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

  1. Regional Economic Growth and Human Capital: The Role of Overeducation By Ramos, Raul; Surinach, Jordi; Artís, Manuel
  2. Urban Growth Externalities and Neighborhood Incentives: Another Cause of Urban Sprawl? By Matthias Cinyabuguma; Virginia McConnell
  3. Spatial Mismatch, Immigrant Networks, and Hispanic Employment in the United States By Judith K. Hellerstein; Melissa McInerney; David Neumark
  4. Anatomy of Regional Disparities in the Slovak Republic By Mariusz Jarmuzek; Biswajit Banerjee
  5. Determinant factors of structural similarity at the regional level: evidence from Portugal By Nuno Crespo; Maria Paula Fontoura
  6. Econometric evaluation of EU Cohesion Policy: a survey By Hagen, Tobias; Mohl, Philipp
  7. Nonparametric regression with spatially dependent data By Stefano Magrini; Margherita Gerolimetto
  8. The Formation of Urban Centers under R\&D and Spillover Externalities By Kranich, Jan
  9. Scale and Scope - human capital and the structure of regional export flows By Andersson, Martin; Johansson, Sara
  10. Does Local Business Ownership Insulate Cities from Economic Shocks? By Kolko, Jed; Neumark, David
  11. Testing for Spatial Autocorrelation in a Fixed Effects Panel Data Model By Nicolas Debarsy; Cem Ertur
  12. Tipping and Residential Segregation: A Unified Schelling Model By Zhang, Junfu
  13. Localised Spillovers and Knowledge Flows: A Study on the Effects of Proximity and Labour Mobility on Plant Performance By Rikard H. Eriksson
  14. Counterfactual analysis using a regional dynamic general equilibrium model with historical calibration By Federico Perali; Stefania Lovo
  15. Why Do Some Places Succeed When Others Decline? A Social Interaction Model of Cluster Viability By Jérôme Vicente; Raphaël Suire
  16. An urban general equilibrium model with multiple household structures and travel mode choice By Tscharaktschiew, Stefan; Hirte, Georg
  17. (In)Efficiency of Matching - the Case of a Post-transition Economy By Tomasz Jeruzalski; Joanna Tyrowicz

  1. By: Ramos, Raul (University of Barcelona); Surinach, Jordi (University of Barcelona); Artís, Manuel (University of Barcelona)
    Abstract: The paper analyses the link between human capital and regional economic growth in the European Union. Using various indicators of human capital calculated from census microdata, we conclude that the recent economic performance of European regions is associated with an increase in overeducation. In fact, measures of educational mismatch seem to be more strongly connected to regional economic performance than do other traditional measures of human capital stock.
    Keywords: regional economic growth, human capital, educational mismatch, overeducation
    JEL: O18 O47 R23
    Date: 2009–09
  2. By: Matthias Cinyabuguma (UMBC); Virginia McConnell (UMBC)
    Abstract: This paper suggests a cause of low density in urban development or urban sprawl that has not been given much attention in the literature. There have been a number of arguments put forward for market failures that may account for urban sprawl, including incomplete pricing of infrastructure, environmental externalities, and unpriced congestion. The problem analyzed here is that urban growth creates benefits for an entire urban area, but the costs of growth are borne by individual neighborhoods. An externality problem arises because existing residents perceive the costs associated with the new residents locating in their neighborhoods, but not the full benefits of new entrants which accrue to the city as a whole. The result is that existing residents have an incentive to block new residents to their neighborhoods, resulting in cities that are less dense than is optimal, or too sprawling. The paper models several different types of urban growth, and examines the optimal and local choice outcomes under each type. In the first model, population growth is endogenous and the physical limits of the city are fixed. The second model examines the case in which population growth in the region is given, but the city boundary is allowed to vary. We show that in both cases the city will tend to be larger and less dense than is optimal. In each, we examine the sensitivity of the model to the number of neighborhoods and to the size of infrastructure and transportation costs. Finally, we examine optimal subsidies and see how they compare to current policies such as impact fees on new development.
    Keywords: Externalities, Urban Growth, Optimality, Policies, Taxation
    JEL: H23 R11 D60 H2
    Date: 2009–08–24
  3. By: Judith K. Hellerstein; Melissa McInerney; David Neumark
    Abstract: We study the relationship between Hispanic employment and location-specific measures of the distribution of jobs. We find that it is only the local density of jobs held by Hispanics that matters for Hispanic employment, that measures of local job density defined for Hispanic poor English speakers or immigrants are more important, and that the density of jobs held by Hispanic poor English speakers are most important for the employment of these less-skilled Hispanics than for other Hispanics. This evidence is consistent with labor market networks being an important influence on the employment of less-skilled Hispanics, as is evidence from other sources. We also find that in MSAs where the growth rates of the Hispanic immigrant population have been highest, which are also MSAs with historically low Hispanic populations, localized job density for low-skilled jobs is even more important for Hispanic employment than in the full sample. We interpret this evidence as consistent with the importance of labor market networks, as strong labor market networks are likely to have been especially important in inducing Hispanics to migrate, and because of these networks employment in these “new immigrant†cities is especially strongly tied to the local availability of jobs.
    JEL: J1 J61
    Date: 2009–10
  4. By: Mariusz Jarmuzek; Biswajit Banerjee
    Abstract: This paper examines economic growth and various dimensions of regional disparities in Slovakia. We find that regional disparities in the levels of GDP per capita, labor productivity, and labor utilization have widened since 2000, coinciding with the time that Slovakia initiated negotiations on EU accession. Notwithstanding ?-divergence in the levels, there was conditional ?-convergence in the growth rates of GDP per capita and labor productivity. Improvements in total factor productivity were the main engine of growth of GDP in all regions. Sustaining growth and reducing disparities will require increasing the labor utilization ratio and improving the structural and policy determinants of productivity in the eastern regions. The main policy priorities are to improve transportation infrastructure, enhance cost competitiveness through greater regional differentiation in wages and further decentralization of collective bargaining, and increase accumulation of human capital.
    Keywords: Cross country analysis , Economic growth , Economic models , European Union , Labor market policy , Labor productivity , Slovak Republic ,
    Date: 2009–07–14
  5. By: Nuno Crespo; Maria Paula Fontoura
    Abstract: There is scant evidence on the determinant factors of structural similarity between geographical spaces; moreover, it has been produced considering only the national level. The present study provides evidence on this topic at the regional level, based on the analysis of 275 Portuguese counties. The results obtained confirm the importance of several explanatory factors, suggesting that the structural similarity between Portuguese counties increases with geographical proximity, the existence of a shared boundary, the similarity of factor endowments in terms of physical and human capital and the similarity in terms of economic centrality and market dimension. Key words: productive structure, Portugal, structural similarity, factor endowments, economic geography
    JEL: R11 R12 R30
    Date: 2009–09
  6. By: Hagen, Tobias; Mohl, Philipp
    Abstract: More than one third of the European Union's total budget is spent on socalled Cohesion Policy via the structural funds. Its main purpose is to promote the development of the EU and to support convergence between the levels of development of the various European regions. Investigating the impact of European Cohesion Policy on economic growth and convergence is a wide research topic in applied econometric research. Nevertheless, the empirical evidence has provided mixed, if not contradictory, results. Against this background, the aim of this chapter is to provide a fundamental review on this topic. Taking fundamental methodological issues into account, we review the existing econometric evaluation studies, draw several conclusions and provide some remarks for future research.
    Keywords: Economic integration,regional growth,EU Cohesion Policy,panel data,spatial econometrics
    JEL: R10 R11 C21 C23
    Date: 2009
  7. By: Stefano Magrini (Department of Economics, University Of Venice Cà Foscari); Margherita Gerolimetto (University Of Venice Cà Foscari)
    Abstract: In this paper we present a new procedure for nonparametric regression in case of spatially dependent data. In particular, we extend usual local linear regression (along the lines of Martins-Filho and Yao, 2009) and propose a two-step method where information on spatial dependence is incorporated in the error covariance matrix, estimated nonparametrically. The finite sample performance of our proposed procedure is then shown via Monte Carlo simulations for various data generating processes.
    Keywords: nonparametric smoothing, spatial dependence
    JEL: C14 C21
    Date: 2009
  8. By: Kranich, Jan
    Abstract: This paper proposes a model of urban agglomeration in conjunction with imperfect competition and endogenous product R\&D of firms. The quality of differentiated manufacturing goods is a result of R\&D services provided by research firms. Sectoral interactions are subject to spatially dependent transaction costs and (knowledge) spillover externalities. The paper analyzes the existence of fundamental city patterns with respect to R\&D intensity and the degree of localization in knowledge production. The model features three equilibrium formations: a monocentric, a mixed, and a perfectly integrated pattern, whereas the R\&D intensity always increases towards the city center. However, product quality and the corresponding R\&D expenditures of firms are not necessarily increasing with the city size; a result, which also renders decisive implications of local innovation policy.
    Keywords: Bid-rent, Land Use, R\&D, Externalities
    JEL: R1 R14
    Date: 2009–09
  9. By: Andersson, Martin (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology); Johansson, Sara (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology)
    Abstract: This paper presents an empirical analysis of the relationship between human capital endowments and the structure of regional export flows. Since the development of each export product may be assumed to be associated with innovation activity, requiring human capital inputs, the core hypothesis tested in this paper is that cross-regional variations in endowments of human capital influence the extensive margin (number of export products) rather than the intensive margin (average export value per product). The hypothesis is tested in a cross-regional regression model, applied to aggregate and within-industry export flows from Swedish regions. The empirical results confirm the theoretical prediction that the response of regional export flows to cross-regional variations in human capital is an increase in the extensive margin. To the extent that the regional human capital endowment affects the intensive margin, the effect is a higher average price per export product.
    Keywords: product differentiation; knowledge; human capital; accessibility; export diversity; extensive margin; economies of scale
    JEL: F12 F14 R12 R32
    Date: 2009–09–28
  10. By: Kolko, Jed (Public Policy Institute of California); Neumark, David (University of California, Irvine)
    Abstract: We assess a prominent argument for local economic policies that favor locally-owned businesses – namely, that locally-owned firms are more likely to internalize the costs to the community of decisions to reduce employment and hence help to insulate cities from adverse economic shocks. We test this argument by examining how establishment-level employment responses to economic shocks are affected by establishment ownership. We find evidence hat some types of local ownership do insulate regions from economic shocks, although the clearest benefits do not come from small, independent businesses, but instead from corporate headquarters and, to a lesser extent, from small, locally-owned chains.
    Keywords: employment stability, employment shocks, local ownership
    JEL: R11 R38 J23
    Date: 2009–09
  11. By: Nicolas Debarsy (CERPE - Centre de Recherches en Economie Régionale et Politique Economique - Université de Namur); Cem Ertur (LEO - Laboratoire d'économie d'Orleans - CNRS : UMR6221 - Université d'Orléans)
    Abstract: This paper derives several Lagrange Multiplier statistics and the correspondinglikelihood ratio statistics to test for spatial autocorrelation in a fixed effectspanel data model. These tests allow discriminating between the two main typesof spatial autocorrelation which are relevant in empirical applications, namelyendogenous spatial lag versus spatially autocorrelated errors. In this paper, fivedifferent statistics are suggested. The first one, the joint test, detects the presenceof spatial autocorrelation whatever its type. Hence, it indicates whetherspecific econometric estimation methods should be implemented to account forthe spatial dimension. In case they need to be implemented, the other four testssupport the choice between the different specifications, i.e. endogenous spatiallag, spatially autocorrelated errors or both. The first two are simple hypothesistests as they detect one kind of spatial autocorrelation assuming the otherone is absent. The last two take into account the presence of one type of spatialautocorrelation when testing for the presence of the other one. We use themethodology developed in Lee and Yu (2008) to set up and estimate the generallikelihood function. Monte Carlo experiments show the good performance ofour tests. Finally, as an illustration, they are applied to the Feldstein-Horiokapuzzle. They indicate a misspecification of the investment-saving regressiondue to the omission of spatial autocorrelation. The traditional saving-retentioncoefficient is shown to be upward biased. In contrast our results favor capitalmobility.
    Keywords: Testing ; Spatial ; Autocorrelation ; Fixed ; Effects ; Panel Data Model
    Date: 2009–07
  12. By: Zhang, Junfu (Clark University)
    Abstract: This paper presents a Schelling-type checkerboard model of residential segregation formulated as a spatial game. It shows that although every agent prefers to live in a mixed-race neighborhood, complete segregation is observed almost all of the time. A concept of tipping is rigorously defined, which is crucial for understanding the dynamics of segregation. Complete segregation emerges and persists in the checkerboard model precisely because tipping is less likely to occur to such residential patterns. Agent-based simulations are used to illustrate how an integrated residential area is tipped into complete segregation and why this process is irreversible. This model incorporates insights from Schelling's two classical models of segregation (the checkerboard model and the neighborhood tipping model) and puts them on a rigorous footing. It helps us better understand the persistence of residential segregation in urban America.
    Keywords: residential segregation, tipping, checkerboard model
    JEL: C72 C73 D62 R13
    Date: 2009–09
  13. By: Rikard H. Eriksson
    Abstract: This paper aims to shed some light on the influence of geographical proximity on both intra- and inter-industry spillovers by elaborating on the geographical dimension of both localised spillovers and inter-firm knowledge flows. By means of a unique longitudinal micro-database with information on all plants and employees in Sweden, both plant-specific agglomeration measurements and labour markets at various distances from each of the 8,313 plants in the sample were created. OLS-regressions were run to account for what type of co-located activities that is most beneficial to productivity growth of plants between 2001 and 2003; how different types of knowledge flows – in and out from the plant – affect performance, and finally; how geographical proximity influences the effects of both localised spillovers and knowledge flows. The empirical results indicate that it is not possible to establish whether either intra- or inter-industry spillovers are most beneficial unless the geographical dimension is considered. This is because neither too much nor too little proximity (measured as both geographical and cognitive proximity) between co-located activities is likely to produce significant localised spillovers. This seems also to be the case when assessing more directly the impacts of inter-plant knowledge flows via labour mobility – only knowledge flows that are complementary to the existing knowledge base of plants, and neither characterised by too much nor too little geographical proximity, affect plant performance positively. Concerning the outflows of skills, the results indicate that it is less harmful for the dispatching plant if the former employee remains within the local milieu as compared to leaving for a job in another part of the economy.
    Keywords: Agglomerations; Knowledge Spillovers; Labour Mobility; Plant Performance; Geographical Pro
    JEL: R11 Q12 O18
    Date: 2009
  14. By: Federico Perali (Department of Economics (University of Verona)); Stefania Lovo (Department of Economics (University of Verona))
    Abstract: This paper develops a regional dynamic general equilibrium model calibrated using two regional SAMs for the Italian region Valle D’Aosta for the years 1963 and 2002. A historical calibration procedure is performed over the 40 years period and a validation exercise ensures that the modelled tendencies closely approximate the actual observed growth patterns of the main regional macroeconomic variables. The dynamic general equilibrium model provides an original and powerful tool for historical counterfactual analysis not available using standard dynamic general equilibrium models. The model is used to compare the growth path followed by the region during the period of interest with different scenarios intended to rank the social desirability of alternative behaviours of the regional administration.
    Keywords: historical calibration, historical validation, regional dynamic general equilibrium model, historical counterfactual analysis
    JEL: C68 R13
    Date: 2009–09
  15. By: Jérôme Vicente (LEREPS - Laboratoire d'Etudes et de Recherche sur l'Economie, les Politiques et les Systèmes Sociaux. - Université des sciences socailes de Toulouse); Raphaël Suire (CREM - Centre de Recherche en Economie et Management - CNRS : UMR6211 - Université de Rennes I - Université de Caen)
    Abstract: One of the most convincing explanations papers generally provide concerning clusters in knowledge-based economies refers to the geographically bounded dimension of knowledge spillovers. Here we shall underline that location decision externalities precede local knowledge spillovers in the explanation of cluster aggregate efficiency, which thus requires us to focus on the sequential process of location and the nature of interdependences in location decision-making. To that end, we mean to associate cluster emergence with the formation of locational norms, and to study the critical parameters of their stability. These parameters relate to the type of decision externalities among more or less cognitively distant firms, which influences the weight and the resulting ambivalent role of knowledge spillovers at the aggregate level of clusters. We suggest two theoretical propositions which we test within a simple and general norm location dynamics modeling framework. We then proceed to discuss the results so obtained by comparing them with an emerging related literature based on the life cycle and viability of clusters
    Keywords: clusters, location under decision externalities, cognitive distance, knowledge spillovers
    Date: 2009
  16. By: Tscharaktschiew, Stefan; Hirte, Georg
    Abstract: Households in real cities are heterogeneous regarding their size and composition. An aspect usually neglected in urban models used to study economic and policy issues that arise in today's cities. We develop an urban general equilibrium model that takes a more complex household structure explicitly into account. The model is based on the single consumer type model of Anas and Xu (1999) or Anas and Rhee (2006) and treats the interactions of urban product, labor and land markets as well as linkages between city firms and different consumer types living in different household structures. Households differ not only in endowments, preferences and their valuation in regard to different travel modes, but also in size and the composition regarding their members. The implementation of a more complex household structure then allows studying a broad range of further urban economic issues, which treat different household structures differently
    Keywords: urban economics; general equilibrium; household structure; location choice
    JEL: R13 R12 R20 R14
    Date: 2009–06–10
  17. By: Tomasz Jeruzalski (Faculty of Economic Sciences, University of Warsaw); Joanna Tyrowicz (Faculty of Economic Sciences, University of Warsaw)
    Abstract: This paper approaches the question of efficiency in job placement using regional data for Polish regions (policy-relevant NUTS 4 level) over the time span of 2000-2008. Using a unique data set we estimate the matching function using stochastic frontier as well as difference-in-difference estimators. We have also combined this unique data set with another unique source of data on the ALMPs coverage, unemployment structure across time and regions as well as the individual capacity of local labour offices. We use these data to explain the exceptional variation in estimated efficiency scores. Our findings suggest that matching abilities are highly driven by demand fluctuations, while unemployment structure, ALMPs and individual labour office capacities have little explanatory power. Although without individual data it is fairly impossible to provide a reliable counterfactual, we raise some arguments to support the claim of job placement inefficiency by public employment services in Poland.
    Keywords: matching function, stochastic frontier, Poland
    JEL: P3 J64 J69 C33
    Date: 2009

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