nep-geo New Economics Papers
on Economic Geography
Issue of 2011‒01‒16
fifteen papers chosen by
Vassilis Monastiriotis
London School of Economics

  1. The emerging empirics of evolutionary economic geography By Ron Boschma; Koen Frenken
  2. Regional Economic Resilience, Hysteresis and Recessionary Shocks By Ron Martin
  3. Elemente der Neuen Ökonomischen Geographie By Klaus Schöler
  4. Das Städtesystem der Russischen Föderation aus Sicht der Neuen Ökonomischen Geographie = The Russian system of cities from the perspective of New Economic Geography By Albrecht Kauffmann
  5. Spatial Differentiation in Industrial Dynamics. A Core-Periphery Analysis Based on the Pavitt-Miozzo-Soete Taxonomy By Marco Capasso; Elena Cefis; Koen Frenken
  6. Do Firms Benefit from Being Present in Multiple Technology Clusters? An Assessment of the Technological Performance of Biopharmaceutical Firms By Catherine Lecocq; Bart Leten; Jeroen Kusters; Bart Van Looy
  7. Balanced Budget Government Spending in a Small Open Regional Economy By Patrizio Lecca; Peter McGregor; Kim Swales
  8. Labour market performance of immigrants in smaller regions of western countries: some evidence from Atlantic Canada By Akbari, Ather H.
  9. “Policy Scepticism” and the Impact of London-based Higher Education Institutions (HEIs) on the economy of England: Accounting for Alternative Uses of Public Expenditure By Kristinn Hermannsson; Katerina Lisenkova; Peter McGregor; Kim Swales
  10. Is there a metropolitan bias ? the inverse relationship between poverty and city size in selected developing countries By Ferre, Celine; Ferreira, Francisco H.G.; Lanjouw, Peter
  11. The Propagation of Regional Recessions By James D. Hamilton; Michael T. Owyang
  12. Spatial Decentralization and Program Evaluation: Theory and an Example from Indonesia By Nidhiya Menon; Mark M. Pitt
  13. European Integration and Labour Migration By d'Artis Kancs; Julia Kielyte
  14. Assessing the evidence on neighborhood effects from moving to opportunity By Dionissi Aliprantis
  15. Momentum and mean reversion in regional housing markets: Evidence from variance ratio tests By Elias Oikarinen

  1. By: Ron Boschma; Koen Frenken
    Abstract: Following last decadeÕs programmatic papers on Evolutionary Economic Geography, we report on recent empirical advances and how this empirical work can be positioned vis-ˆ-vis other strands of research in economic geography. First, we review studies on the path dependent nature of clustering, and how the evolutionary perspective relates to that of New Economic Geography. Second, we discuss research on agglomeration externalities in Regional Science, and how Evolutionary Economic Geography contributed to this literature with the concepts of cognitive proximity and related variety. Third, we go into the role of institutions in Evolutionary Economic Geography, and we relate this to the way Institutional Economic Geography tends to view institutions. From this discussion, a number of new research challenges are derived.
    Keywords: evolutionary economic geography, clusters, related variety, institutions, regional branching
    JEL: B25 B52 D85 L25 R0 R1
    Date: 2011–01
  2. By: Ron Martin
    Abstract: The notion of 'resilience' has recently risen to prominence in several disciplines, and has also entered policy discourse. Yet the meaning and relevance of the concept are far from settled matters. This paper develops the idea of resilience and examines its usefulness as an aid to understanding the reaction of regional economies to major recessionary shocks. But in so doing, it is also argued that the notion of resilience can usefully be combined with that of hysteresis in order to more fully capture the possible reactions of regional economies to major recessions. These ideas are then used as the basis for a preliminary empirical analysis of the UK regions.
    Keywords: Regional economic growth, Recessionary shocks, Resilience Hysteresis
    JEL: E32 R0 R10 R11
    Date: 2010–12
  3. By: Klaus Schöler
    Abstract: The most important question of regional economics is: What are the reasons for the existence, the growth, and the changes of regional economic structures? Without any doubt, agglomerations which are not based on natural sources belong to the most significant regional structures. The New Economic Geography gives answers - based on a microeconomic total model with different regions and industrial sectors, with heterogeneous goods and different transport costs - to the questions with regard to the reasons of the existence of agglomerations. This book pursues three objectives: First of all, the new paradigm is connected with the historical background of the traditional regional economics and trade theory. Furthermore, the basic model is described in detail and then discussed from a critical point of view. Finally, some possible extensions are introduced, which make it possible to eliminate some criticized elements of the basic model.
    Keywords: New Economic Geography, agglomerations, transport costs, regional economic structures
    JEL: R12
    Date: 2010–12
  4. By: Albrecht Kauffmann
    Abstract: The rise in energy prices may result in long-lasting rise in costs of freight transports. Which effects do rising freight transport costs have for the development of urban systems? Such rise of transport costs in real terms has happened in Russia after price liberalisation in 1992. At the same time, the Russian official demographic statistics provides data that can be used to test hypotheses concerning the development of urban systems affected by rising transport costs. In the present study, these data are comprehensively evaluated. The theoretical background is provided by modelling of a linear shaped urban system in the framework of New Economic Geography. By means of this tool, analysis can be applied to spacious urban systems with large transport distances. For the first time, the underlying theoretical approach is explained in detail. The empirical results provide evidence for the outcomes of the theoretical model: In spacious countries or regions, respectively, whose urban systems are drawn-out on long lines, rising costs of freight transport are conducive to tendencies of concentration of population in large cities in the centre of the system, while peripheral regions are increasingly disconnected.
    Keywords: Russia, urban systems, New Economic Geography, migration
    JEL: R49 R23 R13 R12 P25
    Date: 2010–11
  5. By: Marco Capasso; Elena Cefis; Koen Frenken
    Abstract: We compare the industrial dynamics in the core, semi-periphery and periphery in The Netherlands in terms of firm entry-exit, size, growth and sectoral location patterns. The contribution of our work is to provide the first comprehensive study on spatial differentiation in industrial dynamics for all firm sizes and all sectors, including services. We find that at the aggregate level the spatial pattern of industrial dynamics is consistent with the spatial product lifecycle thesis: entry and exit rates are highest in the core and lowest in the periphery, while the share of persistently growing firms is higher in the periphery than in the core. Disaggregating the analysis to the sectoral level following the Pavitt-Miozzo-Soete taxonomy, findings are less robust. Finally, sectoral location patterns are largely consistent with the spatial product lifecycle model: Fordist sectors are over-represented in the periphery, while sectors associated with the ICT paradigm are over-represented in the core, with the notable exception of science-based manufacturing.
    Keywords: Entry, exit, spatial product lifecycle, Fordist paradigm, ICT paradigm
    JEL: L25 L26 L60 L80 O18 O33 R10
    Date: 2010–01–10
  6. By: Catherine Lecocq; Bart Leten; Jeroen Kusters; Bart Van Looy
    Abstract: Firms active in knowledge-intensive fields are increasingly organizing their R&D activities on an international scale. This paper investigates whether firms active in biotechnology can improve their technological performance by developing R&D activities in multiple technology clusters. Regions in the US, Japan and Europe, that host a concentration of biotechnology activity are identified as clusters. Fixed-effect panel data analyses with 59 biopharmaceutical firms (period 1995-2002) provides evidence for a positive, albeit diminishing (inverted-U shape) relationship between the number of technology clusters in which a firm is present and its overall technological performance. This effect is distinct from a mere multi-location effect.
    Keywords: region, clusters, biotechnology, technology clusters
    JEL: O30 R12 R30
    Date: 2010–12
  7. By: Patrizio Lecca (Department of Economics, Strathclyde University); Peter McGregor (Fraser of Allander Institute, Strathclyde University); Kim Swales (Department of Economics, Strathclyde University)
    Abstract: This paper investigates the impact of a balanced budget fiscal policy expansion in a regional context within a numerical dynamic general equilibrium model. We take Scotland as an example where, recently, there has been extensive debate on greater fiscal autonomy. In response to a balanced budget fiscal expansion the model suggests that: an increase in current government purchase in goods and services has negative multiplier effects only if the elasticity of substitution between private and public consumption is high enough to move downward the marginal utility of private consumers; public capital expenditure crowds in consumption and investment even with a high level of congestion; but crowding out effects might arise in the short-run if agents are myopic.
    Keywords: regional computable general equilibrium analysis, fiscal federalism, fiscal policy.
    JEL: H72 R13 R50
    Date: 2010–10
  8. By: Akbari, Ather H.
    Abstract: Despite recent interest in regionalization of immigration in host nations, most studies have analyzed immigrants’ economic performance by largely focusing on their overall national performance. A regional analysis is necessary because changing geographic distribution of immigrants can affect their economic performance positively or negatively. Present paper focuses on Atlantic Canada whose share in annual Canadian immigrant inflows has been traditionally low, but where recent policy initiatives have resulted in greater attraction and retention of immigrants. Immigrants are found performing better than non-immigrants in regional labour market. The importance of regional analysis of immigrants’ economic performance and contribution in host nations is highlighted.
    Keywords: Immigrant attraction and retention; regionalization of immigration; immigration policy
    JEL: R1 J61 J18 J11
    Date: 2010
  9. 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 (2010a) for the case of London-based HEIs’ impact on the English economy in order to provide a self-contained analysis that is readily accessible by those whose primary concern is with the regional impacts of London 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 alternative uses of public expenditure, and show how conventional impact analyses can be augmented to accommodate this. 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: London Higher Education Institutions, Input-Output, England, Impact study, Multipliers.
    JEL: R51 R15 H75 I23
    Date: 2010–12
  10. By: Ferre, Celine; Ferreira, Francisco H.G.; Lanjouw, Peter
    Abstract: This paper provides evidence from eight developing countries of an inverse relationship between poverty and city size. Poverty is both more widespread and deeper in very small and small towns than in large or very large cities. This basic pattern is generally robust to choice of poverty line. The paper shows, further, that for all eight countries, a majority of the urban poor live in medium, small, or very small towns. Moreover, it is shown that the greater incidence and severity of consumption poverty in smaller towns is generally compounded by similarly greater deprivation in terms of access to basic infrastructure services, such as electricity, heating gas, sewerage, and solid waste disposal. The authors illustrate for one country -- Morocco -- that inequality within large cities is not driven by a severe dichotomy between slum dwellers and others. The notion of a single cleavage between slum residents and well-to-do burghers as the driver of urban inequality in the developing world thus appears to be unsubstantiated -- at least in this case. Robustness checks are performed to assess whether the findings in the paper are driven by price variation across city-size categories, by the reliance on an income-based concept of well-being, and by the application of small-area estimation techniques for estimating poverty rates at the town and city level.
    Keywords: Rural Poverty Reduction,Subnational Economic Development,City Development Strategies,Regional Economic Development
    Date: 2010–12–01
  11. By: James D. Hamilton; Michael T. Owyang
    Abstract: This paper develops a framework for inferring common Markov-switching components in a panel data set with large cross-section and time-series dimensions. We apply the framework to studying similarities and differences across U.S. states in the timing of business cycles. We hypothesize that there exists a small number of cluster designations, with individual states in a given cluster sharing certain business cycle characteristics. We find that although oil-producing and agricultural states can sometimes experience a separate recession from the rest of the United States, for the most part, differences across states appear to be a matter of timing, with some states entering recession or recovering before others.
    JEL: E32
    Date: 2011–01
  12. By: Nidhiya Menon (Department of Economics, Brandeis University); Mark M. Pitt (Brown University)
    Abstract: This paper proposes a novel instrumental variable method for program evaluation that only requires a single cross-section of data on the spatial intensity of programs and outcomes. The instruments are derived from a simple theoretical model of government decision-making in which governments are responsive to the attributes of places and their populations, rather than to the attributes of individuals, in making allocation decisions across space, and have a social welfare function that is spatially weakly separable, that is, that the budgeting process is multi-stage with respect to administrative districts and sub-districts. The spatial instrumental variables model is then estimated and tested by GMM with a single cross-section of Indonesian census data. The results offer support to the identification strategy proposed.
    Keywords: Spatial Decentralization, Program Evaluation, Instrumental Variables, Indonesia
    JEL: C21 H44 O12 C50
    Date: 2010–09
  13. By: d'Artis Kancs; Julia Kielyte
    Abstract: The present paper studies how European integration might affect the migration of workers in the enlarged EU. Unlike the reduced-form migration models, we base our empirical analysis on the theory of economic geography à la Krugman (1991), which provides an alternative modelling of migration pull and push factors. Parameters of the theoretical model are estimated econometrically using historical migration data. Our empirical findings suggest that European integration would trigger selective migration between the countries in the enlarged EU. In the Baltics, Lithuania would gain about 7.25% of the total work force. In the Visegrád Four, the share of the mobile labour force would increase the most in Hungary, 8.35%, compared to the pre-integration state. Our predictions for the East-West migration are moderate and lower than those of reduced-form models: between 5.44% (from the Baltics) and 3.61% (from the Visegrád Four) would emigrate to the EU North. Because migrants not only follow market potential, but also shape the region’s market potential, the long-run agglomeration forces are sufficiently weak to make a swift emergence of a core-periphery pattern in the enlarged EU very unlikely.
    Keywords: New economic geography; Market potential; Labour migration; Economic integration.
    JEL: F12 L11 R12 R23
    Date: 2010–07–27
  14. By: Dionissi Aliprantis
    Abstract: The interpretation of estimates from Moving to Opportunity (MTO) as neighborhood effects has created significant controversy among social scientists. This paper presents a framework that clarifies the interpretation of results from the MTO housing mobility experiment. The paper defines several neighborhood treatments and estimates their Local Average Treatment Effects (LATEs) using assigned treatment in MTO as an instrumental variable. This framework clarifies that while parameters estimated in the literature do not suffer from selection bias, selection into treatment is an inescapable issue if one seeks to learn about neighborhood effects from MTO. The LATE parameters estimated in this paper are neighborhood effects for the subgroup of MTO families who are compliers with respect to the defined treatment. In contrast, the Treatment-on-the-Treated (TOT) parameters reported in the literature are program effects. Since the subgroup of compliers for various neighborhood treatments can be considerably smaller than the subgroup induced to move by MTO, preliminary estimates indicate that LATE neighborhood effects tend to be much larger than the TOT program effects from MTO. This re-interpretation of the MTO data suggests two important conclusions related to the current understanding of neighborhood effects and programs. First, if alternative housing mobility programs were designed to induce moves to neighborhoods with characteristics other than low poverty, it is entirely feasible that such programs might induce larger effects than MTO. Second, initial LATE estimates appear to reconcile the evidence from MTO with prevailing theories of neighborhood effects.
    Keywords: Poverty ; Housing policy
    Date: 2011
  15. By: Elias Oikarinen
    Abstract: This study adds to the literature on mean aversion and mean reversion in housing prices. In contrast with the previous related literature, the persistence and reversion characteristics are studied by computing variance ratios using Kim's (2006) Wild bootstrapping and by investigating horizons up to 10 years. The variance ratios clearly indicate that housing prices do not follow random walk in any of the 15 Finnish cities included in the analysis. Instead, momentum in housing price growth is longlasting and considerable in size. Since the eventual reversion is substantially weaker than the initial mean aversion, housing is notably riskier asset in the long term than suggested by variances computed from quarterly or annual price movements. The results also show that the momentum and reversion patterns may substantially vary between regional housing markets. These differences influence the optimal housing portfolio allocation and highlight one more reason why it is complicated to use country level housing price data when analyzing the optimal portfolio allocation or housing price dynamics.
    Keywords: housing prices; momentum; mean reversion; variance ratio; portfolio allocation
    JEL: R31 G11
    Date: 2010–12

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