeck (Massachusetts Institute of Technology, USA); Enrico Moretti (University of California and NBER, USA and The Rimini Centre of Economic Analisys, Italy)
    Abstract: We quantify agglomeration spillovers by estimating the impact of the opening of a large new manufacturing plant on the total factor productivity (TFP) of incumbent plants in the same county. Articles in the corporate real estate journal Site Selection reveal the county where the "Million Dollar Plant" ultimately chose to locate (the "winning county"), as well as the one or two runner-up counties (the "losing counties"). The incumbent plants in the losing counties are used as a counterfactual for the TFP of incumbent plants in winning counties in the absence of the plant opening. Incumbent plants in winning and losing counties have economically and statistically similar trends in TFP in the 7 years before the opening, which supports the validity of the identifying assumption. After the new plant opening, incumbent plants in winning counties experience a sharp relative increase in TFP. Five years after the opening, TFP of incumbent plants in winning counties is 12% higher than TFP of incumbent plants in losing counties. Consistent with some theories of agglomeration, this effect is larger for incumbent plants that share similar labor and technology pools with the new plant. We also find evidence of a relative increase in skill-adjusted labor costs in winning counties, indicating that the ultimate effect on profits is smaller than the direct increase in productivity.
    Date: 2008–01
  14. By: Andrea BONFIGLIO ([n.a.])
    Abstract: This paper aims to analyse economic and social effects produced by changes in agricultural policy on an Italian "significantly rural" region, the Marche region. To this aim, a regional CGE model based on a 2004 SAM, constructed for this purpose, has been applied. Two policy scenarios have been analysed: total removal of price support and full decoupling. Results suggest that price support has indeed sustained agricultural output but has limited growth potentialities of the region. Moreover, it turned out that decoupling partly removes obstacles to a higher allocative efficiency and favours an improvement in income distribution.
    Keywords: Common Agricultural Policy, Social Accounting Matrix, policy impact, regional CGE model
    JEL: C63 C68 O18 Q18
    Date: 2008–12
  15. By: Robert Baumann (Department of Economics, College of the Holy Cross); Bryan Engelhardt (Department of Economics, College of the Holy Cross); Victor Matheson (Department of Economics, College of the Holy Cross)
    Abstract: While presidential inaugurations routinely attract hundreds of thousands or more visitors to Washington, D.C. for the quadrennial celebration, our examination of employment from the Current Employment Statistics survey from 1939 to the present and both employment and unemployment from the Current Population Survey from 1977 to the present finds no noticeable effect on either variable from the event. The residents of D.C. should not expect the inauguration to make them any richer, and the city should not count on any economic benefits generated by the event to fully pay for the significant costs of hosting it.
    Keywords: Presidential Inauguration, impact analysis, mega-event, tourism
    JEL: O18 R53
    Date: 2009–01
  16. By: Hanes, Niklas (Department of Economics, Umeå University); Wikström, Magnus (Department of Economics, Umeå University); Wångmar, Erik (Department of Social Science, Växjö University)
    Abstract: This paper concerns municipal preferences for state imposed municipal amalgamations. The main purpose of the paper is to study what factors that can explain municipal acceptance or objection of a state imposed amalgamation decision. The empirical analysis is based on the extensive municipal reform in Sweden in 1952. As much as 66 percent of the newly formed municipalities had at least one municipality that objected to the new organisation. The results indicate that the size of the municipality is of importance; small and large municipalities are most likely to accept the amalgamation decision. Furthermore, the relative municipal size affects the probability of accepting the amalgamation decision and equally sized municipalities are less likely to amalgamate on a voluntary basis. We also find that interjurisdictional co-operation prior to the reform has a positive effect on the municipal decision to accept the new municipal structure.
    Keywords: Local government structure; municipal amalgamations; heterogeneous preferences
    JEL: H11 H40 H73 H77 R50
    Date: 2009–01–14

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