nep-geo New Economics Papers
on Economic Geography
Issue of 2011‒03‒05
nineteen papers chosen by
Vassilis Monastiriotis
London School of Economics

  1. Foreign Investments and Productivity Evidence from European Regions By Davide Castellani; Fabio Pieri
  2. Demand linkages and spatial agglomeration of Indian states By Andrzej Cieślik; Sadananda Prusty
  3. Spatial and non spatial approaches to agricultural convergence in Europe By Gutierrez, Luciano; Sassi, Maria
  4. Spatio-Temporal Dynamics in Swiss Regional Unemployment By Rolf Schenker; Martin Straub
  5. Intra-Regional Equalization & Growth in Russia By Jorge Martinez-Vazquez; Andrey Timofeev
  7. A multi-regional general equilibrium model to assess policy effects at regional level By Lovo, Stefania; Magnani, Riccardo; Perali, Federico
  8. A regional analysis of CAP expenditure in Austria By Strahl, Wibke; Dax, Thomas; Hovorka, Gerhard
  9. Decentralization and Regional Government Size: an Application to the Spanish Case By Patricio Perez; David Cantarero
  10. The Economics of Agricultural Land Use Dynamics in Coconut Plantations of Sri Lanka By Marawila, TD; Ancev, T; Odeh, I
  11. The Relationship between Location Choice and Earnings Inequality By Peter McHenry
  12. An empirical analysis of the determinants of the Rural Development policy spending for Human Capital By Materia, Valentina C.; Camaioni, Beatrice
  13. Houses and/or jobs: ownership and the labour market in Belgian districts By D. ISEBAERT; F. HEYLEN; C. SMOLDERS
  14. Mapping changes on agricultural and rural areas: an ex-post evaluation of the EU membership for Hungary By Monasterolo, Irene; Pagliacci, Francesco
  15. The Long and Winding Road to Local Fiscal Equity in the United States: A Fifty Year Retrospective By Jorge Martinez-Vazquez; Andrey Timofeev
  16. Repeated Commuting By Berliant, Marcus
  17. Migration, Skills and Productivity By Michael Landesmann; Robert Stehrer; Robert Hierländer; Peter Huber; Anna Iara; Klaus Nowotny; Mary O'Mahony; Fei Peng; Catherine Robinson
  18. Measuring the local economic integration of farm households: Findings from two case study areas By Roberts, Deborah; Majewski, Edward; Sulewski, Piotr
  19. For whose sake do couples relocate? Gender, career opportunities and couples’ internal migration in Sweden By Brandén, Maria; Ström, Sara

  1. By: Davide Castellani; Fabio Pieri
    Abstract: Differences in productivity across regions have been mainly attributed to agglomeration economies, technology and human capital, while almost no evidence has been provided on the role of internationalization. In this paper we build unique measures of outward and inward foreign direct investment (FDI) counts at the NUTS 2 level and we assess the relationship between regional productivity and foreign investments in Europe. Regions with larger outflows of foreign investments show higher productivity growth, but this correlation fades down with the number of investments and eventually becomes negative in regions with very high outward orientation. Inward investments are also positively associated with regional productivity growth, but only above a certain threshold. Results are robust to the introduction of a number of regional characteristics, to the control for endogeneity of foreign investments, and for spatial dependence.
    Keywords: Regional productivity, foreign investments, Europe, spatial econometric models, instrumental variables.
    JEL: C23 F23 O47 O52 R11
    Date: 2011–01–01
  2. By: Andrzej Cieślik (Faculty of Economic Sciences, University of Warsaw); Sadananda Prusty (Institute of Management Technology)
    Abstract: In this paper, we examine the spatial relationship between wages and consumer purchasing power across Indian states to see whether regional demand linkages contribute to spatial agglomeration. We estimate a variety of the market-potential functions derived from the Harris model as well as more recent models of the New Economic Geography. Besides market-potential, we consider housing stock, density of roadways, density of telecom, and dummies to capture cyclical fluctuations as parameters of consumer purchasing power and demand to explore the importance of scale economies and transport costs. The estimation results suggest that all the above factors influence demand linkages between states, which are strong and growing over the period from 1999-2000 to 2007-2008.
    Keywords: Spatial agglomeration, Scale economies, Wage differentials, Regional studies
    JEL: R12 F12 J31 P48
    Date: 2011
  3. By: Gutierrez, Luciano; Sassi, Maria
    Abstract: The paper starts from the critiques to the Barro-style methodology for convergence analysis with the aim of reviewing the econometric approaches for testing spatial effects in convergence process related to both cross sectional and panel data regressions, a framework that is applied to a sample of 80 regions of the EU-15 at NUTS-2 level over the time period from 1980 to 2007. The empirical analysis compares results from approaches and, at the same time, provides empirical evidence from techniques that are now widely recognised in the understanding of regional growth and the influence of space but never or rarely applied to the agricultural context. Results point out the complexity of the process of agricultural regional convergence in Europe that cannot be adequately captured by the non-spatial growth regression models that have dominated the research and policy debate in this field. Evidence for convergence and spatial dependence emerges especially when estimations refers to spatial panel models while the effects of spatial heterogeneity and the existence of convergence clubs come out from the geographically weighted regression approach. The paper represents a point of departure for further researches in this field whose most important directions are underlined.
    Keywords: Convergence, Spatial approaches, Non spatial approaches, Community/Rural/Urban Development, C21, C33, Q19.,
    Date: 2011–02–10
  4. By: Rolf Schenker (City of Zurich, Statistik, Switzerland); Martin Straub (KOF Swiss Economic Institute, ETH Zurich, Switzerland)
    Abstract: It is generally accepted that regional labor markets are characterized by strong interdependencies. However, only few studies include spatial elements to their estimations. Using the model framework proposed by Cliff and Ord (1973, 1981) and the estimation technique proposed by Kelejian and Prucha (1998), we estimate a spatial time series model for the Swiss cantonal unemployment rates on a quarterly level. Our model contains a spatial lag in the level and in the error term, as well as further exogenous explanatory variables. While both spatial lags turn out to be significant in our estimations, the dependency in the error term seems to be even stronger than the one in the level.
    Keywords: Regional Unemployment, Spatial Econometrics, Switzerland
    JEL: C31 C32 E24 R11
    Date: 2011–02
  5. By: Jorge Martinez-Vazquez (International Studies Program. Andrew Young School of Policy Studies, Georgia State University); Andrey Timofeev (International Studies Program. Andrew Young School of Policy Studies, Georgia State University)
    Abstract: Until 2009, the Russian economy had been enjoying above 5% annual growth since it hit bottom along with the oil prices in 1998. However, the dynamics of the economic recovery have been very uneven across Russian regions. Thus, the determinants of regional economic growth are likely to have a strong sub-national level component. In this paper we examine the potential role played by the fiscal relations between regional governments and their constituent localities. Our empirical results strongly suggest that intra-regional fiscal inequality across local governments and inter-jurisdictional equalization policies pursued by the regional governments have a substantial impact on regional growth. Specifically, we find the following policy tradeoff: one standard deviation higher level of regional equalization translates into half a standard deviation lower rate of regional growth. One question for future research is whether decentralization designs into a hierarchical system result in more local government equalization in comparison to other inter-governmental design, such as a bifurcated system, where the central government is in charge of local equalization.
    Date: 2010–05–01
  6. By: Fitriani, Rahma; Harris, Michael
    Abstract: The Jakarta Metropolitan area has experienced urban sprawl. Existing planning processes do not appear to manage sprawl effectively. The aim of this study is to empirically analyse the contribution of spatial externalities on sprawl, and its effect on proximate agricultural land and conservation areas. A residential location choice model incorporating externalities is constructed, and a Tobit panel data analysis is conducted using grid-based land use data. The analysis finds significant empirical evidence regarding the contribution of neighbourhood development externalities to sprawl. Implications for policy are discussed.
    Keywords: sprawl, Jakarta, urban development, spatial externalities, International Development,
    Date: 2011
  7. By: Lovo, Stefania; Magnani, Riccardo; Perali, Federico
    Abstract: This paper develops a multi-regional general equilibrium model (MEG-R) to compare the social desirability of the CAP reform in the three Italian macro-regions: North, Center and South. The model employs a mixed complementary framework that allows for the decision of not producing a particular crop in one or more regions and presents an attempt to model interregional trade flows. The model incorporates the links between production and consumption that characterize farm householdâs behavior and allows for heterogeneous household responses across regions. Results show a general tendency to reallocations from cereal crops to forage that appear more severe in the South. In this region, the reduction in crops cannot be translated into an effective expansion of fodder and could lead to the âdeactivationâ of the land.
    Keywords: Multi-regional general equilibrium model, farm households, interregional trade, Agricultural and Food Policy, C68, R13, Q18,
    Date: 2011–02–10
  8. By: Strahl, Wibke; Dax, Thomas; Hovorka, Gerhard
    Abstract: This paper reflects the demand for taking account of the territorial dimension in the application of Common Agricultural Policy (CAP) more comprehensively. While this has been addressed in rural development discourse to a wide extent over the last two decades and consensus for regionalized strategies is emerging, programme evaluation is in general still limited to the analysis of policy interventions at the national level. This implies that conclusions on the territorial effects of CAP are largely missing.Therefore the intention of this paper is to provide a regional analysis of CAP expenditures for pillar 1 and pillar 2, and to demonstrate and assess their actual territorial impacts, represented on the basis of the NUTS 3 region âObersteiermark Westâ: The territorial analysis presented is an example to reduce this gap (national vs territorial) in the evaluation of CAP.
    Keywords: CAP expenditure, regional analysis, territorial effectiveness, Agricultural and Food Policy, Q18,
    Date: 2011–02–10
  9. By: Patricio Perez (University of Cantabria); David Cantarero (University of Cantabria)
    Abstract: This paper studies the impact of decentralization on the size of regional governments in Spain controlling for economies of scale, interregional heterogeneity and institutional framework, and successfully tests some implications of the model. Firstly, it supports the classic public goods theory of a trade-off-between the economic benefits of size and the costs of heterogeneity. Secondly, it rejects the “Leviathan” hypothesis because of vertical power imbalance and lack of fiscal competition among regions. Thirdly, the paper argues that government size is mediated by financial resources obtained through intergovernmental grants, consistent with welfare economics and positive economic politics.
    Keywords: government size, fiscal decentralization, leviathan hypothesis, vertical imbalances, flypaper effect.
    Date: 2010–11–01
  10. By: Marawila, TD; Ancev, T; Odeh, I
    Abstract: In this study a spatially explicit economic analysis was employed to determine the land use change in a traditional coconut growing district of Sri Lanka. From a theoretical model of land use, an econometric framework was developed to incorporate spatial and individual effects that would affect the land use decision. Markovian transition probabilities derived from the econometric analysis and spatial analysis was used to predict the land use change over the next 30 years. The results revealed that the fragmentation and conversion of coconut lands to urban continue in the areas close to the urban centre and also with less productive lands. Spatial analysis provides further evidence of the positive trend of conversion of coconut lands to urban uses close to the urban areas.
    Keywords: Resource /Energy Economics and Policy,
    Date: 2011
  11. By: Peter McHenry (Department of Economics, College of William and Mary)
    Abstract: This paper provides new empirical evidence about how workers’ locations affect measurements of earnings inequality (and their changes over time) in the United States. Part of the inequality observed in any given U.S. sample is due to the fact that workers with different skills (and therefore earnings) are not distributed symmetrically across locations that are more and less productive (and therefore pay higher and lower wages). In particular, I estimate that a significant and rising proportion of the college wage premium is due to college graduates living in and moving toward higher-paying locations than high school graduates. Furthermore, I assess the impact of location on real wage inequality (adjusting for local costs of living). The higher wages that college graduates enjoy as a result of their location choices are mostly counterbalanced by higher costs of living. From this, I infer that college graduates choose to live in more economically productive labor markets than do workers with less education, but college graduates are not necessarily more capable of exploiting locational wage differences for their own advantage.
    Keywords: Earnings inequality, Migration, Regional labor markets
    JEL: J31 R23 J61
    Date: 2011–02–21
  12. By: Materia, Valentina C.; Camaioni, Beatrice
    Abstract: The aim of the paper is twofold: to present a preliminary analysis of the distribution of the Rural Development (RD) expenditure for specific measures related to human capital across EU and to investigate which factors may explain the variation of intensity of spending between the regions. In particular, a descriptive analysis of the budget and of the expenditure for EU 27 will be presented. A linear regression model (OLS) is also presented in order to verify which factors weigh more in determining the spending decisions for the European regions. The analysis is carried out taking into account the EAFRD expenditures for the measures related to human capital for the period 2007-2008 at NUTS2 level.
    Keywords: Rural Development, Human Capital, distribution of the Expenditure, Agricultural and Food Policy, Q18,
    Date: 2011–02–10
    Abstract: In a number of papers A.J. Oswald (1996, 1997) argues that high rates of home ownership may imply inferior labour market outcomes. This paper tests the Oswald hypothesis in a panel of 42 Belgian districts since the 1970s. The use of data going back to 1970 allows us to embed the Oswald hypothesis in a broader model including other key determinants of employment like labour costs and productivity, the skill level of the population, and demography. Considering that ownership may be endogenous to (shocks in) employment, we use IV estimation methods. Overall, we find evidence in favour of the Oswald hypothesis. We observe that a 1 percentage point rise in the rate of home ownership in a district implies a statistically significant fall in the employment rate by about 0.3 percentage points. Our results underscore the importance of including other determinants of employment, of controlling for unobserved fixed regional and time effects, and of appropriately dealing with endogeneity. Disregarding these issues, as is often done in the macro labour literature, may imply very different estimation results. Additional estimation reveals that the size of the Oswald effect falls in the fraction of high skilled in a district.
    Keywords: employment, home ownership, Oswald hypothesis, Belgian regions, panel data
    JEL: E24 J61 J64 R23
    Date: 2010–12
  14. By: Monasterolo, Irene; Pagliacci, Francesco
    Abstract: Several progresses have been made in evaluating the development policies for rural areas in the last years; many indicators1 have been set for assessing the effectiveness of Common Agricultural Policy (CAP) and Rural Development Policies (RDPs) and their role on the convergence process of the EU members, but a shared definition of rurality is still missing. The results obtained at the level of growth and development by the most lagging behind areas, are far from being satisfactory (Brasili, 2005). The evaluation of the policies and programmes introduced evidenced lack of institutional planning and implementing abilities, and an insufficient targeting of policies and payments (Mantino, 2010). The experience of the 10 New Member States (NMSs)2 showed how the current CAP and Cohesion policy, designed for the EU-15 (Csaki et al. 2010), arenât enough for addressing the regional specificities, hindering a process of development which is already weakened by the effects of the unfinished transition. This paper aims at offering a methodological contribution for evaluating the EU membership, with particular attention to the CAP, in Hungary. We chose this Country among the 10 NMSs because of the relevance (96%) of the rural areas on the total land3, and given the historical socio-economic role played by agriculture. The authors believe that more targeted â and therefore efficient â policies for agricultural and rural areas require a deeper knowledge of their structural and dynamic characteristics. Therefore, in order to identify the changes occurred before (2003) and after (2007) the EU membership on agricultural and rural areas, we use the following multivariate statistics methodologies: Principal Components Analysis, applied to the set of 42 variables, and Cluster Analysis on the results obtained by the Principal Components Analysis. Then, we offer a preliminary evaluation of the distribution of Single Area Payment Scheme (SAPS)4, using the information on the applications provided at the County level by the Hungarian Paying Agency to show correlations with the leading factors.
    Keywords: Agricultural and rural development policy evaluation, rural areas, policy targeting, EU enlargement, Agricultural and Food Policy, O18, P25, R58,
    Date: 2011–02–10
  15. By: Jorge Martinez-Vazquez (International Studies Program. Andrew Young School of Policy Studies, Georgia State University); Andrey Timofeev (International Studies Program. Andrew Young School of Policy Studies, Georgia State University)
    Abstract: Outside the United States, fiscal equity is a common explicit objective for intergovernmental transfers at the central and regional levels, with transfers often having specific equalization targets. In contrast, the United States does not have a comprehensive federal transfer scheme for explicit fiscal equalization but rather employs an array of categorical and block grants, some of which are formula-based while others are project-driven. However, the allocation of many of these grants has equalization effects resulting in the narrowing of fiscal disparities among jurisdictions. Indeed, almost half of federal grants in the United States are allocated to healthcare and another quarter to income security programs. In addition, the largest category of state grants is allocated to school districts using formulae similar to those used in other countries for fiscal equalization by the central government, including the measurement of fiscal capacity and expenditure needs. Few studies have attempted to quantify the extent of equalization achieved with federal and state grants in a manner that would allow comparisons across states and over time. While recently several important studies have been published on fiscal inequities between and within states (e.g., Murray et al., AER 1998), their focus has been narrowed to school districts. In this study we set out to take this literature further by measuring the extent of equalization across local governments in the United States that is implicit in the federal grants system and more explicit in the grants implemented by the individual states. Rather than focusing on specific types of local services, we look at the evolution of per capita resources available to all types of local governments combined. The extent of equalization is measured by the ratio of inequality indices before and after the allocation of grants, following the methodology used in Martinez-Vazquez and Timofeev (JCE 2008). We find that, on average, state grants tend to considerably reduce the within-state inequality but tend to slightly increase the between-state inequality. States showing more equalization are those with less socio-political fractionalization, higher income inequality, less decentralization of revenue, and court-ordered reforms of school financing. The equalizing impact of direct federal grants to local governments has fluctuated over time but all in all it has been much smaller than that of the state grants. Overall, federal grants tend to slightly reduce the between-state inequality but slightly increase the within-state inequality. Because the within-state disparities in own-source revenues have become dominant, the overall level of inequality across local jurisdictions has tended to increase with the allocation of federal grants.
    Date: 2010–09–01
  16. By: Berliant, Marcus
    Abstract: We examine commuting in a game-theoretic setting with a continuum of commuters. Commuters' home and work locations can be heterogeneous. The exogenous transport network is arbitrary. Traffic speed is determined by link capacity and by local congestion at a time and place along a link, where local congestion at a time and place is endogenous. After formulating a static model, where consumers choose only routes to work, and a dynamic model, where they also choose departure times, we describe and examine existence of Nash equilibrium in both models and show that they differ, so the static model is not a steady state representation of the dynamic model. Then it is shown via the folk theorem that for sufficiently large discount factors the repeated dynamic model has as equilibrium any strategy that is achievable in the one shot game with choice of departure times, including the efficient ones. A similar result holds for the static model. Our results pose a challenge to congestion pricing. Finally, we examine evidence from St. Louis to determine what equilibrium strategies are actually played in the repeated commuting game.
    Keywords: commuting; folk theorem
    JEL: R41
    Date: 2011–02–18
  17. By: Michael Landesmann (The Vienna Institute for International Economic Studies, wiiw); Robert Stehrer (The Vienna Institute for International Economic Studies, wiiw); Robert Hierländer; Peter Huber; Anna Iara; Klaus Nowotny; Mary O'Mahony; Fei Peng; Catherine Robinson
    Abstract: The literature on international migration has repeatedly emphasized that the extent and structure of migration has an important impact on the competitiveness of regions and countries. This report provides an overview of the extent and the potential effects of high-skill migration to the EU27. It shows how many high-skilled migrants live in the EU, where these migrants come from, and how the European Union is positioned in the international competition for talent. Second, we examine how high-skilled migrants fare in European labour markets. Finally we address the issue of the effects of high-skill migration on multifactor productivity, gross value added and GDP per capita growth as well as patenting activities at the sectoral and regional levels. We find that - despite substantial heterogeneity among individual EU countries - high-skilled foreign-born are an important source for high-skilled labour in the EU27. There was some evidence that - on average - EU OECD economies (EU) had a lower share of highly qualified migrants than the (arithmetic) average of the (high migration) non-EU OECD economies. However, our results also suggest that this increasing selectivity of immigration regimes is countered by a relatively low qualification structure of short-term migrants in the EU. A second important policy relevant finding of this study is that high-skilled migrants in the EU face a number of challenges when entering the European labour market, that make them distinct from other migrant groups such as less skilled migrants. In particular the high-skilled migrants - in contrast to less skilled migrants - have lower labour market participation rates, higher unemployment rates and lower employment rates than comparable natives and face substantially higher risks of being employed in jobs that do not fit their skill structure. Our analysis regarding the impact of migration and of high-skilled migration in particular on sectoral productivity and gross value added (levels and growth) yielded a number of interesting results though still being preliminary. Particularly interesting was the difference of the impact of the share of migrants in levels and growth specifications, as well as the importance of a break-down by different groups of migrants (from EU and RoW). There was also a relatively robust result of a positive impact of the share of high-skill migrants and of an interactive effect of high-skill migrant share and ICT technology. As regards the analysis of migrants and regional growth and regional technological development (proxied by patents per capita) we found a positive relationship between the share of high-skilled employed persons and of high-skilled migrants and the growth rate of regional GDP per capita.
    Keywords: migration patterns, high-skill migration, job mismatch, productivity effects
    JEL: J61 I21 J11
    Date: 2010–11
  18. By: Roberts, Deborah; Majewski, Edward; Sulewski, Piotr
    Abstract: Despite the emphasis given in EU agricultural policy to the local economic benefits of a maintaining a strong agricultural sector, relatively little research has focussed on the contribution farm households make to their localities. The lack of understanding is particularly acute given ongoing changes in the agri-food chain and changes in farm structures. The paper presents findings from an analysis of the direct transactions associated with a sample of farm households drawn from two European case study areas â Podlaskie, Poland and North East Scotland, UK. The results confirm that the concept of âlocalâ in relation to farm household transactions depends on the economic geography of the area under analysis. With the exception of off-farm work, farm households within North East Scotland study have more distant and spatially-concentrated transactions due to the consolidation of upstream and downstream agri-businesses in the region. In contrast, transactions in Podlaskie take place far closer to the holding and are more spatially dispersed. Farm size does not systematically influence input purchasing and output sales patterns in either area but farmer attachment and supply-side factors are shown to be significant influences on behaviour.
    Keywords: local, spatial concentration, farm households, Agricultural and Food Policy, R12, Q12, Q18,
    Date: 2011–02–10
  19. By: Brandén, Maria (Department of Sociology, Stockholm University); Ström, Sara (Department of Sociology, Stockholm University)
    Abstract: The aim with this study is to examine how career possibilities in the man’s and the woman’s occupations – in the country as a whole, as well as in the region where the couple resides – affect heterosexual couples’ regional mobility. The context is Sweden –a country with a strong dual earner norm combined with a very sex segregated labor market. In the analyses we perform logistic regressions on Swedish register data, 1998–2007. We study how four dimensions of career possibilities affect couples’ geographical mobility and are interested in if their effect varies by gender. The dimensions are geographical wage differences, current career, occupational level and wage compression in occupations. In summary, our findings indicate that male and female career opportunities affect the couple in different ways when one moves beyond focusing on the level of their occupations. In particular the effect from wage compression in occupations seems to be dependent on gender, with a clear effect for men and no effect for women. Even when including measures of career opportunities within professions, there exist some non-egalitarian patterns in whose career couples adjust to. It hence seems as if couples adapt somewhat more to the man's career possibilities than the woman’s, even when we adjust for the underlying gender differences in career possi-bilities.
    Keywords: Regional mobility; internal migration; sex segregation; career; gender
    JEL: J16 R23
    Date: 2011–02–07

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