nep-geo New Economics Papers
on Economic Geography
Issue of 2010‒05‒02
fourteen papers chosen by
Vassilis Monastiriotis
London School of Economics

  1. Spatial distribution of innovative activities and economic performances: A geographical-friendly model By Eric BROUILLAT (GREThA UMR CNRS 5113); Yannick LUNG (GREThA UMR CNRS 5113)
  2. Human Capital and Regional Growth in Switzerland By Polasek, Wolfgang; Schwarzbauer, Wolfgang; Sellner, Richard
  3. Seeds of Regional Structural Change: The Role of Entrepreneurs and Expanding Firms in Shaping Local Path Dependencies By Neffke, F.; Henning, M.
  4. Panel Data Inference under Spatial Dependence By Badi H. Baltagi; Alain Pirotte
  5. The Emergence and Evolution of Regional Convergence Clusters in China’s Energy Markets By Hengyun Ma; Les Oxley
  6. Fiscal decentralization and intergovernmental grants: the European regional policy and Spanish autonomous regions By Juan González Alegre
  7. Modelling Personal Income Taxation in Spain:Revenue Elasticities and Regional Comparisons By John Creedy; José Félix Sanz?Sanz
  8. Cultural Identity, Mobility, and Decentralization By Christopher-Johannes Schild; Matthias Wrede
  9. Is agglomeration taxable? By Jordi Jofre-Monseny
  10. The Regional Economic Effects of Military Base Realignments and Closures in Germany By Alfrede R. Paloyo; Colin Vance; Matthias Vorell
  11. The Academic Entrepreneur: Myth or Reality for Increased Regional Growth in Europe? By Katalin Erdõs; Attila Varga
  12. Determinants of the assignment of E.U. funds to Portuguese municipalities By Linda Gonçalves Veiga
  13. Growth Convergence and Spillovers among Indian States: What Matters? What Does Not? By Sanjay Kalra; Piyaporn Sodsriwiboon
  14. Fiscal federalism and electoral accountability By Toke S. Aidt; Jayasri Dutta

  1. By: Eric BROUILLAT (GREThA UMR CNRS 5113); Yannick LUNG (GREThA UMR CNRS 5113)
    Abstract: The paper identifies 5 stylized facts to characterize the geographic distribution of innovative activities in France (mainly its high concentration in the region Ile-de-France). It proposes an original model of regional growth in a knowledge-based economy considering the density of RD activities and the connectivity to the other regions. The model is computed and run into 2 different configurations: equidistribution and overconcentration. The simulations’ results lead to the conclusion that the equidistribution configuration is Pareto-efficient (higher growth rate of the national economy, lower income spatial inequalities) compared to the overconcentration. Policy implications are discussed in conclusion.
    Keywords: France; Geography of innovation; Knowledge spillover; Regional growth; Simulation
    JEL: O33 R11
    Date: 2010
  2. By: Polasek, Wolfgang (Department of Economics and Finance, Institute for Advanced Studies, Vienna, Austria); Schwarzbauer, Wolfgang (Department of Economics and Finance, Institute for Advanced Studies, Vienna, Austria); Sellner, Richard (Department of Economics and Finance, Institute for Advanced Studies, Vienna, Austria)
    Abstract: This paper develops a regional production function model for Swiss cantons that incorporates human capital together with spatial effects. Within a spatial panel framework we find that controlling for time effects the spatial spillover effect becomes insignificant. Our results are sensitive with respect to the human capital proxy. We find that the share of academics in the workforce is the main component of human capital driving productivity growth in Swiss cantons. This is in line with findings of previous studies suggesting that mostly highly skilled workers matter for productivity growth in technologically advanced economies.
    Keywords: Production function with human capital, spatial panel, regional growth
    JEL: C21 C23 I22 J23 R11 R12
    Date: 2010–04
  3. By: Neffke, F. (Erasmus Research Institute of Management (ERIM), RSM Erasmus University); Henning, M. (Erasmus Research Institute of Management (ERIM), RSM Erasmus University)
    Abstract: This article studies path dependent regional structural change using a quantitative framework. Based on an inter-industry skill-relatedness indicator, the degree to which local skill-bases exist and force local economies onto a path-dependent development trajectory is studied. The main question is into which local industries new plants enter, while distinguishing between the plants of entrepreneurs and firms. Using a dataset on Swedish individuals and municipalities, it is found that entrepreneurs tend to reinforce established local industrial specializations, whereas new plants of already existing firms do less so. Moreover, outside actors deepen local economy’s core specialization more than do local actors.
    Keywords: structural change;region;path dependence;entrepreneurship;skill-relatedness;human capital
    Date: 2010–03–24
  4. By: Badi H. Baltagi (Center for Policy Research, Maxwell School, Syracuse University, Syracuse, NY 13244-1020); Alain Pirotte (ERMES (CNRS) and TEPP (CNRS), Université Panthéon-Assas Paris II, France INRETS-DEST, National Institute of Research on Transports and Safety, France)
    Abstract: This paper focuses on inference based on the usual panel data estimators of a one-way error component regression model when the true specification is a spatial error component model. Among the estimators considered, are pooled OLS, random and fixed effects, maximum likelihood under normality, etc. The spatial effects capture the cross-section dependence, and the usual panel data estimators ignore this dependence. Two popular forms of spatial autocorrelation are considered, namely, spatial auto-regressive random effects (SAR-RE) and spatial moving average random effects (SMA-RE). We show that when the spatial coefficients are large, test of hypothesis based on the usual panel data estimators that ignore spatial dependence can lead to misleading inference.
    Keywords: Panel data; Hausman test; Random effect; Spatial autocorrelation; Maximum Likelihood.
    JEL: C33
    Date: 2010–03
  5. By: Hengyun Ma; Les Oxley (University of Canterbury)
    Abstract: Employing the new regression tests for Convergence, Club Convergence and Clustering proposed by Phillips and Sul (2007), this paper models and analyzes the behavior of China‘s energy sectors. Energy market =convergence clusters‘ are identified using new price data and their regional spatial distributions are mapped for four major fuel types; coal, gasoline, diesel and electricity. It is found that: i) as yet, there are no fully integrated national energy markets in China as more than one convergence cluster is identified for all four fuels; ii) some regional energy markets can be regarded as =quite mature‘ as evidenced by the existence of some highly concentrated convergence clusters connected geographically; iii) some regional markets remain in a =state of transition‘ as witnessed by convergence clusters that are scattered geographically and growing in membership; vi) it seems that there is more regional-based integration for coal and electricity than for gasoline and diesel as more convergent clusters were identified for coal and electricity than for gasoline and diesel v) Overall, China still appears to be in the process of energy market integration as demonstrated by the number and evolution of convergence clusters over time.
    Keywords: China; Energy market; Convergence cluster
    JEL: C33 L83 O10 O40 O57
    Date: 2010–04–20
  6. 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
  7. By: John Creedy; José Félix Sanz?Sanz
    Abstract: This paper derives analytical expressions for the revenue elasticity of the Spanish personal income tax system, as applied to tax units and in aggregate. This is complicated by the schedular nature of the system, and the role of central and regional governments, along with the existence of a range of tax credits and eligible expenditures and deductions. Empirical estimates are obtained using a cros -sectional dataset which enables a number of important ancillary elasticities (relating to allowances and tax credits, and different income sources) to be estimated. It was found that there is considerable variation among tax units in the revenue elasticity, with highly (positively) skewed distributions. The nature of the distributions varies among regions of Spain, and the aggregate elasticities for each region were found to display some variation associated with income distribution differences. The national aggregate is found to be around 1.3. The paper also derives aggregate tax revenue as a function of characteristics of the distribution of taxable income in each region. This allows the sources of revenue differences among regions to be identified.
    Date: 2010
  8. By: Christopher-Johannes Schild (University of Marburg); Matthias Wrede (University of Marburg and CESifo)
    Abstract: Regional cultural identity increases trust and facilitates interaction between native citizens ("social capital"). At the same time, it also affects non-native's migration decisions and their utility as it excludes non-native mobile workers from economic interaction within the region. Policies to increase regional cultural identity thus exert an externality that is negative for a basic model where future local productivity is exogenous and random, leading to the result of oversupply of regional culture under decentralization. If migration affects productivity, the basic result of oversupply may be reversed, depending on production technology and the government's objective function. Some positive and normative conclusions for cultural policy are derived.
    Keywords: Decentralization, Labor Mobility, Cultural Policy, Cultural Identity, Social Capital
    JEL: H72 H73 J61 Z13
    Date: 2010
  9. By: Jordi Jofre-Monseny (University of Barcelona & IEB)
    Abstract: Several theoretical papers that examine tax competition with agglomeration effects have stressed the possibility that the governments of jurisdictions in which economic activity is concentrated may tax firms more heavily (taxable agglomeration rents). In this paper, we examine the tax rate setting decisions taken with regard to the Spanish municipal business tax (Impuesto sobre Actividades Económicas). The analysis, carried out with a sample of 2,772 municipalities, focuses on the effect that urbanization economies, localization economies and the market potential of municipalities have on their business tax rates. High urbanization economies and high localization economies are found to increase the business tax rate. Although the evidence is weaker, the results also indicate that municipalities with better access to demand (of consumers) set higher tax rates
    Keywords: Local taxes, agglomeration economies, tax competition
    JEL: H3 H7 R
    Date: 2010
  10. By: Alfrede R. Paloyo; Colin Vance; Matthias Vorell
    Abstract: Within the context of the current political discussion over base realignments and closures (BRACs) in Germany, this study provides policy guidance by examining the economic consequences to the surrounding community. We identify the causal effect of a reduction in military personnel on a number of socioeconomic indicators within the peripheries of military bases. The BRACs within the German armed forces is used an exogenous source of variation that allows for the estimation of the causal effect of a particular demand shock on household income, output, unemployment, and tax revenue within a specified buff er zone around each base. The analysis covers 298 communities for the period 2003–2007. Consistent with evidence found elsewhere, we find that these base adjustments have only a marginal impact on the local community in which the bases are located.
    Keywords: Geographic information system; armed forces; regional adjustment
    JEL: H56 K42 R19
    Date: 2010–04
  11. By: Katalin Erdõs (Department of Economics and Regional Studies, University of Pécs); Attila Varga (Department of Economics and Regional Studies, University of Pécs)
    Abstract: Knowledge flows from universities to the regional economy can take different forms ranging from formal research collaborations to consultancy and informal personal connections. One of the knowledge communication channels drawing substantial interest of both researchers and regional policy makers is academic spin-off firm formation. According to the concept of the “academic entrepreneur” (Etzkowitz) university spin-off firm formation has grown naturally from the academic culture of the US where professors traditionally behave very much like entrepreneurs while setting up and maintaining research labs, hiring research assistants, “marketing” research results in conferences and publications or networking with colleagues and funding agencies. Spinning off a company is just a step forward from such entrepreneurial tasks of academics. Thus according to this concept academic motivations are main drivers in university spin-off firm formation in the US. Despite this challenging view the empirical literature pays relatively little attention to the particular “academic” features of university spin-offs and rarely considers the specificities of university entrepreneurship most notably the role of scientists as entrepreneurs. Empirical evidence suggests that Europe performs less successfully than the US in transferring knowledge from university labs to the regional economy via spin-off companies. One potential reason behind this difference is that institutions that determine the continental European research system hold back the emergence of academic entrepreneurs. Thus it is the main research question in our paper whether those specific “academic” drivers behind university spin-off firm formation are present at all in the continental European context. The related question is whether professional characteristics of the academics, their social capital, the norms of academia and the academic and business environment support or hinder these academic motivations? This paper is based on interviews carried out with university researchers who actively participate in firm formation in Hungary. Hungary is an excellent European case since the features of its university system are rooted in the continental (mainly German) tradition, but it also inherits some characteristics from the even more centralized socialist (soviet) tradition.
    Keywords: University, spin-off, academic entrepreneurship, regional university technology transfer
    JEL: I23 O18 O33 R11
    Date: 2009–12
  12. By: Linda Gonçalves Veiga (Universidade do Minho - NIPE)
    Abstract: The paper examines the determinants of the assignment of EU funds to Portuguese municipalities using a large and unexplored dataset covering all (278) mainland municipalities over fifteen years. Empirical results reveal that besides normative objectives, the national government also takes into account political motivations in the distribution of funds to municipalities. Grants increase during local election years, more funds are transferred to municipalities where the government party had higher percentages of votes, and where there are more swing voters.
    Keywords: Fiscal federalism, political economy, local governments, EU funds, Portugal.
    JEL: D72 H72 R58
    Date: 2010
  13. By: Sanjay Kalra; Piyaporn Sodsriwiboon
    Abstract: Convergence and spillovers across countries and within countries are old, but recurrent policy concerns, and India is no exception to this rule. This paper examines convergence and spillovers across Indian states using non-stationary panel data techniques. Results on convergence among Indian states are generally found to be similar, but more nuanced, than previous studies. Generally speaking, there is evidence of divergence over the entire sample period, convergence during sub-periods corresponding to structural breaks, and club convergence. There is strong evidence of club convergence among the high- and low-income states; the evidence for middle-income states is mixed. Dynamic spillover effects among states are small.
    Keywords: Cross country analysis , Economic growth , Economic models , India , Regional shocks , Spillovers , Time series ,
    Date: 2010–04–13
  14. By: Toke S. Aidt (University of Cambridge); Jayasri Dutta (University of Birmingham)
    Abstract: We study the efficient allocation of spending and taxation authority in a federation in which federal politicians are exposed to electoral uncertainty. We show that centralization may, but need not, result in a loss of electoral accountability. We identify an important asymmetry between positive and negative externalities and show that centralization may not be efficient in economies with positive externalities even when regions are identical and centralization does not entail a loss of accountability. We also show that decentralization can only Pareto dominate centralization in economies with negative externalities.
    Keywords: Fiscal federalism, local public goods, externalities, performance voting,turnout uncertainty, electoral accountability
    JEL: D72 D78 H41
    Date: 2010

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