nep-geo New Economics Papers
on Economic Geography
Issue of 2011‒05‒14
fifteen papers chosen by
Vassilis Monastiriotis
London School of Economics

  1. Immigration and Innovation in European Regions By Ozgen, Ceren; Nijkamp, Peter; Poot, Jacques
  2. The price of decentralisation. By Norman, Eva Benedicte Danielsen
  3. Does Globalization affect Regional Growth? Evidence for NUTS-2 Regions in EU-27 By Wolfgang Polasek; Richard Sellner
  4. Geographical economics : a historical perspective By THISSE, Jean - François
  5. What drives economic specialization in Italian Regions? By Eleonora Cutrini, Enzo Valentini
  6. A Spatial Cost of Living Index for Colombia using a Microeconomic Approach and Censored Data By Atuesta, Laura; Paredes, Araya
  7. MCMC Estimation of Extended Hodrick-Prescott (HP) Filtering Models By Wolfgang Polasek
  8. The Turkish Wage Curve : Evidence from the Household Labor Force Survey (Türkiye’de Ücret Egrisi: Hanehalki Isgücü Anketi’nden Bulgular) By Badi H. Baltagi; Yusuf Soner Baskaya; Timur Hulagu
  9. Discordant city employment cycles By Owyang, Michael T.; Piger, Jeremy; Wall, Howard J.
  10. Beyond Identities: Support for Decentralisation Across Regions in Spain By Cesena , Marc Guinjoa; Casarramona , Toni Rodon
  11. Models of Spatial Competition: a Critical Review By Ricardo Biscaia; Isabel Mota
  12. Agglomeration, tax competition and local public goods supply. By Norman, Eva Benedicte Danielsen; Norman, Victor Danielsen
  13. Local Universities as Engines for Innovation and Regional Development in Southern Economies with Reference to MOROCCO By Driouchi, Ahmed; Zouag, Nada
  14. Moving to Segregation: Evidence from 8 Italian cities By Tito Boeri; Marta De Philippis; Eleonora Patacchini; Michele Pellizzari
  15. To assemble to resemble? A study of tax disparities among French municipalities By Marie-Laure Breuille; Pascale Duran-Vigneron; Anne-Laure Samson

  1. By: Ozgen, Ceren (VU University Amsterdam); Nijkamp, Peter (VU University Amsterdam); Poot, Jacques (University of Waikato)
    Abstract: The concentration of people with diverse socio-cultural backgrounds in particular geographic areas may boost the creation of new ideas, knowledge spillovers, entrepreneurship, and economic growth. In this paper we measure the impact of the size, skills, and diversity of immigration on the innovativeness of host regions. For this purpose we construct a panel of data on 170 regions in Europe (NUTS 2 level) for the periods 1991-1995 and 2001-2005. Innovation outcomes are measured by means of the number of patent applications per million inhabitants. Given the geographical concentration and subsequent diffusion of innovation activity, and the spatial selectivity of immigrants' location choices, we take account of spatial dependence and of the endogeneity of immigrant settlement in our econometric modelling. We use the location of McDonald's restaurants as a novel instrument for immigration. The results confirm that innovation is clearly a function of regional accessibility, industrial structure, human capital, and GDP growth. In addition, patent applications are positively affected by the diversity of the immigrant community beyond a critical minimum level. An increase in the fractionalization index by 0.1 from the regional mean of 0.5 increases patent applications per million inhabitants by about 0.2 percent. Moreover, the average skill level of immigrants (proxied by global regions of origin) also affects patent applications. In contrast, an increasing share of foreigners in the population does not conclusively impact on patent applications. Therefore, a distinct composition of immigrants from different backgrounds is a more important driving force for innovation than the sheer size of the immigrant population in a certain locality.
    Keywords: innovation, economic growth, cultural diversity, immigration, spatial autocorrelation
    JEL: J61 O31 R23
    Date: 2011–04
  2. By: Norman, Eva Benedicte Danielsen (Samfunns- og Nærlingslivsforskning)
    Abstract: This paper develops a model for analysing problems related to centralisation and decentralisation. The model is of the new economic geography type, in which there are agglomeration gains in cities but not in rural areas. These gains are counteracted by residential preferences. We show that, even though people have preferences for rural living, an unregulated market economy gives too little centralisation. This result holds even when city governments actively pursue policies to attract economic activities in order to make their city bigger. When allowing for cities of unequal size, a likely outcome is that big cities and rural areas will be overpopulated whereas smaller cities will be too few and too small.
    Keywords: Number of cities; size of cities; external economies; local public inputs; regional competition; agglomeration; welfare.
    JEL: H32 H41 R12 R13 R50
    Date: 2010–08–17
  3. By: Wolfgang Polasek (Institute for Advanced Studies, Austria; The Rimini Centre for Economic Analysis (RCEA), Italy); Richard Sellner (Institute for Advanced Studies, Austria)
    Abstract: We analyze the influence of newly constructed globalization measures on regional growth for the EU-27 countries between 2001 and 2006. The spatial Chow-Lin procedure, a method constructed by the authors, was used to construct on a NUTS-2 level a complete regional data for exports, imports and FDI inward stocks, which serve as indicators for the in uence of globalization, integration and technology transfers on European regions. The results suggest that most regions have significantly benefited from globalization measured by increasing trade openness and FDI. In a non-linear growth convergence model the growth elasticities for globalization and technology transfers decrease with increasing GDP per capita. Furthermore, the estimated elasticity for FDI decreases when the model includes a higher human capital premium for CEE countries and a small significant growth enhancing effect accrues from the structural funds expenditures in the EU.
    Keywords: Regional Globalization Measures, EU Integration (Structural Funds), Regional Growth Convergence Models, Foreign Direct Investment (FDI)
    JEL: C11 C15 C51 R12
    Date: 2011–05
  4. By: THISSE, Jean - François (Université catholique de Louvain, CORE, B-1348 Louvain-la-Neuve, Belgium; Paris School of Economics and CEPR)
    Abstract: This paper provides a bird-eye overview of the history of spatial economic theory. It is organized around three main ideas (and authors): (i) land use and urban economics (Thünen), (ii) the nature of competition across space (Hotelling), and (iii) new economic geography and the emergence of economic agglomerations (Krugman).
    Date: 2011–02–01
  5. By: Eleonora Cutrini, Enzo Valentini (University of Macerata)
    Abstract: <div style="text-align: justify;">It is well-known that Italy has two distinguishing characteristics closely intertwined with each other and unusual for an advanced country: a persisting specialization in traditional industries and deep internal disparities. The Italian "anomaly" is rooted in the predominance of clusters of small firms producing and exporting low-skilled labour-intensive goods. Some authors have suggested that marked regional variations in manufacturing structures underpin Italy’s perpetual North-South divide, with northern regions more oriented to capital (and knowledge) intensive industries than the rest of the country. Whatever the remote causes of the Italian "anomaly" may be, we provide evidence of a new tendency whereby capital- and knowledge intensive regional structural change has occurred. The literature to date may provide some descriptive and indirect evidence on the dynamics of regional specialization in high-tech industries during the past decades, but previous studies have not addressed the issue of what determines such specialization. The aim of the article is to fill this gap. Our main research question can be summarized as follows: What are the structural characteristics that may explain the regional high-tech share in manufacturing? The methodology is based on a panel analysis (GLS with dummies to account for regional fixed effects) over the period 2004-2007. We control for panel level heteroskedasticity, autocorrelation and endogeneity. The results suggest that various factors such as labour force composition, firms borrowing capacity, accessibility, R&D, private and public expenditure and a good cultural environment significantly and positively influence regional high-tech specialization. We also find that a high prevalence of industrial districts may lock-in regional structures away from capital-intensive and high-tech manufacturing activities.</div>
    Keywords: manufacturing structure,GLS panel analysis,High-tech specialization, Italy
    JEL: C33 O18 R11
    Date: 2011–05
  6. By: Atuesta, Laura; Paredes, Araya
    Abstract: This paper describes a methodology to calculate a spatial cost of living index using Colombian data for 2006 that takes into consideration the microeconomic behavior of households. Using the Almost Ideal Demand System and recovering the expenditure functions for the 23 main Colombian cities, the index proposed is compared to the traditional methodologies used to calculate the regional basket of goods in the country and to an alternative methodology proposed by Romero (2005). This comparison suggests that when the substitution effects are not considered, and the same basket of goods is evaluated in every city, the index is biased, and this bias increases when the diference between cities increases. For reducing the bias, we use a microeconomic approach that keeps the households' level of utility constant and allows substitution among diferent baskets of goods. According to our calculations, Bogota is still the most expensive city in the country followed by Armenia, Cali, Bucaramanga and Ibague.
    Keywords: Spatial Price Index; Almost Ideal Demand System
    JEL: D12 C34 C24
    Date: 2011–04–29
  7. By: Wolfgang Polasek (Institute for Advanced Studies, Austria; University of Porto, Portugal; The Rimini Centre for Economic Analysis (RCEA), Italy)
    Abstract: The Hodrick-Prescott (HP) method was originally developed to smooth time series, i.e. to get a smooth (long-term) component. We show that the HP smoother can be viewed as a Bayesian linear model with a strong prior for the smoothness component. Extending this Bayesian approach in a linear model set-up is possible by a conjugate and a non-conjugate model using MCMC. The Bayesian HP smoothing model is also extended to a spatial smoothing model. We have to define spatial neighbors for each observation and we can use in a similar way a smoothness prior as for the HP filter in time series. The new smoothing approaches are applied to the (textbook) airline passenger data for time series and to the problem of smoothing spatial regional data. This new approach can be used for a new class of model-based smoothers for time series and spatial models.
    Keywords: Hodrick-Prescott (HP) smoothers, Spatial econometrics, MCMC estimation, Airline passenger time series, Spatial smoothing of regional data, NUTS: nomenclature of territorial units for statistics
    JEL: C11 C15 C52 E17 R12
    Date: 2011–05
  8. By: Badi H. Baltagi; Yusuf Soner Baskaya; Timur Hulagu
    Abstract: This paper examines the Turkish wage curve using individual data from the Household Labor Force Survey (HLFS) including 26 NUTS-2 regions over the period 2005 - 2008. When the local unemployment rate is treated as predetermined, there is evidence in favor of the wage curve only for younger and female workers. However, if the lagged unemployment rate is used as an instrument for current unemployment rate, we find an unemployment elasticity of -0.099. We also find a higher elasticity for younger, less educated, low experienced workers than for older, more educated and more experienced workers. Another important finding is that the wages of females in Turkey are significantly more responsive to local unemployment rates than their male counterparts.
    Keywords: Wage Curve, Fixed Effects, Regional Labor Markets, Two-Stage Least Squares
    JEL: J30 J60
    Date: 2011
  9. By: Owyang, Michael T.; Piger, Jeremy; Wall, Howard J.
    Abstract: This paper estimates city-level employment cycles for 58 large U.S. cities and documents the substantial cross-city variation in the timing, lengths, and frequencies of their employment contractions. It also shows how the spread of city-level contractions associated with U.S. recessions has tended to follow recession-specific geographic patterns. In addition, cities within the same state or region have tended to have similar employment cycles. We find no evidence, that similarities in employment cycles are related to similarities in industry mix, although cities with more-similar high school attainment and mean establishment size have tended to have more-similar employment cycles.
    Keywords: City Employment Cycles
    JEL: E32 R12
    Date: 2010–08–12
  10. By: Cesena , Marc Guinjoa; Casarramona , Toni Rodon
    Abstract: After thirty years of the Spanish territorial model being implemented, an important number of citizens in different regions are supporting higher levels of self-government. This article analyses the causal mechanisms put forward by the literature on territorial decentralisation to explain this phenomenon. The Spanish case is employed to quantitatively test the various explanations regarding support for decentralisation. Using a linear hierarchical model we show that, even in those regions without a different sub-national identity, citizens’ evaluation of the regional governments’ public policies is crucial in explaining support for a stronger regional government. In analysing political attitudes towards decentralisation, we highlight the importance of party competition as a crucial determinant, as well as the necessity to consider decentralisation as an endogenous process, in which parties and citizens interact and affect the final territorial model.
    Keywords: decentralisation; hierarchical model; national identification; autonomous community
    JEL: H7
    Date: 2011–03
  11. By: Ricardo Biscaia (CIPES and Faculdade de Economia, Universidade do Porto); Isabel Mota (CEF.UP and Faculdade de Economia, Universidade do Porto)
    Abstract: This critical review focuses on the development of spatial competition models in which the location choice by firms plays a major role. Therefore, after a brief review of the roots of spatial competition modeling, this paper intends to offer a critical analysis over its recent developments. The starting point is the recognition of the increased importance of this topic through the quantification of the research in this field by using some bibliometric tools. After that, this study proceeds by identifying the main research paths within spatial competition modeling. Specifically, the type of strategy (Bertrand vs. Cournot competition) and its implications over location equilibria are discussed. Additionally, it is presented a comparison of the effects on the location equilibria of the most typical assumptions in literature, that respect to the market (linear vs. circular), production costs, transportation costs, as well as the number of firms. Finally, the type of information (complete vs. incomplete) and its effects over the equilibria are also discussed.
    Keywords: spatial competition, review, Hotelling, game theory
    JEL: L13 R10 D82
    Date: 2011–04
  12. By: Norman, Eva Benedicte Danielsen (Samfunns- og Næringslivsforskning); Norman, Victor Danielsen (Dept. of Economics, Norwegian School of Economics and Business Administration)
    Abstract: In this paper we develop a framework for studying tax competition and local public goods supply in a setting where real and fiscal externalities interact with local democracy. We use the framework (a) to analyse if there is any reason to believe that local autonomy generally will give a tax race to the bottom (there is not), and (b) to look more closely at possible sources of oversupply or undersupply of publicly provided goods in a setting where local democracies compete for people. We identify two potential sources – the relationship between individual mobility and willingness to pay for publicly provided goods, and the mobility distribution of individuals (i.e. the distribution of individuals over residential preferences). The two could reinforce each other in a local democracy if the majority of the residents in a community are relatively mobile (the “American” case), while they would pull in opposite directions if the majority of residents are relatively immobile (the “European” case).
    Keywords: Tax competition; local public goods; agglomeration; migration; regional economic policy
    JEL: F12 H21 H73 J61
    Date: 2010–08–17
  13. By: Driouchi, Ahmed; Zouag, Nada
    Abstract: Abstract: The objective of this paper is to show that universities can be engines for local development in Southern economies. Previous contributions to the literature on this subject have already shown the positive effects of regional sources of tacit knowledge on local development. Using data on developed, developing and emerging countries, regression analysis is pursued with the available data. The attained results show that developing economies do have room for local development as this can be further provided by regional universities and schools. These potential gains have been expressed to be higher for developing and emerging countries. These results imply that developing and emerging countries can enhance their local and overall development through the promotion of local universities and schools but these sources of skills and knowledge need to be tied with the local needs of the population as in developed countries. The case of Morocco illustrates the potential and positive effects of regional universities on local development. The transmission channel includes encouragement of skills, access to patents and intellectual property rights protection besides enterprise creation and implementation. These trends are likely to be accelerated within the regionalization process and the role of regional knowledge centers.
    Keywords: universities-innovations-local development-Southern countries-Morocco
    JEL: R10 O18 O31
    Date: 2011–04–29
  14. By: Tito Boeri; Marta De Philippis; Eleonora Patacchini; Michele Pellizzari
    Abstract: We use a new dataset and a novel identification strategy to analyze the effects on labor market outcomes of residential segregation of migrants in 8 Italian cities. Our data are representative of the population of both legal and illegal migrants, allow us to measure segregation at the very local level (the block) and include measures of housing prices, commuting costs and migrants’ linguistic ability. We find evidence that migrants who reside in areas with a high concentration of non-Italians are less likely to be employed compared to similar migrants who reside in less segregated areas. In our preferred specification, a 10 percentage points increase in residential segregation reduces the probability of being employed by 7 percentage points or about 8% over the average. Additionally, we also show that this effect emerges only above a critical threshold of 15-20% of migrants over the total local population, below which there is no statistically detectable effect. Contrary to common wisdom, in our data migrants seem to be positively selected into segregated areas. A simple matching model with heterogeneous workers and endogenous sorting into heterogeneous locations rationalizes our findings and is supported by additional empirical results.
    Date: 2011
  15. By: Marie-Laure Breuille (INRA, UMR1041 CESAER); Pascale Duran-Vigneron (Department of Economics, University of Exeter); Anne-Laure Samson (LEDA-LEGOS, University Paris Dauphine)
    Abstract: The purpose of this paper is to analyze the effect of inter-municipal cooperation on local taxation. Municipalities that join/create an inter-municipal jurisdiction choose between three tax regimes, which may induce both horizontal and vertical tax externalities. Using the differences in differences method with a quasi-exhaustive panel for French municipalities over the 1994-2010 period, we show a positive causal effect of cooperation on the level of cumulative tax rates (i.e. the sum of municipal and inter-municipal tax rates). In addition, we show that cooperation leads to a convergence of tax rates within an inter-municipal structure, which thus reduces tax disparities among municipalities.
    Keywords: Inter-municipal cooperation, tax competition, ?scal disparities.
    JEL: H23 H7
    Date: 2011

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