nep-geo New Economics Papers
on Economic Geography
Issue of 2010‒10‒16
thirteen papers chosen by
Vassilis Monastiriotis
London School of Economics

  1. Productivity and the density of human capital By Jaison R. Abel; Ishita Dey; Todd M. Gabe
  2. The long-term patterns of regional income inequality in Spain (1860-2000) By Joan R. Rosés; Daniel A. Tirado; Julio Martínez-Galarraga
  3. Clusters and Entrepreneurship By Mercedes Delgado; Michael Porter; Scott Stern
  4. The Spatial Impact of Local Infrastructural Investment in New Zealand By William Cochrane; Arthur Grimes; Phillip McCann; Jacques Poot
  5. Policy competition and agglomeration: a local government view By Michiel Gerritse
  6. The Regional Supply of Venture Capital - Can Syndication overcome Bottlenecks? By Michael Fritsch; Dirk Schilder
  7. Understanding the city size wage gap By Nathaniel Baum-Snow; Ronni Pavan
  8. A Matter of Location: The Role of Regional Social Capital in Overcoming the Liability of Newness in R&D Acquisition Activities By Keld Laursen; Francesca Masciarelli; Toke Reichstein
  9. The Geographic Distribution of Human Capital: Measurement of Contributing Mechanisms By Peter McHenry
  10. Total Factor Productivity Estimates: Some Evidence from European Regions By Maria Gabriela Ladu
  11. Regional Financial Soundness and R&D Activities By GOTO Yasuo
  12. Limits to Growth: Tourism and Regional Labor Migration By Denise Konan
  13. Le Traiettorie Reticolari dell'Innovazione Territoriale By Nicolò Bellanca; Mauro Lombardi

  1. By: Jaison R. Abel (Federal Reserve Bank of New York); Ishita Dey (University at Buffalo); Todd M. Gabe (University of Maine)
    Abstract: We estimate a model of urban productivity in which the agglomeration effect of density is enhanced by a metropolitan area’s stock of human capital. Estimation accounts for potential biases due to the endogeneity of density and industrial composition effects. Using new information on output per worker for U.S. metropolitan areas along with a measure of density that accounts for the spatial distribution of population, we find that a doubling of density increases productivity by 2 to 4 percent. Consistent with theories of learning and knowledge spillovers in cities, we demonstrate that the elasticity of average labor productivity with respect to density increases with human capital. Metropolitan areas with a human capital stock one standard deviation below the mean realize no productivity gain, while doubling density in metropolitan areas with a human capital stock one standard deviation above the mean yields productivity benefits that are about twice the average.
    Keywords: Agglomeration, productivity, density, knowledge spillovers
    JEL: R12 R30 J24 O40
    Date: 2010
  2. By: Joan R. Rosés; Daniel A. Tirado; Julio Martínez-Galarraga
    Abstract: This paper studies the evolution of Spanish regional inequality from 1860 to 2000. The results point to the coexistence of two basic forces behind changes in regional economic inequality: differences in economic structure and labor productivity across regions. In the Spanish case, the initial expansion of industrialization during the period 1860-1900, in a context of growing economic integration of regions, promoted the spatial concentration of manufacturing in certain regions, which also benefited from the greatest advances in terms of labor productivity. Since 1900 and until 1985, the diffusion of manufacturing and services production to a greater number of locations generated the emulation of production structures and a process of catching-up in labor productivity and wages. So, in these first 125 years, national market integration and economic growth has been followed by a Ushaped evolution of regional incomes inequality. Nevertheless, some productivity differentials remained and, from 1985 on, the Spanish entry in the UE generated a new upsurge of divergence in productivity across Spanish regions that could be in the base of a new phase of regional income divergence.
    Keywords: Industrialization, Market integration, Heckscher-Ohlin Model, New economic geography
    JEL: N93 N94 R11
    Date: 2010–10
  3. By: Mercedes Delgado; Michael Porter; Scott Stern
    Abstract: This paper examines the role of regional clusters in regional entrepreneurship. We focus on the distinct influences of convergence and agglomeration on growth in the number of start-up firms as well as in employment in these new firms in a given region-industry. While reversion to the mean and diminishing returns to entrepreneurship at the region-industry level can result in a convergence effect, the presence of complementary economic activity creates externalities that enhance incentives and reduce barriers for new business creation. Clusters are a particularly important way through which location-based complementarities are realized. The empirical analysis uses a novel panel dataset from the Longitudinal Business Database of the Census Bureau and the U.S. Cluster Mapping Project (Porter, 2003). Using this dataset, there is significant evidence of the positive impact of clusters on entrepreneurship. After controlling for convergence in start-up activity at the region-industry level, industries located in regions with strong clusters (i.e. a large presence of other related industries) experience higher growth in new business formation and start-up employment. Strong clusters are also associated with the formation of new establishments of existing firms, thus influencing the location decision of multiestablishment firms. Finally, strong clusters contribute to start-up firm survival.
    Keywords: Entrepreneurship, Industry Clusters, Dynamic Economies of Agglomeration
    Date: 2010–09
  4. By: William Cochrane (University of Waikato); Arthur Grimes (Motu Economic and Public Policy Research; and University of Waikato); Phillip McCann (University of Groningen); Jacques Poot (University of Waikato)
    Abstract: In this paper we estimate the impact of local authority infrastructure spending in New Zealand using spatial econometric modelling, with the infrastructure spending itself endogenously determined. Utilizing data from the New Zealand Census and Local Authorities Finance data (1991-2008), aggregated to functional labour market areas, we formulate a simultaneous equations growth model of real income, population, land rent and public infrastructure investment. Estimation is conducted using a spatial 3SLS procedure. We find that an increase in local infrastructure spending increases population growth, real income and land values, but is itself endogenous and spatially correlated.
    Keywords: local infrastructure, economic growth, migration, land value, spatial spillover
    JEL: H54 J21 R12
    Date: 2010–10
  5. By: Michiel Gerritse (VU University of Amsterdam)
    Abstract: This paper presents a model of local government policy competition in an New Economic Geography-setting. To maximize welfare, local governments can subsidize a mobile factor or provide public goods. In the local perspective, firms’ vertical linkages promote colocation and policy (subsidy) setting is simultaneous, giving rise to mixed profiles. Agglomeration benefits lead larger regions to set higher subsidies, preventing a race to the top. We show the results numerically as well as in an analytical case. In contrast to related literature, policy harmonization can be welfare-improving, mainly due simultaneous policy-setting with a (local) utilitarian objective.
    Keywords: Spatial general equilibrium, local policy competition
    JEL: R38 R50 R53 F12
    Date: 2010
  6. By: Michael Fritsch (School of Economics and Business Administration, Friedrich-Schiller-University Jena); Dirk Schilder
    Abstract: We investigate whether the supply of venture capital (VC) is driven by spatial proximity between a VC company and the portfolio firm. Our analysis is based on information about VC investments in Germany between 2004 and 2009. We find that possible problems caused by the geographic distance to a portfolio firm seem to be overcome by syndication of investments with one of the VC firms located close to the investment. Our analysis does, however, suggest that short geographic distance between an investor and the investment has an increasing effeon the probability for syndication as well as on the number of firms that join the syndicate. Hence, local VC suppliers may assume a role of an 'anchor' connecting the regional economy to more distant parts of the industry.
    Keywords: Venture Capital, syndication, geographic proximity, start-up financing, equity gap
    JEL: G24 O16 D21 M13 R12
    Date: 2010–10–05
  7. By: Nathaniel Baum-Snow (Brown University); Ronni Pavan (University of Rochester)
    Abstract: In 2000, wages of full time full year workers were more than 30 percent higher in metropolitan areas of over 1.5 million people than rural areas. The monotonic relationship between wages and city size is robust to controls for age, schooling and labor market experience. In this paper, we decompose the city size wage gap into various components. We propose an on-the-job search model that incorporates latent ability, search frictions, firm-worker match quality, human capital accumulation and endogenous migration between large, medium and small cities. Counterfactual simulations of the model indicate that variation in returns to experience and differences in wage intercepts across location type are the most important mechanisms contributing to the overall city size wage premium. Steeper returns to experience in larger cities is more important for college graduates while differences in wage intercepts is more important for high school graduates. Sorting on unobserved ability within education group and differences in labor market search frictions and distributions of firm-worker match quality contribute little or slightly negatively to observed city size wage premia in both samples.
    Keywords: Agglomeration, wage growth, urban wage premium
    JEL: J24 J31 R12 R23
    Date: 2010
  8. By: Keld Laursen; Francesca Masciarelli; Toke Reichstein
    Abstract: External knowledge acquisition represents a precondition for firms’ competitive advantage. However, young firms find it particularly difficult to gain access to external sources of knowledge: young firms suffer from a liability of newness by exhibiting significantly lower propensities to invest in external R&D than their older counterparts. We explore the role of geographically bound social capital in moderating this liability. By employing a Nested Logit approach, our findings show that geographically bound social capital moderates the liability of newness related to R&D acquisition, suggesting that the liability exists only in regions associated with low levels of social capital.
    Keywords: Research and development; social capital; liability of newness; geography
    Date: 2010
  9. By: Peter McHenry (Department of Economics, College of William and Mary)
    Abstract: This paper investigates how the geographic distribution of human capital evolves over time. With U.S. data, I decompose generation-to-generation changes in local human capital into three factors: the previous generation’s human capital, intergenerational transmission of skills from parents to their children, and migration of the children. I find evidence of regression to the mean of local skills at the state level and divergence at the commuting zone level. Labor market size, climate, local colleges, and taxes affect local skill measures. Skills move from urban to rural labor markets through intergenerational transmission but from rural to urban labor markets through migration.
    Keywords: Migration, Intergenerational transmission, Regional labor markets
    JEL: R23 J61 J11
    Date: 2010–09–15
  10. By: Maria Gabriela Ladu (Università degli Studi di Sassari and CRENoS)
    Abstract: This paper analyses the economic performance of European Regions and computes the Total Factor Productivity (TFP) using a panel cointegration approach. The main idea behind this choice is that this approach allows to directly estimate differences across economies in the production function and also to test for the presence of scale economies and market imperfections. In fact, recent studies (de la Fuente, 1995, 1996B, and de la Fuente – Doménech, 2000) show that TFP differences across countries and regions are substantial and highlight the importance of TFP dynamics as crucial in the evolution of productivity.
    Keywords: Total Factor Productivity, Panel Unit Root Test, Panel Cointegration, Fully Modified OLS
    Date: 2010–09–29
  11. By: GOTO Yasuo
    Abstract: In order to explore the impact of financial factors on the real economy, many researchers are analyzing the relationship between finance and real economic activity using new theories and approaches. This paper focuses on the relationship between financial soundness and corporate R&D activities on a regional scale. By measuring regional financial performance using data series including periods of financial crisis and recovery (from the end of the 1990s to the middle of the 2000s), this paper statistically examines the correlation with factors such as corporate R&D expenditure.
    Date: 2010–10
  12. By: Denise Konan (University of Hawaii at Manoa, Economics Department; Center for Sustainable Coastal Tourism; University of Hawaii Economic Research Organization (UHERO))
    Abstract: The paper provides a methodology for considering the carrying capacity and limits to growth of a labor-constrained mature tourism destination. A computable general equilibrium model is used to examine the impacts of visitor expenditure growth and labor migration on Hawai‘i’s economy. Impacts on regional income, welfare, prices, sector-level output, and gross state product are considered under alternative migration scenarios. Labor market constraints impose limits to growth in real visitor expenditures. Labor market growth with constrained visitor demand generates falling per capita household welfare.
    Keywords: Computable general equilibrium model, tourism, migration, Hawaii
    Date: 2010–06–01
  13. By: Nicolò Bellanca (Università degli Studi di Firenze, Dipartimento di Scienze Economiche); Mauro Lombardi (Università degli Studi di Firenze, Dipartimento di Scienze Economiche)
    Abstract: Traditions of studies dating back to Marshall, Porter and Krugman interpreted Local socio-economic systems (LSS) mainly considering the spatial proximity of the actors. It was the local anchorage that enabled an increase in specific forms of external economies, competitive advantages and endogenous dynamics. Therefore, in the last decades, these local systems have gone through multiple changes in a multi-dimensional scale. The new structural connotations - including cognitive proximity, the task-based competition, the complementarity of formal contracts and informal agreements in business partnerships, trans-local networks - require a different theoretical framework and involve different policy implications. The theoretical framework focuses on co-evolution of technologies, organizational models, cultures and institutions. Among the multiple trajectories made possible by the co-evolution, each SSL is both related to a socio-technical system that restricts its dynamics of change, and plugged into paths along which can access in a discontinuous way to far techno-economic horizons. Therefore the policy implications must refer to innovative trajectories that the existing global socio-technical transition makes possible for a specific group of SSL, which is Tuscany in our case. At the strategic and operative level – considering political and social limits of the society we are considering - we try to catch some “bottlenecks” which obstruct the perception and the pursuit of long-term collective interests. These blocks relate to myopia, both of entrepreneurs and of public institutions, in respect of the scientific-technical potential and effectively evolutionary paths that would be convenient to take; the inadequacy of institutional forms within which commons are produced and managed; the lack of appropriate ways to capitalize innovative enterprises. For each of these lock-in we make constructive and viable proposals.
    Keywords: District, Local socio-economic system, Socio-technical transition, Lock-in, Tuscany.
    JEL: B52 L25 L53 O33
    Date: 2010

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