nep-geo New Economics Papers
on Economic Geography
Issue of 2010‒10‒23
fourteen papers chosen by
Vassilis Monastiriotis
London School of Economics

  1. Clusters, Convergence, and Economic Performance By Mercedes Delgado; Michael Porter; Scott Stern
  2. Defining and measuring polycentric regions: the case of Tuscany By Burgalassi, David
  3. Exaggerated Death of Distance: Revisiting Distance Effects on Regional Price Dispersions By Kazuko Kano; Takashi Kano; Kazutaka Takechi
  4. Mergers in Fiscal Federalism By Breuillé, Marie-Laure; Zanaj, Skerdilajda
  5. Maximum Likelihood Estimation and Lagrange Multiplier Tests for Panel Seemingly Unrelated Regressions with Spatial Lag and Spatial Errors: An Application to Hedonic Housing Prices in Paris By Baltagi, Badi H.; Bresson, Georges
  6. Entrepreneurship and market size. The case of young college graduates in Italy By Sabrina Di Addario; Daniela Vuri
  7. Spatial development and the law of one price: Evidence of convergence of land values By Joseph J. Capuno
  8. Productivity in cities: self-selection and sorting By Anthony J. Venables
  9. Weighting Ripley’s K-function to account for the firm dimension in the analysis of spatial concentration By Giuseppe Espa; Diego Giuliani; Giuseppe Arbia
  10. The Regional Multi-Agent Simulator (RegMAS): an open-source spatially explicit model to assess the impact of agricultural policies By Lobianco, Antonello; Esposti, Roberto
  11. Evaluating the Impact of Regional Development Programs By Paul Winters; Susana Sitja Rubio
  12. Job and residential mobility in the Netherlands: the influence of human capital, household composition and location By Kronenberg, Kristin; Carree, Martin
  13. Spatial Relocation with Heterogeneous Firms and Heterogeneous Sectors By OKUBO Toshihiro; Rikard FORSLID
  14. Local tax interaction with multiple tax instruments: evidence from Flemish municipalities By S. VAN PARYS; B. MERLEVEDE; T. VERBEKE

  1. By: Mercedes Delgado; Michael Porter; Scott Stern
    Abstract: This paper evaluates the role of regional cluster composition in the economic performance of industries, clusters and regions. On the one hand, diminishing returns to specialization in a location can result in a convergence effect: the growth rate of an industry within a region may be declining in the level of activity of that industry. At the same time, positive spillovers across complementary economic activities provide an impetus for agglomeration: the growth rate of an industry within a region may be increasing in the size and strength (i.e., relative presence) of related economic sectors. Building on Porter (1998, 2003), we develop a systematic empirical framework to identify the role of regional clusters – groups of closely related and complementary industries operating within a particular region in regional economic performance. We exploit newly available data from the US Cluster Mapping Project to disentangle the impact of convergence at the region-industry level from agglomeration within clusters. We find that, after controlling for the impact of convergence at the narrowest unit of analysis, there is significant evidence for cluster-driven agglomeration. Industries participating in a strong cluster register higher employment growth as well as higher growth of wages, number of establishments, and patenting. Industry and cluster level growth also increases with the strength of related clusters in the region and with the strength of similar clusters in adjacent regions. Importantly, we find evidence that new industries emerge where there is a strong cluster environment. Our analysis also suggests that the presence of strong clusters in a region enhances growth opportunities in other industries and clusters. Overall, these findings highlight the important role of cluster-based agglomeration in regional economic performance.
    Date: 2010–10
  2. By: Burgalassi, David
    Abstract: Polycentric development in regions has many dimensions, which involve several definitions and measures. This paper tackles the problem of defining and measuring polycentricity under an integrated and multi- dimensional perspective. Firstly, the policy relevance of polycentricity is analysed. Then, the paper identifies the definitions and measures of polycentricity by surveying the literature. It also provides a taxonomy among two main aspects involved in the definition of polycentricity: the morphological dimension and the functional dimension. Based on this background, an empirical analysis is carried out, by using data about population and commuting flows in the Tuscany Region (Italy). The results show that Tuscany can be viewed as a polycentric spatial structure, both considering rank-size distribution of cities and spatial interaction.
    Keywords: Polycentric development; spatial structure; rank-size estimations; spatial interaction; Tuscany
    JEL: R12 R11 R23
    Date: 2010–09
  3. By: Kazuko Kano (School of Finance and Economics, University of Technology, Sydney); Takashi Kano (Graduate School of Economics, University of Tokyo); Kazutaka Takechi (Faculty of Economics, Hosei University)
    Abstract: Past studies in the literature of the law of one price (LOP) show statistically significant but economically subtle roles of geographical distance in regional price dispersions. In this paper, we challenge this empirical "death of distance" as a primary source of LOP violations investigating a unique daily data set of wholesale prices of agricultural products in Japan that enables us to identify source regions and observe product-delivery patterns to consuming regions. We build a simple structural model to explain the observed product-delivery patterns and argue that ignoring the underlying delivery choice results in a serious under-bias toward inferences on distance effects on regional price dispersions due to sample selection. Estimating a sample-selection model, on which theoretical restrictions of our structural model are imposed, with data of several agricultural products, we find quite large estimates of the distance elasticity of price differential compared with conventional estimates. This paper, hence, provides evidence that conventional estimates of the distance elasticity could be heavily biased downwards and spuriously underestimate the role transportation costs play in regional price dispersions and LOP violations.
    Keywords: law of one price; regional price dispersion; transportation cost; geographical distance; agricultural wholesale price; sample-selection bias
    JEL: F11 F14 F41
    Date: 2010–10–01
  4. By: Breuillé, Marie-Laure; Zanaj, Skerdilajda
    Abstract: This paper analyzes mergers of regions in a two-tier setting with both horizontal and vertical tax competition. The merger of regions induces three e.ects on regional and local tax policies, which are transmitted both horizontally and vertically: i) an alleviation of tax competition at the regional level, ii) a rise in the regional tax base, and iii) a larger internalization of tax externalities generated by cities. It is shown that the merger of regions increases regional tax rates while decreasing local tax rates. This Nash equilibrium with mergers is then compared with the Nash equilibrium with coalitions of regions.
    Keywords: Mergers, Tax Competition, Fiscal Federalism
    JEL: H73 H25
    Date: 2010–09
  5. By: Baltagi, Badi H. (Syracuse University); Bresson, Georges (University of Paris 2)
    Abstract: This paper proposes maximum likelihood estimators for panel seemingly unrelated regressions with both spatial lag and spatial error components. We study the general case where spatial effects are incorporated via spatial errors terms and via a spatial lag dependent variable and where the heterogeneity in the panel is incorporated via an error component specification. We generalize the approach of Wang and Kockelman (2007) and propose joint and conditional Lagrange Multiplier tests for spatial autocorrelation and random effects for this spatial SUR panel model. The small sample performance of the proposed estimators and tests are examined using Monte Carlo experiments. An empirical application to hedonic housing prices in Paris illustrates these methods. The proposed specification uses a system of three SUR equations corresponding to three types of flats within 80 districts of Paris over the period 1990-2003. We test for spatial effects and heterogeneity and find reasonable estimates of the shadow prices for housing characteristics.
    Keywords: hedonic housing prices, Lagrange multiplier tests, maximum likelihood, panel spatial dependence, spatial lag, spatial error, SUR
    JEL: C31 C33 R21
    Date: 2010–09
  6. By: Sabrina Di Addario (Bank of Italy); Daniela Vuri (University of Rome Tor Vergata)
    Abstract: We analyse empirically the effects of urbanization on Italian college graduates' work possibilities as entrepreneurs three years after graduation. We find that doubling the population density of the province of work reduces the chances of being an entrepreneur by 2-3 percentage points. This result holds after controlling for regional fixed effects and is robust to instrumenting urbanization. Provincial competition, urban amenities and disamenities, cost of labour, earning differentials between employees and self-employed workers, unemployment rates and value added per capita account for more than half of the negative urbanization penalty. Our result cannot be explained by the presence of negative differentials in returns to entrepreneurship between the most and the least densely populated areas either. In fact, as long as they succeed in entering the most densely populated markets, young entrepreneurs are able to reap the benefits of urbanization externalities: doubling the population density of the province of work increases entrepreneurs' net monthly earnings by 2-3 per cent.
    Keywords: Labour market transitions, urbanization
    JEL: R12 J24 J21
    Date: 2010–09
  7. By: Joseph J. Capuno (School of Economics, University of the Philippines Diliman)
    Abstract: Many developing countries exhibit imbalanced spatial development, but corrective policies are hampered by lack of adequate sub-regional development data. Building on the insights of the factor price equalization theorem and by applying measures of spatial autocorrelation on land values, patterns of local development and linkages in the Philippines are traced. Evidence of convergence in provincial and urban land values is found in 1986-2000, although the clustering is more local than global. Thus, greater infrastructure investments and use of land values by local governments as policy guides should be made to facilitate in-country trade and migration, and to disperse growth.
    Keywords: Spatial development, land values, convergence, Philippines
    JEL: O18 R12 R14
    Date: 2010–01
  8. By: Anthony J. Venables
    Abstract: Productivity is high in cities partly because the urban environment acts as a self-selection mechanism. If workers have imperfect information about the quality of workers with whom they match and matches take place within cities, then high-ability workers will choose to live and work in expensive cities. This self-selection improves the quality of matches in such cities. The mechanism may be reinforced by the development of informational networks in cities with a large proportion of high ability workers. As a consequence productivity in these cities is high for workers of all ability types.
    Keywords: economic geography, productivity, city, urban, sorting, self-selection
    JEL: R0 R1
    Date: 2010
  9. By: Giuseppe Espa; Diego Giuliani; Giuseppe Arbia
    Abstract: The spatial concentration of firms has long been a central issue in economics both under the theoretical and the applied point of view due mainly to the important policy implications. A popular approach to its measurement, which does not suffer from the problem of the arbitrariness of the regional boundaries, makes use of micro data and looks at the firms as if they were dimensionless points distributed in the economic space. However in practical circumstances the points (firms) observed in the economic space are far from being dimensionless and are conversely characterized by different dimension in terms of the number of employees, the product, the capital and so on. In the literature, the works that originally introduce such an approach (e.g. Arbia and Espa, 1996; Marcon and Puech, 2003) disregard the aspect of the different firm dimension and ignore the fact that a high degree of spatial concentration may result from both the case of many small points clustering in definite portions of space and from only few large points clustering together (e.g. few large firms). We refer to this phenomena as to clustering of firms and clustering of economic activities. The present paper aims at tackling this problem by adapting the popular Kfunction (Ripley, 1977) to account for the point dimension using the framework of marked point process theory (Penttinen, 2006)
    Keywords: Agglomeration, Marked point processes, Spatial clusters, Spatial econometrics
    JEL: C21 D92 L60 O18 R12
    Date: 2010
  10. By: Lobianco, Antonello; Esposti, Roberto
    Abstract: RegMAS (Regional Multi Agent Simulator) is an open-source spatially explicit multi-agent model framework specifically designed for long-term simulations of the effects of policies on agricultural systems. Using iterated conventional optimisation problems as agents’ behavioural rules, it allows for a bidirectional integration between geophysical and social models where spatially-distributed characteristics are taken into account in the programming problem of the optimising agents. With RegMAS it is possible to simulate the local specific response to a given policy (or scenario), where policies, together with macro and regional characteristics, are read into the program in specially formatted spreadsheets and standard GIS files. The paper presents the model logic and structure and describes its functioning by applying it to a case-study, where RegMAS results are compared with conventional agent-based modelling to demonstrate the advantages of spatial explicitness. The simulation refers to the impact of the recent “Health Check” of the CAP on farm structures, income and land use in a hilly area of a central Italian region (Marche).
    Keywords: Agent-Based Modelling; Mathematical Programming; Explicit Spatial Analysis; Common Agricultural Policy
    JEL: C63 C61 Q12 Q18
    Date: 2010–06
  11. By: Paul Winters; Susana Sitja Rubio
    Abstract: The purpose of this guideline is to discuss the objectives and approaches of regional (subnational) development programs in order to provide guidance on issues related to evaluating the impact of these programs. Regional development programs are designed to improve the income-generating capacity of, and reduce poverty in, a focus region within a country. The primary and unique characteristics of these programs lie in promoting a broad range of productive activities in a predefined region. To do this, regional development programs often need to address the institutional structure under which decisions are made as well as how economic resources should flow from the center to the local level. As such, the programs involve both productive and institutional transformation. Evaluating the impact of regional development programs is complicated by the need to assess both the impact of productive investment as well as the institutional transformation. As with all impact evaluations, evaluating regional development programs is thus much more likely to be successful if planned along with the design of the program. This guideline provides a summary of the options for setting up evaluations of regional development programs, while carefully considering the need to go beyond evaluating the impact on beneficiaries alone
    Keywords: regional development, impact evaluation, development effectiveness,rural livelihoods, decentralization.
    JEL: C81 O12 O18 O22 R11 R58
    Date: 2010–08
  12. By: Kronenberg, Kristin; Carree, Martin
    Abstract: This study identifies and evaluates determinants of employees’ job and residential mobility. It examines mobility of fulltime employees in selected sectors in 2003/2004, using register data provided by Statistics Netherlands. We estimate a multinomial model of job and residential change. The results illustrate that individuals decide upon changing jobs and/or relocating by taking into account the strength of their family- and job-related ties. We also find that the prevalence of internal versus external career opportunities impedes job changes. While a high salary facilitates relocation, our findings regarding the effect of salary on interfirm mobility were inconclusive. A long commuting distance encourages (simultaneous) job and housing mobility, while being situated in the municipality of a large city encourages employees to either change jobs, or to relocate.
    Keywords: Job mobility; residential mobility; regional migration; human capital
    JEL: J62 J61 J24 R23
    Date: 2010
  13. By: OKUBO Toshihiro; Rikard FORSLID
    Abstract: The present paper focuses on sorting as a mechanism behind the well-established fact that there is a central region productivity premium. Using a model of heterogeneous firms that can move between regions, Baldwin and Okubo (2006) show how more productive firms sort themselves to the large core region. We extend this model by introducing different capital intensities among firms and sectors. In accordance with empirical evidence, more productive firms are assumed to be more capital intensive. As a result, our model can produce sorting to the large regions from both ends of the productivity distribution. Firms with high capital intensity and high productivity, as well as firms with very low productivity and low capital intensity, tend to relocate to the core. We use region and sector productivity distributions from Japanese micro data to test the predictions of the model. Several sectors show patterns consistent with two-sided sorting, and roughly an equal number of sectors seem to primarily be driven by sorting and selection. We also find supportive evidence for our model prediction that two-sided sorting occurs in sectors with high capital intensity.
    Date: 2010–10
    Abstract: We investigate the long run result of strategic interaction among local jurisdictions using multiple tax instruments. Most studies about local policy interaction only consider a single policy instrument. With multiple tax instruments, however, tax interaction is more complex. We construct a simple theoretical framework based on a basic spillover model, with two tax rates and immobile resources. We show that the signs of within and cross tax interaction crucially depend on the extent to which a jurisdiction mimics the other jurisdiction’s budget, and the extent to which the preference for one tax instrument is affected by the level of the same or the other tax instrument in the other jurisdiction. Its specific institutional setting makes of Flanders (Belgium) a unique region to evaluate multiple tax interaction. Municipalities in Belgium are free to set two important local tax rates: the local property tax rate and the local income tax rate. We estimate whether years of strategic interaction between Flemish municipalities, of which the division is stable since 1983, has resulted in municipalities mimicking their neighbors’ tax structure. We do so by between estimating income and property tax reaction functions for the period 1992-2004, each of which simultaneously includes the neighboring municipalities’ income ànd property tax rate. We find that the property (income) tax rate of a municipality is significantly higher if the property (income) tax rate in other municipalities is high, and that the coefficient is higher if the possible impact of the other municipalities’ income (property) tax rate is accounted for. The cross impact of the other municipalities’ income (property) tax rate on the property (income) tax rate is always negative, though the significance is higher for the property tax than for the income tax reaction function. The result suggests that municipalities are keener on competing each other’s tax structure than on mimicking the neighboring municipalities’ budget.
    Keywords: tax competition; yardstick competition; local tax rates; spatial econometrics; multiple taxes; tax structure
    Date: 2010–09

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