nep-geo New Economics Papers
on Economic Geography
Issue of 2009‒02‒07
eighteen papers chosen by
Vassilis Monastiriotis
London School of Economics

  1. Persistence and Change of Regional Industrial Activities – The Impact of Diversification in the German Machine Tool Industry By Dirk Fornahl; Christina Guenther
  2. Total factor productivity, intangible assets and spatial dependence in the European regions By Barbara Dettori; Emanuela Marrocu; Raffaele Paci
  3. Short-run Birth and Death of U.S. Manufacturing Firms: 2000 - 2005 By Brown, Jason P.; Lambert, Dayton M.
  4. Can information asymmetry cause agglomeration? By Berliant, Marcus; Kung, Fan-chin
  5. The Dynamic Effects of Open-Space Conservation Policies on Residential Development Density By Lewis, David J.; Provencher, Bill; Butsic, Van
  6. Do Local Economic Development Programs Work? Evidence from the Federal Empowerment Zone Program By Busso, Matias; Kline, Patrick
  7. Agglomeration and Growth with Endogenous Expenditure Shares By Fabio Cerina; Francesco Mureddu
  8. Schooling, Production Structure and Growth: An Empirical Analysis on Italian Regions By Carina Hirsch; Giovanni Sulis
  9. Understanding Commercial Real Estate: Just How Different from Housing Is It? By Joseph Gyourko
  10. Some correlation properties of spatial autoregressions By Martellosio, Federico
  11. Input-Output Analysis, Linear Programming and Modified Multipliers By Zhu, Erqian; Kim, Man-Keun; Harris, Thomas
  12. The Changing Incidence of Geography By James E. Anderson; Yoto V. Yotov
  13. EU Regional Policy and Tax Competition By Johannes Becker; Clemens Fuest
  14. Federal, State, and Local Governments: Evaluating their Separate Roles in US Growth By Higgins, Matthew; Young, Andrew; Levy, Daniel
  15. Income Convergence and Growth in Alabama: Evidence from Sub-county Level Data By Gyawali, Buddhi; Fraser, Rory; Banerjee, Ban; Bukenya, James
  16. Convergencia: del análisis del nivel de actividad económica a las variables sociales. Una revisión de la literatura del caso colombiano By Katherine Aguirre Tobón
  18. Measuring the Economic Impact of Tourism and Special Events: Lessons from Mississippi By Myles, Albert E.; Carter, Rachael

  1. By: Dirk Fornahl; Christina Guenther
    Abstract: The paper Investigates stability and change of regional economic activities in the long-run. As the unit of analysis we selected the machine tool industry in West Germany for the years 1953 to 2002. We spot a strong variance in the activities between the different regions. These differences are relatively stable over time and the regional activities are rather path-dependent. Nevertheless, the paper also identifies changes in the level of activities. As the main driving factors for these changes we examine the effect of regional diversification strategies. We find that those regions pursuing a general diversification strategy have a higher likelihood to grow than regions which are specialising. Furthermore, diversification into totally new technological and product fields is only beneficial under specific circumstances based on technological and market developments. Hence, in most cases a broad diversification is superior to one focusing on new state-of-the-art technological fields.
    Keywords: Geographic concentration, specialisation indices, machine tool industry, path-dependencies, agglomeration economies Length 29 pages
    JEL: L61 O1 O18 R11 R12
    Date: 2009–01
  2. By: Barbara Dettori; Emanuela Marrocu; Raffaele Paci
    Abstract: In the last decade there has been an upsurge of studies on international comparisons of Total Factor Productivity (TFP). The empirical evidence suggests that countries and regions differ not only in traditional factor endowments (labour and physical capital) but mainly in productivity and technology. Therefore, a crucial issue is the analysis of the determinants of such differences in the efficiency levels across economies. In this paper we try to assess these issues by pursuing a twofold aim. First, we derive a regression based measure of regional TFP which have the nice advantage of not imposing a priori restrictions on the inputs elasticities; this is done by estimating a Cobb-Douglas production function relationship for 199 European regions over the period 1985-2006, which includes the traditional inputs as well as a measure of spatial interdependences across regions. Secondly, we investigate the determinants of the TFP levels by analyzing the role played by intangible factors: human capital, social capital and technological capital. It turns out that a large part of TFP differences across the European regions are explained by the disparities in the endowments of such assets. This outcome indicates the importance of policy strategies which aim at increasing the level of knowledge and social capital as stressed by the Lisbon agenda.
    Keywords: Total factor productivity; human capital; social capital; technology; Europe.
    JEL: R11 O47 O52 C31
    Date: 2008
  3. By: Brown, Jason P.; Lambert, Dayton M.
    Abstract: Attracting manufacturing investment remains a viable regional development policy. Previous research in the location literature has informed policymakers which factors are most important for attracting new firm investment. Far less is known about the dynamics of firm death and the possible interaction with firm birth. A conceptual model of county-level investment in the U.S. manufacturing sector is developed from location theory and subsequent literature. Specifically, we test the relative importance of location factors influencing firm investment, and if these factors influence firm birth and death differently. Local factors include labor quality, availability, and cost, market conditions, agglomeration due to localization and urbanization economies, infrastructure, and fiscal policy. This study covers the time period 2000 to 2004 for U.S. counties in the lower 48 states. Firm data are from the U.S. Census Bureau’s Dynamic Firm Data Series, which links establishments across space and time. Regional adjustment models are used to show how ceteris paribus changes in location factors affect the birth and death rates in a county.
    Keywords: location factors, manufacturing, creative destruction, Community/Rural/Urban Development, L60, R11, R12,
    Date: 2009
  4. By: Berliant, Marcus; Kung, Fan-chin
    Abstract: The modern literature on city formation and development, for example the New Economic Geography literature, has studied the agglomeration of agents in size or mass. We investigate agglomeration in sorting or by type of worker, that implies agglomeration in size when worker populations differ by type. This kind of agglomeration can be driven by asymmetric information in the labor market, specifically when firms do not know if a particular worker is of high or low skill. In a model with two types and two regions, workers of different skill levels are offered separating contracts in equilibrium. When mobile low skill worker population rises or there is technological change that favors high skilled workers, integration of both types of workers in the same region at equilibrium becomes unstable, whereas sorting of worker types into different regions in equilibrium remains stable. The instability of integrated equilibria results from firms, in the region to which workers are perturbed, offering attractive contracts to low skill workers when there is a mixture of workers in the region of origin.
    Keywords: Adverse Selection; Agglomeration
    JEL: R13 D82 R12
    Date: 2009–01–30
  5. By: Lewis, David J. (U of Wisconsin); Provencher, Bill; Butsic, Van
    Abstract: Recent economic analyses emphasize that designated open-space increases the rents on neighboring residential land, and likewise, the probability of undeveloped land converting to residential uses. This paper addresses a different question: What is the effect of local open space conservation on the rate of growth in the density of existing residential land? The analysis is relevant for exurban development and also for remote lakeshore development, where shoreline development density can rapidly increase over time and open-space policies are often advocated as a way to protect ecosystems by reducing development. A discrete choice econometric model of lakeshore development is estimated with a unique parcel-level spatial-temporal dataset, using maximum simulated likelihood to account for i) the panel structure of the data, ii) unobserved spatial heterogeneity, and iii) sample selection resulting from correlated unobservables. Results indicate that, contrary to the intuition derived from the current literature, local open space conservation policies do not increase the rate of growth in residential development density, and some open space conservation policies may reduce the rate of growth in residential development density. This is consistent with land-value complementarity between local open space and parcel size. Spatially-explicit simulations at the landscape scale examine the relative effects of conservation policies on the time path of development.
    Date: 2008–01
  6. By: Busso, Matias (U of Michigan); Kline, Patrick (Yale U)
    Abstract: This paper evaluates the impact of Round I of the federal urban Empowerment Zone (EZ) program on neighborhood level labor and housing market outcomes over the period 1994-2000. Using four decades of Census data in conjunction with information on the proposed boundaries of rejected EZs, we find that neighborhoods receiving EZ designation experienced substantial improvements in labor market conditions and moderate increases in rents relative to rejected and future zones. These effects were accompanied by small changes in the demographic composition of the neighborhoods, though evidence from disaggregate Census tabulations suggests that these changes account for little of the observed improvements.
    JEL: C21
    Date: 2008–02
  7. By: Fabio Cerina; Francesco Mureddu
    Abstract: We develop a New Economic Geography and Growth model which, by using a CES utility function in the second-stage optimization problem, allows for expenditure shares in industrial goods to be endogenously determined. The implications of our generalization are quite relevant. In particular, we obtain the following novel results: 1) catastrophic agglomeration may always take place, whatever the degree of market integration, provided that the traditional and the industrial goods are sufficiently good substitutes; 2) the regional rate of growth is affected by the interregional allocation of economic activities even in the absence of localized spillovers, so that geography always matters for growth and 3) the regional rate of growth is affected by the degree of market openness: in particular, depending on whether the traditional and the industrial goods are good or poor substitutes, economic integration may be respectively growth-enhancing or growth-detrimental.
    Keywords: new economic geography, endogenous expenditure shares, substitution effect
    JEL: O41 F43 R12
    Date: 2008
  8. By: Carina Hirsch; Giovanni Sulis
    Abstract: This paper analyses the growth effects of high levels of human capital at the industry level. By favouring technology adoption, human-capital-intensive industries grow faster compared to less human-capital-intensive industries in economies that have higher levels of human capital. Using data for nine macro sectors of manufacturing industries in the twenty Italian regions, the results show positive and significant effects of human capital levels and accumulation on value added growth. This result is robust to a series of sensitivity checks such as measures of productivity growth and different indicators of human capital. This finding is particularly important for Italy, as it has always had a model of industrial specialization focused on the traditional sectors which have a low content of technology and human capital.
    Keywords: Growth, Human Capital, Technology Adoption, Regions, Sectors, Italy.
    JEL: O47 R11
    Date: 2008
  9. By: Joseph Gyourko
    Abstract: Recent sharp declines in owner-occupied housing prices naturally raise the question of whether something similar will happen to income-producing properties. It already has based on the nearly 60% decline in the share prices of publicly-traded, commercial property firms from their peak in early 2007. The core model of spatial equilibrium in urban economics suggests this should not be a surprise, as it shows that both real estate sectors are driven by common fundamentals, which should make them perform similarly. On the other hand, stronger limits to arbitrage in housing suggest wider swings in prices unrelated to fundamentals are feasible in that property sector. The data find many more similarities than differences across the two real estate sectors. The simple correlation between appreciation rates on owner-occupied housing and commercial real estate is nearly 40%. Both sectors also exhibit similar time series patterns in their price appreciation, with there being persistence across individual years and mean reversion over longer periods. Commercial real estate capital structure looks to be quite weak due to high leverage combined with strong mean reversion in prices. The aggregate loan-to-value ratio on income-producing properties is about 75%. Estimated mean reversion in price appreciation of at least 25% over relatively short horizons suggests that normal change from the recent peak will leave little or no equity on average to cushion against any future negative shocks.
    JEL: R0 R21 R31
    Date: 2009–02
  10. By: Martellosio, Federico
    Abstract: This paper investigates how the correlations implied by a first-order simultaneous autoregressive (SAR(1)) process are affected by the weights matrix W and the autocorrelation parameter . We provide an interpretation of the covariances between the random variables observed at two spatial units, based on a particular type of walks connecting the two units. The interpretation serves to explain a number of correlation properties of SAR(1) models, and clarifies why it is impossible to control the correlations through the specification of W.
    Keywords: simultaneous autoregressions; spatial autocorrelation; spatial weights matrices; walks in graphs.
    JEL: C50 C21
    Date: 2008–10
  11. By: Zhu, Erqian; Kim, Man-Keun; Harris, Thomas
    Abstract: The input-output (IO) analysis explores changes in final demand through the regional economy using multipliers. However, it isn’t flexible to investigate the regional impact from the capacity limitations which are directly imposed on production, not final demand. This is because the multipliers are changing with exogenous restrictions on production. Conventionally, the IO analysis is performed assuming exogenous production restrictions being the changes in final demands or assuming the sector being exogenous sector like the final demand. If researchers or policy makers are interested in only economic impacts from production restrictions, there is no need to look into the modified multipliers. The modified multipliers should be considered when researchers and policy makers attempt to analyze the compensation of impact, especially recovery of loss using government expenditure. We suggest that the linear programming is a useful and efficient tool to derive modified multipliers and estimate correct regional impact from the policy changes.
    Keywords: Input-Output Analysis, Multipliers, Regional Impact Analysis, Community/Rural/Urban Development, C67, R15, R5,
    Date: 2009
  12. By: James E. Anderson (Boston College); Yoto V. Yotov (Drexel University)
    Abstract: Neglected properties of the structural gravity model offer a theoretically consistent method to calculate the incidence of estimated trade costs, disaggregated by commodity and region, and re-aggregated into forms useful for economic geography. For Canada's provinces, 1992-2003, incidence is on average some five times higher for sellers than for buyers. Sellers' incidence falls over time due to specialization, despite constant gravity coefficients. This previously unrecognized globalizing force drives big reductions in 'constructed home bias', the disproportionate share of local trade; and large but varying gains in real GDP. Aggregation biases gravity coefficients downward.
    Keywords: geography, gravity model, rade costs, globalization
    JEL: F10 D24
    Date: 2008–09–01
  13. By: Johannes Becker (Oxford University Centre for Business Taxation); Clemens Fuest (Oxford University Centre for Business Taxation)
    Abstract: The European Union provides coordination and financing of trans-European transport infrastructures, i.e. roads and railways, which link the EU Member States and reduce the cost of transport and mobility. This raises the question of whether EU involvement in this area is justified by inefficiencies of national infrastructure policies. Moreover, an often expressed concern is that policies enhancing mobility may boost tax competition. We analyse these questions using a model where countries compete for the location of profitable firms. We show that a coordination of investment in transport cost reducing infrastructures within union countries enhances welfare and mitigates tax competition. In contrast, with regard to union-periphery infrastructure, the union has an interest in a coordinated reduction of investment expenditures. Here, the effects on tax competition are ambiguous. Our results provide a rationale for EU-level regional policy that supports the development of intra-union infrastructure.
    Keywords: European Union, Infrastructure, Regional Policy, Tax Competition
    JEL: H54 H25 F23
    Date: 2009
  14. By: Higgins, Matthew; Young, Andrew; Levy, Daniel
    Abstract: We use US county level data (3,058 observations) from 1970 to 1998 to explore the relationship between economic growth and the extent of government employment at three levels: federal, state and local. We find that increases in federal, state and local government employments are all negatively associated with economic growth. We find no evidence that government is more efficient at lower levels. While we cannot separate out the productive and redistributive services of government, we document that the county-level income distribution became slightly more unequal from 1970 to 1998. For those who justify government activities in terms of equity concerns – perhaps even trading off economic growth for equity – the burden falls on them to show that the income distribution would have widened more in the absence of government activities. We conclude that a release of government-employed labor inputs to the private sector would be growth-enhancing.
    Keywords: Economic Growth; Federal Government; State Government; Local Government; County-Level Data; Metro and Non-Metro Counties; Income Distribution; Equity
    JEL: E62 O18 H50 O40 H70 O11 O43 O51 R11
    Date: 2009–01–29
  15. By: Gyawali, Buddhi; Fraser, Rory; Banerjee, Ban; Bukenya, James
    Abstract: 1980 and 2000 Census Block Group (CBG) data were used to examine income convergence in all Alabama counties vis-à-vis Alabama’s Black Belt and Northwest regions. Though all three models demonstrated conditional income convergence, CBGs with smaller initial populations, smaller changes in African-American or dependent age populations had higher income changes.
    Keywords: Alabama, African-Americans, Black Belt, Census Block Groups, Income Convergence, Community/Rural/Urban Development, Resource /Energy Economics and Policy,
    Date: 2009
  16. By: Katherine Aguirre Tobón
    Abstract: Resumen: Las diferencias regionales en el nivel de actividad económica han sido amplio tema de discusión y análisis en Colombia. La aplicación de la metodología tradicional planteada por Barro y Sala-i-Martin y además de metodologías alternativas, ha permitido concluir, para la mayoría de los casos, que los departamentos de Colombia muestran una distribución persistente en los ingresos. Variables de corte social, político, económico y geográfico, entran en los diferentes trabajos con el objetivo de condicionar los estados estacionarios a los cuales convergen los departamentos. Finalmente, la convergencia en indicadores alternativos al ingreso es revisada por los trabajos más recientes, los cuales muestran convergencia en la mayoría de los indicadores utilizados. Summary: regional differences in the economic activity have been a widespread topic in the national economic debate and analysis. Different methodologies including the traditional based in Barro and Sala-i-Martin and their alternatives allow to conclude (for the majority of the papers) that there is a persistent distribution in the national income. Social, political, economic and geographical variables have been also used in order to condition the different steady states of the Colombian departments. Finally, alternative variables to the income are used in most the most recent documents that mostly conclude convergence in that indicators.
    Date: 2008–11–30
  17. By: Mojica, Maribel; Gebremedhin, Tesfa; Schaeffer, Peter
    Keywords: Community/Rural/Urban Development,
    Date: 2009–01
  18. By: Myles, Albert E.; Carter, Rachael
    Abstract: With the use of this dynamic spreadsheet model, tourism managers can gain valuable insight into tourism and special events. This insight can help them plan future events or evaluate whether the costs of producing these events are justified by the benefits. Visitor spending from outside the county creates direct sales in the local economy. Each dollar of direct sales adds indirect and induced spending in the county. Besides these impacts, visitor spending produces labor income and jobs for residents in the county.
    Keywords: economic impact, activity, event, employment, income, sales, and tax revenues direct, indirect, and total impact, Community/Rural/Urban Development, Consumer/Household Economics, Research and Development/Tech Change/Emerging Technologies, Teaching/Communication/Extension/Profession,
    Date: 2009

This nep-geo issue is ©2009 by Vassilis Monastiriotis. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
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