nep-geo New Economics Papers
on Economic Geography
Issue of 2009‒12‒11
thirteen papers chosen by
Vassilis Monastiriotis
London School of Economics

  1. Wages, Productivity and Industry Composition – agglomeration economies in Swedish regions By Klaesson, Johan; Larsson, Hanna
  2. Urban Growth in Germany – The Impact of Localization and Urbanization Economies By Annette Illy; Christoph Hornych; Michael Schwartz; Martin T.W. Rosenfeld
  3. Some Evidence on the Nature of Urbanization Economies By Krupka, Douglas J.
  4. Human Capital Spillovers, Productivity and Regional Convergence in Spain By Ramos, Raul; Surinach, Jordi; Artís, Manuel
  5. An Industrial Agglomeration Approach to Central Place and City Size Regularities By Tomoya Mori; Tony E. Smith
  6. Urban Economics and Entrepreneurship By Edward L. Glaeser; Stuart S. Rosenthal; William C. Strange
  7. The importance of R&D subsidies and technological infrastructure for regional innovation performance - A conditional efficiency approach By Tom Broekel; Charlotte Schlump
  8. Human Capital and Regional Wage Gaps. By Enrique López-Bazo; Elisabet Motellón
  9. The Impact of Local Decentralization on Economic Growth: Evidence from U.S. Counties By Hammond, George W.; Tosun, Mehmet S.
  10. Sprawl and Blight By Jan K. Brueckner; Robert W. Helsley
  11. A Hedonic Analysis of the Value of Parks and Green Spaces in the Dublin Area By Mayor, Karen; Lyons, Seán; Duffy, David; Tol, Richard S. J.
  12. Market Potential and New Firm Formation By Grek, Jenny; Karlsson, Charlie; Klaesson, Johan
  13. Sex and Migration: Who is the Tied Mover? By Åström, Johanna; Westerlund, Olle

  1. By: Klaesson, Johan (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology); Larsson, Hanna (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology)
    Abstract: It is a well known fact that wages have a tendency to be higher in larger regions. The source of the regional difference in wages between larger and smaller areas can be broadly divided into two parts. The first part can be attributed to the fact that regions have different industrial compositions. The second part is due to the fact that average regional productivity differs between regions. Using a decomposition method, akin to shift-share, we are able to separate regional wage disparities into an industrial composition component and productivity component. According to theory it is expected that productivity is higher in larger regions due to different kinds of economies of agglomeration. Also, larger regions are able to host a wider array of sectors compared to smaller regions. Output from sectors demanding a large local or regional market can only locate in larger regions. Examples of such sectors are e.g. various types of advanced services with high average wages. The purpose of the paper is to explain regional differences in wages and the productivity and composition components, respectively. The paper tests the dependence of wages, productivity and industrial composition effects on regional size (using a market potential measure). In the estimation we control for regional differences in education, employment shares, average firm size and self-employment. Swedish regional data from 2004 are used. The results verify that larger regions on average have higher wages, originating from higher productivity and more favorable industry composition.
    Keywords: Agglomeration Economies; Regions; Wages; Productivity; Industrial Composition; Sweden
    JEL: C21 J31 O18 R10 R12
    Date: 2009–11–23
  2. By: Annette Illy; Christoph Hornych; Michael Schwartz; Martin T.W. Rosenfeld
    Abstract: This study examines the impact of localization and urbanization economies as well as the impact of city size on urban growth in German cities from 2003 to 2007. Although, from a theoretical perspective, agglomeration economies are supposed to have positive impacts on regional growth, prior empirical studies do not show consistent results. Especially little is known about agglomeration economies in Germany, where interregional support policy and the characteristics of the federal system are further determinants of urban growth. The results of the econometric analysis show a U-shaped relationship between specialization and urban growth, which particularly holds for manufacturing industries. We do not find evidence for the impact of Jacobs-externalities; however, city size shows a positive (but decreasing) effect on urban growth.
    Date: 2009–12
  3. By: Krupka, Douglas J. (University of Michigan)
    Abstract: Urbanization economies – the effects on productivity and utility created endogenously by larger cities – are a fundamental component of both the economic geography of modern societies and the perpetuation of innovation and economic growth at a national level. Cities account for vast majorities of population – and even larger proportions of production and innovation – in all advanced economies. The nature of these endogenous effects of city size is thus of considerable importance. Krupka (2008) presents a general model in which exogenous variation in local productivity ("natural advantage") and development constraints generate covariation in local incomes, housing prices and population. In that model, the strength of the correlation amongst these variables depends on the nature of the dominant urbanization economy (or diseconomy). This paper looks at the data over the last several decades and finds that the data is consistent with city size increasing consumer/resident happiness and/or reducing productivity of employers.
    Keywords: agglomeration, urbanization economies, congestion, regional equilibrium, natural advantage, economic geography
    JEL: D5 J31 R12 R13 R23 R31
    Date: 2009–11
  4. By: Ramos, Raul (University of Barcelona); Surinach, Jordi (University of Barcelona); Artís, Manuel (University of Barcelona)
    Abstract: This paper analyses the differential impact of human capital, in terms of different levels of schooling, on regional productivity and convergence. The potential existence of geographical spillovers of human capital is also considered by applying spatial panel data techniques. The empirical analysis of Spanish provinces between 1980 and 2007 confirms the positive impact of human capital on regional productivity and convergence, but reveals no evidence of any positive geographical spillovers of human capital. In fact, in some specifications the spatial lag presented by tertiary studies has a negative effect on the variables under consideration.
    Keywords: regional convergence, productivity, human capital composition, geographical spillovers
    JEL: O18 O47 R23
    Date: 2009–11
  5. By: Tomoya Mori (Institute of Economic Research, Kyoto University); Tony E. Smith (Department of Electrical and Systems Engineering, University of Pennsylvania)
    Abstract: An empirical regularity designated as the Number-Average Size (NAS) Rule was first identified for the case of Japan by Mori, Nishikimi and Smith [13], and has since been extended to the US by Hsu [6]. This rule asserts a negative log-linear relation between the number and average population size of cities where a given industry is present, i.e., of industry-choice cities. Hence one of its key features is to focus on the presence or absence of industries in each city, rather than the percentage distribution of industries across cities. But despite the strong empirical regularity of this rule, there still remains the statistical question of whether such location patterns could simply have occurred by chance. In this paper an alternative approach to industry-choice cities is proposed. This approach utilizes the statistical procedure developed in Mori and Smith [15] to identify spatially explicit patterns of agglomeration for each industry. In this context, the desired industry-choice cities are taken to be those (economic) cities that constitute at least part of a significant spatial agglomeration for the industry. These cluster-based choice cities are then used to reformulate both the NAS Rule and the closely related Hierarchy Principle of Christaller [2]. The key empirical result of the paper is to show that the NAS Rule not only continues to hold under this new definition, but in some respects is even stronger. The Hierarchy Principle is also shown to hold under this new definition. Finally, the present notion of cluster-based choice cities is also used to develop tests of both the locational diversity of industries and the industrial diversity of cities in Japan.
    Date: 2009–12
  6. By: Edward L. Glaeser; Stuart S. Rosenthal; William C. Strange
    Abstract: Research on entrepreneurship often examines the local dimensions of new business formation. The local environment influences the choices of entrepreneurs; entrepreneurial success influences the local economy. Yet modern urban economics has paid relatively little attention to entrepreneurs. This essay introduces a special issue of Journal of Urban Economics dedicated to the geography of entrepreneurship. The paper frames the core questions facing researchers interested in assessing the local causes and consequences of entrepreneurship, perturbs a core urban model to incorporate entrepreneurship, and concludes by offering an agenda for future work on the spatial aspects of entrepreneurship.
    JEL: J23 L26 M13 O31 R30
    Date: 2009–11
  7. By: Tom Broekel; Charlotte Schlump
    Abstract: The importance of R&D subsidies for innovation activities is highlighted by numerous firm-level studies. These approaches miss however the systematic regional character of innovation activities and potential firm-spanning effects of this policy measure. The literature on regional innovation performance has widely neglected R&D subsidies so far. This paper analyzes the importance of R&D subsidies as well as the relevance of a publicly funded technological infrastructure for the innovation efficiency of German regions. Using conditional nonparametric frontier techniques we find positive effects of R&D subsidies and somewhat smaller ones for the technological infrastructure, which however vary between industries.
    Keywords: innovation policy, regional innovation efficiency, technological infrastructure, stepwise conditional efficiency analysis
    JEL: O18 O38 R58 R12
    Date: 2009–11
  8. By: Enrique López-Bazo (Faculty of Economics, University of Barcelona); Elisabet Motellón (Faculty of Economics, University of Barcelona)
    Abstract: This paper uses micro-level data to analyse the effect of human capital on regional wage differentials. The results for the set of Spanish regions confirm that they differ in the endowment of human capital, but also that the return that individuals obtain from it varies sharply across regions. Regional heterogeneity in returns is especially intense in the case of education, particularly when considering its effect on the employability of individuals. These differences in endowment and, especially, in returns to human capital, account for a significant proportion of regional wage gaps.
    Keywords: Education, Experience, Regional disparities, Returns to human capital, Wage gap decomposition.
    Date: 2009–11
  9. By: Hammond, George W. (West Virginia University); Tosun, Mehmet S. (University of Nevada, Reno)
    Abstract: We analyze the impact of fiscal decentralization on U.S. county population, employment, and real income growth. Our findings suggest that government organization matters for local economic growth, but that the impacts vary by government unit and by economic indicator. We find that single-purpose governments per square mile have a positive impact on metropolitan population and employment growth, but no significant impact on nonmetropolitan counties. In contrast, the fragmentation of general-purpose governments per capita has a negative impact on employment and population growth in nonmetropolitan counties. Our results suggest that local government decentralization matters differently for metropolitan and nonmetropolitan counties.
    Keywords: fiscal decentralization, metropolitan, nonmetropolitan, population, employment, income, spatial econometrics
    JEL: E62 H7 R11
    Date: 2009–11
  10. By: Jan K. Brueckner (Department of Economics, University of California-Irvine); Robert W. Helsley (Haas School of Business, University of California, Berkeley)
    Abstract: The objective of this paper is to show how the same market failures that contribute to urban sprawl also contribute to urban blight. The paper develops a simple dynamic model in which new suburban and older central-city properties compete for mobile residents. The level of housing services generated by older properties depends on current maintenance or reinvestment expenditures. In this setting, market failures that reduce the cost of occupying suburban locations, thus leading to excessive suburban development, also depress central-city housing prices and undermine maintenance incentives, leading to deficient levels of central-city reinvestment. Corrective policies that shift population from the suburbs to the center result in higher levels of reinvestment in central-city housing, therefore reducing blight.
    Keywords: Urban sprawl; Urban blight; Market failures
    JEL: R00 R51 R52
    Date: 2009–09
  11. By: Mayor, Karen; Lyons, Seán; Duffy, David; Tol, Richard S. J.
    Abstract: We use a hedonic house price model to estimate the value of green spaces and parks to homeowners in the Dublin area. Using a dataset of house sales between 2001 and 2006 and combining it with available data on the location of green spaces in Dublin it is possible to assess the different values assigned to green areas by homeowners. We find that the value of green space depends first of all on how far from the property it is located. We also find a difference in the values assigned to open access parks and green spaces. For every 10% increase in the share of green space and park area near a house, its average price increases by 7% to 9%. We also attempted to identify different individual parks and rank them according to their value, however due to spatial multicollinearity the results were mixed.
    Keywords: green spaces/hedonic regression/Ireland/urban parks
    Date: 2009–09
  12. By: Grek, Jenny (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology); Karlsson, Charlie (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology); Klaesson, Johan (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology)
    Abstract: The purpose of the paper is to show how entrepreneurship conditions vary between regions of various sizes, and test the theoretical arguments on why large regions generally should generate more entrepreneurship. The paper empirically ana¬lyzes the role of regional size in explaining varia¬tions in total entrepreneurship. It also examines en¬trepreneurship in different sectors across functional regions, using data from Sweden for the period 1993 to 2004. Employing fixed effects vector decomposition (FEVD) regressions, we estimate how the conditions for entrepreneurship vary between re¬gions. The results show that the market potential as measured by local and external accessibility to gross regional product (GRP) has a strong significant impact on both entry of new firms and on firm exit. For the primary sector and the manufacturing sector this impact is negative and for the ordinary service sector and the advanced service sector its positive. A high employment rate implies that there is a strong negative impact on firm entry in all sectors. This is in line with what one could expect as there are weaker incentives for individuals starting own businesses in periods of low employment rate. Further, the presence of many small firms in different sectors has a strong positive significant impact on new firm formation.
    Keywords: Entrepreneurship; Entry; Exit; Net entry; Regions; Sweden
    JEL: L10 R11 R12
    Date: 2009–11–23
  13. By: Åström, Johanna (Department of Economics, Umeå University); Westerlund, Olle (Department of Economics, Umeå University)
    Abstract: We study the effects of interregional migration on two-earner household gross earnings as well as on the relative income between married and cohabiting couples. In particular, we examine the link between education level and income gains. The empirical analysis is based on longitudinal data from Sweden as well as on functional regional labour markets that operate as regional entities. Using difference-in-differences propensity score matching, we find that migration increases total gross household earnings and has no significant impact on the male/female earnings gap. We find that pre-migration education level is a key determinant of migration and economic outcomes and is also a determinant of the effect of migration on income distribution within the household. The positive average effect on household earnings is largely explained by income gains among highly-educated males. Females generally experience no significant income gain from migration in absolute terms. Females gain significantly in relative income only if they are highly educated and married or cohabitating with a lower-educated male.
    Keywords: Regional migration; labor mobility; two earner households
    JEL: D10 J61
    Date: 2009–11–27

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