nep-geo New Economics Papers
on Economic Geography
Issue of 2009‒07‒17
seven papers chosen by
Vassilis Monastiriotis
London School of Economics

  1. Agglomeration Elasticities in New Zealand By David C. Maré; Daniel J. Graham
  2. Bayesian Methods for Completing Data in Space-time Panel Models By Llano, Carlos; Polasek, Wolfgang; Sellner, Richard
  3. Bohemians, Human Capital, and Regional Economic Growth By Oliver Falck; Michael Fritsch; Stephan Heblich
  4. A Spatial Explanation for the Balassa-Samuelson Effect By Péter Karádi; Miklós Koren
  5. On cost restrictions in spatial competition models with heterogeneous firms By Marco Alderighi; Claudio A. Piga
  6. Agglomeration and wage bargaining By Kenmei Tsubota
  7. Growth Accounting for the Chinese Provinces 1990-2000: Incorporating Human Capital Accumulation By Xiaolei Qian; Russell Smyth

  1. By: David C. Maré (Motu Economic and Public Policy Research); Daniel J. Graham (Centre for Transport Studies, Imperial College, London)
    Abstract: This paper analyses the relationship between firms’ multi-factor productivity and the effective employment density of the areas where they operate. Quantifying these agglomeration elasticities is of central importance in the evaluation of the wider economic benefits of transport investments. We estimate agglomeration elasticities using the Statistics New Zealand prototype Longitudinal Business Database: a firm-level panel covering the period 1999 to 2006. We estimate that an area with 10 percent higher effective density has firms with productivity that is 0.69 percent higher, once we control for the industry specific production functions and sorting of more productive firms across industries and locations. We present separate estimates of agglomeration elasticities for specific industries and regions, and examine the interaction of agglomeration with capital, labour, and other inputs.
    Keywords: Agglomeration, urban density, transport evaluation, productivity
    JEL: L25 R12 R3 R40
    Date: 2009–06
  2. By: Llano, Carlos (Departamento de Análisis Económico, Facultad de Ciencias Económicas y Empresariales, Universidad Autónoma de Madrid); Polasek, Wolfgang (Department of Economics and Finance, Institute for Advanced Studies, Vienna, Austria); Sellner, Richard (Department of Economics and Finance, Institute for Advanced Studies, Vienna, Austria)
    Abstract: Completing data sets that are collected in heterogeneous units is a quite frequent problem. Chow and Lin (1971) were the first to develop a united framework for the three problems (interpolation, extrapolation and distribution) of predicting times series by related series (the 'indicators'). This paper develops a spatial Chow-Lin procedure for cross-sectional and panel data and compares the classical and Bayesian estimation methods. We outline the error covariance structure in a spatial context and derive the BLUE for the ML and Bayesian MCMC estimation. Finally, we apply the procedure to Spanish regional GDP data between 2000-2004. We assume that only NUTS-2 GDP is known and predict GDPat NUTS-3 level by using socio-economic and spatial information available at NUTS-3. The spatial neighborhood is defined by either km distance, travel-time, contiguity and trade relationships. After running some sensitivity analysis, we present the forecast accuracy criteria comparing the predicted with the observed values.
    Keywords: Interpolation, Spatial panel econometrics, MCMC, Spatial Chow-Lin, Missing regional data, Spanish provinces, 'Polycentric-periphery' relationship
    JEL: C11 C15 C52 E17 R12
    Date: 2009–07
  3. By: Oliver Falck (Ifo Institute for Economic Research, Munich.); Michael Fritsch (University of Jena, School of Economics and Business Administration, and Max Planck Institute of Economics, and German Institute for Economic Research (DIW)); Stephan Heblich (Max Planck Institute of Economics, Jena; Entrepreneurship, Growth, and Public Policy Group)
    Abstract: An emerging literature on the geography of bohemians argues that a region's lifestyle and cultural amenities explain, at least partly, the unequal distribution of highly qualified people across space, which in turn, explains geographic disparities in economic growth. However, to date, there has been little or no empirical attempt to identify a causal relation. To identify the causal impact of bohemians on economic growth, we apply an instrumental variable approach using as an exogenous instrument the geographic distribution of bohemians prior to the Industrial Revolution in Germany. This distribution was primary the result of competition for prestige between courts and not of economic prosperity. Accordingly, the instrument is independent of today's regional economic development. Focusing on the concentration of highly skilled people today that is explained by the proximity to exogenous concentrations of bohemians, the observed local average treatment effect supports the hypothesis of a positive impact of bohemians on regional economic development.
    Keywords: Regional Growth, Human Capital, Bohemians, Instrumental Variables
    JEL: R11 J24 C31
    Date: 2009–07–06
  4. By: Péter Karádi; Miklós Koren
    Abstract: We propose a simple spatial model to explain why the price level is higher in rich countries. There are two sectors: manufacturing, which is freely tradable, and non-tradable services, which have to locate near customers in big cities. As countries develop, total factor productivity increases simultaneously in both sectors. However, because services compete with the population for scarce land, labor productivity will grow slower in services than in manufacturing. Services become more expensive, and the aggregate price level becomes higher. The model hence provides a theoretical foundation for the Balassa--Samuelson assumption that productivity growth is slower in the non-tradable sector than in the tradable sector. Empirical results confirm two key implications of the theory. First, we compare countries where land is scarce (densely populated, highly urban countries) to rural countries. The Balassa--Samuelson effect is stronger among urban countries. Second, we compare sectors that locate at different distance to consumers. The Balassa--Samuelson effect is stronger within sectors that locate closer to consumers.
    Date: 2008–10–01
  5. By: Marco Alderighi (University of Valle d'Aosta, Italy.); Claudio A. Piga (Dept of Economics, Loughborough University)
    Abstract: This paper investigates the properties of two types of cost restrictions that guarantee the existence of an equilibrium in pure strategies in Bayesian spatial competition models with heterogenous firms.
    Keywords: Localized competition; market effciency, cost heterogeneity.
    JEL: L11 D61
    Date: 2009–07
  6. By: Kenmei Tsubota (Institute of Economic Research, Kyoto University)
    Abstract: TThis paper examines the role of trade union and the type of wage bargainings in economic geography model. In our setting, wage bargaining is held between immobile workers and mobile entrepreneurs who decide the location of their firm. It is shown that stronger trade unions in both regions would put a stronger pressure toward agglomeration of firms. This is due to the fact that the stronger bargaining power of trade union makes home market effect larger. Under core-periphery distribution of firms, this effect can act the role as anchorage of firms. Stronger trade unions in home region can keep the firms remain in their region. Moreover, we extend to several employment environments, which are the outside option of workers. We show that differences in bargaining structures and employment environments could affect the stability of symmetrically distributed firms, namely symmetry break point. We show that while unemployment rate acts as a centripetal force, not only the degree of bargaining power of trade union but also unemployment benefit can play as a centrifugal force. A key message of the paper is that generous unemployment benefit and higher trade union make the distribution of firms more uneven and sustainable.
    Keywords: Labour market rigidity, Regional Unemployment, Location of firms, Anchorage effect of trade union
    JEL: F15 F16 J50 R12 R38
    Date: 2009–06
  7. By: Xiaolei Qian; Russell Smyth
    Abstract: This paper examines the linkage between aggregate real output, capital, labour, education, and productivity within a growth accounting framework for 27 Chinese provinces between 1990 and 2000. The results suggest that human capital has had a significant role in facilitating economic growth of all of the provinces throughout the 1990s. Regional disparities in factor accumulation are also considered. The results suggest that uneven distribution of resources between the coastal and inland provinces increased the regional gap in economic growth throughout the 1990s.
    Keywords: China, Economic growth, Human capital, Reform
    JEL: O40 O15 O53
    Date: 2009–05

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