nep-geo New Economics Papers
on Economic Geography
Issue of 2009‒10‒03
seventeen papers chosen by
Vassilis Monastiriotis
London School of Economics

  1. Environmental Policy, Spatial Spillovers and the Emergence of Economic Agglomerations By Anastasios Xepapadeas; Efthymia Kyriakopoulou
  2. Evolutionary economic geography and its implications for regional innovation policy By Ron Boschma
  3. Can information asymmetry cause agglomeration? By Berliant, Marcus; Kung, Fan-chin
  4. Entrepreneurship, Evolution and Geography By Erik Stam
  5. Mapping the Evolution of "Clusters": A Meta-analysis By Mario A. Maggioni; T. Erika Uberti; Francesca Gambarotto
  6. Labor market pooling and occupational agglomeration By Todd M. Gabe; Jaison R. Abel
  7. Innovation and Knowledge Links in Metropolitan Regions - The Case of Vienna By Franz Tödtling; Michaela Trippl
  8. The German spatial poverty divide: poorly endowed or bad luck? By Bönke, Timm; Schröder, Carsten
  9. Human Capital Convergence in Greece: A Panel Data Analysis By George Liaskos; Christos Papadas
  10. Distributive and Regional Effects of Monopoly Power By Urzúa, Carlos M.
  11. Sprawl or No Sprawl? - A Quantitative Analysis for the City of Vienna By Julia Lechner; Gunther Maier
  12. Rethinking China's underurbanization: An evaluation of its county-to-city upgrading policy By Fan, Shenggen; Li, Lixing; Zhang, Xiaobo
  13. Cultural Diversity and Economic Performance: Evidence from European Regions By Giovanni Prarolo; Elena Bellini; Gianmarco I.P. Ottaviano; Dino Pinelli
  14. Managing Housing Bubbles in Regional Economies under EMU: Ireland and Spain By Conefrey, Thomas; Fitz Gerald, John
  15. German reunification and convergence policies By Juan Carlos Martinez Oliva
  16. Regional value added in Italy (1891-2001): estimates, elaborations By Emanuele Felice
  17. Cultural Identity and Knowledge Creation in Cosmopolitan Cities By Gianmarco I.P. Ottaviano; Giovanni Prarolo

  1. By: Anastasios Xepapadeas (Athens University of Economics and Business); Efthymia Kyriakopoulou (Athens University of Economics and Business)
    Abstract: We explain the spatial concentration of economic activity, in a model of economic geography, when the cost of environmental policy - which is increasing in the concentration of emissions - and an immobile production factor act as centrifugal forces, while positive knowledge spillovers and iceberg transportation costs act as centripetal forces. We study the agglomeration effects caused by trade-offs between centripetal and centrifugal forces. The above effects govern firms’ location decisions and as a result, they define the distribution of economic activity across space. We derive the rational expectations equilibrium and the social optimum, compare the outcomes and characterize the optimal spatial policies.
    Keywords: Agglomeration, Spatial Economics, Environmental Policy, Knowledge Spillovers, Transportation Cost
    JEL: R3 Q5 H2
    Date: 2009–09
  2. By: Ron Boschma
    Abstract: Related variety is important to regional growth because it induces knowledge transfer between complementary sectors at the regional level. This is accomplished through three mechanisms: spinoff dynamics, labor mobility and network formation. They transfer knowledge across related sectors, which contributes to industrial renewal and economic branching in regions. Since these mechanisms of knowledge transfer are basically taking place at the regional level, and because they make regions move into new growth paths while building on their existing assets, regional innovation policy should encourage spinoff activity, labor mobility and network formation. Doing so, policy builds on region-specific assets that provides opportunities but also sets limits to what can be achieved by policy. Public intervention should neither apply Ôone-size-fits-allÕ approaches nor adopt Ôpicking-the- winnerÕ strategies, but should aim to connect complementary sectors and exploit related variety as a source of regional diversification.
    Keywords: related variety, evolutionary economic geography, regional innovation systems, regional growth
    JEL: R0 R1 R12
    Date: 2009–09
  3. By: Berliant, Marcus; Kung, Fan-chin
    Abstract: The modern literature on city formation and development, for example the New Economic Geography literature, has studied the agglomeration of agents in size or mass. We investigate agglomeration in sorting or by type of worker, that implies agglomeration in size when worker populations differ by type. This kind of agglomeration can be driven by asymmetric information in the labor market, specifically when firms do not know if a particular worker is of high or low skill. In a model with two types and two regions, workers of different skill levels are offered separating contracts in equilibrium. When mobile low skill worker population rises or there is technological change that favors high skilled workers, integration of both types of workers in the same region at equilibrium becomes unstable, whereas sorting of worker types into different regions in equilibrium remains stable. The instability of integrated equilibria results from firms, in the region to which workers are perturbed, offering attractive contracts to low skill workers when there is a mixture of workers in the region of origin.
    Keywords: Adverse Selection; Agglomeration
    JEL: R13 R12 D82
    Date: 2009–09–28
  4. By: Erik Stam
    Abstract: This chapter is an inquiry into the role of entrepreneurship in evolutionary economic geography. The focus is on how and why entrepreneurship is a distinctly spatially uneven process. We will start with a discussion on the role of entrepreneurship in the theory of economic evolution. Next, we will review the empirical literature on the geography of entrepreneurship. The chapter concludes with a discussion of a future agenda for the study of entrepreneurship within evolutionary economic geography.
    Keywords: entrepreneurship, evolution, geography
    JEL: R0 M13 R11
    Date: 2009–09
  5. By: Mario A. Maggioni (Catholic University); T. Erika Uberti (Catholic University); Francesca Gambarotto (University of Padova)
    Abstract: This paper presents a meta-analysis of the “cluster literature” contained in scientific journals from 1969 to 2007. Thanks to an original database we study the evolution of a stream of literature which focuses on a research object which is both a theoretical puzzle and an empirical widespread evidence. We identify different growth stages, from take-off to development and maturity. We test the existence of a life-cycle within the authorships and we discover the existence of a substitutability relation between different collaborative behaviours. We study the relationships between a “spatial” and an “industrial” approach within the textual corpus of cluster literature and we show the existence of a “predatory” interaction. We detect the relevance of clustering behaviours in the location of authors working on clusters and in measuring the influence of geographical distance in co-authorship. We measure the extent of a convergence process of the vocabulary of scientists working on clusters.
    Keywords: Cluster, Life-Cycle, Cluster Literature, Textual Analysis, Agglomeration, Co-Authorship
    JEL: O18 R12 Z13 B41
    Date: 2009–09
  6. By: Todd M. Gabe; Jaison R. Abel
    Abstract: This paper examines the micro-foundations of occupational agglomeration in U.S. metropolitan areas, with an emphasis on labor market pooling. Controlling for a wide range of occupational attributes, including proxies for the use of specialized machinery and for the importance of knowledge spillovers, we find that jobs characterized by a unique knowledge base exhibit higher levels of geographic concentration than do occupations with generic knowledge requirements. Further, by analyzing co-agglomeration patterns, we find that occupations with similar knowledge requirements tend to co-agglomerate. Both results provide new evidence on the importance of labor market pooling as a determinant of occupational agglomeration.
    Keywords: Labor market ; Labor mobility
    Date: 2009
  7. By: Franz Tödtling; Michaela Trippl
    Date: 2009
  8. By: Bönke, Timm; Schröder, Carsten
    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
  9. By: George Liaskos (Department of Agricultural Economics and Rural Development, Agricultural University of Athens); Christos Papadas (Department of Agricultural Economics and Rural Development, Agricultural University of Athens)
    Abstract: The neoclassical growth model has been supported by a large amount of regional and cross-country studies providing evidence of â-convergence. Nevertheless, it faces theoretical and empirical challenges which are still the subject of research on the dynamics of growth. Consideration of human capital accumulation has strengthened the theoretical foundations of the model, especially its open economy version. It has also improved the explanatory power of the model and its usefulness in quantitative analysis. Human capital accumulation accounts for that part of observed per capita income and output disparities, not explained adequately by the initial approach. Newer versions of neoclassical growth modeling imply clearly that the process of growth and convergence depends heavily on human capital accumulation and convergence. This study investigates regional human capital convergence in Greece during the period 1971-2001, for the census years of which necessary data are available. Following the usual practice in the literature, human capital quality is expressed in terms of educational achievement. Panel data econometric analysis is conducted using census year data for the Greek prefectures (NUTS III areas). The existence of human capital â-convergence is examined. Changes in the distributions of educational achievement, using different criteria, are also examined in order to see if actual convergence occurs. Results show that both space and time effects are significant and so is the established conditional â-convergence. Nevertheless, actual convergence is not achieved over the examined period and the dispersion of the observed human capital distributions has been increasing.
    Date: 2009
  10. By: Urzúa, Carlos M. (Tecnológico de Monterrey, Campus Ciudad de México)
    Abstract: This paper estimates the distributive and regional effects of firms with market power in the case of Mexico. It presents evidence that the welfare losses due to the exercise of monopoly power are not only significant, but also regressive. Moreover, the losses are different for the urban and rural sectors, as well as for each of the states of Mexico, being the inhabitants of the poorest ones the most affected by firms with market power.
    Keywords: monopoly, Cournot oligopoly, distributive effects, regional effects, income distribution, goods markets, Mexico
    JEL: L10 L40 L66 I31 O14 R20
    Date: 2009–04
  11. By: Julia Lechner; Gunther Maier
    Date: 2009
  12. By: Fan, Shenggen; Li, Lixing; Zhang, Xiaobo
    Abstract: "It has been argued in the literature that China is underurbanized in large part because of restrictions on migration. While the presence of migration barriers can help explain why existing cities fail to achieve their optimal size, it cannot explain the lack of cities. Although migration has become much easier over time, the number of cities in China has been rather stagnant. In this paper, we argue that lack of appropriate mechanisms for creating new cities is another reason for underurbanization. Under China's hierarchical governance structure, the only way to create new cities is through the centralized policy of upgrading existing counties or prefectures into cities. However, in practice the implementation of the county-to-city upgrading policy was more complicated than expected. Based on a county-level panel dataset, this paper shows that jurisdictions that were upgraded to cities prior to 1998 do not perform better relative to their counterparts that remain to be counties in terms of both economic growth and providing public services. The policy was retracted in 1997, freezing the number of county-level cities since then. This, in turn, contributes to the observed underurbanization." from authors' abstract
    Keywords: Urbanization, City creation, Governance structure, Political centralization, Development strategies,
    Date: 2009
  13. By: Giovanni Prarolo (Università di Bologna); Elena Bellini (FEEM); Gianmarco I.P. Ottaviano (University of Bologna, FEEM and CEPR); Dino Pinelli (FEEM)
    Abstract: We investigate the relationship between diversity and productivity in Europe using an original dataset covering the NUTS 3 regions of 12 countries of the EU15 (Austria, Belgium, Denmark, France, former Western Germany, Ireland, Italy, the Netherlands, Portugal, Spain, Sweden and the United Kingdom). In so doing, we follow the empirical methodology developed by Ottaviano and Peri (2006a) in the case of US cities. The main idea is that, as cultural diversity may affect both production and consumption through positive or negative externalities, the joint estimation of price and income equations is needed to identify the dominant effect. Based on this methodology, we find that diversity is positively correlated with productivity. Moreover, we find evidence that causation runs from the former to the latter. These results for EU regions are broadly consistent with those found by Ottaviano and Peri for US cities.
    Keywords: Cultural Diversity, Economic Performance, Productivity, Europe
    JEL: O5 O11 O57 R5 R58
    Date: 2009–08
  14. By: Conefrey, Thomas (ESRI); Fitz Gerald, John (ESRI)
    Abstract: With the advent of EMU monetary policy can no longer be used to prevent housing market bubbles in regional economies such as Ireland or Spain. However, fiscal policy can and should be used to achieve the same effect. This paper shows that the advent of EMU relaxed existing financial constraints in Ireland and Spain, allowing a more rapid expansion of the housing stock in those countries to meet their specific demographic circumstances. However, the failure to prevent these booms turning into bubbles did lasting damage to the two economies, damage that could have been avoided by more appropriate fiscal policy action.
    Date: 2009–09
  15. By: Juan Carlos Martinez Oliva (Banca d'Italia)
    Abstract: This paper examines German reunification from its inception. It shows that after the rapid expansion of the early years, former East Germany entered a phase of slow growth that made it impossible to bridge the gap with West Germany. Unemployment remains high, low growth rates appear ingrained, and persistent regional unbalances affect the social and economic prospects of the area. The long-term outlook is threatened by adverse demographic trends and by the need for fiscal consolidation. A comparison between eastern Germany and the Italian Mezzogiorno shows that both rely heavily on government intervention. This dependency is perpetuated by the evident difficulty of setting an autonomous growth process in motion. By contrast, unlike the Mezzogiorno, the eastern German regions enjoy a high level of infrastructural endowment, a legal system that is both efficient and effective, and excellent human capital, partly inherited from the former DDR.
    Keywords: Germany, Mezzogiorno, transition, integration, Finanzausgleich, Treuhandanstalt
    JEL: H0 O47 O52 P2
    Date: 2009–07
  16. By: Emanuele Felice
    Abstract: The aim of this paper is to present and discuss the pattern of regional inequality in Italy, from the end of the nineteenth century until our days. Value added estimates for the Italian regions, in benchmark years from 1891 until 1951, are linked to those from official figures available from 1971, in order to offer a long-term picture. It is worth anticipating that 1891-1951 estimates are not entirely satisfactory yet (sources and methodologies used for 1891-1951 estimates are explained in some detail in the final appendix). However, at the present stage of research they are comparable to those available for other countries; further refinements can hardly be produced in the short run, while it seems reasonable to think that they would not change significantly the overall pattern. In short, present estimates allow us to set the Italian case within the international context and to draw the basic lines of a long-term picture.
    Keywords: industrialization, regional inequality, regional income, economic growth
    JEL: N93 N94 R11
    Date: 2009–09
  17. By: Gianmarco I.P. Ottaviano (Bocconi University, DEP-KITeS, FEEM and CEPR); Giovanni Prarolo (University of Bologna and FEEM)
    Abstract: We study how the city system is affected by the possibility for the members of the same cultural diaspora to interact across different cities. In so doing, we propose a simple two- city model with two mobile cultural groups. A localized externality fosters the productivity of individuals when groups interact in a city. At the same time, such interaction dilutes cultural identities and reduces the consumption of culture-specific goods and services. We show that the two groups segregate in different cities when diaspora members find it hard to communicate at distance whereas they integrate in multicultural cities when communication is easy. The model generates situations in which segregation is an equilibrium but is Pareto dominated by integration.
    Keywords: Cultural Identity, Cosmopolitan City, Productiviy
    Date: 2009–09

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