nep-geo New Economics Papers
on Economic Geography
Issue of 2009‒03‒22
twenty-two papers chosen by
Vassilis Monastiriotis
London School of Economics

  1. The Russian regional convergence process: Where does it go? By Konstantin Kholodilin; Alexei Oshchepkov; Boriss Siliverstovs
  2. The Wealth of Cities: Agglomeration Economies and Spatial Equilibrium in the United States By Edward L. Glaeser; Joshua D. Gottlieb
  3. Unemployment duration, city size, and the tightness of the labor market By Cécile Détang-Dessendre; Carl Gaigné
  4. Accessibility and Industrial Location: evidence from Spain By Angel Alañón Pardo; Josep-Maria Arauzo-Carod
  5. Political Institutionalisation and Economic Specialisation in Polycentric Metropolitan Regions – The Case of the East-German ‘Saxony Triangle’ By Peter Franz; Christoph Hornych
  6. Modelling the Effects of Immigration on Regional Economic Performance and the Wage Distribution: A CGE Analysis of Three EU Regions By Pouliakas, Konstantinos; Roberts, Deborah; Balamou, Eudokia; Psaltopoulos, Dimitris
  7. A simple model to evaluate relative urban conditions By Pareto, Vittorio Emmanuel
  8. Statistical analysis of regional integration effects By Olga Nosova
  9. Is housing the business cycle? evidence from U.S. cities By Andra C. Ghent; Michael T. Owyang
  10. Misbehavioral urban economics By Berliant, Marcus
  11. O Plano de Deslocações Urbanas e a Resposta Estratégica que Falta aos PROTs e PDMs: A descentralização do planeamento do território e dos transportes By Carlos F. S. Gaivoto
  12. Congestion pricing and long term urban form: Application to Ile-de-France By Michel De Lara; André De Palma; Moez Kilani; Serge Piperno
  13. Local policy, income, and housing prices By Göbel, Jürgen
  14. The Effect of Property Taxes on Location Decisions:Evidence From the Market for Vacation Homes By Erik B. Johnson; Randall Walsh
  15. A Generalized Spatial Panel Data Model with Random Effects By Badi H. Baltagi; Peter Egger; Michael Pfafermayr
  16. Who benefits from increased government spending? a state-level analysis By Michael T. Owyang; Sarah Zubairy
  17. Testing for Cross-Sectional Dependence in Fixed Effects Panel Data Models By Badi H. Baltagi; Qu Feng; Chihwa Kao
  18. Cordon pricing in the Monocentric city model: Theory and application to Ile-de- France By André De Palma; Moez Kilani; Michel De Lara; Serge Piperno
  19. Product Variety, Price Elasticity of Demand and Fixed Cost in Spatial Models By Yiquan Gu; Tobias Wenzel
  20. Growing Shopping Malls and Behavior of Urban Shoppers By Rajagopal
  21. Cross-border metropolitan integration in Europe (Luxembourg, Basel and Geneva) By Sohn, Christophe; Reitel, Bernard; Walther, Olivier
  22. Risk aversion, the value of information and traffic equilibrium By André De Palma; Robin Lindsey; Nathalie Picard

  1. By: Konstantin Kholodilin (DIW Berlin, Germany); Alexei Oshchepkov (Higher School of Economics, Moscow, Russia); Boriss Siliverstovs (KOF Swiss Economic Institute, ETH Zurich, Switzerland)
    Abstract: This paper investigates the income convergence among Russian regions in the period 1998- 2006. It makes two major contributions to rather extensive literature on the regional con- vergence in Russia. First, it identifies spatial regimes using the exploratory spatial data analysis. Second, it examines the impact of spatial effects on the convergence process. Our results show that the overall speed of regional convergence in Russia, being low by inter- national standards, becomes even lower after controlling for spatial effects. However, when accounting for the spatial regimes, we find a strong regional convergence among high-income regions located near other high-income regions. Our results indicate that estimation of speed of convergence using aggregate data may result in misleading conclusions regarding the na- ture of convergence process among Russia’s regions.
    Keywords: Regional convergence, spatial regimes, spatial effects
    JEL: C21 O47 R12
    Date: 2009–02
  2. By: Edward L. Glaeser; Joshua D. Gottlieb
    Abstract: Empirical research on cities starts with a spatial equilibrium condition: workers and firms are assumed to be indifferent across space. This condition implies that research on cities is different from research on countries, and that work on places within countries needs to consider population, income and housing prices simultaneously. Housing supply elasticity will determine whether urban success shows up in more people or higher incomes. Urban economists generally accept the existence of agglomeration economies, which exist when productivity rises with density, but estimating the magnitude of those economies is difficult. Some manufacturing firms cluster to reduce the costs of moving goods, but this force no longer appears to be important in driving urban success. Instead, modern cities are far more dependent on the role that density can play in speeding the flow of ideas. Finally, urban economics has some insights to offer related topics such as growth theory, national income accounts, public economics and housing prices.
    JEL: D0 D00 R0 R00
    Date: 2009–03
  3. By: Cécile Détang-Dessendre; Carl Gaigné
    Abstract: This paper attempts to determine whether residential location affects unemployment duration. Our analysis is based on a spatial job search framework that shows the importance of dissociating the role of travel time from physical distance in unemployment duration. The contribution of our study also stems from the development of skill-specific accessibility measures that take into account the spatial distribution of labor supply and demand. Our results show that physical distance and competition among searchers must be controlled for in order to understand the significant role of job access (measured in terms of travel time) in unemployment duration. Second, improvements in access raise the probability that persons living in urban fringes and rural areas will become employed. Third, for workers living in large urban centers, the relationship between location and unemployment duration is insignificant.
    Keywords: unemployment duration, job accessibility, commuting time
    JEL: J64 R23
    Date: 2009
  4. By: Angel Alañón Pardo (Department of Applied Economics I (Complutense University of Madrid) and Real Colegio Complutense at Harvard University); Josep-Maria Arauzo-Carod (Quantitative Urban and Regional Economics (QURE) Department of Economics (Rovira i Virgili University))
    Abstract: This paper deals with location decisions of manufacturing firms in Spain. We analyse how agglomeration economies and, especially, transport accessibility influence location decisions of firms. During the 1990s there was an intense programme of high capacity road construction which improved accessibility to municipalities. We analyse the location decisions of firms at municipality level and in three industries. The main empirical contributions of this paper are the econometric techniques used (spatial econometrics models) and some of the explanatory variables (local added value, road accessibility, and the characteristics of firms in neighbouring municipalities). The results show that agglomeration economies (including road network improvements) are important in industrial location decision-making.
    Date: 2009
  5. By: Peter Franz; Christoph Hornych
    Abstract: The rising attention of politicians as well as scientists in the EU to the large urban agglomerations as centres of economic growth is accompanied by political efforts to identify and to demarcate such agglomerations under the label ‘metropolitan regions’. This study develops a theoretical framework broaching the issue of cooperation between municipalities from the perspective of regional economics as well as political science. The framework is applied to the empirical case of the polycentric metropolitan region ‘Saxony Triangle’ in East Germany. The results show that various intervening factors prevent intense cooperation between the actors in the region. Policy implications and con- clusions for future research are discussed.
    Keywords: Polycentric Urban Regions, Metropolitan Regions, Saxony Triangle, Coop- eration, Agglomeration, Correspondence Analysis
    JEL: R12 R53 R58
    Date: 2009–03
  6. By: Pouliakas, Konstantinos; Roberts, Deborah; Balamou, Eudokia; Psaltopoulos, Dimitris
    Abstract: The paper uses a regional Computable General Equilibrium (CGE) model to analyse the effects of immigration on three small remote EU regions located within Scotland, Greece and Latvia. Two migration scenarios are assessed. In the first, total labour supply is affected. In the second, the importance of migratory flows by differential labour skill types is investigated. The results indicate significant differences in the extent to which regional economies are affected by immigration. They also suggest that remote regions are highly vulnerable to the out-migration of skilled workers (‘brain-drain’) while the in-migration of unskilled workers leads to widening wage inequality.
    Keywords: Immigration; CGE; Skills; Wage Inequality; Brain-drain; Regional economies
    JEL: R13 D33 D58 R23
    Date: 2008–11–30
  7. By: Pareto, Vittorio Emmanuel
    Abstract: The urban development process intends to enhance urban equipment, infrastructure and services to improve urban conditions and reduce inequalities. While planning activities usually demand a sizeable amount of data to assess these conditions, it is hard to find a straightforward procedure to translate these data into a comprehensive and balanced set of projects and programs. Most urban projects have a strong sectorial character and it is difficult to compare parks with roads or sanitation with schools. Development projects are normally justified in their own terms, yet rarely are sectorial demands equably met by the proposed projects. The following model intends to facilitate this task, providing a simple yet efficient means to assess urban conditions, evaluate and compare the sectorial demands and assemble a balanced set of development goals that can be used to estimate the overall investment needed. The proposed system assesses urban conditions through a set of selected indicators, derived from a compact data base. These indicators represent the performance of the basic urban sectors at each urban zone, thus providing the necessary spatial component to the system. The indicators are normalised to allow comparison of conditions between different sectors. The values of the normalised indicators are then used to evaluate the relative quality of services at each urban zone. By displaying the normalised indicators as bar charts, it is easier to visualise sectorial demands and spatial imbalances. The model is built on a spreadsheet, making fairly easy to verify how much improvement in the sector is needed to attain the desired performance level in each zone. New values can be entered interactively until a preferred urban conditions pattern is attained. The information produced by the model can be used as the basic guideline to dimension sectorial projects and compose a comprehensive development program. Besides describing and discussing all the procedures adopted, a simple yet complete example illustrates the use of the model.
    Keywords: planning; urban; development; model; infrastructure; condition; regional
    JEL: O18
    Date: 2009–02
  8. By: Olga Nosova
    Abstract: The paper studies the regional integration as the unique process which depends on the degree of cooperation and interchange among regions. The generalisation of existing approaches for regional integration has been classified by the criterions. The data of the main economic indicators have been analysed. The economic analysis proves the differences in production endowments, the asymmetry in fixed capital investment, the disproportional income, and foreign direct investment distribution in 2001 – 2005 in Ukrainian regions. Econometric modelling depicts the existence of the division for the industrial regions with high urbanisation and backward agrarian regions in the Ukraine, the industrial development disparities among regions; the insufficient infrastructure (telecommunications, roads, hotels, services and etc.), the low labour productivity in industrial sector, and insufficient regional trade.
    Keywords: regional integration, regions, economic disparities
    Date: 2009–02
  9. By: Andra C. Ghent; Michael T. Owyang
    Abstract: We analyze the relationship between housing and the business cycle in a set of 36 US cities. Most surprisingly, we find that falls in house prices are often not followed by declines in employment. We also find that the leading indicator property of residential investment is not consistent across cities and that, at the national level, the leading indicator property of residential investment is not robust to including financial factors as control variables.
    Keywords: Housing ; Housing - Prices ; Business cycles
    Date: 2009
  10. By: Berliant, Marcus
    Abstract: Applications of the framework of behavioral economics to questions arising from urban economics are discussed. Directions for future research are outlined.
    Keywords: behavioral urban economics; ambiguity aversion; loss aversion; regional art
    JEL: C90 R23
    Date: 2009–03–17
  11. By: Carlos F. S. Gaivoto (Carris)
    Abstract: The sustainable urban mobility plan is the framework of planning and organisation of mobility system. It is a strategic and operational plan with consequences in the planning and organisation of territorial and transport systems. When it’s defining the principles and the objectives of sustainable development and when it’s working in the scenarios of modal shift more favourable to the alternative modes than the car, the planning and the organisation of territory will be integrated on the political of reduction of road circulation volumes, in the reduction of GEE, waste of space and time, in the improvement of quality of urban environment. The Urbanism Agencies and the Urban Transport Authorities will get their selves in the urban mobility plan, in territory scenarios development, mobility and transports, with the objective to understand the sustainable politics in the accessibilities which are available by the transportation bill. In Portugal, although the authorities are not yet working, the law (1/2009) recently approved in last December and published at the beginning of the year, they have the sustainable urban mobility plans forward in this strategy.
    Keywords: Mobility, sustainability, environment, urban mobility plan, transportation bill, urban transport authority, accessibility, territory, sustainable development, urbanism agency
    JEL: L62 L92 O18 R14 R41 R58
    Date: 2009–03
  12. By: Michel De Lara (Université Paris-Est, CERMICS, Ecole des Ponts ParisTech - Université Paris-Est); André De Palma (Department of Economics, Ecole Polytechnique - CNRS : UMR7176 - Polytechnique - X, ENS Cachan - Ecole Normale Supérieure de Cachan - Ecole Normale Supérieure de Cachan); Moez Kilani (Université Paris-Est, CERMICS, Ecole des Ponts ParisTech - Université Paris-Est); Serge Piperno (Université Paris-Est, CERMICS, Ecole des Ponts ParisTech - Université Paris-Est)
    Abstract: We propose an efficient algorithm that solves the monocentric city model with traffic congestion, and use it to explore the impact of congestion pricing on urban forms and, hence, on transport volume, CO2 emissions and energy consumption. The application focuses on the region Ie-de-France. Four pricing policies are considered: no toll, where transport cost is equal to the vehicle operating cost, cordon toll where users pay the toll when they drive inside cordon region linear toll (optimal under the class of linear tolls) and optimal toll (or first-best toll). The linear toll is equivalent to an increase in the vehicle operating cost. It performs well with respect to the first-best solution but, since it applies identically to all trips, it is not likely to be relevant in practice. By comparison to the no-toll situation, optimal congestion pricing reduces the radius of the city and the average travel distance by 34% and 15%, respectively.
    Keywords: Monocentric model; Equilibrium computation; Transport pricing; Long term impacts
    Date: 2008–12
  13. By: Göbel, Jürgen
    Abstract: In a local economy, the citizens can react on local policy by exit. Exit induces a shift in the housing demand. The local policy may thus capitalize into the housing prices. However, the citizens encounter specific coordination problems on the housing market. Therefore, it may be asked how effective their exit option is. To answer this question, we work with a sample of 234 U.S. counties, from 2002 and 2003. Our empirical analysis shows that the property tax revenue is the local fiscal variable which has the strongest connection with the housing prices. In contradiction to the general theory, this connection is positive and indirect. The essential element within this connection is the personal income.
    Keywords: local policy; exit; housing price; capitalization
    JEL: H72 H30 R21
    Date: 2009–02–28
  14. By: Erik B. Johnson; Randall Walsh
    Abstract: The Tiebout model assumes that individuals 'vote with their feet' and choose to locate in the jurisdiction which best matches their fiscal preferences. In this paper, we test Tiebout's voting mechanism by examining whether housing purchase decisions are sensitive to changes in local property tax rates. Results from previous empirical tests of the link between property taxes and mobility are mixed and typically suffer from a myriad of identification problems including the confounding influence of tax rates on public good levels, tax endogeneity arising as a result of jurisdictional composition, and aggregation bias. In this paper, we are able to overcome many of the traditional obstacles to identification by: 1) focusing on purchasers of vacation homes who arguably receive no benefits from public goods funded by the tax change; 2) examining an exogenous and differential change in tax rates that arose from Michigan's Proposal A in 1994; and 3) using a high-resolution tax dataset at the Census Tract level. Our results provide some of the clearest evidence to date that household location choices are sensitive to tax changes. Further, consistent with theoretical predictions, the impact of tax changes on housing counts is found to be sensitive to the elasticity of housing supply.
    JEL: H2 H22 H71 R21 R23 R31
    Date: 2009–03
  15. By: Badi H. Baltagi (Center for Policy Research, Maxwell School, Syracuse University, Syracuse, NY 13244-1020); Peter Egger; Michael Pfafermayr
    Abstract: This paper prooses a generalized panel data model with random effects and first-order spatially autocorrelated residuals that encompasses two previously suggested specifications. The first one is described in Anselin's (1988) book and the second one by Kapoor, Kelejian, and Prucha (2007). Our encompassing specification allows us to test for these models as restricted specifications. In particular, we derive three LM and LR tests that restrict out generalized model to obtain (i) the Anselin model, (ii) the Kapoor, Kelejian, and Prucha model, and (iii) the simple random effects model that ignores the spatial correlation in the residuals. For two of these three tests, we obtain closed form solutions and we derive their large sample distributions. Our Monte Carlo results show that the suggested tests are powerful in testing for these restricted specifications even in small and medium sized samples.
    Keywords: Panel data, spatially autocorrelated residuals, maximum-likelihood estimation, Lagrange multiplier, likelihood ratio
    JEL: C12 C23
    Date: 2009–02
  16. By: Michael T. Owyang; Sarah Zubairy
    Abstract: We simultaneously identify two government spending shocks: military spending shocks as defined by Ramey (2008) and federal spending shocks as defined by Perotti (2008). We analyze the effect of these shocks on state-level personal income and employment. We find regional patterns in the manner in which both shocks affect state-level variables. Moreover, we find differences in the propagation mechanisms for military versus nonmilitary spending shocks. The former benefits economies with larger manufacturing and retail sectors and states that receive military contracts. While nonmilitary shocks also benefit states with the proper industrial mix, they appear to stimulate economic activity in more-urban, lower-income states.
    Keywords: Government spending policy ; Expenditures, Public
    Date: 2009
  17. By: Badi H. Baltagi (Center for Policy Research, Maxwell School, Syracuse University, Syracuse, NY 13244-1020); Qu Feng (; Chihwa Kao (Center for Policy Research, Maxwell School, Syracuse University, Syracuse, NY 13244-1020)
    Abstract: This paper proposes a new test for cross-sectional dependence in fixed effects panel data models. It is well known that ignoring cross-sectional dependence leads to incorrect statistical inference. In the panel data literature, attempts to account for cross-sectional dependence include factor models and spatial correlation. In most cases, strong assumptions on the covariance matrix are imposed. Attempts at avoiding ad hoc specifications rely on the sample covariance matrix. Unfortunately, when the dimension of this variance-covariance matrix is large, the sample covariance matrix turns out to be an inconsistent estimator of the population covariance matrix. This is especially relevant for micro panels with a large number of cross-sectional units observed over a short time series span. This fact undermines existing tests based on the sample covariance matrix directly. This paper uses the Random Matrix Theory based approach of Ledoit and Wolf (2002) to test for cross-sectional dependence of the error terms in linear large panel models with comparable number of cross-sectional units and time series observations. Since the errors are unobservable, the residuals from the fixed effects regression are used. As shown in the paper, the difference cannot be ignored asymptotically, and the limiting distribution of the proposed test statistic is derived. Additionally, its finite sample properties are examined and compared to the traditional testsw for cross-sectional dependence using Monte Carlo simulations.
    Keywords: Cross-sectional dependence, panel data, fixed effects, John test
    JEL: C13 C33
    Date: 2009–02
  18. By: André De Palma (Department of Economics, Ecole Polytechnique - CNRS : UMR7176 - Polytechnique - X, ENS Cachan - Ecole Normale Supérieure de Cachan - Ecole Normale Supérieure de Cachan); Moez Kilani (Université Paris-Est, CERMICS, Ecole des Ponts ParisTech - Université Paris-Est); Michel De Lara (Université Paris-Est, CERMICS, Ecole des Ponts ParisTech - Université Paris-Est); Serge Piperno (Université Paris-Est, CERMICS, Ecole des Ponts ParisTech - Université Paris-Est)
    Abstract: We propose a method to compute an equilibrium solution for the monocentric city model with traffic congestion, and to quantify the im- pact of cordon tolls on social surplus. The focus of this paper is on the comparison of road pricing of one and two cordons, with the no toll and first-best situations as benchmarks. We find that a one-cordon toll yields a social efficiency of 63% with respect to first-best, and that an optimal two-cordon toll increases the efficiency to 73%. Both policies have a pos- itive impact on CO2 emissions because they reduce the average length of trips and reduce the road size.
    Keywords: Monocentric model; Cordon toll; Acceptability of road pricing
    Date: 2008–12
  19. By: Yiquan Gu; Tobias Wenzel
    Abstract: This paper explores the implications of price-dependent demand in spatial models of product differentiation.We introduce consumers with a quasi-linear utility function in the framework of the Salop (1979) model.We show that the so-called excess entry theorem relies critically on the assumption of completely inelastic demand. Our model is able to produce excessive, insufficient, or optimal product variety.A proof for the existence and uniqueness of symmetric equilibrium when price elasticity of demand is increasing in price is also provided.
    Keywords: Demand elasticity, spatial models, excess entry theorem
    JEL: L11 L13
    Date: 2009–03
  20. By: Rajagopal (Tecnológico de Monterrey, Campus Ciudad de México)
    Abstract: Shopping malls contribute to business more significantly than traditional markets which were viewed as simple convergence of supply and demand. Shopping malls attract buyers and sellers, and induce customers providing enough time to make choices as well as a recreational means of shopping. However, competition between malls, congestion of markets and traditional shopping centers has led mall developers and management to consider alternative methods to build excitement with customers. This study examines the impact of growing congestion of shopping mall in urban areas on shopping conveniences and shopping behavior. Based on the survey of urban shoppers, the study analyzes the cognitive attributes of the shoppers towards attractiveness of shopping malls and intensity of shopping. The results of the study reveal that ambiance of shopping malls, assortment of stores, sales promotions and comparative economic gains in the mall attract higher customer traffic to the malls.
    Keywords: Shopping malls, traditional markets, sales promotion, market ambiance, leisure shopping, recreational services, retailing, market congestion, customer value, consumer behavior
    JEL: D12 L81 M31 R51
    Date: 2009–03
  21. By: Sohn, Christophe (Centre for Population, Poverty and Public Policy Studies (CEPS/INSTEAD), Luxembourg); Reitel, Bernard (University of Upper Alsace, France); Walther, Olivier (Centre for Population, Poverty and Public Policy Studies (CEPS/INSTEAD), Luxembourg)
    Abstract: This article questions the integration processes in three small cross-border metropolitan areas: Luxembourg, Basel and Geneva. By referring to an original analysis framework, it evaluates the nature and intensity of the functional and institutional integration and highlights the elements that structure the cooperation between the actors. The analysis shows that there is not necessarily a reciprocal link between the size of the functional area and the extent of the cooperation. Whilst no metropolitan-sized project is on the agenda in Luxembourg, the example of Basel and Geneva shows that the presence of a national border offers an opportunity to invent original forms of governance, increase the autonomy of the local authorities by different types of cooperation which transcend the institutional and territorial divides, and enable the international character of the metropolitan centre to be valued for what it is. In a context of global competition, these features represent an undeniable benefit.
    Keywords: Metropolitan regions; Governance ; Border studies ; Integration ; Europe
    JEL: R12 R58 P41 P52
    Date: 2009–02
  22. By: André De Palma (Department of Economics, Ecole Polytechnique - CNRS : UMR7176 - Polytechnique - X, ENS Cachan - Ecole Normale Supérieure de Cachan - Ecole Normale Supérieure de Cachan); Robin Lindsey (University of Alberta - University of Alberta); Nathalie Picard (THEMA - Théorie économique, modélisation et applications - CNRS : UMR8184 - Université de Cergy Pontoise)
    Abstract: Information about traffic conditions has traditionally been conveyed to drivers by radio and variable message signs, and more recently via the Internet and Advanced Traveler Information Systems. This has spurred research on how travelers respond to information, how much they are willing to pay for it and how much they are likely to benefit from it collectively. In this paper we analyze the decisions of drivers whether to acquire information and which route to take on a simple congested road network. Drivers vary in their degree of risk aversion with respect to travel time. Four information regimes are considered: No information, Free information which is publicly available at no cost, Costly information which is publicly available for a fee, and Private information which is available free to a single individual. Private information is shown to be individually more valuable than either Free or Costly information, while the benefits from Free and Costly information cannot be ranked in general. Free or Costly information can decrease the expected utility of drivers who are very risk-averse, and with sufficient risk aversion in the population the aggregate compensating variation for information can be negative.
    Keywords: Transportation, route choice, information provision, expected utility, congestion
    Date: 2008–12

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