nep-geo New Economics Papers
on Economic Geography
Issue of 2009‒05‒23
25 papers chosen by
Vassilis Monastiriotis
London School of Economics

  1. Infrastructure and economic geography: An overview of theory and evidence By I.P. Ottaviano, Gianmarco
  2. Infrastructure endowment and investment as determinants of regional growth in the European Union By Crescenzi, Riccardo; Rodriguez-Pose, Andres
  3. Agglomeration and cross-border infrastructure By Puga, Diego
  4. Knowledge Coherence, Variety and Productivity Growth: Manufacturing Evidence from Italian Regions By Francesco Quatraro
  5. Surviving in agglomerations: Plant evolution and the changing benefits of the local environment By Frank Neffke; Martin Svensson Henning; Ron Boschma
  6. What Are Cities Worth? Land Rents, Local Productivity, and the Capitalization of Amenity Values By David Albouy
  7. Death of distance? Economic implications of infrastructure improvement in Russia By Brown, David; Fay, Marianne; V. Lall, Somik; Gun Wang, Hyoung; Felkner, John
  8. Panel VAR Models with Spatial Dependence By Mutl, Jan
  9. Some Notes on Institutions in Evolutionary Economic Geography By Ron Boschma; Koen Frenken
  10. Methodological Issues in Measuring Innovation Performance of Spatial Units By Thomas Brenner; Tom Broekel
  11. Who is Paying for Regional Balance? By Morgenroth, Edgar
  12. Disparities, persistence and dynamics of regional unemployment rates in Germany By Kunz, Marcus
  13. Spatial Price Discrimination with Heterogeneous Firms By Jonathan Vogel
  14. Time-Varying Agglomeration Externalities in UK Counties between 1841 and 1971 By Frank Neffke
  15. Does decentralization matter for regional disparities? A cross-country analysis By Andrés Rodríguez-Pose; Roberto Ezcurra
  16. Patents, technological inputs and spillovers among regions By Gumbau-Albert, Mercedes; Maudos, Joaquin
  17. Human Capital and Employment Growth in German Metropolitan Areas: New Evidence By Steven Poelhekke
  18. Regional and Sector Environmental Efficiency Empirical Evidence from Structural Shift-share Analysis of NAMEA data By Massimiliano Mazzanti; Anna Montini
  19. Series enlazadas de algunos agregados económicos regionales, 1955-2007. Versión 1.1 By Angel de la Fuente
  20. Bringing History into Evolutionary Economic Geography for a Better Understanding of Evolution By Zhigao Liu
  21. Geography of a Sports Metropolis By Gabriel M. Ahlfeldt; Arne Feddersen
  22. Productivity Spillovers from Competitive Reallocation: Evidence from Canadian Manufacturing Plants By Gellatly, Guy; Baldwin, John R.
  23. New Stadia and Regional Economic Development By Arne Feddersen; André L. Grötzinger; Wolfgang Maennig
  24. Regional Financial Development and Bank Competition: Effects on Firms' Growth By Fernandez de Guevara, Juan; Maudos, Joaquin
  25. External influences on local institutions: spatial dependence and openness By Gerrit Faber; Michiel Gerritse

  1. By: I.P. Ottaviano, Gianmarco (Universita di Bologna, Dipartimento di Scienze Economiche)
    Abstract: This essay provides an overview of the role of infrastructure on economic geography in the light of both theoretical and empirical findings. Two main lessons stand out. First, infrastructural improvements affect the geographical distribution of economic activities. Second, even when localized, infrastructure investment generates externalities that may diffuse quite far across the economy. These two lessons have two far-reaching policy implications. First, effective infrastructure projects require knowledge on their impacts on the spatial distribution of economic activities. These impacts depend crucially on the specific details of the projects and the specific sources of agglomeration economies they affect. Second, regions need to coordinate not only in terms of interregional infrastructure projects but also in terms of intraregional ones if they want to avoid beggar-thyneighbour and self-defeating outcomes.
    Keywords: agglomeration; infrastructure; regional development; transport networks
    JEL: F12 F15 F21 R12
    Date: 2008–07–18
  2. By: Crescenzi, Riccardo (Robert Schuman Centre of the European University Institute, Florence); Rodriguez-Pose, Andres (London School of Economics)
    Abstract: This paper analyses the role of infrastructure endowment and investment in the genesis of regional growth in the European Union. It assesses the economic effects of the existence and improvement of transport networks in light of their interactions with innovation and local socio-economic conditions. The analysis accounts for spatial interactions between different regions in the form of spillovers and network externalities. The regression results highlight the impact of infrastructural endowment on regional economic performance, but also the weak contribution of additional investment. Regions having good transport infrastructure endowment and being well connected to regions with similar good endowments tend to grow faster. However, investment in infrastructure within a region or in neighbouring regions seems to leave especially peripheral regions more vulnerable to competition. Furthermore, the positive impact of infrastructure endowment on growth tends to wane quickly and is weaker than that of, for example, the level of human capital.
    Keywords: Economic growth; infrastructure; transport network; investment; innovation; spillovers; regions; endowment
    JEL: R11 R12 R42 R58
    Date: 2008–07–18
  3. By: Puga, Diego (Madrid Institute for Advanced Studies (IMDEA) Social Sciences)
    Abstract: This paper deals with the effects of cross-border transport infrastructure in the presence of agglomeration economies. Cross-border infrastructure is more likely to increase than to decrease inequalities between and within regions, and has not helped regional convergence in Europe. Under-investment due to spillovers, coordination failures, and the inadequacy of networks originally designed for national markets provide a role for supranational institutions. Hub-andspoke networks tend to increase urban primacy while cross-border transport connections tend to reduce it. Improvements in transport and communication allow firms to separate innovation, management and production, increasing efficiency and urban interdependence.
    Keywords: transport; cross-border infrastructure; agglomeration; urban specialization
    JEL: R12 R40
    Date: 2008–07–18
  4. By: Francesco Quatraro
    Abstract: This paper analyzes the effects of the evolution of knowledge base in the manufacturing sectors on regional productivity growth. Knowledge is viewed as a heterogeneous asset, and an evolutionary perspective is adopted. The results of the empirical estimations corroborate the hypothesis that beyond the traditional measure of knowledge stock, knowledge coherence and variety matter in shaping productivity dynamics. The check for spatial dependence suggests that cross-regional externalities exert additional triggering effects on productivity growth, without debasing the effects of knowledge. Important policy implications stem from the analysis, in that regional innovation strategies should be carefully coordinated so as to reach a higher degree of internal coherence and exert positive effects on productivity.
    Keywords: knowledge, variety, regional growth, productivity
    JEL: O33 R11
    Date: 2009–02
  5. By: Frank Neffke; Martin Svensson Henning; Ron Boschma
    Abstract: Cities vary with regard to the characteristics of their economic life. A formal model by Duranton and Puga (2001) suggests a division of labour between diversified and specialized cities. Diversified cities (the “nursery cities”) provide a fertile environment for search and innovation. Specialized cities, by contrast, are better equipped to facilitate mass-production. In essence, this spurs firms to re-locate as they mature from the exploratory set-up stage to mass-production. In this article, we empirically test the assumptions behind this model by means of survival analysis using Swedish plant level data of over 11 000 plants. More specifically, we investigate the effects of local specialization and local diversity on plant survival at different ages of a plant and for different size categories of plants. Not all types of local diversity will be of value to a plant. Rather, we expect plants to benefit especially from local diversity in related industries. In a similar vein, cities with a large concentration of a broad range of activities in related trades may confer larger benefits than cities with a narrow specialization in the plant’s own industry. To quantify the degree of relatedness between industries, we use a new measure, Revealed Relatedness. This serves to identify technological relatedness by measuring economies of scope as implied by the structure of production portfolios of plants. The findings suggest that regional characteristics strongly influence the chances of a plant to survive. In general, the hypothesized specialization effects are only found when we look at related specialization. Large plants at high stages of maturity form the only exception to this. However, diversity effects are only visible when we take all local diversity into account, not just diversity in related industries. Moreover, it is only young firms that benefit from regional diversity. This indicates that the “nursery city” metaphor holds as much for small, prototype plants as for large mass-production plants.
    Keywords: agglomeration economies, revealed relatedness, industry relations, Sweden
    Date: 2008–12
  6. By: David Albouy
    Abstract: Estimates of local land rents and firm productivity from wage and housing-cost data should incorporate parameters from the housing production function. Across cities, differences in amenity values are capitalized into the sum of local land values and federal-tax payments. Improved modeling is used to predict how amenities affect wages and housing costs, estimate quality-of-life and firm-productivity differences across U.S. cities, and revise estimates of the value of public-infrastructure investments. Private land values vary mainly from quality-of-life differences, while social land values vary mainly from firm-productivity differences. Highly valuable cities are typically coastal, temperate, sunny, and have large or well-educated populations.
    JEL: H2 H4 J30 Q5 R1
    Date: 2009–05
  7. By: Brown, David (Heriot-Watt University); Fay, Marianne (World Bank); V. Lall, Somik (World Bank); Gun Wang, Hyoung (World Bank); Felkner, John (University of Chicago)
    Abstract: We examine the economic implications of infrastructure investment policies that try to improve economic conditions in Russia's peripheral regions. Our analysis of firm-level industrial data for 1989 and 2004 highlights a 'death of distance' in industrial location, with increasing concentration of new firms in regions with good market access. We assess the geographic determinants of growth econometrically and identify market size and proximity to Moscow and regional infrastructure as important drivers of productivity for new and for privately-owned firms. Simulations show that the benefits of infrastructure improvements are highest in the country's capital region where economic activity is already concentrated. Policies that divert public investment towards peripheral regions run the risk of slowing down national economic growth.
    Keywords: Transport infrastructure; gravity; distance; travel time; market access; multi-factor productivity; Russia
    JEL: D24 H54 R12 R53
    Date: 2008–07–18
  8. By: Mutl, Jan (Department of Economics, Institute for Advanced Studies, Vienna, Austria)
    Abstract: I consider a panel vector-autoregressive model with cross-sectional dependence of the disturbances characterized by a spatial autoregressive process. I propose a three-step estimation procedure. Its first step is an instrumental variable estimation that ignores the spatial correlation. In the second step, the estimated disturbances are used in a multivariate spatial generalized moments estimation to infer the degree of spatial correlation. The final step of the procedure uses transformed data and applies standard techniques for estimation of panel vector-autoregressive models. I compare the small-sample performance of various estimation strategies in a Monte Carlo study.
    Keywords: Spatial PVAR, Multivariate dynamic panel data model, Spatial GM, Spatial Cochrane-Orcutt transformation, Constrained maximum likelihood estimation
    JEL: C13 C31 C33
    Date: 2009–03
  9. By: Ron Boschma; Koen Frenken
    Abstract: Within the evolutionary economic geography framework the role of institutions deserves more explicit attention. We argue that territorial institutions are to be viewed as orthogonal to organisational routines in that each territory is characterised by a variety of routines, and in that a single firm can apply its routines in different territorial contexts. It is therefore meaningful to distinguish between institutional economic geography and evolutionary economic geography as their explanans is different. Yet, the two approaches can be combined in a dynamic framework in which institutions co-evolve with organisational routines, particularly in emerging industries. Furthermore, integrating the evolutionary and institutional approach allows one to analyse the spatial diffusion of organisational routines that mediate conflicts between social groups, in particular, those between capitalists and labourers. An evolutionary economic geography advocates an empirical research program, both qualitative and quantitative, in which the relative importance of organisational routines and territorial institutions for regional development can be addressed.
    Keywords: evolutionary economic geography, routines, institutions
    Date: 2008–10
  10. By: Thomas Brenner; Tom Broekel
    Abstract: Measuring the innovation performance of regions or nations has been repeatedly done in the literature. What is missing in the literature is a discussion of what innovation performance of a region means. How do regions or nations contribute really to the innovation output of Þrms? And how can this contribution be investigated in an empirically sound way? We argue that while the literature offers many suggestions, their theoretical foundation is often weak and the under- lying assumptions are rarely discussed. In this paper, we systematize various mechanisms by which spatial units inßuence ÞrmsÕ innovation activities. On the basis of this, common innova- tion performance measures and analyses are discussed and evaluated. It is concluded that there is no general best way of measuring the innovation performance of spatial units. In fact, the most interesting insights can be obtained using a multitude of different approaches at the same time.
    Keywords: innovation performance, regional innovativeness, innovation generation, regional innovation system, national innovation system
    JEL: R11 O31 R11
    Date: 2009–04
  11. By: Morgenroth, Edgar (Economic and Social Research Institute (ESRI))
    Date: 2009–04
  12. By: Kunz, Marcus
    Abstract: "The paper shows that the distribution of regional unemployment rates in Germany exhibits strong persistent behaviour. Furthermore, panel unit root tests and autoregressive fixed effects models indicate that regional unemployment rates display conditional rather than unconditional convergence. Thus, highly persistent unemployment disparities can be regarded as region-specific unemployment rates due to different regional endowments, adjusting quite rapidly to their region-specific means and therefore towards a stable pattern of unemployment disparities, rather than towards the national unemployment rate. Additionally, an investigation of adjustment processes suggests that the degree of persistence in western German unemployment rates after aggregate shocks has decreased markedly since the 1960s. For more recent years (1989-2004), neither aggregate nor region-specific shocks exhibit persistent behaviour. Therefore, slowworking adjustment mechanisms in response to shocks are not responsible for the persistent unemployment differentials. A comparison of regions and districts shows that the two regional levels have quite similar adjustment paths. The estimated half-lives of both aggregate and regionspecific shocks are found to be very robust within a range of 1-3 years." (author's abstract, IAB-Doku) ((en))
    Keywords: Arbeitslosigkeit - Entwicklung, Arbeitslosenquote, regionale Verteilung, Persistenz, regionale Disparität, Konvergenz
    JEL: C22 C23 O18 R11 R12
    Date: 2009–05–14
  13. By: Jonathan Vogel
    Abstract: In this paper we present and solve a three-stage game of entry, location, and pricing in a spatial price discrimination framework with arbitrarily many heterogeneous firms. We provide a unique characterization of all pure undominated strategy SPNE without imposing restrictions on the distribution of marginal costs or the allocation of transportation costs between firms and consumers.
    JEL: L13
    Date: 2009–05
  14. By: Frank Neffke
    Abstract: Using dynamic panel data methods on UK counties (1841-1971), we investigate long-term employment dynamics in seven distinct local industries. We study how industries benefit from specialised environments (MAR), diverse local economies (Jacobs’) and large local markets (urbanization), and, in contrast to most other authors, test if the strength of MAR, Jacobs’ and urbanization externalities changes over time. We find declining MAR and rising Jacobs’ externalities since the mid-nineteenth century, questioning the adequacy of a static framework when studying agglomeration externalities
    Keywords: agglomeration, dynamic externalities, Jacobs’ externalities, MAR externalities, urbanization externalities
    JEL: L60 N93 N94 R11
    Date: 2008–12
  15. By: Andrés Rodríguez-Pose (London School of Economics); Roberto Ezcurra (Universidad Pública de Navarra)
    Abstract: This paper looks at the relationship between fiscal and political decentralization and the evolution of regional inequalities in a panel of 26 countries – 19 developed and 7 developing – for the period between 1990 and 2006. Using an instrumental variables method, it finds that whereas for the whole sample decentralization is completely dissociated for the evolution of regional disparities, the results are highly contingent on the level of development, the existing level of territorial inequalities, and the fiscal redistributive capacity of the countries in the sample. Decentralization in high income countries has, if anything, been associated with a reduction of regional inequality. In low and medium income countries, fiscal decentralization has been associated with a significant rise in regional disparities, which the positive effects of political decentralization have been unable to compensate. Policy preferences by subnational governments for expenditure in economic affairs, education, and social protection have contributed to this trend.
    Keywords: fiscal decentralization; political decentralization; regional disparities; territorial inequality; fiscal redistribution
    JEL: H11 H71 R11
    Date: 2009–05–14
  16. By: Gumbau-Albert, Mercedes; Maudos, Joaquin
    Abstract: This paper analyses the importance of different technological inputs (R&D and human capital) and different spillovers in explaining the differences in patenting among Spanish regions in the period 1986-2003. The analysis is based on the estimation of a knowledge production function. A region’s own R&D activities and human capital are observed to have a positive significant effect on innovation output, measured by the number of patents. R&D spillovers weighted by the distance and the volume of trade flows between regions cause positive effects on a region’s patents. However, distance matters more than the intensity of trade flows and the R&D spillover effects between regions are bounded: spillovers from closer regions perform better than spillovers from distant regions. On the opposite side, human capital spillovers do not cause any effect outside the region itself.
    Keywords: patents; R&D; human capital; spillovers
    JEL: O18 O31 R11
    Date: 2009
  17. By: Steven Poelhekke
    Abstract: German metropolitan areas with more highly skilled workers became increasingly skilled between 1975 and 2003, and this has important implications for urban employment growth.Using for the first time German metropolitan areas instead of administrative regions we show that the share of college graduates affects growth by the same magnitude as it does in US MSAs. However, conventional estimators are biased upwards. Correcting for the endogeneity of initial employment and solving a common problem of under-identification shows that the effect is at least a third smaller and closer to 0.5% employment growth for a 10% increase in the concentration of skilled workers. The effect is robust to various controls across two data sets. We additionally question the view that aggregate productivity growth is solely due to college graduates. After distinguishing between six different skill levels we find positive growth effects of high school graduates with vocational training, especially if the local concentration of technical professionals is high. The concentration of non-technical university graduates becomes more important over time, but has less bearing on the marginal growth effects of other skill groups. City success may thus depend on the ‘right' combination of skills as well as college graduates. 
    Keywords: human capital; skills; city employment growth; Germany; GMM estimation
    Date: 2009–04
  18. By: Massimiliano Mazzanti (University of Ferrara); Anna Montini (niversity of Bologna, CERIS CNR)
    Abstract: This paper provides new empirical evidence on regional–national disparities in environmental efficiency, based on case studies of Italy and the Lazio region, which includes the city of Rome. Shift-share analyses provide evidence on the drivers of environmental efficiency and on sector specificity. This confirms the usefulness of this method for studying the environmental economics realm, in order to investigate structural and efficiency factors at the level of within country environmental efficiency performance, even in light of the different shares of services. Our evidence shows that although the Rome region has achieved higher environmental performance compared to Italy mainly thanks to its being less industry based, some critical points in the energy sector and in some services should be taken into account in shaping the future development of the region. Environmental, industrial and sector-oriented policy making may also derive valuable information from the evidence provided by our study.
    Keywords: NAMEA, Shift Share, Regional Development, RAMEA, Emission Efficiency, Economic Efficiency
    JEL: C67 D57 O4 O18 Q53 Q56
    Date: 2009–02
  19. By: Angel de la Fuente
    Abstract: Tras un breve repaso de la experiencia internacional, en el presente trabajo se cuantifica la contribución de la inversión en las nuevas tecnologías de la información y las comunicaciones (TICs) al crecimiento de España y sus regiones y a las disparidades de productividad entre estas últimas. Con este fin se estima una función de producción regional desagregando la dotación de capital en un componente TIC y otro no TIC. Una comparación de los resultados con los obtenidos a partir de la metodología habitual de contabilidad del crecimiento sugiere que la inversión en bienes TIC podría generar efectos indirectos internos y externos muy considerables.
    Date: 2009–02
  20. By: Zhigao Liu
    Abstract: The paper tries to construct the historical methodology for evolutionary economic geography. I elevate history to the methodological foundation of evolutionary economic geography, on which concrete research methods should be based. I explore how to evolution in economic geography by placing history in historical time and historical contexts. Accordingly, the concepts of path creation and path dependence should be used together in historical study. More important, the concept of path interdependence, which stresses the importance of the circumstances under which different processes and events are likely to occur, opens a new window on the temporal aspects of the world.
    Keywords: Organizational ecology, fashion industry, creative industries, clusters, institutional lock-in
    Date: 2009–01
  21. By: Gabriel M. Ahlfeldt (University of Hamburg); Arne Feddersen (University of Hamburg)
    Abstract: This study analyses the sports infrastructure of Hamburg, Germany, from the residents’ perspective. Empirical evidence is provided for the Sports Place Theory developed by BALE (2003) using a micro-level dataset of 1,319 sports facilities, which is merged with highly disaggregated data on population, socio-demographic characteristics and land values. In line with the theory, small and medium facilities on average are found to have catchment areas ranging from 1,000 to 2,500m. Similarly, large facilities carry out services within an area of up to 5,000m. Based on implicit travel costs, locations’ endowment of sports infrastructure is captured by potentiality variables, while accounting for natural and unnatural barriers. Given potential demand, central areas are found to be relatively underprovided with a sports infrastructure compared to peripheral areas where opportunity cost in the form of price of land is lower. The determinants of spatial distribution vary systematically across types of sports fcilities. Publicly provided open sports fields and sport halls tend to be concentrated in areas of relativelylow income which is in line with their social infrastructure character, emphasized by local authorities. In contrast, there is a clear tendency for market allocated tennis facilities to follow purchasing power. Areas with higher proportions of foreigners are subject to relatively lower provision of a sports infrastructure, which contradicts the stated ambitions of planning authorities. To meet the implicit call for action, detailed maps of relative supply indicating privileged and disadvantaged areas offer useful guidance.
    Keywords: Sports Facilities, Sports Geography, Public Infrastructure
    JEL: L83 H4 R53
    Date: 2008–06
  22. By: Gellatly, Guy; Baldwin, John R.
    Abstract: This paper uses plant-level data on productivity growth and changes in market share over different periods during the 1970s, 1980s, and 1990s to investigate whether plants with declining market shares obtain productivity spillovers from more successful producers and whether the impact of spillovers is affected by the distance between plants. We are primarily interested in the extent to which productivity externalities moderate the centrifugal forces that separate growing plants from declining rivals because of the productivity advantages enjoyed by the former. The paper focuses on the productivity performance of plants with declining market shares as potential receivers of productivity spillovers. Two possible sources for these spillovers are examined rival plants operating at the technological frontier and rivals that are actively gaining market share. The analysis advances a model of the externality process in which the productivity of declining plants is influenced by (1) the economic distance of the declining plant from its technological frontier at the beginning of any period, (2) contemporaneous productivity gains in rival plants that are actively wresting market share away from decliners, and (3) the distance between rival plants. We evaluate the existence and magnitude of these sources of spillovers frontier plants and market-share gainers because of what they reveal about the types of productive information that struggling plants may be able to assimilate from rivals. Spillovers from the plants at the existing frontier are likely to reflect the established best practices of industry leaders; spillovers coming from market-share gainers involve new sources of productive knowledge that emerge as the frontier is actively being re-established. Our model also incorporates geographic information on the proximity of declining plants to both frontier plants and market-share gainers to test whether productivity spillovers are spatially circumscribed. The resu
    Keywords: Manufacturing, Economic accounts, Productivity accounts
    Date: 2009–05–19
  23. By: Arne Feddersen (University of Hamburg); André L. Grötzinger (University of Hamburg); Wolfgang Maennig (University of Hamburg)
    Abstract: Using the case of the new stadiums for the FIFA World Cup 2006 in Germany, this paper is the first multivariate work that examines the potential income and employment effects of new stadiums outside of the USA. This study is also the first work on this topic that conducts tests on the basis of a (serial correlation consistent) Difference-in-Difference model with level and trends. As a robustness check, we use the “ignoring time series information” model in a form that is modified for nonsynchronous interventions. We were not able to identify income or employment effects of the construction of new stadiums for the FIFA World Cup 2006, which are significantly different from zero. \
    Keywords: Sports Economics, Regional Economics, Stadia Infrastructure, Difference-in-Difference Model
    JEL: H54 L83 R12 R53
    Date: 2008–10
  24. By: Fernandez de Guevara, Juan; Maudos, Joaquin
    Abstract: This paper analyzes the effect of regional financial development and bank competition on firms’ growth using the Spanish provinces as a testing ground. Our results show that firms in industries with a greater dependence on external finance grow faster in more financially developed provinces. The results also show that bank monopoly power has an inverted-U effect on firms’ growth, suggesting that market power has its highest effect at intermediate values. The effect is heterogeneous among firms according to the financial dependence of the industry they belong to. This result is consistent with the literature on relationship banking which argues that bank competition can have a negative effect on the availability of finance for more informationally opaque firms.
    Keywords: economic growth; regional financial development; bank competition
    JEL: L11 D40 G21
    Date: 2009
  25. By: Gerrit Faber; Michiel Gerritse
    Abstract: There are both empirical and theoretical arguments for the thesis that external factors have an impact on domestic institutional quality. Consequently, external factors may have large effects on domestic income via local institutions. This paper investigates the role of external factors by estimating the impact of openness and the institutional environment of proximate countries on local institutions and local income. In a 107-country cross-section, we find that both openness (in trade, and especially FDI) and the institutional indicators of nearby countries have an independent impact on local institutional indicators. The effects on income levels are not symmetric, however. We estimate that trade openness plays a major role as a direct determinant of the income level, and a smaller role in determining local institutions. By contrast, institutions of nearby countries are a prime determinant of local institutions, but carry no direct effects on local income levels.
    Keywords: Economic institutions, Spatial spillovers, Economic openness, Income differences
    JEL: F43 H73 O11 O43
    Date: 2009–05

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