nep-geo New Economics Papers
on Economic Geography
Issue of 2009‒07‒11
eighteen papers chosen by
Vassilis Monastiriotis
London School of Economics

  1. Why do creative industries cluster? An analysis of the determinants of clustering of creative industries By Luciana Lazzeretti; Rafael Boix; Francesco Capone
  2. Simulating Wages and House Prices Using the NEG* By Bernard Fingleton
  3. A model of urban demography By Hiroshi Aiura; Yasuhiro Sato
  4. Identifying spatial efficiency-equity tradeoffs in territorial development policies : evidence from Uganda By Lall, Somik V.; Schroeder, Elizabeth; Schmidt, Emily
  5. The regional public spending for tourism in Italy: An empirical analysis By Cellini, Roberto; Torrisi, Gianpiero
  6. Regional Dynamics of Innovation - Investigating the Co-Evolution of Patents, R&D, and Employment By Matthias Buerger; Tom Broekel; Alex Coad
  7. Forecasting with Spatial Panel Data By Baltagi, Badi H.; Bresson, Georges; Pirotte, Alain
  8. Crime, City and Space: A Case of Mumbai Megapolis By Abdul Shaban
  9. Spatial Filtering, Model Uncertainty and the Speed of Income Convergence in Europe By Jesus Crespo Cuaresma; Martin Feldkircher
  10. Lessons from European Union policies for regional development By Shankar, Raja; Shah, Anwar
  11. House price fluctuations and residential sorting By Haavio, Markus; Kauppi, Heikki
  12. Analysing the impact of public capital stock using the NEG wage equation: a panel data approach By Bernard Fingleton; Miguel Gómez-Antonio
  13. Papers or Patents: Channels of University Effect on Regional Innovation By Robin Cowan; Natalia Zinovyeva
  14. Fiscal amenities, school finance reform and the supply side of the Tiebout market By Byron F. Lutz
  15. Regional growth and finance in Europe: Is there a quality effect of bank efficiency? By Hasan, Iftekhar; Koetter , Michael; Wedow, Michael
  16. Are all migrants really worse off in urban labour markets: new empirical evidence from China. By Gagnon, Jason; Xenogiani, Theodora; Xing, Chunbing
  17. The German spatial poverty divide: poorly endowed or bad luck? By Timm Bönke; Carsten Schröder
  18. Interregional Trade, Industrial Location and Import Infrastructure By Kikuchi, Toru; Iwasa, Kazumichi

  1. By: Luciana Lazzeretti (Department of Bussines Economics, University of Florence); Rafael Boix (Institut d'Estudis Regionals i Metropolitans de Barcelona); Francesco Capone (Department of Bussines Economics, University of Florence)
    Abstract: Creative industries tend to concentrate mainly around large- and medium-sized cities, forming creative local production systems. The text analyses the forces behind clustering of creative industries to provide the first empirical explanation of the determinants of creative employment clustering following a multidisciplinary approach based on cultural and creative economics, evolutionary geography and urban economics. A comparative analysis has been performed for Italy and Spain. The results show different patterns of creative employment clustering in both countries. The small role of historical and cultural endowments, the size of the place, the average size of creative industries, the productive diversity and the concentration of human capital and creative class have been found as common factors of clustering in both countries.
    Keywords: creative industries, creative local production systems, creative clusters, agglomeration economies
    JEL: L22 R12 L82
    Date: 2009–04
  2. By: Bernard Fingleton (Department of Economics, University of Strathclyde)
    Abstract: The paper incorporates house prices within an NEG framework leading to the spatial distributions of wages, prices and income. The model assumes that all expenditure goes to firms under a monopolistic competition market structure, that labour efficiency units are appropriate, and that spatial equilibrium exists. The house price model coefficients are estimated outside the NEG model, allowing an econometric analysis of the significance of relevant covariates. The paper illustrates the methodology by estimating wages, income and prices for small administrative areas in Great Britain, and uses the model to simulate the effects of an exogenous employment shock.
    Keywords: new economic geography, real estate prices, spatial econometrics
    JEL: C21 C31 O18 R12 R31
    Date: 2009–05
  3. By: Hiroshi Aiura (Faculty of Economics, Oita University (Japan)); Yasuhiro Sato (Graduate School of Economics, Osaka University (Japan))
    Abstract: This paper develops an overlapping generations model that involves endogenous determination of fertility and explicit city structure. We provide conditions under which there exists a unique steady state, which can replicate spatial features of demography observed in Japanese cities. We also provide comparative steady state analysis by calibration.
    Keywords: city structure, land rent, fertility, demography
    JEL: J11 R11 R23
    Date: 2009–06
  4. By: Lall, Somik V.; Schroeder, Elizabeth; Schmidt, Emily
    Abstract: In many countries, place specific investments in infrastructure are viewed as integral components of territorial development policies. But are these policies fighting market forces of concentration? Or are they adding net value to the national economy by tapping underexploited resources? This paper contributes to the debate on the spatial allocation of infrastructure investments by examining where these investments will generate the highest economic returns"spatial efficiency", and identifying whether there re tradeoffs when infrastructure coverage is made more equitable across regions"spatial equity". The empirical analysis focuses on Uganda and is based on estimating models of firm location choice, drawing on insights from the new economic geography literature. The main findings show that establishments in the manufacturing industry gain from being in areas that offer a diverse mix of economic activities. In addition, availability of power supply, transport links connecting districts to markets, and the supply of skilled workers attract manufacturing activities. Combining all these factors gives a distinct advantage to existing agglomerations along leading areas around Kampala and Jinja. Infrastructure investments in these areas are likely to produce the highest returns compared with investments elsewhere. Public infrastructure investments in other locations are likely to attract fewer private investors, and will pose a spatial efficiencyequity tradeoff. To better integrate lagging regions with the national economy, lessons from the WDR2009"Reshaping Economic Geography"calling for investments in health and education in lagging areas are likely to be more beneficial.
    Keywords: Transport Economics Policy&Planning,E-Business,Banks&Banking Reform,Non Bank Financial Institutions,Economic Theory&Research
    Date: 2009–06–01
  5. By: Cellini, Roberto; Torrisi, Gianpiero
    Abstract: We analyse the effects of public spending for tourism, in Italian regions. The evaluation is permitted by the availability of the databank under the project “Conti Pubblici Territoriali” (“Regional Public Account”) of the Ministry of Economic Development: the spending of all public subjects is aggregated according to the regions of destinations, and classified according to different criteria, including the sectoral criterion. We take a cross-section regression analysis approach. The effects of public spending for tourism on tourism attraction are investigated. Generally speaking, the effectiveness of public spending appears to be really weak.
    Keywords: Tourism; Regions; Public Spending; Regional Public Account.
    JEL: R53 R58 L83 C21
    Date: 2009–07–07
  6. By: Matthias Buerger; Tom Broekel; Alex Coad
    Abstract: We investigate the lead-lag relationship between growth of patent applications, growth of R&D, and growth of total sectoral employment for 270 German labour market regions over the period 1999-2005. Our unique panel dataset includes information on four two-digit industries, namely Chemistry, Transport equipment, Medical & Optical Equipment as well as Electrics & Electronics. The results obtained from a vector autoregression model show that an increased innovative activity is associated with subsequent growth of employment in the Medical & Optical Equipment industry as well as in the Electrics & Electronics sector. With respect to the latter growth of patent applications is also associated with subsequent growth of R&D employees indicating either a ‘success-breeds-success’ story or benefits due to agglomeration economies at the level of the region. However we do not find those effects for the other industries due to their idiosyncratic innovation and patenting behaviour.
    Keywords: innovation, regional dynamics, r&d growth, employment growth, patent growth
    JEL: O18 R11
    Date: 2009–06
  7. By: Baltagi, Badi H. (Syracuse University); Bresson, Georges (University of Paris 2); Pirotte, Alain (University of Paris 2)
    Abstract: This paper compares various forecasts using panel data with spatial error correlation. The true data generating process is assumed to be a simple error component regression model with spatial remainder disturbances of the autoregressive or moving average type. The best linear unbiased predictor is compared with other forecasts ignoring spatial correlation, or ignoring heterogeneity due to the individual effects, using Monte Carlo experiments. In addition, we check the performance of these forecasts under misspecification of the spatial error process, various spatial weight matrices, and heterogeneous rather than homogeneous panel data models.
    Keywords: forecasting, BLUP, panel data, spatial dependence, heterogeneity
    JEL: C33
    Date: 2009–06
  8. By: Abdul Shaban
    Abstract: The present study has been an attempt to examine spatial distribution of various forms of crimes in Mumbai city (Municipal Corporation) and find out their correlates. More specifically the attempts have been made to find out ‘hotspots’ of various forms of crimes, to analysed the types of crimes which occur in close spatial association with each other, to interrelate the spatial dimensions to other criminogenic factors, to examine whether recent emphasis on development has drastically changed the character of crimes and its causes where space has its role to play, and to study implication of space-induced crimes to law and order in the city.
    Keywords: mumbai, India, dowry deaths, crimes, criminogenic factors, law and order,unemployment, textile mills, labour unions, murder rates, population
    Date: 2009
  9. By: Jesus Crespo Cuaresma; Martin Feldkircher
    Abstract: In this paper we put forward a Bayesian Model Averaging method dealing with model uncertainty in the presence of potential spatial autocorrelation. The method uses spatial filtering in order to account for different types of spatial links. We contribute to existing methods that handle spatial dependence among observations by explicitly taking care of uncertainty stemming from the choice of a particular spatial structure. Our method is applied to estimate the conditional speed of income convergence across 255 NUTS-2 European regions for the period 1995-2005. We show that the choice of a spatial weight matrix - and in particular the choice of a class thereof - can have an important effect on the estimates of the parameters attached to the model covariates. We also show that estimates of the speed of income convergence across European regions depend strongly on the form of the spatial patterns which are assumed to underly the dataset. When we take into account this dimension of model uncertainty, the posterior distribution of the speed of convergence parameter appears bimodal, with a large probability mass around no convergence (0% speed of convergence) and a rate of convergence of 1%, approximately half of the value which is usually reported in the literature.
    Keywords: Model uncertainty, spatial filtering, determinants of economic growth, European regions.
    JEL: C11 C15 C21 R11 O52
    Date: 2009–06
  10. By: Shankar, Raja; Shah, Anwar
    Abstract: Regional disparities present an ever present development challenge in most countries, especially those with large geographic areas under their jurisdiction. A neglect of these inequities may create the potential for disunity and, in extreme cases, for disintegration. In view of this, most countries actively pursue policies with a view to helping lagging regions catch up with faster growing regions. These policies have at best a mixed record of success. It is therefore useful to discern what type of policies work and why? In this context learning from the experience of the European Union (EU) may be particularly instructive as, over the years, it has provided significant support to assist poorer regions achieve convergence with the richer regions. This paper reviews the impact of EU policies for regional development to draw lessons of interest to other countries pursuing similar goals. The paper concludes that policies that serve to create an internal common market by creating a level playing field that enables poorer regions to integrate with the broader national and global economies have the best potential to advance regional income convergence. In this context, removal of barriers to trade and factor mobility and providing enhanced access to information and technology to the lagging regions should be main policy priorities for regional development.
    Keywords: Regional Rural Development,Trade and Regional Integration,Political Economy,Economic Theory&Research,Debt Markets
    Date: 2009–06–01
  11. By: Haavio, Markus (Bank of Finland); Kauppi, Heikki (University of Turku)
    Abstract: Empirical evidence suggests that local jurisdictions are internally more heterogeneous than standard sorting models predict. We develop a dynamic multi-region model, with fluctuating regional house prices, where an owner-occupying household’s location choice depends on its current wealth and its current ‘match’ and involves both consumption and investment considerations. The relative weights of the consumption and investment motives in the location choice determine the equilibrium pattern of residential sorting, with a strong investment (consumption) motive implying sorting according to match (wealth). The model predicts a negative relation between size of house price fluctuations and residential sorting in the match dimension. Also movers should be more sorted than stayers. These predictions are consistent with evidence from US metropolitan areas when income, age and education are used as proxies for the match.
    Keywords: residential sorting; house prices; incomplete markets; owner-occupation; household mobility
    JEL: D31 D52 R13 R21 R23
    Date: 2009–06–10
  12. By: Bernard Fingleton (Department of Economics, University of Strathclyde); Miguel Gómez-Antonio (Universidad Complutense de Madrid)
    Abstract: This paper examines the relationship between the level of public infrastructure and the level of productivity using panel data for the Spanish provinces over the period 1984-2004, a period which is particularly relevant due to the substantial changes occurring in the Spanish economy at that time. The underlying model used for the data analysis is based on the wage equation, which is one of a handful of simultaneous equations which when satisfied correspond to the short-run equilibrium of New Economic Geography theory. This is estimated using a spatial panel model with fixed time and province effects, so that unmodelled space and time constant sources of heterogeneity are eliminated. The model assumes that productivity depends on the level of educational attainment and the public capital stock endowment of each province. The results show that although changes in productivity are positively associated with changes in public investment within the same province, there is a negative relationship between productivity changes and changes in public investment in other regions.
    Keywords: spatial economics, public infrastructure, productivity, panel data, economic geography
    JEL: H54 R11 R15 C21
    Date: 2009–05
  13. By: Robin Cowan; Natalia Zinovyeva
    Abstract: This paper analyzes empirically the channels through which university research affects industry innovation. We examine how the opening of new science, medicine and engineering departments in Italy during 1985-2000 affected regional innovation systems. We find that creation of a new university department increased regional innovation activity 3-4 years later. On average, an opening of a new department has led to a twenty percent change in the number of patents led by regional firms. Given that this effect occurs within the first half decade of the appearance of a new department, it cannot be ascribed to improvements in the quality and quantity of graduates. At the same time, traditional measures of academic research activity -- publications and patents -- can explain at most 50 percent of this effect, of which the lion's share is due to publications.
    Date: 2009–06
  14. By: Byron F. Lutz
    Abstract: This study asks if local governments which provide a high level of public services per tax dollar attract housing capital. The first portion of the paper examines large shifts in property tax burdens induced by an unusual school finance reform in the state of New Hampshire. The estimates suggest that, in most of the state, communities with a reduced tax burden experience a large increase in residential construction. In the area of the state near the region's primary urban center (Boston), however, the shock clears through a price adjustment--i.e. by capitalizing into property values. The differing responses are attributed to differing housing supply elasticities. Furthermore, the shock induced communities with a lowered tax burden to enact more stringent land use regulations. The second portion of the paper uses a national sample and exploits variation in education spending levels arising from 1980s era school finance reforms. The results confirm the findings from New Hampshire--fiscal amenities have a significant impact on the location of residential capital and the impact is largest outside of dense, urban areas. These results, which are interpreted through the lens of a simple theoretical model, have important implications for a host of issues, including the equity and efficiency of local public goods provision, assessing who bears the burden of local taxation, and land use issues such as the location and pace of residential development and the causes of land use regulation.
    Date: 2009
  15. By: Hasan, Iftekhar (Lally School of Management and Technology, USA, and Bank of Finland Research); Koetter , Michael (University of Groningen and Deutsche Bundesbank); Wedow, Michael (Deutsche Bundesbank)
    Abstract: In this study, we test whether regional growth in 11 European countries depends on financial development and suggest the use of cost- and profit-efficiency estimates as quality measures for financial institutions. Contrary to the usual quantitative proxies for financial development, the quality of financial institutions is measured in this study as the relative ability of banks to intermediate funds. An improvement in bank efficiency spurs five times more regional growth than does an identical increase in credit. More credit provided by efficient banks exerts an independent growth effect in addition to the direct quantity and quality channel effects.
    Keywords: bank performance; regional growth; bank efficiency; Europe
    JEL: G21 O16 O47 O52
    Date: 2009–05–18
  16. By: Gagnon, Jason; Xenogiani, Theodora; Xing, Chunbing
    Abstract: The rapid and massive increase in rural-to-urban worker flows to the coast of China has drawn recent attention to the welfare of migrants working in urban regions, particularly to their working conditions and pay; serious concern is raised regarding pay discrimination against rural migrants. This paper uses data from a random draw of the 2005 Chinese national census survey to shed more light on the discrimination issue, by making comparisons of earnings and the sector of work between rural migrants on one hand, and urban residents and urban migrants on the other. Contrary to popular belief, we find no earnings discrimination against rural migrants compared to urban residents. However, rural migrants are found to be discriminated in terms of the sector in which they work, with a vast majority working in the informal sector lacking adequate social protection.
    Keywords: Migration; China; Discrimination; Informal Employment
    JEL: O15 J71 J24 R23
    Date: 2009–06
  17. By: Timm Bönke (Freie Universität Berlin); Carsten Schröder (University of Kiel)
    Abstract: We study inter-temporal changes in poverty for Germany from year 1978 to 2003, and we employ the bootstrap method to test for statistical significance of results. All results are decomposed by household type and region. Poverty estimates are particularly high for single parents. Most striking, however, is the poverty divide between the old and newly-formed German Federal States, with poverty being significantly higher in the latter. We conduct a nonlinear Oaxaca-Blinder decomposition to quantify the separate contribution of regional differences in households’ characteristics to the probability of being poor.
    Keywords: Poverty, decomposition, expenditure patterns, necessities, Oaxaca-Blinder decomposition, bootstrap, equivalence scale.
    JEL: H53 I38
    Date: 2009
  18. By: Kikuchi, Toru; Iwasa, Kazumichi
    Abstract: The purpose of this study is to illustrate, with a simple two-region, two-good, two-factor model, how an improvement in one region’s import infrastructure can affect firms’ location decisions and the nature of the trading equilibrium. It is shown that, through improvements in import infrastructure, one region might divert high-tech industries to another region. This effect reduces the incentive to improve import infrastructure.
    Keywords: Interregional Trade; Import Infrastructure
    JEL: F12
    Date: 2009

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