nep-geo New Economics Papers
on Economic Geography
Issue of 2011‒02‒12
thirteen papers chosen by
Vassilis Monastiriotis
London School of Economics

  1. A Dynamic Spatial Panel Data Approach to the German Wave Curve By Badi H. Baltagi; Uwe Blien and Katja Wolf
  2. On Regional Unemployment: An Empirical Examination of the Determinants of Geographical Differentials in the UK By Dimitris Korobilis; Michelle Gilmartin
  3. Spatial differentiation in industrial dynamics A core-periphery analysis based on the Pavitt-Miozzo-Soete taxonomy By Marco Capasso; Elena Cefis; Koen Frenken
  4. Family Firms and Regional Innovation Activity: Evidence from the German Mittelstand By Block, Joern; Spiegel, Frank
  5. Regional value added in Italy over the long run (1891-2001): linking indirect estimates with official figures, and implications By Emanuele Felice
  6. Economic Integration in Europe and Income Divergence over EU Regions (1995 - 2006) By Sunandan Ghosh; Gerrit Faber
  7. The Dynamic Effects of U.S. Monetary Policy on State Unemployment By Dimitris Korobilis; Michelle Gilmartin
  8. The Fight Against Geography: Malaria and Economic Development in Italian Regions By Marco Percoco
  9. Aktualisierung von Regionalindikatoren für die deutschen Arbeitsmarktregionen : Gutachten für die Gemeinschaftsaufgabe "Verbesserung der regionalen Wirtschaftsstruktur" im Auftrag des Ministeriums für Wissenschaft, Wirtschaft und Verkehr des Landes Schleswig-Holstein By Schwengler, Barbara; Hecht , Veronika; Haag, Günter; Sdogou, Ekaterini; Liedl, Philipp
  10. Robust Control and Hot Spots in Dynamic Spatially Interconnected Systems By William Brock; Anastasios Xepapadeas
  11. Inter-regional Wage Differentials with Individual Heterogeneity: Evidence from Brazil By Freguglia, Ricardo S.; Menezes, Naercio A.
  12. Overeducation across British regions By Pamela Lenton
  13. The effect of new business formation on regional development - Empirical evidence, interpretation, and avenues for further research By Michael Fritsch

  1. By: Badi H. Baltagi (Center for Policy Research, Maxwell School, Syracuse University, Syracuse, NY 13244-1020); Uwe Blien and Katja Wolf (Institute for Employment Research (IAB), D-90327 Nuremberg, Germany-0049-911-1793035 and Otto-Friedrich-University of Bamberg (Blien))
    Abstract: A wave curve is a decreasing function of wages on the regional unemployment rate. Most empirical studies on the wave curve ignore possible spatial interaction effects between the regions which are the primary units of research. This paper reconsiders the western German wage curve with a special focus on the geography of labour markets. Spillovers between regions are taken into account. The paper tests whether the unemployment rate in the larger surrounding region also affects wages. In addition, agglomeration effects and effects of local monopsony are assessed. The main data base is a random sample of 974,179 employees observed over the period 1980-2004 and covering 326 NUTS3 units (districts). This rich data set is used to estimate a dynamic wage curve according to the two-step approach of Bell et al. (2002). In the first step one controls for individual heterogeneity and in the second step one allows for spatial effects of unemployment across regions on wages. We check the sensitivity of this wage elasticity to various spatial weight matrices as well as allowing for the endogeneity of unemployment. We also estimate the wage elasticity for various population groups.
    Keywords: Seemingly unrelated regressions, panel data, spatial dependence, heterogeneity, forecasting.
    JEL: J30 C23 R10
    Date: 2010–09
  2. By: Dimitris Korobilis (Université Catholique de Louvain); Michelle Gilmartin (University of Strathclyde)
    Abstract: This paper considers the determinants of regional disparities in unemployment rates for the UK regions at NUTS-II level. We use a mixture panel data model to describe unemployment differentials between heterogeneous groups of regions. The results indicate the existence of two clusters of regions in the UK economy, characterised by high and low unemployment rates respectively. A major source of heterogeneity seems to be caused by the varying (between the two clusters) effect of the share of employment in the services sector, and we trace its origin to the fact that the “high unemployment” cluster is characterised by a higher degree of urbanization.
    Keywords: distribution dynamics, regional labour markets, unemployment differentials
    JEL: C23 J08 J64 R12 R23
    Date: 2011–02
  3. 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: 2011–01
  4. By: Block, Joern; Spiegel, Frank
    Abstract: Family firms are important not only for a region but for the economy as a whole. In particular, the long-term orientation and the local embeddedness of family firms suggest a positive effect on regional innovation activity. Yet, despite the widely acknowledged importance of family firms for the economy, little research exists on this issue. This paper analyses the effect of family firms on regional innovation. Using a dataset of 326 German regions, our regressions show that regions with a higher share of family firms also show higher levels of innovation activity, as measured by the number of successful patent applications. The implications of these findings for policy and research are discussed.
    Keywords: innovation; family firms; geography; Mittelstand; patents
    JEL: L26 O3
    Date: 2011–02–04
  5. By: Emanuele Felice (Departament d’Economia i d’Història Econòmica, Universitat Autònoma de Barcelona, Spain)
    Abstract: This paper presents value added estimates for the Italian regions, in benchmark years from 1891 until 1951, which are linked to those from official figures available from 1971 in order to offer a long-term picture. Sources and methodology are documented and discussed, whilst regional activity rates and productivity are also presented and compared. Thus some questions are briefly reconsidered: the origins and extent of the north-south divide, the role of migration and regional policy in shaping the pattern of regional inequality, the importance of social capital, and the positioning of Italy in the international debate on regional convergence, where it stands out for the long run persistence of its disparities.
    Keywords: Italy, regional growth, convergence, productivity
    JEL: N93 N94 O47 R11 Y10
    Date: 2011–01
  6. By: Sunandan Ghosh; Gerrit Faber
    Abstract: This paper tests the question whether the integration process in the EU has contributed to the often-observed growing dispersion of income over the regions of the EU, in the presence of convergence between the member states. We do this by introducing price convergence as an indicator of integration and controlling for the concentration of skilled labour and allowing for path dependency. Our main findings are in line with the expectations of the New Economic Geography School in that integration does contribute to the growing regional inequality in the EU. Price convergence is a significant explanatory variable even after the introduction of a time lag in the dependent variable
    Keywords: Economic integration, Regional inequality, European Union
    JEL: F11 F15 F22 R11
    Date: 2010–12
  7. By: Dimitris Korobilis (Université Catholique de Louvain); Michelle Gilmartin (University of Strathclyde)
    Abstract: This paper studies the transmission of monetary shocks to state unemployment rates, within a novel structural factor-augmented VAR framework with a timevarying propagation mechanism. We find evidence of large heterogeneity over time in the responses of state unemployment rates to monetary policy shocks, which do not necessarily comply with the response of the national unemployment rate. We also find evidence of heterogeneity over the spatial dimension, although geographical proximity seems to play an important role in the transmission of monetary shocks.
    Keywords: regional unemployment, structural VAR, factor model, monetary policy
    JEL: R15 C11 E52
    Date: 2011–02
  8. By: Marco Percoco (Department of Institutional Analysis and Public Management and CERTeT Università Bocconi)
    Abstract: Geography has long been considered as a fundamental prerequisite for economic development and growth. In recent years, a growing number of papers have considered the role of physical geography as a determinant of regional growth and development by considering it as a source of “intrinsic advantage”. Malaria is considered to be strictly related to poverty and its geographically-related origin is now widely recognized, i.e. it is endemic only in certain areas of the globe whose environmental and climatic characteristics are ideal for the proliferation of mosquitoes which are the vector for the transmission of the disease. The World Health Organization is currently setting a series of policies aiming to eradicate the disease from Africa, with the specific goals to preserve human lives and possibly to boost economic growth in those areas. Among the several malaria parasites, the worst, Plasmodium falciparum, has infested Italian regions for centuries until the complete eradication occurred in the period 1945-1950. In this paper I provide an empirical assessment of the economic outcomes of malaria eradication in Italian regions. By making use of both macroeconomic and microeconomic data, I found support to the hypothesis that malaria eradication boosts productivity growth and that in the long run it leads to an increase in human capital. In particular, I found that the presence of malaria reduced significantly regional growth over the period 1891-1961, while its eradication increased the years of schooling for both males and females respectively, although my evidence points at a larger support for a very long run impact of eradication actions through an intergenerational spillover effect.
    Keywords: Geography, Regional Growth, Malaria
    JEL: J10 N30 O10 R10
    Date: 2011–01
  9. By: Schwengler, Barbara (Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany]); Hecht , Veronika; Haag, Günter; Sdogou, Ekaterini; Liedl, Philipp
    Abstract: "The Joint Task 'Improvement of the Regional Economic Structure' has commis-sioned an expert opinion to the Institute for Employment Research in cooperation with the Steinbeis Transfer Centre Applied System Analysis (STASA), Stuttgart. This paper presents the results of this expert opinion which was financed by the Ministry of Science, Economic Affairs and Transport of the State of Schleswig-Holstein and was submitted in 2009. Since the last demarcation of structurally weak regions that are eligible for regional aid several indicators that describe the labour market and income situation in German labour market regions needed to be updated. The calculated indicators are the annual average of the unemployment rate for all unemployed, for female unemployed and for young unemployed under 25 years, the number of long-term unemployed, the employment level, the mean wages per employee and the gross wages for all 270 German labour market regions. These indicators were also entered into the regional database 'RegioDat' of the German Federal Ministry of Finance to help the federal government and the German states to evaluate the economic situation of the German labour market regions before the next demarcation of structurally weak regions that are eligible for regional aid in the year 2013." (Author's abstract, IAB-Doku) ((en))<br><br><b>Additional Information</b><ul><li><a href=''>Hier finden Sie den Kartenanhang zum IAB-Forschungsbericht 01/2011.</a></li></ul>
    Date: 2011–02–01
  10. By: William Brock (University of Wisconsin and Beijer Fellow); Anastasios Xepapadeas (Athens University of Economics and Beijer Fellow)
    Abstract: This paper develops linear quadratic robust control theory for a class of spatially invariant distributed control systems that appear in areas of economics such as New Economic Geography, management of ecological systems, optimal harvesting of spatially mobile species, and the like. Since this class of problems has an infinite dimensional state and control space it would appear analytically intractable. We show that by Fourier transforming the problem, the solution decomposes into a countable number of finite state space robust control problems each of which can be solved by standard methods. We use this convenient property to characterize “hot spots” which are points in the transformed space that correspond to “breakdown” points in conventional finite dimensional robust control, or where instabilities appear or where the value function loses concavity. We apply our methods to a spatial extension of a well known optimal fishing model.
    Keywords: Distributed Parameter Systems, Robust Control, Spatial Invariance, Hot Spot, Agglomeration
    JEL: C61 C65 Q22
    Date: 2010–12
  11. By: Freguglia, Ricardo S.; Menezes, Naercio A.
    Date: 2011–10
  12. By: Pamela Lenton (Department of Economics, The University of Sheffield)
    Abstract: This paper analyses levels of over-education and wage returns to education for males across eleven regions of the UK using Labour Force Survey data. Significant differences are found in the probability of being over-educated across regions; also, differences are found in the return to the ‘correct’ level of education in each region, in each case associated with flexibility of movement between and into particular regions, which determines the ease of job matching. Furthermore, evidence is found that, after controlling for the level of education acquired, there exists a premium to the ‘correct’ level of education, which varies across UK regions.
    Keywords: education, returns
    JEL: J24
    Date: 2011–01
  13. By: Michael Fritsch (School of Economics and Business Administration, Friedrich-Schiller-University Jena)
    Abstract: This paper reviews the current state of knowledge about the effect of new business formation on regional development. After a brief sketch of the origins of research on this issue, the main results of different lines of inquiry are discussed. Main issues are the development of start-up cohorts, the relative magnitude of direct and indirect effects, and results by type of entry and by industry, as well as differences in the effects that have been found for different types of regions. After interpreting the results based on a common framework, I put forward a number of important questions for further research and draw some conclusions for entrepreneurship policy.
    Keywords: Entrepreneurship, new business formation, employment, regional development
    JEL: L26 M13 O1 O18 R11
    Date: 2011–02–02

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