nep-geo New Economics Papers
on Economic Geography
Issue of 2011‒02‒26
fifteen papers chosen by
Vassilis Monastiriotis
London School of Economics

  1. Strategies for Underperforming Places By Paul Lawless; Henry G. Overman; Peter Tyler
  3. Regional Clusters of Innovative Activity in Europe: Are Social Capital and Geographical Proximity the Key Determinants? By Laura de Dominicis; Raymond J.G.M. Florax; Henri L.F. de Groot
  4. The Shape of the Income Distribution and Economic Growth: Evidence from Swedish Labor Market Regions By Rooth, Dan-Olof; Stenberg, Anders
  5. Spatial Asset Pricing: A First Step By Francois Ortalo-Magne; Andrea Prat
  6. Medida gradiente de mobilidade regional By Rodrigo Peñaloza; Herton Ellery Araújo
  7. Incentive Effects of Fiscal Equalization: The Case of France By Fischer, Justina AV; Thiessen, Ulrich
  8. When local interaction does not suffice: Sources of firm innovation in urban Norway By Rune Dahl Fitjar; Andrés Rodríguez-Pose
  9. Institutions and Entry: A Cross-Regional Analysis in Russia By Bruno, Randolph Luca; Bytchkova, Maria; Estrin, Saul
  10. Micro-Evidence on the Determinants of Innovation in The Netherlands: The Relative Importance of Absorptive Capacity and Agglomeration Externalities By Martijn J. Smit; Maria A. Abreu; Henri L.F. de Groot
  11. On the determinants of local tax rates: new evidence from Spain By Francisco J. Delgado; Santiago Lago-Peñas; Matías Mayor
  12. Spatial versus Social Mismatch: The Strength of Weak Ties By Zenou, Yves
  13. Social Networks and Interactions in Cities By Helsley, Robert W.; Zenou, Yves
  14. Relationship between Shopping Streets and Community Currency Circulation : A Case Study of the City of Musashino, Tokyo, Japan By Kurita, Ken-ichi; Miyazaki, Yoshihisa; Nishibe, Makoto
  15. Fiscal Federalism and Decentralization in Mongolia By Lkhagvadorj, Ariunaa

  1. By: Paul Lawless; Henry G. Overman; Peter Tyler
    Abstract: All governments are concerned with tackling the problems of areas that experience sustained decline and underperformance. In the UK, several factors have combined to raise profound questions about future government policy in this area. First, it is becoming increasingly clear that the recession has impacted on different places in different ways. Some places have emerged relatively unscathed. For other places, the impacts have been far more negative. Unfortunately, many of the places that have suffered most were already struggling and may also be the least well placed to recover. Second, the recession has had a negative impact on the government finances. The third significant factor is, of course, the change in government with the coalition placing increasing emphasis on decentralised decision making across a range of policy areas, including those of regeneration and local economic development. Against this background, the Department for Communities and Local Government and the Spatial Economics Research Centre (SERC) jointly organised a seminar to consider Strategies for Underperforming Places. The papers presented in this report were presented at that seminar. The authors all agree the need for open debate and the importance of research in to the causes of local decline and the impact of previous policy interventions. Only by increasing our knowledge and by building on what is known will we be able to formulate appropriate policy responses to the challenges raised by the recession and its impact on struggling places.
    Date: 2011–02
  2. 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
  3. By: Laura de Dominicis (European Commission, Seville); Raymond J.G.M. Florax (Purdue University, W. Lafayette, and VU University Amsterdam); Henri L.F. de Groot (VU University Amsterdam)
    Abstract: Finding proper policy instruments to promote productivity growth features prominently on the Lisbon agenda and is central in many national as well as European policy debates. In view of the increased mobility of high-skilled workers in Europe, ongoing globalization and increased interregional and international co-operation, location patterns of innovative activity may be subject to drastic changes. A proper understanding of location patterns of innovative outputs can enhance the effectiveness and efficiency of national and European innovation policies. Building on the literature on the knowledge production function the aim of this paper is to explain the observed differences in the production of innovative output across European regions. Our main research question is whether geographical proximity and social capital are important vehicles of knowledge transmission for the production of innovative output in Europe. Several other variables are used to control for structural differences across European regions. We find support for the hypothesis that both social capital and geographical proximity are important factors in explaining the differences in the production of innovative output across European regions.
    Keywords: innovation; knowledge production function; social capital; spatial econometrics; European regions
    JEL: C21 I23 O18 O31
    Date: 2011–01–13
  4. By: Rooth, Dan-Olof (Linneaus University); Stenberg, Anders (SOFI, Stockholm University)
    Abstract: We analyze the association between inequality and growth across 72 labor market regions in Sweden 1990-2006. Highly accurate measures of growth and inequality (gini, Q3, p9075, p5010) are derived from population register data. The regional set-up also reduces problems with omitted variable bias and endogeneity found in cross country comparisons since the regions within a country share the same redistributive policies and institutions. The findings suggest that inequality between the 90th and 75th percentiles enhances regional growth. This result no longer holds when we take into account changes in commuting patterns. Although only suggestive, the finding is interesting in that it is consistent with the hypothesis that inequality enhances growth by stimulating commuting incentives.
    Keywords: growth, income distribution, inequality, gini
    JEL: O4 D3 J6
    Date: 2011–02
  5. By: Francois Ortalo-Magne; Andrea Prat
    Abstract: People choose where to live and how much to invest in housing. Traditionally, the first decision has been the domain of spatial economics, while the second has been analyzed in finance. Spatial asset pricing is an attempt to combine equilibrium concepts from both disciplines. In the finance context, we show how spatial decisions can be framed as an expanded portfolio problem. Within spatial economics, we identify the consequences of hedging motives for location decisions. We characterize a number of observable deviations from standard predictions in finance (e.g. the definition of the relevant market portfolio for the pricing of risk includes homeownership rates) and in spatial economics (e.g. hedging considerations and the pricing of risk affect the geographic allocation of human capital).
    Date: 2010–04
  6. By: Rodrigo Peñaloza (Departamento de Economia (Department of Economics) Faculdade de Economia, Administração, Contabilidade e Ciência da Informação e Documentação (FACE) (Faculty of Economics, Administration, Accounting and Information Science) Universidade de Brasília); Herton Ellery Araújo (Instituto de Pesquisa Econômica e Aplicada (IPEA))
    Abstract: We propose a new measure of regional mobility: the gradient measure of mobility. Besides the extension, it also captures the overall intensity of migration and is comprised of the marginal impacts of each locality over the population distri- bution. We compare it with standard measures of mobility, such as the accounting measure and the Yasudas measure, and give some characterizations in terms of Hirschmann-Her…ndahl indexes.
    Keywords: Demography, measures of regional mobility.
    JEL: J10
    Date: 2011–01
  7. By: Fischer, Justina AV; Thiessen, Ulrich
    Abstract: This empirical study shows for 22 French regions between 2002 and 2008 that fiscal equalization does not appear to distort incentives for regional governments. We find a growth-enhancing impact of inter-governmental transfers on regional growth, with no major differences between donor and recipient regions. Only for the extremely poor recipient regions do we find an insignificant transfer effect. In addition, a high 'marginal tax on own tax revenues' appears to trigger income compensation efforts, yielding higher regional growth. These findings contradict previous empirical studies for federal countries that tend to find adverse incentive effects of fiscal equalization on regional governments and growth. Overall, our tentative explanation for our own contrasting results is that France’s system of transfers is relatively moderate with regard to both the volume and the 'marginal tax on regional tax revenues', and also that local governments in France have – in comparison with other industrial countries – relatively well established own revenues.
    Keywords: Fiscal equalization; inter-governmental transfers; French regions; decentralization
    JEL: E62 H7 R11
    Date: 2011–02–14
  8. By: Rune Dahl Fitjar (International Research Institute of Stavanger); Andrés Rodríguez-Pose (IMDEA Social Sciences Institute)
    Abstract: The geographical sources of innovation of firms have been hotly debated. While the traditional view is that physical proximity within city-regions is key for the innovative capacity of firms, the literature on 'global pipelines' has been stressing the importance of establishing communication channels to the outside world. This paper uses a specifically tailored survey of the level of innovation of 1604 firms of more than 10 employees located in the five largest Norwegian city-regions (Oslo, Bergen, Stavanger, Trondheim, and Kristiansand) in order to determine a) the geographical dimension of the sources of innovation and b) the factors behind the propensity to innovate in Norwegian firms. The results stress that while interaction with a multitude of partners within Norwegian city-regions or with other national partners has a negligible effect on firm innovation, those firms with a greater diversity of international partners tend to innovate more and introduce more radical innovations. The results also highlight that the roots of this greater innovative capacity lie in a combination of firm – size of firms, share of foreign ownership, and sector – and cultural – the level of open-mindedness of managers – characteristics.
    Keywords: Innovation; radical innovation; interaction; pipelines; partnerships; firms; city-regions; Norway
    Date: 2011–02–15
  9. By: Bruno, Randolph Luca (University of Birmingham); Bytchkova, Maria (London School of Economics); Estrin, Saul (London School of Economics)
    Abstract: We analyse a micro-panel data set to investigate the effect of regional institutional environment and economic factors on Russian new firm entry rates across time, industries and regions. The paper builds on novel databases and exploits inter-regional variation in a large number of institutional variables. We find entry rates across industries in Russia are not especially low by international standards and are correlated with entry rates in developed market economies, as well as with institutional environment and firm size. Furthermore, industries that, for scale or technological reasons, are characterised by higher entry rates experience lower entry within regions affected subject to political change. A higher level of democracy enhances entry rates for small sized firms but reduces them for medium or large ones.
    Keywords: entry rate, institutions, democracy
    JEL: L26 P31
    Date: 2011–02
  10. By: Martijn J. Smit (VU University Amsterdam); Maria A. Abreu (University of Groningen, University of Cambridge); Henri L.F. de Groot (VU University)
    Abstract: This paper employs firm-level data to analyze the relative importance of firm characteristics and agglomeration externalities in explaining variation in innovation rates across firms. More specifically, we combine micro-data and census data to estimate the probability that a firm will introduce a goods, service or process innovation. We consider internal firm-level characteristics as well as externalities, using information on the regional production structure to test for Marshall-Arrow-Romer, Porter and Jacobs effects. Our results show that most firm-specific variables are highly statistically significant, whereas agglomeration variables are only significant for a few specific sectors, and even then only for some types of innovation.
    Keywords: innovation; absorptive capacity; agglomeration externalities; Community Innovation Survey; micro-data; firm behavior
    JEL: L20 O30 R11
    Date: 2010–06–21
  11. By: Francisco J. Delgado (University of Oviedo); Santiago Lago-Peñas (REDE, IEB and University of Vigo); Matías Mayor (University of Oviedo)
    Abstract: This paper studies the determinants of local tax rates. For the two main local taxes in Spain - the property tax and the motor vehicle tax - we test the existence of tax mimicking, yardstick competition and political trends in a sample of 2,713 municipalities. Using different spatial models, the results support the hypothesis of tax mimicking, with coefficients over 0.40. We also show the relevance of political variables such as the ideology of the incumbents and political fragmentation. The fact that incumbents with weaker political support display stronger mimicking behaviour is interpreted as evidence in favour of yardstick competition. Finally, we find incumbents mimic neighbouring municipalities ruled by the same political party, confirming the political trends hypothesis.
    Keywords: Local taxation, tax mimicking, yardstick competition, political trends
    JEL: C31 H71 H77
    Date: 2011
  12. By: Zenou, Yves (Stockholm University)
    Abstract: The aim of this paper is to provide a new mechanism based on social interactions explaining why distance to jobs can have a negative impact on workers' labor-market outcomes, especially ethnic minorities. Building on Granovetter's idea that weak ties are superior to strong ties for providing support in getting a job, we develop a model in which workers who live far away from jobs tend to have less connections to weak ties. Because of the lack of good public transportation in the US, it is costly (both in terms of time and money) to commute to business centers to meet other types of people who can provide other sources of information about jobs. If distant minority workers mainly rely on their strong ties, who are more likely to be unemployed, there is then little chance of escaping unemployment. It is therefore the separation in both the social and physical space that prevents ethnic minorities from finding a job.
    Keywords: weak ties, labor market, social networks, land rent
    JEL: A14 J15 R14 Z13
    Date: 2011–02
  13. By: Helsley, Robert W. (University of California, Berkeley); Zenou, Yves (Stockholm University)
    Abstract: We examine how interaction choices depend on the interplay of social and physical distance, and show that agents who are more central in the social network, or are located closer to the geographic center of interaction, choose higher levels of interactions in equilibrium. As a result, the level of interactivity in the economy as a whole will rise with the density of links in the social network and with the degree to which agents are clustered in physical space. When agents can choose geographic locations, there is a tendency for those who are more central in the social network to locate closer to the interaction center, leading to a form of endogenous geographic separation based on social distance. Finally, we show that the market equilibrium is not optimal because of social externalities. We determine the value of the subsidy to interactions that could support the first-best allocation as an equilibrium and show that interaction effort and the incentives for clustering are higher under the subsidy program.
    Keywords: social networks, urban-land use, Bonacich centrality
    JEL: D85 R14 Z13
    Date: 2011–02
  14. By: Kurita, Ken-ichi; Miyazaki, Yoshihisa; Nishibe, Makoto
    Date: 2011–02
  15. By: Lkhagvadorj, Ariunaa
    Abstract: Fiscal federalism has been an important topic among public finance theorists in the last four decades. Developing and transition countries have developed a variety of forms of fiscal decentralization as a possible strategy to achieve effective and efficient governmental structures. A generalized principle of decentralization due to the country specific circumstances does not exist. Therefore, decentralization has taken place in different forms in various countries at different times, and even exactly the same extent of decentralization may have had different impacts under different conditions. As a former socialist country Mongolia has had a highly centralized governmental sector. The result of the analysis below revealed that the Mongolia has introduced a number of decentralization measures, which followed a top down approach and were slowly implemented without any integrated decentralization strategy in the last decade. As a result Mongolia became de-concentrated state with fiscal centralization. The revenue assignment is lacking a very important element, for instance significant revenue autonomy given to sub-national governments, which is vital for the efficient service delivery at the local level. According to the current assignments of the expenditure and revenue responsibilities most of the provinces are unable to provide a certain national standard of public goods supply. Hence, intergovernmental transfers from the central jurisdiction to the sub-national jurisdictions play an important role for the equalization of the vertical and horizontal imbalances in Mongolia. The critical problem associated with intergovernmental transfers is that there is not a stable, predictable and transparent system of transfer allocation. The amount of transfers to sub-national governments is determined largely by political decisions on ad hoc basis and disregards local differences in needs and fiscal capacity. Thus a fiscal equalization system based on the fiscal needs of the provinces should be implemented. The equalization transfers will at least partly offset the regional disparities in revenues and enable the sub-national governments to provide a national minimum standard of local public goods.
    Keywords: Fiscal Federalism; Decentralization; Revenue Autonomy; Expenditure Assignment; Intergovernmental transfers.
    JEL: H77
    Date: 2010–02

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