nep-geo New Economics Papers
on Economic Geography
Issue of 2010‒01‒30
fourteen papers chosen by
Vassilis Monastiriotis
London School of Economics

  1. Regions as Networks: Towards a Conceptual Framework of Territorial Dynamics By Carlos Brito; Ricardo Correia
  2. Endogenous Economic Growth through Connectivity By Zon, Adriaan van; Mupela, Evans
  3. The Effects of Location and Sectoral Components of Growth By Asep Suryahadi; Daniel Suryadarma; Sudarno Sumarto
  4. Industrial Agglomeration and Industrial Policies- The Philippine Experience By PIDS
  6. Impact Assessment of National and Regional Policies Using the Philippine Regional General Equilibrium Model By Roehlano M. Briones
  7. A Centered Index of Spatial Concentration- Axiomatic Approach with an Application to Population and Capital Cities By Filipe R. Campante; Quoc-Anh Do
  8. Detecting Hidden Violence: The Spatial Distribution of Excess Mortality in Rwanda By Marijke verpoorten
  9. Development Strategies and Regional Income Disparities in China By Justin Yifu Lin; Peilin Liu
  10. On Joint Modelling and Testing for Local and Global Spatial Externalities By Zhenlin Yang
  11. GMM estimation of Spatial Panels with Fixed Effects By Moscone, Francesco; Tosetti, Elisa
  12. Estimating Nonlinearities in Spatial Autoregressive Models By Nicolas Debarsy; Vincenzo Verardi
  13. Instrumental Variable Quantile Estimation of Spatial Autoregressive Models By Liangjun Su; Zhenlin Yang
  14. A Robust LM Test for Spatial Error Components By Zhenlin Yang

  1. By: Carlos Brito (Faculdade de Economia, Universidade do Porto); Ricardo Correia (Escola Superior de Comunicação Administração e Turismo – Instituto Politécnico de Bragança)
    Abstract: Regions interact with multiple actors and industrial companies are one of the most important players in this interaction. By their strategic actions and relationships, companies are simultaneously present in different regions and influence a territory’s dynamics and structure. Moreover, territorial characteristics are also a condition that can shape a company’s action. This reciprocal influence is recognized by an emerging theoretical background of relational geography. Within the industrial network approach interest in this phenomenon is also increasing. However, the interactions between companies and regions have not been sufficiently explained. Thus, the main objective of this working paper is to produce new knowledge about the dynamics and interactions between regions and industrial networks. More precisely, the authors want to explain how companies’ strategic action is reflected in territorial dynamics and structure and how such factors affect the companies’ strategic action. Based on extensive research of the interactive relations between companies and regions, a model aimed at providing a better understanding of this mutual influence was developed.
    Keywords: industrial networks, relationships, territory, regional development
    JEL: R19
    Date: 2010–01
  2. By: Zon, Adriaan van (UNU-MERIT, and Maastricht University); Mupela, Evans (UNU-MERIT)
    Abstract: In this paper we show the benefits of regional connectivity and specialization to growth. Starting with one region we show how welfare measured by utility per head increases as the number of connected regions increase. We assume a common connectivity infrastructure implemented by satellite, through which the 'Great Connector' (GC) is able to add new regions to the pool of connected regions by taking a tax form those already connected. We find that increasing production costs leads to faster transitions towards the steady state whereas increasing transportation and communication costs tends to lengthen the transition. The results point to reductions in transportation and communication costs in particular as a suitable vehicle to speed up growth. The results also show a strong positive effect of reductions in the cost of making new connections. This has a significant impact on both the steady state growth rate and on transitional growth, while significantly reducing the transition period.
    Keywords: Connectivity, Satellites, Growth, Specialization, Networks
    JEL: O25 O43 O47 F15 F43
    Date: 2010
  3. By: Asep Suryahadi; Daniel Suryadarma; Sudarno Sumarto (SMERU Research Institute)
    Abstract: This study extends the literature on the relationship between economic growth and poverty reduction by differentiating growth and poverty into their sectoral compositions and locations. We find that growth in the rural services sector reduces poverty in all sectors and locations. However, in terms of elasticity of poverty, urban services growth has the largest for all sectors except urban agriculture. We also find that rural agriculture growth strongly reduces poverty in the rural agriculture sector, the largest contributor to poverty in Indonesia. This implies that the most effective way to accelerate poverty reduction is by focusing on rural agriculture and urban services growth. In the long run, however, the focus should be shifted to achieving robust overall growth in the services sector.
    Keywords: economic growth, poverty, urban, rural, Indonesia
    JEL: I32 O18 O49
    Date: 2010–01
  4. By: PIDS (Philippine Institute for Development Studies)
    Abstract: In the relatively new body of ideas dubbed “new economic geography� and “spatial economics,� we find insights on the potentials of industrial agglomeration for regional and national economic development. This paper looked into the evolution of industrial development in the country as a means of elucidating the centripetal and centrifugal forces leading to agglomeration of firms and investments. A micro perspective was provided with the case study extended into the prime region in the country, Greater Manila Area. It was found that industrial agglomeration in the country takes the form of special economic zones and industry clusters, indicating that the government is taking the route towards regional dispersal of industries and the clustering strategy to spur industrial dynamism and competitiveness and consequently, regional and national economic development.
    Keywords: economic geography, spatial economics, industrial development, economic development
    JEL: L52 L50 L51
    Date: 2010–01
  5. By: Thulin, Per (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology)
    Abstract: This paper investigates the relationship between inter-firm labor mobility and regional productivity growth. Previous studies have shown that density is positively correlated with growth. I claim that it is not density in itself, but rather the attributes associated with it that drives economic growth. One such attribute is the increased possibility for labor mobility and knowledge diffusion that follows when firms and individuals locate in close proximity to each other. This hypothesis is tested using a matched employer-employee dataset where regional labor mobility is instrumented with density. The result shows that labor mobility increases regional growth rates.
    Keywords: Labor mobility; regional growth; agglomeration economies
    JEL: J62 R11 R23
    Date: 2009–12–18
  6. By: Roehlano M. Briones (Philippine Institute for Development Studies)
    Abstract: For the Philippines, quantitative policy analysis should incorporate regional differences in welfare and economic structure, which arise partly from geographic constraints. However, existing CGE models offer limited analysis of regional effects or national impacts of region-specific interventions, owing to the absence of key regional data. This study formulates a regional CGE model that overcomes these limitations. Applications of the model yield the following results- i) completion of the tariff reform program in agriculture will contract some import-competing sectors in lagging regions, but improve welfare across all regions; ii) massive investments in marketing infrastructure promise bigger pay-offs, though with a trade-off between the size and spread of welfare gains across regions; iii) combining trade reform with marketing infrastructure investments mitigate some of the contractionary effects from the former; however the absence of welfare synergies suggest that the two sets of policies can be pursued independently.
    Keywords: computable general equilibrium, regional economics, agricultural development, marketing infrastructure, trade liberalization, welfare impact
    JEL: C68 M39 Q18 R13 R58
    Date: 2010–01
  7. By: Filipe R. Campante; Quoc-Anh Do (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 renement 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 specifc boundaries for the elasticity coecient 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.
    Keywords: Spatial Concentration, Population Concentration, Capital Cities, Gravity, CRRA, Harmonic Functions, Axiomatics
    JEL: C43 F10 R23
    Date: 2010–01
  8. By: Marijke verpoorten
    Abstract: Rwanda experienced several forms of internal violence, including civil war,genocide, reprisal killings and (counter-)insurgency. While these events all occurred in 1990-1998, their geographic location within Rwanda differred, with the genocide especially severe in the South of the country, the civil war and reprisal killings mostly taking place in the North and East, and the (counter-)insurgency concentrated in the Northwest. In order to assess the relative impact of the different forms of violence, this article derives a detailed spatial pattern of excess mortality from the population census. In line with previous evidence on the death toll of armed conflict in Rwanda, we find significant high-high excess mortality clusters in the southern province of Butare, in and around Kigali City, and in the eastern province Kibungo. Furthermore, we present the first quantitative evidence to date of high excess mortality in the northwestern porvince Gisenyi, indicating that the 1995-1998 (counter-)insurgency inflicted a much higher death toll on the population than presently acknowledged by the Rwandan government, the UN and large western donors.
    Keywords: armed conflict, genocide, excess mortality, Rwanda
    JEL: J11 J15 Y80
    Date: 2010
  9. By: Justin Yifu Lin; Peilin Liu (China Centre for Economic Research)
    Abstract: Since the economic reforms began in 1978, China has achieved remarkable economic results. Real GDP per capita grew at an average annual rate of 8.1% in the period of 1978-2001. Maintaining such a high growth rate over such a long period of time with a population of more than one billion truly is a miracle in world economy history (Lin et. al. 1994 and 1999).
    Keywords: China, Regional income disparities, income distribution
    JEL: D33 E64 O15
    Date: 2010–01
  10. By: Zhenlin Yang (Singapore Management University)
    Abstract: This paper concerns the joint modeling, estimation and testing for local and global spatial externalities. Spatial externalities have become in recent years a standard notion of economic research activities in relation to social interactions, spatial spillovers and dependence, etc., and have received an increasing attention by econometricians and applied researchers. While conceptually the principle underlying the spatial dependence is straightforward, the precise way in which this dependence should be included in a regression model is complex. Following the taxonomy of Anselin (2003, International Regional Science Review 26, 153-166), a general model is proposed, which takes into account jointly local and global externalities in both modelled and unmodelled effects. The proposed model encompasses all the models discussed in Anselin (2003). Robust methods of estimation and testing are developed based on Gaussian quasi-likelihood. Large and small sample properties of the proposed methods are investigated.
    Keywords: Asymptotic property, Finite sample property, Quasi-likelihood, Spatial regression models, Robustness, Tests of spatial externalities
    JEL: C1 C2 C5
    Date: 2010–01
  11. By: Moscone, Francesco; Tosetti, Elisa
    Abstract: In this paper we consider the estimation of a panel data regression model with spatial autoregressive disturbances, fixed effects and unknown heteroskedasticity. Following the work by Kelejian and Prucha (1999), Lee and Liu (2006a) and others, we adopt the Generalized Method of Moments (GMM) and consider as moments a set linear quadratic conditions in the disturbances. As in Lee and Liu (2006a), we assume that the inner matrices in the quadratic forms have zero diagonal elements to robustify moments against unknown heteroskedasticity. We derive the asymptotic distribution of the GMM estimator based on such conditions. Hence, we carry out some Monte Carlo experiment to investigate the small sample properties of GMM estimators based on various sets of moment conditions.
    Keywords: spatial econometrics; panel data; within estimator
    JEL: C15
    Date: 2010–01–19
  12. By: Nicolas Debarsy (CERPE - Centre de Recherches en Economie Régionale et Politique Economique - Université de Namur); Vincenzo Verardi (European Centre for Advanced Research in Economics and Statistics (ECARES) - Université Libre de Bruxelles, CRED - Centre de Recherche en Economie du Développement - Université de Namur)
    Abstract: In spatial autoregressive models, the functional form of autocorrelation is assumed to be linear. In this paper, we propose a simple semiparametric procedure, based on Yatchew's (1998) partial linear least squares, that relaxes this restriction. Simple simulations show that this model outperforms traditional SAR estimation when nonlinearities are present. We then apply the methodology on real data to test for the spatial pattern of voting for independent candidates in US presidential elections. We find that in some counties, votes for “third candidates” are non-linearly related to votes for “third candidates” in neighboring counties, which pleads for strategic behavior.
    Keywords: Spatial econometrics; semiparametric estimations
    Date: 2010–01–13
  13. By: Liangjun Su; Zhenlin Yang (Singapore Management University)
    Abstract: We propose an instrumental variable quantile regression (IVQR) estimator for spatial autoregressive (SAR) models. Like the GMM estimators of Lin and Lee (2006) and Kelejian and Prucha (2006), the IVQR estimator is robust against heteroscedasticity. Unlike the GMM estimators, the IVQR estimator is also robust against outliers and requires weaker moment conditions. More importantly, it allows us to characterize the heterogeneous impact of variables on different points (quantiles) of a response distribution. We derive the limiting distribution of the new estimator. Simulation results show that the new estimator performs well in finite samples at various quantile points. In the special case of median restriction, it outperforms the conventional QML estimator without taking into account of heteroscedasticity in the errors; it also outperforms the GMM estimators with or without considering the heteroscedasticity.
    Keywords: Spatial Autoregressive Model, Quantile Regression, Instrumental Variable, Quasi Maximum Likelihood, GMM, Robustness
    JEL: C13 C21 C51
    Date: 2010–01
  14. By: Zhenlin Yang (Singapore Management University)
    Abstract: This paper presents a modified LM test of spatial error components, which is shown to be robust against distributional misspecifications and spatial layouts. The proposed test differs from the LM test of Anselin (2001) by a term in the denominators of the test statistics. This term disappears when either the errors are normal, or the variance of the diagonal elements of the product of spatial weights matrix and its transpose is zero or approaching to zero as sample size goes large. When neither is true, as is often the case in practice, the effect of this term can be significant even when sample size is large. As a result, there can be severe size distortions of the Anselin’s LM test, a phenomenon revealed by the Monte Carlo results of Anselin and Moreno (2003) and further confirmed by the Monte Carlo results presented in this paper. Our Monte Carlo results also show that the proposed test performs well in general.
    Keywords: Distributional misspecification, Robustness, Spatial layouts, Spatial error components, LM tests
    JEL: C23 C5
    Date: 2010–01

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