nep-geo New Economics Papers
on Economic Geography
Issue of 2009‒09‒26
twenty-one papers chosen by
Vassilis Monastiriotis
London School of Economics

  1. A Probabilistic Modeling Approach to the Detection of Industrial Agglomerations By Tomoya Mori; Tony E. Smith
  2. A Centered Index of Spatial Concentration: Axiomatic Approach with an Application to Population and Capital Cities By Campante, Filipe R.; Do, Quoc-Anh
  3. Does the location of manufacturing determine service sectors’ location choices? Evidence from Portugal By Nuno Crespo; Maria Paula Fontoura
  4. Breakthrough Inventions and Migrating Clusters of Innovation By William R. Kerr
  5. The magnitude and causes of agglomeration economies By Diego Puga
  6. Agglomeration versus Fragmentation:A Comparison of East Asia and Europe By Hayakawa, Kazunobu; JI, Zheng; Obashi, Ayako
  7. Spatial networks, labor supply, and income dynamics: Evidence from Indonesian villages By Yamauchi, Futoshi; Muto, Megumi; Chowdhury, Shyamal; Dewina, Reno; Sumaryanto, Sony
  8. Rethinking Regional Path Dependence: Beyond Lock-in to Evolution By Ron Martin
  9. Clusters of Entrepreneurship By Edward L. Glaeser; William R. Kerr; Giacomo A. M. Ponzetto
  10. Spatial Localization in Manufacturing: A Cross-Country Analysis By Stefania Vitali; Mauro Napoletano; Giorgio Fagiolo
  11. Industrial clusters and economic integration : theoretic concepts and an application to the European Metropolitan Region Nuremberg By Litzel, Nicole; Möller, Joachim
  12. Lagging regions and development strategies: The case of Peru By Thurlow, James; Morley, Samuel; Pratt, Alejandro Nin
  13. Clusters of Entrepreneurship By Edward L. Glaeser; William R. Kerr; Giacomo A.M. Ponzetto
  14. The Cluster Experience In China By Marco Bellandi; Silvia Lombardi
  15. The Fundamental Law of Road Congestion: Evidence from US cities By Gilles Duranton; Matthew A. Turner
  16. Rational expectations in urban economics By Berliant, Marcus; Yu, Chia-Ming
  17. Relational and evolutionary economic geography: competing or complementary paradigms? By Robert Hassink; Claudia Klaerding
  18. UCLG Policy Paper on Local Finance By UCLG Committee on Local Finance and Development UCLG
  19. Neighborhood Effects: Accomplishments and Looking Beyond Them By Yannis M. Ioannides; Giorgio Topa
  20. Understanding Regional Growth Dynamics in JAPAN: Panel Cointegration Approach Utilizing The PANIC Method By Masahiko Shibamoto; Yoshiro Tsutsui; Chisako Yamane
  21. Remotely Engaged? A Framework for Monitoring the Success of Stakeholder Engagement in Remote Regions By Silva Larson; Thomas G Measham; Liana J Williams

  1. By: Tomoya Mori (Institute of Economic Research, Kyoto University); Tony E. Smith (Department of Electrical and Systems Engineering, University of Pennsylvania)
    Abstract: Dating from the seminal work of Ellison and Glaeser [17] in 1997, a wealth of evidence for the ubiquity of industrial agglomerations has been published. However, most of these results are based on analyses of single (scalar) indices of agglomeration. Hence it is not surprising that industries deemed to be similar by such indices can often exhibit very different patterns of agglomeration – with respect to the number, size, and spatial extent of individual agglomerations. The purpose of this paper is thus to propose a more detailed spatial analysis of agglomeration in terms of multiple-cluster patterns, where each cluster represents a (roughly) convex set of contiguous regions within which the density of establishments is relatively uniform. The key idea is to develop a simple probability model of multiple clusters, called cluster schemes, and then to seek a “best” cluster scheme for each industry by employing a standard model-selection criterion. Our ultimate objective is to provide a richer characterization of spatial agglomeration patterns that will allow more meaningful comparisons of these patterns across industries.
    Keywords: Industrial Agglomeration, Cluster Analysis, Geodesic Convexity, Bayesian Information Criterion
    JEL: C49 L60 R12 R14
    Date: 2009–09
  2. By: Campante, Filipe R. (Harvard University); Do, Quoc-Anh (Singapore Management University)
    Abstract: We construct an axiomatic index of spatial concentration around a center or capital point of interest, a concept with wide applicability from urban economics, economic geography and trade, to political economy and industrial organization. We propose basic axioms (decomposability and monotonicity) and refinement axioms (order preservation, convexity, and local monotonicity) for how the index should respond to changes in the underlying distribution. We obtain a unique class of functions satisfying all these properties, defined over any n-dimensional Euclidian space: the sum of a decreasing, isoelastic function of individual distances to the capital point of interest, with specific boundaries for the elasticity coefficient that depend on n. We apply our index to measure the concentration of population around capital cities across countries and US states, and also in US metropolitan areas. We show its advantages over alternative measures, and explore its correlations with many economic and political variables of interest.
    JEL: C43 F10 R23
    Date: 2009–01
  3. By: Nuno Crespo (ISCTE – Lisbon University Institute, Department of Economics and ERC/UNIDE); Maria Paula Fontoura (ISEG (School of Economics and Management), Technical University of Lisbon and UECE (Research Unit on Complexity and Economics))
    Abstract: Considering the case of Portugal over the period 1995-2000, this paper analyses whether the location of market services is explained by the geographical proximity of the industrial sectors that use these services as intermediate inputs. A rather detailed level of regional disaggregation is used, namely the county level (275 counties). This influence is confirmed by the results of some location indices and by the regressions made for each sector. An alternative spatial unit is also used, consisting of the county itself combined with those with which it shares boundaries, showing the relevance of the level of regional disaggregation for the results obtained.
    Keywords: Services, Manufacturing Industry, Location of Economic Activity, Portugal.
    JEL: R11 R12 R30
    Date: 2009–09
  4. By: William R. Kerr (Harvard Business School, Entrepreneurial Management Unit)
    Abstract: We investigate the speed at which clusters of invention for a technology migrate spatially following breakthrough inventions. We identify breakthrough inventions as the top one percent of US inventions for a technology during 1975-1984 in terms of subsequent citations. Patenting growth is significantly higher in cities and technologies where breakthrough inventions occur after 1984 relative to peer locations that do not experience breakthrough inventions. This growth differential in turn depends on the mobility of the technology's labor force, which we model through the extent that technologies depend upon immigrant scientists and engineers. Spatial adjustments are faster for technologies that depend heavily on immigrant inventors. The results qualitatively con.rm the mechanism of industry migration proposed in models like [Duranton, G., 2007. Urban evolutions: The fast, the slow, and the still. American Economic Review 97, 197.221].
    Keywords: Agglomeration, Clusters, Entrepreneurship, Invention, Mobility, Reallocation, R&D, Patents, Scientists, Engineers, Immigration.
    JEL: F2 J4 J6 O3 O4 R1 R3
    Date: 2009–09
  5. By: Diego Puga (IMDEA Social Sciences, Universidad Carlos III de Madrid and, CEPR)
    Abstract: Firms and workers are much more productive in large and dense urban environments. There is substantial evidence of such agglomeration economies based on three aproaches. First, on a clustering of production beyond what can be explained by chance or comparative advantage. Second, on spatial patterns in wages and rents. Third, on systematic variations in productivity with the urban environment. However, more needs to be learned about the causes of agglomeration economies. We have good models of agglomeration through sharing and matching, but not a deep enough understanding of learning in cities. Despite recent progress, more work is needed to distinguish empirically between alternative causes.
    Keywords: agglomeration economies
    JEL: R30
    Date: 2009–09–21
  6. By: Hayakawa, Kazunobu; JI, Zheng; Obashi, Ayako
    Abstract: Inspired by the observed contrasting patterns of industrial distribution in East Asia and Europe, this paper conducts an empirical clarification of the difference in spatial relationships among countries within a region for the electric machinery industry by use of spatial econometric analysis. The results indicate that, while production in the electric machinery industry in a country is positively correlated with that of neighboring countries in East Asia, there is no significant spatial correlation in Europe. Such a difference in spatial interdependence has important implications for economic development in those regions.
    Keywords: Agglomeration, Fragmentation, East Asia, Europe, Local industry, Electric industries
    JEL: N64 N65 R11 R12
    Date: 2009–08
  7. By: Yamauchi, Futoshi; Muto, Megumi; Chowdhury, Shyamal; Dewina, Reno; Sumaryanto, Sony
    Abstract: "This paper uses household panel and village census data from Indonesia to examine the impact of spatial connectivity (road) development on household income growth and nonagricultural labor supply. The empirical results show that the impacts of improvements in local road quality (which positively correlate with transportation speed) on income growth and the transition to nonagricultural labor markets depend on the distance to economic centers and the household education level. In particular, postprimary education significantly increases the benefit from local spatial connectivity improvement in remote areas and promotes labor transition to nonagricultural sectors. Education and local road quality are complementary, mutually increasing income growth and nonagricultural labor income in remote areas. The gain from improvements in local connectivity (measured by average road quality) depends on village remoteness and initial household-level endowments." from authors' abstract
    Keywords: income growth, Spatial connectivity, Rural economy, Education, Social protection, Human capital,
    Date: 2009
  8. By: Ron Martin
    Abstract: This paper argues that in its 'canonical' form, the path dependence model, with its core concept of 'lock-in, affords a very restrictive and narrowly applicable account of regional and local industrial evolution, an account moreover that is tied to problematic underpinnings based on equilibrist thinking. As such the canonical path dependence model actually stresses continuity rather than change. The paper goes on to explore recent developments in historical sociology and political science, where there are active attempts to rethink the application of path dependence to the evolution of institutions so as to emphasise change rather than continuity. These developments are used to argue for a rethinking of path dependence ideas in economic geography.
    Keywords: path dependence, lock-in, equilibrium evolution, layering, conversion, adaptation
    JEL: B52 O18 R11 R12
    Date: 2009–09
  9. By: Edward L. Glaeser (Harvard University, Faculty of Arts and Sciences; Harvard Kennedy School); William R. Kerr (Harvard Business School, Entrepreneurial Management Unit); Giacomo A. M. Ponzetto (CREI and Universitat Pompeu Fabra)
    Abstract: Employment growth is strongly predicted by smaller average establishment size, both across cities and across industries within cities, but there is little consensus on why this relationship exists. Traditional economic explanations emphasize factors that reduce entry costs or raise entrepreneurial returns, thereby increasing net returns and attracting entrepreneurs. A second class of theories hypothesizes that some places are endowed with a greater supply of entrepreneurship. Evidence on sales per worker does not support the higher returns for entrepreneurship rationale. Our evidence suggests that entrepreneurship is higher when fixed costs are lower and when there are more entrepreneurial people.
    Keywords: Entrepreneurship, Industrial Organization, Chinitz, Agglomeration, Clusters, Cities.
    JEL: J2 L0 L1 L2 L6 O3 R2
    Date: 2009–09
  10. By: Stefania Vitali (ETH Zurich); Mauro Napoletano (Observatoire Français des Conjonctures Économiques); Giorgio Fagiolo (Sant’Anna School of Advanced Studies)
    Date: 2009
  11. By: Litzel, Nicole (Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany]); Möller, Joachim (Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany])
    Abstract: "Economic integration typically goes along with disintegration of production through outsourcing and offshoring (Feenstra 1998). As horizontal and vertical links between firms become more and more pronounced, value chains within regions are increasingly organized by production and innovation clusters. On the basis of a literature overview, we argue that in a world of economic integration clusters can be expected to play a prominent role. Therefore clusters can also be seen as a key element in the European Metropolitan Region concept. Within such an economic space, localisation economies according to the 'Marshallian trinity' (knowledge spillovers, input sharing and labour market pooling (Rosenthal/Strange 2003)) can be realized. The paper builds on a comprehensive company survey for the core of the European Metropolitan Region Nuremberg that includes customer-supplier relationships and various forms of cooperation. As indicated by numerous empirical studies, the characteristics of clusters differ substantially. In order to overcome the fuzziness of the concept we suggest a bottom-up methodology of cluster identification using a set of qualitative and quantitative indicators. Given that many kinds of barriers to interregional and international trade are becoming less and less important and transport cost are falling, modern production clusters tend to have a higher geographical extension than traditional ones. We therefore raise the question of whether clustering is relevant for economic integration on the regional, national and supra-national level." (author's abstract, IAB-Doku) ((en))
    JEL: R11 R12
    Date: 2009–09–17
  12. By: Thurlow, James; Morley, Samuel; Pratt, Alejandro Nin
    Abstract: "Despite the economic transformation of Peru's coastal economy, the country's inland region remains poor and underdeveloped. We herein examine the economic linkages between the two regions using a multi-regional computable general equilibrium model based on a regionalized social accounting matrix. The model results show that coastal growth undermines the inland economy by increasing import competition and internal migration. Peru, therefore, cannot rely solely on rapid national growth to generate broad-based poverty reduction. When we simulate policies aimed at curbing divergence, we find that reducing interregional transaction costs stimulates national economic growth, but widens divergence by shifting inland production towards agriculture and concentrating investment in coastal manufacturing. In contrast, conditional cash transfers reduce regional and rural-urban inequality, but do not stimulate national growth. Finally, investing in inland productivity (through extension services and improved rural roads) reduces regional divergence, but the resulting market constraints worsen rural-urban inequality. These findings suggest that isolated interventions may worsen inequality, and that complementarities exist between supply-side investments and policies aimed at stimulating demand and improving access to national markets." from authors' abstract
    Keywords: Regional development, Public investments, economic growth, Development strategies,
    Date: 2009
  13. By: Edward L. Glaeser; William R. Kerr; Giacomo A.M. Ponzetto
    Abstract: Employment growth is strongly predicted by smaller average establishment size, both across cities and across industries within cities, but there is little consensus on why this relationship exists. Traditional economic explanations emphasize factors that reduce entry costs or raise entrepreneurial returns, thereby increasing net returns and attracting entrepreneurs. A second class of theories hypothesizes that some places are endowed with a greater supply of entrepreneurship. Evidence on sales per worker does not support the higher returns for entrepreneurship rationale. Our evidence suggests that entrepreneurship is higher when fixed costs are lower and when there are more entrepreneurial people.
    JEL: J00 J2 L0 L1 L2 L6 O3 R2
    Date: 2009–09
  14. By: Marco Bellandi (Department of Economics, University of Florence); Silvia Lombardi (Department of Economics, University of Florence)
    Keywords: industrial clusters, China, local development
    JEL: L16 O53
    Date: 2009–08
  15. By: Gilles Duranton; Matthew A. Turner
    Abstract: We investigate the relationship between interstate highways and highway vehicle kilometers traveled (VKT) in US cities. We find that VKT increases proportionately to highways and identify three important sources for this extra VKT: an increase in driving by current residents; an increase in transportation intensive production activity; and an inflow of new residents. The provision of public transportation has no impact on VKT. We also estimate the aggregate city level demand for VKT and find it to be very elastic. We conclude that an increased provision of roads or public transit is unlikely to relieve congestion.
    JEL: L91 R41
    Date: 2009–09
  16. By: Berliant, Marcus; Yu, Chia-Ming
    Abstract: Canonical analysis of the classical general equilibrium model demonstrates the existence of an open and dense subset of standard economies that possess fully-revealing rational expectations equilibria. This paper shows that the analogous result is not true in urban economies. An open subset of economies where none of the rational expectations equilibria fully reveal private information is found. There are two important pieces. First, there can be information about a location known by a consumer who does not live in that location in equilibrium, and thus the equilibrium rent does not reflect this information. Second, if a consumer’s utility depends only on information about their (endogenous) location of residence, perturbations of utility naturally do not incorporate information about other locations conditional on their location of residence. Existence of a rational expectations equilibrium is proved. Space can prevent housing prices from transmitting information from informed to uninformed households, resulting in an inefficient outcome.
    Keywords: Urban Economics; General Equilibrium; Private Information; Rational Expectations
    JEL: R13 D82 D51
    Date: 2009–09–15
  17. By: Robert Hassink; Claudia Klaerding
    Abstract: Economic geographers have recently been confronted with attempts to constitute both relational and evolutionary economic geography. The two proposed paradigms have much in common, such as the perception of space as being socially constructed instead of a pre-given entity with causal powers. Until now, however, astonishingly little has been written about the differences between these proposed paradigms. By comparatively focussing on three research issues, the paper concludes that the conceptual differences are rather subtle and that the relational approach seems to include a wider and therefore, more unspecific perspective to explain the distribution of economic activities over space.
    Keywords: trade network, knowledge network, social network analysis, wine sector
    JEL: B52 O18 R11 R12
    Date: 2009–09
  18. By: UCLG Committee on Local Finance and Development UCLG
    Abstract: The Policy Paper seeks to give voice to a local government vision on financing and stems from a shared understanding of the challenges we face. The Policy Paper contains 25 concrete recom- mendations for increasing local government access to infrastructure financing, particular- ly in developing country cities where infrastructure planning and construction have not kept pace with rapid urbanisation. At the global level, UCLG advocates that a fixed proportion of development aid and debt relief be allocated directly to local governments to enable them to address poverty reduction through public infrastructure provision.
    Keywords: urban finance, local finance, municipal finance, UNHABITAT, economics, infrastructure, urban infrastructure, public funding, urban development
    Date: 2009
  19. By: Yannis M. Ioannides; Giorgio Topa
    Abstract: The paper addresses the empirical significance of the social context in economic decisions. Decisions of individuals who share spatial and social milieus are likely to be interdependent, and econometric identification of social effects poses intricate data and methodological problems, including dealing with self-selection in spatial and socail groups. It uses a simple empirical framework to introduce social interactions effects at different levels of aggregation, and examines estimation problems into linear models, the impact of self-selection and of non linearities. It also examines neighborhood effects in job matching and proposes a research agenda that offers new techniques and data sources.
    Keywords: Neighborhood effects, social interactions, social networks, social effects, self-selection, neighborhood choice, social multiplier, spatial effects
    JEL: C00 C81 J6 R22 Z13
    Date: 2009
  20. By: Masahiko Shibamoto (Research Institute for Economics and Business Administration, Kobe University); Yoshiro Tsutsui (Graduate School of Economics, Osaka University); Chisako Yamane (Faculty of Economics, Niigata Sangyo University)
    Abstract: This study aimed at understanding regional growth dynamics in Japan using nonstationary panel data. Since the panel unit root test did not adequately produce a detailed picture of the development of Japanese prefectures, we followed a panel cointegration approach using the PANIC method. We found that there is one common source of growth to which prefectures attach different long-run weights and that the per capita real income of follower-prefectures will catch up to that of leader-prefectures. Using the concept of relative convergence, we found that although the poor stay poor, the relative income gap will narrow substantially in the future.
    Keywords: β-convergence, common trends, panel unit root test, PANIC method, relative convergence, Japan
    JEL: O40 C22 C23
    Date: 2009–09
  21. By: Silva Larson; Thomas G Measham; Liana J Williams (CSIRO Sustainable Ecosystems, Australia)
    Abstract: The importance of stakeholder engagement for the success of natural resources management processes is widely acknowledged, yet evaluation frameworks employed by administrators of environmental programs continue to provide limited recognition of or insistence upon engagement processes. This paper presents a framework for monitoring and evaluation of engagement that aims to better incorporate community engagement into mainstream environmental programs, in particular in remote regions such as arid and desert regions of the world. We argue that successful monitoring of engagement should not only comprise a generic set of indicators but rather, in addition to the principles of good monitoring practice, should take into account a variety of the stakeholder interests as well as key regional drivers, addressing them at right geographic, institutional and time scale.
    Keywords: engagement, evaluation, governance, natural resources, participation, stakeholders
    JEL: D83 H11 Q01 R58 Q57
    Date: 2009–08

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