nep-geo New Economics Papers
on Economic Geography
Issue of 2011‒02‒05
eight papers chosen by
Vassilis Monastiriotis
London School of Economics

  1. Where is the Economics in Spatial Econometrics? By Bernard Fingleton; Luisa Corrado
  2. Regional Skill Supplies and Location of Firms: The Case of Information Technology Industry in India By Abraham, Vinoj
  3. On the effects of highway investment on the regional concentration of economic activity in the USA By Alfredo Marvão Pereira; Jorge M. Andraz
  4. Regional productivity variation and the impact of public capital stock: an analysis with spatial interaction, with reference to Spain By Bernard Fingleton; Miguel Gómez-Antonio
  5. Financial Development and Innovation in China: Evidence from the Provincial Data By Aoife Hanley; Wan-Hsin LIU; Andrea Vaona
  6. The relationship between start-ups, market mobility and employment growth: An empirical analysis for Dutch regions By André van Stel; Sierdjan Koster
  7. Localized knowledge spillovers and patent citations: A distance-based approach By Yasusada Murata; Ryo Nakajima; Ryosuke Okamoto; Ryuichi Tamura
  8. Dynamics of Industrial Districts and Business Groups: the Case of the Marche Region By Filippo Randelli; Ron Boschma

  1. By: Bernard Fingleton (Department of Economics, University of Strathclyde.); Luisa Corrado (Faculty of Economics, University of Cambridge)
    Abstract: Spatial econometrics has been criticized by some economists because some model specifications have been driven by data-analytic considerations rather than having a firm foundation in economic theory. In particular this applies to the so-called W matrix, which is integral to the structure of endogenous and exogenous spatial lags, and to spatial error processes, and which are almost the sine qua non of spatial econometrics. Moreover it has been suggested that the significance of a spatially lagged dependent variable involving W may be misleading, since it may be simply picking up the e¤ects of omitted spatially dependent variables, incorrectly suggesting the existence of a spillover mechanism. In this paper we review the theoretical and empirical rationale for network dependence and spatial externalities as embodied in spatially lagged variables, arguing that failing to acknowledge their presence at least leads to biased inference, can be a cause of inconsistent estimation, and leads to an incorrect understanding of true causal processes.
    Keywords: Spatial econometrics, endogenous spatial lag, exogenous spatial lag, spatially dependent errors, network dependence, externalities, the W matrix, panel data with spatial effects, multilevel models with spatial effects.
    JEL: C21 C31 R0
    Date: 2011–01
  2. By: Abraham, Vinoj
    Abstract: The “new economic geography” of the IT industry is shaped by two characteristic features of the industry, smaller size of the firms and zero transportation costs of its products that provide its ability of being a ‘footloose’ industry. The IT industry could locate itself in a region on the basis of two factors, namely, the nearness to large markets that ensures steady demand for its products, and the nearness to its factors of production. The importance of proximity to large markets in the case of Indian IT industry is only marginal as the IT industry, mainly dominated by the computer software segment, is a highly export oriented industry. There are reasons, however to believe that the location of firms in the ICT industry would be based on the supply of its crucial factor of production, namely, skilled labour. The IT industry being a skilled-labour-intensive, export-oriented industry it is by reducing the cost of labour, relative to capital, that it can reap comparative advantage benefits. Moreover, the skill requirement of this industry being very flexible and is subjected to fast rate of obsolescence it remains important for the firm, in order to have uninterrupted production, to locate itself in large pools of skilled labour. Correlations drawn between the location of firms and regional supply of skills tend to support the hypothesis that the quantity and quality of skills supplied in a region could determine the location of firms in a region and clustering of firms to a city.
    Keywords: Skill Supply; Information Technology Industry; Location; Region; India; Economic Geography; Agglomeration Economies.
    JEL: L25 R1 J44 L86 R11
    Date: 2010–03–10
  3. By: Alfredo Marvão Pereira (Department of Economics, The College of William and Mary); Jorge M. Andraz (Faculdade de Economia, Universidade do Algarve)
    Abstract: The empirical results in this note are based on state-level VAR estimates using private output, employment, and investment, as well as different measures of highway investment to capture, for each state, both the direct effects of highway investment in the state itself and spillover effects of highway investment in other states. Empirical results suggest that the largest states tend to also be the biggest beneficiaries of highway investments which means that highway investment has not only contributed to regional concentration of economic activity in the country but has done so in many of the largest states thereby contributing to regional asymmetries in the country.
    Date: 2011–01–23
  4. By: Bernard Fingleton (Department of Economics, University of Strathclyde.); Miguel Gómez-Antonio (Department of Public Finance and Fiscal System,Universidad Complutense de Madrid)
    Abstract: In this paper we examine whether variations in the level of public capital across Spain?s Provinces affected productivity levels over the period 1996-2005. The analysis is motivated by contemporary urban economics theory, involving a production function for the competitive sector of the economy („industry?) which includes the level of composite services derived from 'service' firms under monopolistic competition. The outcome is potentially increasing returns to scale resulting from pecuniary externalities deriving from internal increasing returns in the monopolistic competition sector. We extend the production function by also making (log) labour efficiency a function of (log) total public capital stock and (log) human capital stock, leading to a simple and empirically tractable reduced form linking productivity level to density of employment, human capital and public capital stock. The model is further extended to include technological externalities or spillovers across provinces. Using panel data methodology, we find significant elasticities for total capital stock and for human capital stock, and a significant impact for employment density. The finding that the effect of public capital is significantly different from zero, indicating that it has a direct effect even after controlling for employment density, is contrary to some of the earlier research findings which leave the question of the impact of public capital unresolved.
    Keywords: Public capital, urban economics, spatial econometrics.
    JEL: C21 R11 R12
    Date: 2011–01
  5. By: Aoife Hanley; Wan-Hsin LIU; Andrea Vaona
    Abstract: This paper investigates the role of regional financial development, in addition to FDI, for regional innovation in China, using a more recent provincial dataset and more sophisticated panel data estimation techniques than previous studies. Two aspects of regional financial system development are considered: its financial depth and government intervention in the financial system. Estimation results show that the financial depth of a region has a significantly positive effect on regional innovation (patenting) performance. This positive effect is found to be higher for minor innovations such as external design patents than for more complicated innovations such as utility model patents and invention patents. Surprisingly, estimation results do not show that government financial system intervention reduces allocative efficiency of resources which would otherwise impede regional innovation performance
    Keywords: regional financial system, FDI, innovation, patent, regional study, China
    JEL: G20 O30 O53 R10
    Date: 2011–01
  6. By: André van Stel; Sierdjan Koster
    Abstract: Recent literature suggests that two types of competition may contribute to macro-economic performance: the extent of new-firm entry and the extent of competition among incumbent firms. In the present paper we explain employment growth at the region-sector level using direct indicators for both these types of competition -the start-up rate and the market mobility rate- as main independent variables. While previous studies in this field measured competition among incumbent firms in an indirect way, we use a direct measure called market mobility. The empirical analysis reiterates existing results in that we find the long-term economic effect of start-ups to be bigger than the short-term effect. We also find empirical indications that this long-term effect consist of two significant parts. First, the most successful start-ups grow out to become high-growth firms, and second, the entry of new firms stimulates incumbent firms to perform better.  
    Date: 2011–01–24
  7. By: Yasusada Murata; Ryo Nakajima; Ryosuke Okamoto; Ryuichi Tamura
    Abstract: We develop a new approach to localized knowledge spillovers by incorporating the concept of control patents (Jaffe, Trajtenberg and Henderson 1993) into the distance-based test of localization (Duranton and Overman, 2005). Using microgeographic data, we identify localization distance while allowing for cross-boundary spillovers, unlike the existing literature where the extent of localized knowledge spillovers is detected at the state or metropolitan statistical area level. We revisit the recent debate by Thompson and Fox-Kean (2005) and Henderson, Jaffe and Trajtenberg (2005) on the existence of localized knowledge spillovers, and find solid evidence supporting localization, even when finer controls are used.
    Date: 2011–01
  8. By: Filippo Randelli (Università degli Studi di Firenze,); Ron Boschma (Department of Economic Geography, Utrecht University)
    Abstract: Italian industrial districts are undergoing fundamental changes due to globalization. Taking a firm perspective, we argue that the analysis of firm strategies, in particular the rise of business groups, is key to understand the organizational adjustments industrial districts have recently gone through. Due to the typical family structure of industrial district firms in the Marche region, as in other fragmented Italian districts, the organizational form adopted by firms to manage growth is that of the business group. We evaluate the empirical relevance of business groups in the Marche region, and we describe different transition strategies that turned firms into business groups.
    Keywords: Industrial Districts, Business Groups, Globalization, Marche Region
    JEL: L22 R12
    Date: 2011

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