nep-geo New Economics Papers
on Economic Geography
Issue of 2010‒05‒15
eight papers chosen by
Vassilis Monastiriotis
London School of Economics

  1. Spatial dynamics and convergence: The spatial AK model By Raouf BOUCEKKINE; Carmen CAMACHO; Giorgio FABBRI
  2. Interprovincial disparities in China since the reforms: convergence or divergence? By Farhad Noorbakhsh; Zhikai Wang
  3. Rational Expectations in Urban Economics By Berliant, Marcus; Yu, Chia-Ming
  4. Regional economic divide and the role of technological spillovers in Italy. Evidence from microdata By Aiello, Francesco; Cardamone, Paola
  5. Representation and regional redistribution in federations By Tiberiu Dragu; Jonathan Rodden
  6. Measuring Persistence of U.S. City Prices: New Evidence from Robust Tests By Basher, Syed Abul; Carrion-i-Silvestre, Josep Lluis
  7. Village level inequality, migration and remittances in rural Mexico: How do they change over time? By Aslihan Arslan; J. Edward Taylor
  8. A model-based analysis of the impact of Cohesion Policy expenditure 2000-06: simulations with the QUEST III endogenous R&D model By Janos Varga; Jan in 't Veld

  1. By: Raouf BOUCEKKINE (UNIVERSITE CATHOLIQUE DE LOUVAIN, Department of Economics and Core, Univerity of Glasgow, Department of Economics); Carmen CAMACHO (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES) and FNRS); Giorgio FABBRI (Dipartimento di Studi Economici S.Vinci, Universita di Napoli Parthenope,Naples and UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES))
    Abstract: We study the optimal dynamics of an AK economy where population is uniformly distributed along the unit circle. Locations only differ in initial capital endowments. Despite constant returns to capital, we prove that transition dynamics will set in. In particular, we prove that the spatio-temporal dynamics, induced by the willingness of the planner to give the same (detrended) consumption over space and time, lead to convergence in the level of capital across locations in the long-run.
    Keywords: Economic Growth, Inequality, Spatial Dynamics, Convergence
    JEL: C60 O11 R11 R12 R13
    Date: 2010–03–16
  2. By: Farhad Noorbakhsh; Zhikai Wang
    Abstract: This paper investigates the extent of disparities amongst the provinces of China since the economic reform in 1978 up to the most recent year for which data is available. After a brief review of theoretical and in particular recent empirical literature on regional inequality in China it investigates whether or not the dynamic economic growth in China has been coupled with increasing disparities amongst the Chinese provinces. The paper utilises a few models of convergence along the lines of those hypothesised by neoclassical economists. It employs per capita income and per capita consumption to identify the possible absolute and conditional convergence since the economic reforms. The coverage and impact of the disparities in terms of the relative size of population affected are then taken into account in the analysis of inequality in income and consumption.
    Keywords: China, Regional disparities, inequality, convergence
    Date: 2010–03
  3. By: Berliant, Marcus; Yu, Chia-Ming
    Abstract: Canonical analysis of the classical general equilibrium model demonstrates the existence of an open and dense subset of standard economies that possess fully-revealing rational expectations equilibria. This paper shows that the analogous result is not true in urban economies under reasonable modifications for this field. An open subset of economies where none of the modified rational expectations equilibria fully reveals private information is found. There are two important pieces. First, there can be information about a location known by a consumer who does not live in that location in equilibrium, and thus the equilibrium rent does not reflect this information. Second, if a consumer's utility depends only on information about their (endogenous) location of residence, perturbations of utility naturally do not incorporate information about other locations conditional on their location of residence. Existence of equilibrium is proved. Space can prevent housing prices from transmitting information from informed to uninformed households, resulting in an inefficient outcome.
    Keywords: Urban Economics; General Equilibrium; Private Information; Rational Expectations
    JEL: R13 D82 D51
    Date: 2010–05–08
  4. By: Aiello, Francesco; Cardamone, Paola
    Abstract: This paper assesses the impact of R&D efforts on production in the North and Centre-South of Italy by using a panel of 1203 manufacturing firms over the period 1998-2003. The estimations are based on a nonlinear translog production function augmented by a measure of R&D spillovers. This measure combines the geographical distance between firms, the technological similarity within each pair of firms and the technical efficiency of each firm. The estimation method takes into account the endogeneity of regressors and the potential sample selection issue regarding firms’ decision to invest in R&D. Results show that the external stock of technology exerts a higher impact in the Centre-South of Italy. Finally, it emerges that R&D capital and R&D spillovers are substitutes for Northern firms and complements for Centre-Southern firms.
    Keywords: R&D spillovers; Italian economic divide; translog production function; technical efficiency
    JEL: C23 O33 L29
    Date: 2010–05–10
  5. By: Tiberiu Dragu (University of Illinois); Jonathan Rodden (Stanford University)
    Abstract: This paper examines the role of institutions of territorial representation in shaping long-term patterns of inter-regional redistribution within federations. A simple legislative bargaining model with endogenous taxation suggests that over-represented states should be favored in the distribution of inter-governmental grants regardless of their income level. We demonstrate that a striking relationship between legislative representation and grants holds up in a diverse group of federations from around the world. The relationship appears not to be an artifact of economic development, population size, population density, or the historical conditions under which the federal bargain was struck. Furthermore, we suggest that the attractiveness of poor states as coalition partners implies that intergovernmental transfer systems will often tend toward progressivity under equal apportionment, but the systematic over-representation of wealthy (or poor) states can undermine (or bolster) this logic.
    Keywords: Redistribution, federalism, intergovernmental transfers, malapportionment
    JEL: D72 D78 H77
    Date: 2010
  6. By: Basher, Syed Abul; Carrion-i-Silvestre, Josep Lluis
    Abstract: This paper revisits the empirical analysis in Cecchetti, Mark and Sonora (2002) involving long-span U.S. city prices, who estimated the persistence of U.S. price differentials to be around nine years. After controlling for the structural breaks in the data, we find that U.S. city price level differentials are I(0) stationary processes with the median half-life of convergence ranged between 1.5 and 2.6 years, estimates that are in accordance with what should be expected from a highly integrated economy as the United States. Our results are also robust to a pairwise tests of price level convergence.
    Keywords: Purchasing power parity; Price level convergence; Half-life; Multiple structural breaks; Pairwise convergence.
    JEL: E31 C23 F41 C33
    Date: 2010–05–04
  7. By: Aslihan Arslan; J. Edward Taylor
    Abstract: We analyze how migration prevalence and remittances shape income distribution using novel panel data that is nationally and regionally representative of rural Mexico. Employing a Gini decomposition and controlling for whole household migration (attrition), we find that migration prevalence has increased between 2002 and 2007 reversing the unequalizing effects of international remittances at the national level. We also analyze regional differences in the effects of remittances on inequality, and find that the regions that had the highest increase in international migration are also the regions where the equalizing change in the marginal effects of remittances was the highest. This provides supporting evidence for the migration diffusion hypothesis. A fixed effects analysis of the effects of migration and remittances on in inequality at the village level, however, fails to support this hypothesis, indicating that most changes in inequality have occurred within rather than between villages. We show that income growth has been pro-poor in all villages, but this is offset by significant re-ranking of individuals in the village inequality measure, concealing the effects of migration and remittances on income distribution at the village level
    Keywords: Inequality, Migration, Network effects, Panel Data, Remittances, Mexico
    JEL: O15
    Date: 2010–05
  8. By: Janos Varga; Jan in 't Veld
    Abstract: More than a third of the EU budget is devoted to Cohesion Policy with the objective to foster economic and social cohesion in the European Union. Large-scale fiscal transfers are used to support investment in infrastructure, R&D and human capital. This paper provides a model-based assessment of the potential macro-economic impact of these fiscal transfers using a DSGE model with semi-endogenous growth (Jones, 1995) and endogenous human capital accumulation. The simulations show the potential benefits of Structural Funds with significant output gains in the long run due to sizeable productivity improvements.
    Keywords: A Model-based Analysis of the Impact of Cohesion Policy Expenditure 2000-06, Cohesion Policy, endogenous growth, dynamic general equilibrium modelling, Varga, in 't Veld,
    JEL: C53 E62 O30 O41
    Date: 2009–10

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