nep-geo New Economics Papers
on Economic Geography
Issue of 2010‒03‒13
fourteen papers chosen by
Vassilis Monastiriotis
London School of Economics

  1. Do Governments Tax Agglomeration Rents? By Hyun-Ju Koh; Nadine Riedel
  2. The Effect of Foreign Investments on European Regional Productivity By Davide Castellani; Fabio Pieri
  3. Effects of Regional Human Capital Structure on Business Entry: A Comparison of Independent Startups and New Subsidiaries in Different Industries By Kenta Ikeuchi; Hiroyuki Okamuro
  4. Learning At The Boundaries In An “Open Regional Innovation System”: A Focus On Firms’ Innovation Strategies In The Emilia Romagna Life Science Industry By fiorenza belussi; silvia rita sedita; alessia sammarra
  5. Fiscal decentralization and intergovernmental grants: the European regional policy and Spanish autonomous regions By Juan González Alegre
  6. The not-so-great moderation? Evidence on changing volatility from Australian regions By David Shepherd; Robert Dixon
  7. Contributions of Proposed Investment in the Northwest Tennessee Regional Port at Cates Landing to the Regional Economy By Murat Arik; David A. Penn
  8. Do firms benefit from being present in technology clusters? Evidence from a panel of biopharmaceutical firms. By Lecocq, Catherine; Leten, Bart; Kusters, Jeroen; Van Looy, Bart
  9. Agglomeration and Trade: State-Level Evidence from U.S. Industries By Hakan Yilmazkuday
  10. Job Competition and the Wage Curve By Longhi, Simonetta
  11. Available Labor Force in Southern Middle Tennessee: An Underemployment Study By Murat Arik; David A. Penn
  12. Urban Settlement: Data, Measures, and Trends By Bloom, David E; Canning, David; Fink, Günther; Khanna, Tarun; Salyer, Patrick
  13. Neighborhood Effects and Housing By Yannis M. Ioannides
  14. Technology transfer in a linear city with symmetric locations By Bouguezzi, Fehmi

  1. By: Hyun-Ju Koh (University of Munich,); Nadine Riedel (Oxford University Centre for Business Taxation, CESifo Munich)
    Abstract: Using the German local business tax as a testing ground, we empirically investigate the impact of firm agglomeration on municipal tax setting behavior. The analysis exploits a rich data source on the population of German firms to construct detailed measures for the communities' agglomeration characteristics. The findings indicate that urbanization and localization economies exert a positive impact on the jurisdictional tax rate choice which confirms predictions of the theoretical New Economic Geography (NEG) literature. Further analysis suggests a qualification of the NEG argument by showing that a municipality's potential to tax agglomeration rents depends on its firm and industry agglomeration relative to neighboring communities. To account for potential endogeneity problems, our analysis exploits long-lagged population and infrastructure variables as instruments for the agglomeration measures.
    Keywords: Agglomeration Rents, Corporate Taxation, Regional Differentiation
    JEL: H73 R12
    Date: 2010
  2. By: Davide Castellani; Fabio Pieri
    Abstract: Differences in productivity among regions have been mainly attributed to agglomeration economies, technology and human capital, while almost no evidence has been provided on the role of internationalization. In this paper we build unique measures of outward and inward foreign direct investment (FDI) counts at the NUTS 2 level and we assess the relationship between regional productivity and foreign investments in the Enlarged Europe. Regions with larger flows of foreign investment projects show higher productivity levels, but this correlation fades down as we control for a set of relevant regional characteristics. However, inward and outward FDIs exert a positive and significant effect on regional productivity growth. We also find that the type of investment matters. In particular, inward and outward investments in R&D have a positive effect on regional productivity, while incoming investments in Sales activities are detrimental for productivity growth..
    Keywords: Regional productivity, foreign investments, Europe.
    JEL: F23 O47 O52 R11
    Date: 2010–02–01
  3. By: Kenta Ikeuchi; Hiroyuki Okamuro
    Abstract: This paper aims to investigate the regional determinants of entry with special attention to the effects of regional human capital, using prefecture-level data from Japan. On the basis of some recent studies in the field, we investigate the effects of several regional factors on business entry, distinguishing between independent startups and new subsidiaries of existing firms on the one hand, and comparing different sectors on the other. Using pooled regional data at the prefecture level for our periods between 1996 and 2006, we estimate the impact of various regional factors, including human capital structure, on the number of independent startups and new subsidiaries for each industry sector, simultaneously. Estimation results demonstrate considerable differences between independent startups and subsidiaries as well as among different industry sectors with regard to the impact of regional human capital structure on business entry. First, the entry of independent startups in the manufacturing sector is positively related with regional human capital. Second, in contrast to our hypothesis, we found a positive relationship between regional human capital structure and the entry of new subsidiaries in the service sector. Third, the regional human capital structure is more important for regional entrepreneurship in more technology-intensive (high-tech) service industries. Considering the possible implications, we suggest that the regional policy to activate business startups should focus more on the differences between encouraging local entrepreneurship and attracting new subsidiaries, and recognize that these differences may vary even within the service sector, depending on what type of human capital is required.
    Keywords: entry, region, independent startup, subsidiary, entrepreneurial human capital
    JEL: L26 M13 R32
    Date: 2010–02
  4. By: fiorenza belussi (University of Padua); silvia rita sedita (University of Padua); alessia sammarra (University of Padua)
    Abstract: The paper investigates the existence of an Open Regional Innovation System (ORIS model). This model is characterised by the firms’ adoption of an open innovation strategy, which overcomes not only the boundaries of the firms but also the boundaries of the region. Using data collected in a sample of life science firms, our research provides the evidence that the Emilia Romagna RIS has evolved towards an ORIS model, where firms’ innovation search strategy, despite being still embedded in local nets (involving several regional public research organisations - PROs), is open to external-to-the-region research networks and knowledge sources. It also shows that innovation openness influences significantly the firms’ innovative performance.
    Keywords: life science sector, learning at the boundaries, Regional Innovation Systems, networks, open innovation model
    JEL: L7 O31
    Date: 2010–02
  5. By: Juan González Alegre (Universidad Pablo de Olavide)
    Abstract: Most of the Structural Actions are designed as an incentive to increase public investment in less-developed areas. However, we suspect that the efficiency of the policy is related to the level of fiscal autonomy of the subsidized government. In this paper we construct a paned data model in order to estimate the role of fiscal federalism on the effectiveness of the EU Structural Actions in enhancing public investment. We use data from the seventeen Spanish regions for the period 1993-2007. The estimation is run upon three alternative strategies: firstly we break the sample according to the level of fiscal autonomy of the units; secondly, we insert an interaction term capturing the join effect of both variables, fiscal decentralization and EU Structural Actions; finally, we estimate a simultaneous equation model in which public investment and the EU transfers are decided simultaneously. Results unambiguously support the hypothesis that the effectiveness of the Structural Funds decreases with larger decentralization. Our results suggest also that this could be due to the fact that regions find it more difficult to be eligible for additional EUSF as they gain fiscal autonomy. The general conclusions include the recommendation that the future design of the European Cohesion policy should take into account the heterogeneity of Fiscal Federalism across the Member States in order to the get the most out of it.
    Keywords: fiscal federalism, intergovernmental grants, European Union, regional policy, panel data, simultaneous equations for panels
    JEL: H72 H77 C33 C23
    Date: 2010
  6. By: David Shepherd; Robert Dixon
    Abstract: In this paper we examine Australian data on national and regional employment numbers, focusing in particular on whether there have been common national and regional changes in the volatility of employment. A subsidiary objective is to assess whether the results derived from traditional growth rate models are sustained when alternative filtering methods are used. In particular, we compare the results of the growth rate models with those obtained from Hodrick-Prescott models. Using frequency filtering methods in conjunction with autoregressive modeling, we show that there is considerable diversity in the regional pattern of change and that it would be wrong to suppose that results derived from the aggregate employment series are generally applicable across the regions. The results suggest that the so-called great moderation may have been less extensive than aggregate macro studies suggest.
    Keywords: Regional employment, State business cycle, Structural change, Volatility
    JEL: R12 C22 E32
    Date: 2010
  7. By: Murat Arik; David A. Penn
    Abstract: The Business and Economic Research Center (BERC), Middle Tennessee State University, is retained by the Northwest Tennessee Regional Port Authority to assess the contributions of the proposed investment in the Port at Cates Landing to the economy of the three-county region (Lake, Dyer, and Obion) and its surrounding areas.
    Keywords: port, Cates Landing, Tennessee, northwest Tennessee, Mississippi River, counties, Lake, Dyer, Obion, county, intermodal transportation
    Date: 2009–09
  8. By: Lecocq, Catherine; Leten, Bart; Kusters, Jeroen; Van Looy, Bart
    Abstract: This paper investigates whether firms active in biotechnology can improve their technological performance by developing R&D activities in technology clusters. Regions that host a concentration of biotechnology activity are identified as technology clusters (level of US states, Japanese prefectures and European NUTS2 regions). A fixed effect panel data analysis on a set of 59 biopharmaceutical firms (period 1995-2002) provides evidence for a positive, albeit diminishing (inverted-U shape) relationship between the number of technology clusters in which a firm is present and its total technological performance. This effect is distinct from a mere multi-location effect.
    Keywords: Cluster; Innovation; Biotechnology;
    Date: 2009–10
  9. By: Hakan Yilmazkuday (Department of Economics, Temple University)
    Abstract: This paper investigates the connection between economic agglomeration and trade patterns within the U.S. at the industry level. On the consumption side, industry- and state-specific international imports and elasticities of substitution are shown to be systematically connected to consumption agglomeration effects, while on the production side, industry- and state-specific international exports and intermediate input trade are shown to be systematically connected to production agglomeration and specialization effects. Industry structures play an important role in the determination and magnitude of these effects.
    Keywords: Regional Trade, Intermediate Inputs, The United States
    JEL: R12 R13 R32
    Date: 2010–03
  10. By: Longhi, Simonetta (ISER, University of Essex)
    Abstract: The wage curve literature consistently finds a negative relationship between regional unemployment rates and regional wages; the most widely accepted theoretical explanations interpret the unemployment rate as a measure of job competition. This paper proposes new ways of measuring job competition, alternative to the unemployment rate, and finds that the negative relationship still holds when job competition is measured following the job search literature. While for men the wage impact of the theoretically-based measures of job competition is rather similar to the wage impact of the unemployment rate, for women the difference is substantial.
    Keywords: wage curve, unemployment, on-the-job search
    JEL: J31 R23
    Date: 2010–02
  11. By: Murat Arik; David A. Penn
    Abstract: Conveniently located between the Nashville and Huntsville MSAs, the southern middle Tennessee counties are well positioned for businesses seeking to expand or relocate their operations. Although location itself is a critical asset, for sustainable economic growth the scope and issues related to counties’ human capital should be fully analyzed and documented. The goal of this study is to identify and analyze the scope and characteristics of the available labor force in the study area.
    Keywords: underemployment, labor force, laborforce, Tennessee, southern middle Tennessee, counties, Bedford, Coffee, Franklin, Grundy, Lincoln, Moore, Warren, county, relocation, regional, human capital
    Date: 2010–01
  12. By: Bloom, David E; Canning, David; Fink, Günther; Khanna, Tarun; Salyer, Patrick
    Abstract: This paper examines data on urbanization. We review the most commonly used data sources, and highlight the difficulties inherent in defining and measuring the size of urban versus rural populations. We show that differences in the measurement of urban populations across countries and over time are significant, and discuss the methods used to obtain these measurements, as well as those for projecting urbanization. We also analyze recent trends and patterns in urbanization. Finally, we describe the principal channels of urbanization and examine their relative contributions to the global urbanization process.
    Keywords: Urbanization, measurement, urban population
    Date: 2010
  13. By: Yannis M. Ioannides
    Abstract: This chapter presents a number of approaches that economists have used in studying neighborhood effects in housing markets. It emphasizes how individuals in effect choose neighborhood effects, or more generally social interactions, via their location decisions. The chapter looks constructively at neighborhood effects and rather than reviewing the role of neighborhood effects as mere externalities that might interfere with locational equilibrium, and focuses on what we have learned empirically about their role by observing locational decisions along with individual and group characteristics. It examines several classes of models which economists have relied upon in exploring the role and empirical significance of neighborhood effects that originate in housing markets. It takes the concept of neighborhood effects quite literally as arising in residential neighborhoods. For precisely this reason, the chapter emphasizes how we may detect empirically the presence of neighborhood effects when they may be priced by housing markets and be capitalized into housing values and rents. The chapter focuses on models that are empirically relevant and help identify neighborhood effects, and discusses actual empirical findings.
    Date: 2010
  14. By: Bouguezzi, Fehmi
    Abstract: This paper compares patent licensing regimes in a Hotelling model where firms are located symmetrically and not necessary at the end points of the city. I suppose that one of the firms owns a process innovation reducing the marginal unit cost. This patent holding firm will decide to sell a license or not to the non innovative firm and will choose, when licensing, between a fixed fee or a royalty. The key difference between this paper and other papers is that here I suppose that firms are not static and can move along the linear city symmetrically. I find that when there is no licensing, Nash equilibrium exists only when innovation is non drastic. I also find that royalties licensing is better than fixed fee licensing when innovation is small. When the innovation is intermediate I find that fixed fee is better than a royalty. The paper shows that a fixed fee is not better than a non licensing regime independently of the innovation size and the optimal licensing regime is royalties when innovation is small. Finally, I show that a patent holding firm should not license its innovation when it is intermediate or drastic
    Keywords: Hotelling model; Technology transfer; Patent licensing
    JEL: L0 D45
    Date: 2010

This nep-geo issue is ©2010 by Vassilis Monastiriotis. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.