nep-geo New Economics Papers
on Economic Geography
Issue of 2010‒11‒27
twenty-one papers chosen by
Vassilis Monastiriotis
London School of Economics

  1. The empirics of economic geography: How to draw policy implications? By Pierre-Philippe Combes
  2. The agglomeration of R&D labs By Gerald A. Carlino; Jake Carr; Robert M. Hunt; Tony E. Smith
  3. Rendimientos crecientes, costos de transporte, eslabonamientos verticales y asimetrías regionales persistentes By Viego, Valentina
  4. Regional Knowledge and the Emergence of an Industry: Laser Systems Production in West Germany, 1975-2005 By Guido Bünstorf; Michael Fritsch; Luis F. Medrano
  5. The Identification of Agglomeration Economies By Pierre-Philippe Combes; Gilles Duranton; Laurent Gobillon
  6. The Influence of Role Models on Immigrant Self-Employment: A Spatial Analysis for Switzerland By Giuliano Guerra; Roberto Patuelli
  7. Why Are East Germans Not More Mobile?: Analyzing the Impact of Local Networks on Migration Intentions By Peter Boenisch; Lutz Schneider
  8. On the road to prosperity ? The economic geography of China's national expressway network By Roberts, Mark; Deichmann, Uwe; Fingleton, Bernard; Shi, Tuo
  9. The mechanisms of agglomeration: Evidence from the effect of inter-industry relations on the location of new firms By Jordi Jofre-Monseny; Raquel Marín-López; Elisabet Viladecans-Marsal
  10. A Nonparametric Estimation of the Local Zipf Exponent for all US Cities By González-Val, Rafael
  11. Working with the market : a new approach to reducing urban slums in India By Annez, Patricia; Bertaud, Alain; Patel, Bimal; Phatak, V. K.
  12. Search, Migration, and Urban Land Use: The Case of Transportation Policies By Zenou, Yves
  13. The Economic Effects of Slum Clearance and Urban Renewal in the United States By William J. Collins; Katharine Shester
  14. Econometría espacial: una aplicación a los problemas de sobrepeso y obesidad en las provincias de Argentina By Viego, Valentina; Temporelli, Karina
  15. Internal Migration and Wage Differentials among Italian University Graduates By Di Cintio, Marco; Grassi, Emanuele
  16. “Policy Scepticism” and the Impact of Welsh Higher Education Institutions (HEIs) on their Host Region: Accounting for Regional Budget Constraints By Kristinn Hermannsson; Katerina Lisenkova; Peter McGregor; Kim Swales
  17. The Regional Economic Impact of the 2009 New Zealand National Masters Hockey Tournament By Bridget Daldy; Matthew Saunders
  18. Conditional grants to independent regional governments: The trade-off between incentives and wasteful grant-seeking By Ivo Bischoff; Frédéric Blaeschke
  19. Closing the Gap between Absolute and Relative Measures of Localization, Concentration or Specialization By Frank Bickenbach; Eckhardt Bode; Christiane Krieger-Boden
  20. Distribution Dynamics of Regional GDP per Employee in Unified Germany By Vollmer, Sebastian; Holzmann, Hajo; Ketterer, Florian; Klasen, Stephan
  21. Convergence Club Empirics: Some Dynamics and Explanations of Unequal Growth across Indian States By Sanghamitra Bandyopadhyay

  1. By: Pierre-Philippe Combes (GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - Université de la Méditerranée - Aix-Marseille II - Université Paul Cézanne - Aix-Marseille III - Ecole des Hautes Etudes en Sciences Sociales (EHESS) - CNRS : UMR6579)
    Abstract: Using both reduced-form and structural approaches, the spectrum of policy recommendations that can be drawn from empirical economic geography is pretty large. Reduced-form approaches allow the researchers to consider many variables that impact on regional disparities, as long as they are careful about interpretation and endogeneity issues. Structural approaches have the opposite advantages. Less issues can be simultaneously addressed, but one can be more precise in terms of which intuitions are considered and the underlying mechanisms and effects at work. Many regional policy issues remain unanswered, opening some interesting future lines of research.
    Keywords: agglomeration economies; regional policy; structural estimation; instrumental variables
    Date: 2010
  2. By: Gerald A. Carlino; Jake Carr; Robert M. Hunt; Tony E. Smith
    Abstract: The authors document the spatial concentration of more than 1,000 research and development (R&D) labs located in the Northeast corridor of the U.S. using point pattern methods. These methods allow systematic examination of clustering at different spatial scales. In particular, Monte Carlo tests based on Ripley's (1976) K-functions are used to identify clusters of labs — at varying spatial scales — that represent statistically significant departures from random locations reflecting the underlying distribution of economic activity (employment). Using global K-functions, they first identify significant clustering of R&D labs at two different spatial scales. This clustering is by far most significant at very small spatial scales (a quarter of a mile), with significance attenuating rapidly during the first half mile. The authors also observe statistically significant clustering at distances of about 40 miles. This corresponds roughly to the size of the four major R&D clusters identified in the second stage of their analysis — one each in Boston, New York-Northern New Jersey, Philadelphia-Wilmington, and Virginia (including the District of Columbia). In this second stage of the analysis, explicit clusters are identified by a new procedure based on local K-functions, which they designate as the multiscale core-cluster approach. This new approach yields a natural nesting of clusters at different scales. The authors' global finding of clustering at two spatial scales suggests the possibility of two distinct forms of spillovers. First, the rapid attenuation of significant clustering at small spatial scales is consistent with the view that knowledge spillovers are highly localized. Second, the scale at which larger clusters are found is roughly comparable to that of local labor markets, suggesting that such markets may be the source of additional spillovers (e.g., input sharing or labor market matching externalities).
    Keywords: Research and development ; Cities and towns ; Industrial location
    Date: 2010
  3. By: Viego, Valentina
    Abstract: Argentina presents certain stylised features in its pattern of regional development: absence of absolute convergence in geographical per capita output, stability in spatial income gaps and locational patterns of population and economic activity, strong dependence on natural resource based activities, defficiencies in truck transport system, and significant weigh of activities with high internal transport costs, among others. The article proposes a variation of the standard model of regional growth developed by Thirwall and Dixit in the mid 1970s combined with some elements from the approach known as "new economic geography", aimed to formally reproduce teh empirical regularities referred above. Also some policy implications can be derived from the model presented.
    Keywords: economías externas de escala; costos de transporte internos; vínculos inter-regionales; crecimiento regional
    JEL: O18 R11
    Date: 2010–04–05
  4. By: Guido Bünstorf (University of Kassel, Department of Economics,); Michael Fritsch (School of Economics and Business Administration, Friedrich-Schiller-University Jena); Luis F. Medrano (School of Economics and Business Administration, Friedrich-Schiller-University Jena)
    Abstract: We analyze the emergence and spatial evolution of the German laser systems industry. Regional knowledge in the related field of laser sources, as well as the presence of universities with physics or engineering departments, is conducive to the emergence of laser systems suppliers. The regional presence of source producers is also positively related to entry into laser systems. One important mechanism behind regional entry is the diversification of upstream laser source producers into the downstream systems market. Entry into the materials processing submarket appears to be unrelated to academic knowledge in the region, but the presence of laser source producers and the regional stock of laser knowledge are still highly predictive in this submarket.
    Keywords: Innovation, regional knowledge, laser technology, emerging industries, diversification
    JEL: L22 L69 R11 O52
    Date: 2010–11–15
  5. By: Pierre-Philippe Combes (GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - Université de la Méditerranée - Aix-Marseille II - Université Paul Cézanne - Aix-Marseille III - Ecole des Hautes Etudes en Sciences Sociales (EHESS) - CNRS : UMR6579); Gilles Duranton (Department of Economics - University of Toronto); Laurent Gobillon (INED - INED)
    Abstract: Measures of urban productivity are typically positively associated with city population. But is this relationship causal? We discuss the main sources of bias in the proper identification of agglomeration effects. We also assess a variety of solutions that have been proposed in the literature to deal with them.
    Keywords: agglomeration economies; instrumental variables; structural estimation; natural experiments
    Date: 2010–11–12
  6. By: Giuliano Guerra (Institute for Economic Research (IRE), University of Lugano, Switzerland); Roberto Patuelli (Institute for Economic Research (IRE), University of Lugano, Switzerland; The Rimini Centre for Economic Analysis, Italy)
    Abstract: Theoretical and empirical research suggests a connection between the presence of role models and the emergence of entrepreneurs. Existing entrepreneurs may act as role models for self-employment candidates by providing successful examples. By explicitly considering the self-employment rates of the natives, which may influence locally the decisions of immigrants towards entrepreneurship, we develop a simple model that explains immigrant self-employment rates for a sample of 2,490 Swiss municipalities. In addition, we accommodate for the presence of spatial spillovers in the distribution of rates, and test a spatial autoregressive model which takes into account the average self-employment rates of immigrants living in nearby municipalities. Our evidence shows a significant (positive) effect of such spatial network effects, which are characterized by a quick distance decay, suggesting spatial spillovers at the household and social network level. Additionally, we show that local conditions and immigrant pool characteristics differ, with respect to self-employment choices, when examining separately urban and rural contexts.
    Keywords: immigrants, self-employment, role models, Switzerland, spatial lag
    JEL: C21 J24 J61 O15 R23
    Date: 2010–01
  7. By: Peter Boenisch; Lutz Schneider
    Abstract: Despite poor regional labour market conditions East Germans exhibit a rather limited willing-ness of leaving their home region. Applying an IV ordered probit approach and using the German Socio Economic Panel (SOEP), we test a local network explanation of lower spatial mobility. Firstly, we find that membership in locally bounded social networks reduces regional mobility. Secondly, we show that native East Germans are more invested in this type of social networks than West Germans. Thirdly, after controlling for the social network effect the mobility gap between East and West substantially reduces. Thus, low regional labour mobility of East Germans is for a significant part attributable to local ties binding people to their home region.
    Keywords: Social networks, labour mobility
    JEL: Z13 R23 J61
    Date: 2010
  8. By: Roberts, Mark; Deichmann, Uwe; Fingleton, Bernard; Shi, Tuo
    Abstract: Over the past two decades, China has embarked on an ambitious program of expressway network expansion. By facilitating market integration, this program aims both to promote efficiency at the national level and to contribute to the catch-up of lagging inland regions with prosperous Eastern ones. This paper evaluates the aggregate and spatial economic impacts of China's newly constructed National Expressway Network, focussing, in particular, on its short-run impacts. To achieve this aim, the authors adopt a counterfactual approach based on the estimation and simulation of a structural"new economic geography"model. Overall, they find that aggregate Chinese real income was approximately 6 percent higher than it would have been in 2007 had the expressway network not been built. Although there is considerable heterogeneity in the results, the authors do not find evidence of a significant reduction in disparities across prefectural level regions or of a reduction in urban-rural disparities. If anything, the expressway network appears to have reinforced existing patterns of spatial inequality, although, over time, these will likely be reduced by enhanced migration.
    Keywords: Transport Economics Policy&Planning,Economic Theory&Research,Labor Policies,Roads&Highways,Regional Economic Development
    Date: 2010–11–01
  9. By: Jordi Jofre-Monseny (Universitat de Barcelona & IEB); Raquel Marín-López (Universitat de Barcelona & IEB); Elisabet Viladecans-Marsal (Universitat de Barcelona & IEB)
    Abstract: The objective of this paper is to explore the relative importance of each of Marshall’s agglomeration mechanisms by examining the location of new manufacturing firms in Spain. In particular, we estimate the count of new firms by industry and location as a function of (pre-determined) local employment levels in industries that: 1) use similar workers (labor market pooling); 2) have a customer-supplier relationship (input sharing); and 3) use similar technologies (knowledge spillovers). We examine the variation in the creation of new firms across cities and across municipalities within large cities to shed light on the geographical scope of each of the three agglomeration mechanisms. We find evidence of all three agglomeration mechanisms, although their incidence differs depending on the geographical scale of the analysis.
    Keywords: Agglomeration economies, coagglomeration, labor market pooling, input sharing, knowledge spillovers
    JEL: L25 L60 R12 R30
    Date: 2010
  10. By: González-Val, Rafael
    Abstract: In this short paper we apply the methodology proposed by Ioannides and Overman (2003) to estimate a local Zipf exponent using data for the entire twentieth century of the complete distribution of cities (incorporated places) without any size restrictions in the US. The results reject Zipf’s Law from a long term perspective, as the estimated values are close to zero. However, decade by decade we find evidence in favour of Zipf’s Law. We also see how periods in which the Zipf exponent grows with city size are interspersed with others in which the relationship between the exponent and city shares is negative.
    Keywords: Zipf’s Law; Gibrat’s Law; urban growth
    JEL: C14 R00
    Date: 2010–11–15
  11. By: Annez, Patricia; Bertaud, Alain; Patel, Bimal; Phatak, V. K.
    Abstract: This paper examines the policy options for India as it seeks to improve living conditions of the poor on a large scale and reduce the population in slums. Addressing the problem requires first a diagnosis of the market at the city level and a recognition that government interventions, rather than thwarting the operations of the market, should seek to make it operate better. This can substantially reduce the subsidies required to assist low income households to attain decent living standards. The authors show that government programs that directly provide housing would cost, in conservative estimates, about of 20 to 30 percent of GDP, and cannot solve a problem on the scale of India's. Using two case studies, for Mumbai and Ahmedabad, the paper offers a critical examination of government policies that shape the real estate market and make formal housing unaffordable for a large part of the population. It illustrates how simple city level market diagnostics can be used to identify policy changes and design smaller assistance programs that can reach the poor. The linkage between chronic infrastructure backlogs and policies makes housing unnecessarily expensive. Increasing the carrying capacity of cities is essential for gaining acceptance of real estate policies suited to Indian cities. The authors propose approaches for funding major investments to achieve this.
    Keywords: Housing&Human Habitats,Urban Housing,Public Sector Management and Reform,Regional Governance,Urban Governance and Management
    Date: 2010–11–01
  12. By: Zenou, Yves (Stockholm University)
    Abstract: We develop a search-matching model with rural-urban migration and an explicit land market. Wages, job creation, urban housing prices are endogenous and we characterize the steady-state equilibrium. We then consider three different policies: a transportation policy that improves the public transport system in the city, an entry-cost policy that encourages investment in the city and a restricting-migration policy that imposes some costs on migrants. We show that all these policies can increase urban employment but the transportation policy has much more drastic effects. This is because a decrease in commuting costs has both a direct positive effect on land rents, which discourages migrants to move to the city, and a direct negative effect on urban wages, which reduces job creation and thus migration. When these two effects are combined with search frictions, the interactions between the land and the labor markets have amplifying positive effects on urban employment. Thus, improving the transport infrastructure in cities can increase urban employment despite the induced migration from rural areas.
    Keywords: rural-urban migration, transportation policies, entry costs, restricting migration
    JEL: D83 J61 O18 R14
    Date: 2010–11
  13. By: William J. Collins (Department of Economics, Vanderbilt University); Katharine Shester (Department of Economics, Vanderbilt University)
    Abstract: The Housing Act of 1949 established a federally subsidized program that helped cities clear areas of existing buildings for redevelopment, rehabilitate deteriorating structures, complete comprehensive city plans, and enforce building codes. The program ended in 1974, but not before financing over 2,100 urban renewal projects and generating great controversy. We use an instrumental variable strategy to estimate the program’s effects on city-level outcomes. The estimates are generally positive and economically significant and are not driven by differential changes in cities’ demographic composition. We caution that the results do not imply that the program was an equitable or optimal approach to dealing with central-city problems.
    Keywords: City growth, Redevelopment, Residential Segregation, Eminent Domain
    JEL: N92 R30 J15 K11
    Date: 2010–10
  14. By: Viego, Valentina; Temporelli, Karina
    Abstract: Despite their vigorous expansion in the last 30 years in the field of econometrics, spatial models are still not widely disseminated in the empirical literature in Argentina focused on quantitative aspects of regional scope. This paper aims to present the central lines of spatial econometric analysis applied to the problem of overweight in the population and its determinants. We use provincial data from the National Survey on Risk Factors. The results show that conventional econometric tools are insufficient for identifying the individual impact of income, poverty or education on the phenomenon of overweight.
    Keywords: econometría espacial; obesidad; sobrepeso
    JEL: I12 C21
    Date: 2010–11–16
  15. By: Di Cintio, Marco; Grassi, Emanuele
    Abstract: In this paper, we estimate wage differentials among Italian university Graduates three years after graduation due to sequential geographic mobility. By means of a matching procedure we quantify wage premia associated with the choice of studying far from home, moving after graduation and moving back home after graduation. We find evidence of large gains for those who move after graduation, little benefits for those who choose to go back home after having studied in regions different from that of origin. We also assess a “transitivity” result for the estimated treatment effects.
    Keywords: Geographic mobility; wage differentials; kernel matching.
    JEL: J31 J61 J24
    Date: 2010–11–15
  16. By: Kristinn Hermannsson (Department of Economics, Strathclyde University); Katerina Lisenkova (Department of Economics, Strathclyde University); Peter McGregor (Fraser of Allander Institute, Strathclyde University); Kim Swales (Department of Economics, Strathclyde University)
    Abstract: This paper replicates the analysis of Scottish HEIs in Hermannsson et al (2010b) for the case of Wales in order to provide a self-contained analysis that is readily accessible by those whose primary concern is with the regional impacts of Welsh HEIs. A “policy scepticism” has emerged that challenges the results of conventional regional HEI impact analyses. This denial of the importance of the expenditure impacts of HEIs appears to be based on a belief in either a binding regional resource constraint or a regional public sector budget constraint. In this paper we provide a systematic critique of this policy scepticism. However, while rejecting the extreme form of policy scepticism, we argue that it is crucial to recognise the importance of the publicsector expenditure constraints that are binding under devolution. We show how conventional impact analyses can be augmented to accommodate regional public sector budget constraints. While our results suggest that conventional impact studies overestimate the expenditure impacts of HEIs, they also demonstrate that the policy scepticism that treats these expenditure effects as irrelevant neglects some key aspects of HEIs, in particular their export intensity.
    Keywords: Higher Education Institutions, Input-Output, Wales, Impact study, Multipliers,Devolution.
    JEL: R51 R15 H75 I23
    Date: 2010–10
  17. By: Bridget Daldy (University of Waikato); Matthew Saunders
    Abstract: This paper analyses the direct and subsequent flow-on expenditure resulting from the week-long National Masters Hockey Tournament held in Hamilton, New Zealand in March 2009. During the tournament, information was collected on the expenditure from a sample of participating players and officials and from the host association, Waikato Hockey. The information was averaged over all participants and used in a regional economic model. The economic impact of the 2009 tournament was also compared to the outcome for the Hamilton tournament held previously in 2003. Total direct expenditure in the Waikato region from the 2009 tournament was approximately $2.5 million compared to $1.2 million in 2003. The 2009 expenditure led subsequently to an extra $1.13 million of value-added to the regional economy mainly in the hospitality and accommodation sectors.
    Keywords: input-output; regional economic impact; masters sport; hockey; New Zealand
    JEL: C67 R11
    Date: 2010–11–18
  18. By: Ivo Bischoff (University of Kassel); Frédéric Blaeschke (University of Kassel)
    Abstract: The paper addresses the welfare implications of conditional grants in the presence of inefficiencies in regional production. While conditional grants may set incentives for regions to reduce inefficiencies, resources are wasted in the process of grant-seeking. We provide a theoretical model to assess the net effect on welfare. A game-theoretic context is developed to derive the optimal grant-distribution scheme. Depending on the characteristics of the collective good and of the regional government, the optimal ratio of conditional to block grants and the optimal number of recipients vary. The impact of different factors on the optimal grant-distribution scheme is derived.
    Keywords: conditional grants, inefficiencies, rent-seeking, fiscal federalism, opportunistic government
    JEL: D7 H77 H5 H11
    Date: 2010
  19. By: Frank Bickenbach; Eckhardt Bode; Christiane Krieger-Boden
    Abstract: This paper solves one of the puzzles in the analysis of regional and industrial distributions of economic activity, the discrepancy between absolute and relative measures. It shows that the difference between an absolute and a relative Theil index of localization can be expressed in terms of absolute and relative concentration and specialization measures. This helps understand and explore why absolute and relative measures frequently evolve in opposite directions. The paper shows for the EU-15 and for UK manufacturing that this divergence originates mainly from the industrial dimension and is largely a statistical artifact inherited from the characteristics of industry classifications
    Keywords: Localization, Concentration, Specialization, Theil index
    JEL: C43 R12
    Date: 2010–11
  20. By: Vollmer, Sebastian; Holzmann, Hajo; Ketterer, Florian; Klasen, Stephan
    Abstract: We investigate to what extent convergence in production levels per worker has been achieved in Germany since unification. To this end, we model the distribution of GDP per employee across German districts using two-component normal mixtures. While in the first year after unification, the two component distributions were clearly separated and bimodal, corresponding to the East and West German districts, respectively, in the following years they started to merge showing only one mode. Still, using the recently developed EM-Test for homogeneity in normal mixtures, the hypothesis of just a single normal component for the whole distribution is clearly rejected for all years. A Posterior analysis shows that about half of the East German districts were assigned to the richer component in 2006, thus catching up to levels of the West. The growth rate of a mover district is about one percentage point higher than the growth rate of a non-mover district which had the same initial level of GDP per employee.
    Keywords: Regional convergence, distribution dynamics, mixture models, Germany
    JEL: O47 R11
    Date: 2010–11
  21. By: Sanghamitra Bandyopadhyay
    Abstract: This paper documents the convergence of incomes across Indian states over the period 1965 to 1998. It departs from traditional analyses of convergence by tracking the evolution of the entire income distribution, instead of standard regression and time series analyses. The findings reveal twin-peaks dynamics—the existence of two income convergence clubs, one at 50 per cent, another at 125 per cent of the national average income. Income disparities across states seem to have declined over the 1960s, only to increase over the subsequent three decades. [Discussion Paper No. 2003/77]
    Keywords: convergence clubs, conditional convergence, distribution dynamics, infrastructure, capital investment, macroeconomic stability, panel data, India
    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.