nep-geo New Economics Papers
on Economic Geography
Issue of 2011‒07‒02
eighteen papers chosen by
Vassilis Monastiriotis
London School of Economics

  1. MNE’s Regional Location Choice - A Comparative Perspective on East Germany, the Czech Republic and Poland By Andrea Gauselmann; Philipp Marek; J. P. Angenendt
  2. Human Capital and Regional Development By Nicola Gennaioli; Rafael La Porta; Florencio Lopez-de-Silanes; Andrei Shleifer
  3. Infrastructure investment opportunities in the New EU Member States: the role of regional policies By Silvia Vignetti; Emanuela Sirtori
  4. A Century of the Evolution of the Urban System in Brazil By Valente J. Matlaba; Mark Holmes; Philip McCann; Jacques Poot
  5. Critical review of cluster mapping studies in Poland By Tomasz Brodzicki
  6. Exploring the polycentric city with an agent-based model By Rémi Lemoy; Charles Raux; Pablo Jensen
  7. Proximity, Networks and Knowledge Production in Europe By Emanuela Marrocu; Raffaele Paci; Stefano Usai
  8. The Incidence of Local Labor Demand Shocks By Matthew J. Notowidigdo
  9. Assessing the tendency of Spanish manufacturing industries to cluster: Co-localization and establishment size By Marta Casanova; Vicente Orts Ríos
  10. Testing for Clustering of Industries - Evidence from micro geographic data By Tobias Scholl; Thomas Brenner
  11. The effect of vertical knowledge spillovers via the supply chain on location decision of firms By Kashefi, Mohammad Ali
  12. Entrepreneurship and Cities: Evidence from the Post-communist World By Maksim Belitski; Julia Korosteleva
  13. The knowledge regions in the enlarged Europe By Alessandra Colombelli; Marta Foddi; Raffaele Paci
  14. Investigating Regional House Price Convergence in the United States: Evidence from a pair-wise approach By Mark J. Holmes; Theodore Panagiotidis; Jesus Otero
  15. Additionality and regional development: are EU Structural Funds complements or substitutes of national Public Finance? By Massimo Florio; Silvia Vignetti; Emanuela Sirtori
  16. Estimación del Producto Interno Bruto regional: el caso de la provincia de Salta (Argentina) 1880-1930 By Eduardo Antonelli
  17. A cluster-based industrial development policy for low-income countries By Otsuka, Keijiro; Sonobe, Tetsushi
  18. Does re-design of the policies on housing finance and supply help to solve housing question of Turkey? By Coskun, Yener

  1. By: Andrea Gauselmann; Philipp Marek; J. P. Angenendt
    Abstract: The focus of this article is the empirical identification of factors influencing Foreign Direct Investment (FDI) in transition economies on a regional level (NUTS 2). The analysis is designed as benchmark between three neighboring post-communist regions, i.e. East Germany, the Czech Republic and Poland. Their different transition paths have not only resulted in economic differences. We can also observe today that the importance of pull factors for FDI varies significantly across the regions. This analysis shows that in comparison with Poland and the Czech Republic, East Germany’s major benefit is its purchasing power, its geographical proximity to West European markets, and its modern infrastructure. Furthermore, the analysis suggests that intra-industry linkages such as specialization and agglomeration economies are relevant factors for the location decision of foreign investors. This result can help to explain the regional divergence of FDI streams in transition economies.
    Keywords: multinational enterprises, international business, regional economic activity: growth, development, and changes, discrete choice
    JEL: F23 R11 C25
    Date: 2011–06
  2. By: Nicola Gennaioli; Rafael La Porta; Florencio Lopez-de-Silanes; Andrei Shleifer
    Abstract: We investigate the determinants of regional development using a newly constructed database of 1569 sub-national regions from 110 countries covering 74 percent of the world’s surface and 96 percent of its GDP. We combine the cross-regional analysis of geographic, institutional, cultural, and human capital determinants of regional development with an examination of productivity in several thousand establishments located in these regions. To organize the discussion, we present a new model of regional development that introduces into a standard migration framework elements of both the Lucas (1978) model of the allocation of talent between entrepreneurship and work, and the Lucas (1988) model of human capital externalities. The evidence points to the paramount importance of human capital in accounting for regional differences in development, but also suggests from model estimation and calibration that entrepreneurial inputs and human capital externalities are essential for understanding the data.
    JEL: L26 O11 O43 O47 R11
    Date: 2011–06
  3. By: Silvia Vignetti (Centre for Industrial Studies (CSIL)); Emanuela Sirtori (Centre for Industrial Studies (CSIL))
    Abstract: Infrastructure development is a priority on policy agendas in the EU and worldwide, because of the very high investment needs in basic infrastructure, especially in lagging behind regions and countries. The paper provides a descriptive analysis of the infrastructural gaps in EU transition economies at national and, as far as possible, regional level for some infrastructure sectors: transport, telecommunication, environment and energy. The analysis suggests that, on average, internal divergences in the infrastructures’ endowment are present between the urbanised capital cities regions and the peripheral and rural areas, in all the Member States; yet, the density and quality of such endowment is significantly higher in the Western countries and limited in the Eastern ones.
    Keywords: Infrastructure, regional policy, EU new member states
    JEL: H54 O18 R11 R58
    Date: 2010–03–15
  4. By: Valente J. Matlaba (University of Waikato); Mark Holmes (University of Waikato); Philip McCann (University of Groningen); Jacques Poot (University of Waikato)
    Abstract: In this paper, we study the hitherto unexplored evolution of the size distribution of 185 urban areas in Brazil between 1907 and 2008. We find that the power law parameter of the size distribution of the 100 largest urban areas increases from 0.63 in 1907 to 0.89 in 2008, which confirms an agglomeration process in which the size distribution has become more unequal. A panel fixed effects model pooling the same range of urban size distributions provides a power law parameter equal to 0.53, smaller than those from cross-sectional estimation. Clearly, Zipf’s Law is rejected. The lognormal distribution fits the city size distribution quite well until the 1940s, but since then applies to small and medium size cities only. These results are consistent with our understanding of historical-political and socio-economic processes that have shaped the development of Brazilian cities.
    Keywords: Zipf’s Law; Gibrat’s Law; lognormal distribution; city size; population growth; Brazil
    JEL: J11 N96 O18 R11 R12
    Date: 2011–06–21
  5. By: Tomasz Brodzicki (Faculty of Economics, University of Gdansk)
    Abstract: The concept of industrial cluster has become one of the most prominent ones both in theoretical discussions, policy making and actual business. It is generally believed that under certain conditions, efficiently performing cluster through positive externalities can become an engine of regional development. Due to potential market imperfections public intervention is frequently required. The concept has gained significance in Eastern and Central European Countries including Poland. Sound cluster-based policy requires a detailed identification of dominant cluster as well as embryonic clusters. In the past few years at the central level of Poland and at the level of some of its provinces (eg. Pomerania, Mazovia, Opole, Silesia) cluster-mapping exercises were performed as part of an effort to modify/inform regional development strategies. Apart from several domestic studies an analysis by an international team for the European Commission for the whole area of Central and Eastern Europe was carried out. The present paper critically reviews the aforementioned studies identifying major methodological bottlenecks. It seems that more emphasis should be placed on the issue of co-location of both vertically related industrial sectors as well as horizontal agglomeration. Spatial autocorrelation should also be included. Appropriate level of sectoral as well as spatial disaggregation of data is of outmost importance.
    Keywords: industrial concentration, cluster, cluster-based policy, statistical cluster mapping
    JEL: B41 C81 R12 R30
    Date: 2010–08
  6. By: Rémi Lemoy (LET - Laboratoire d'économie des transports - CNRS : UMR5593 - Université Lumière - Lyon II - Ecole Nationale des Travaux Publics de l'Etat, IXXI - Institut Rhône-Alpin des systèmes complexes - INRIA - École Normale Supérieure de Lyon - Institut National des Sciences Appliquées de Lyon - Université Claude Bernard - Lyon I - Université Joseph Fourier - Grenoble I - CNRS - IRD - École Normale Supérieure de Lyon); Charles Raux (LET - Laboratoire d'économie des transports - CNRS : UMR5593 - Université Lumière - Lyon II - Ecole Nationale des Travaux Publics de l'Etat, IXXI - Institut Rhône-Alpin des systèmes complexes - INRIA - École Normale Supérieure de Lyon - Institut National des Sciences Appliquées de Lyon - Université Claude Bernard - Lyon I - Université Joseph Fourier - Grenoble I - CNRS - IRD - École Normale Supérieure de Lyon); Pablo Jensen (LET - Laboratoire d'économie des transports - CNRS : UMR5593 - Université Lumière - Lyon II - Ecole Nationale des Travaux Publics de l'Etat, IXXI - Institut Rhône-Alpin des systèmes complexes - INRIA - École Normale Supérieure de Lyon - Institut National des Sciences Appliquées de Lyon - Université Claude Bernard - Lyon I - Université Joseph Fourier - Grenoble I - CNRS - IRD - École Normale Supérieure de Lyon, Phys-ENS - Laboratoire de Physique de l'ENS Lyon - CNRS : UMR5672 - École Normale Supérieure de Lyon)
    Abstract: The standard urban economics model of Alonso, Muth, Mills, describes analytically an equilibrium location of households in urban areas. We present an agent-based model, using simple interactions between agents, and able to reach this equilibrium in a dynamic way. The agent-based model allows us to simulate the development of a city by combination of heterogeneous agents and the introduction of several work centers. This tool allows the addition of a wide variety of features to the standard urban economics model to study their effects. We focus here on the study of the polycentric city.
    Keywords: agent-based model ; urban economics ; location choice ; polycentric city
    Date: 2011–05–30
  7. By: Emanuela Marrocu; Raffaele Paci; Stefano Usai
    Abstract: This paper aims at assessing the role of various dimension of proximity on the innovative capacity of a region within the context of a knowledge production function where we consider as main internal inputs R&D expenditures and human capital. We want to assess if, and how much, the creation of new ideas in a certain region is the result of flows of information and knowledge coming from proximate regions. In particular, we examine in details the concept of proximity combining the usual geographical dimension with the institutional, the technological, the social and the organizational proximity. The analysis is implemented for an ample dataset referring to 287 regions in 29 countries (EU27 plus Norway, Switzerland) for the last decade. Results show that human capital and R&D are clearly essential for innovative activity but with an impact which is much higher for the former factor. As for the proximity and network effects, we find that geography is important but less than technological and cognitive proximity. Social and organizational networks are also relevant but their role is more modest. Finally, most of these proximities prove to have a complementary role in shaping innovative activity across regions in Europe.
    Keywords: knowledge production; technological spillover; proximity; networks
    JEL: O31 C31 O18 R12 O52
    Date: 2011
  8. By: Matthew J. Notowidigdo
    Abstract: Low-skill workers are comparatively immobile: when labor demand slumps in a city, low-skill workers are disproportionately likely to remain to face declining wages and employment. This paper estimates the extent to which (falling) housing prices and (rising) social transfers can account for this fact using a spatial equilibrium model. Nonlinear reduced form estimates of the model using U.S. Census data document that positive labor demand shocks increase population more than negative shocks reduce population, this asymmetry is larger for low-skill workers, and such an asymmetry is absent for wages, housing values, and rental prices. GMM estimates of the full model suggest that the comparative immobility of low-skill workers is not due to higher mobility costs per se, but rather a lower incidence of adverse labor demand shocks.
    JEL: H53 J01 R31
    Date: 2011–06
  9. By: Marta Casanova (Dpto. Economía); Vicente Orts Ríos (Dpt. Economia)
    Abstract: In this paper, we use a distance-based method, specifically the Ripley’s K function, to evaluate the spatial location patterns of Spanish manufacturing establishments and to assess the different tendencies to cluster in each sector or subsector relative to the whole of manufacturing. Specifically, we analyse the role played by the size of establishments in determining the location patterns detected in each sector, and the co-localization between horizontally- and verticallylinked industries to assess the importance of the potential spillovers across industries. We apply this methodology to Spanish manufacturing industries at the two-digit and the four-digit levels. Considering four digits of disaggregation allows us to isolate the different behaviour in the spatialdistribution of each subsector as well as prevent the effects of compensation due to previous aggregation. En este trabajo se utiliza un método basado en la distancia, específicamente la función K de Ripley, para analizar los patrones de localización espacial de los establecimientos manufactureros españoles y evaluar las diferentes tendencias a concentrarse de cada sector o subsector en relación con el conjunto de la industria manufacturera. En concreto, se analiza el papel que desempeña el tamaño de los establecimientos en la determinación de los patrones de localización detectados en cada sector. Así mismo, se evalúa la importancia de los spillovers potenciales entre las diferentes industrias o subsectores mediante un análisis de la tendencia a la co-localización entre empresas de industrias relacionadas horizontal y verticalmente. Aplicamos esta metodología a las industrias manufactureras españolas con un nivel de desagregación de dos y cuatro dígitos CNAE. El hecho de considerar cuatro dígitos de desagregación nos permitedetectar las diferencias en el comportamiento de la distribución espacial de cada subsector, así como prevenir los efectos de compensación debidos a la agregación anterior.
    Keywords: localización espacial, método basado en la distancia, función K de Ripley, área poligonal, desagregación, co-localización, tamaño de establecimiento. spatial location, distance-based method, Ripley’s K function, polygonal boundary, disaggregation, co-localization, establishment size.
    JEL: C15 C40 C60 R12
    Date: 2011–06
  10. By: Tobias Scholl (EBS European Business School); Thomas Brenner (Department of Geography, Philipps University Marburg)
    Abstract: We present a new statistical method that describes the localization patterns of industries in a continuous space. The proposed method does not divide space into subunits whereby it is not affected by the Modifiable Areal Unit Problem (MAUP). Our method fulfils all five criteria for a spatial statistical test of localization proposed by Duranton and Overman (2005) and improves them with respect to the significance of its results. Additionally, our test allows inference to the localization of highly clustered firms. Furthermore, the algorithm is efficient in its computation, which eases the usage in research.
    Keywords: Spatial concenctration, localization, clusters, MAUP, distance-based measures
    JEL: C40 C60 R12
    Date: 2011–06
  11. By: Kashefi, Mohammad Ali
    Abstract: In this paper a game theoretic model is employed to analyze the relationship between strategic location decision of firms in the supply chain considering the role of horizontal and vertical knowledge spillovers, and numerical approach is applied to characterize the equilibria of the considered multi-stage game. Geographical concentration or isolation as equilibrium outcome is determined based on our different parameterizations and two scenarios each consists of two separated cases, which we establish according to the location of our agents. In the first scenario both suppliers are supposed to be located in different regions while in the second one they act in a same region. In addition, first case of each scenario considers geographical isolation of two producers whereas second case investigates the geographical concentration. Furthermore, the effect of different technological level of our agents on their final location decision is investigated.
    Keywords: Strategic Firm Location; Knowledge Spillover; Geographical Concentration; Supply Chain
    JEL: R30 L13 C88 C61 D83 C72
    Date: 2011–05–01
  12. By: Maksim Belitski (Brunel University); Julia Korosteleva (University College London)
    Abstract: This paper investigates the variation in entrepreneurship across cities of the Commonwealth of Independent States during 1995-2008, utilising a unique dataset and employing the System Generalised Method of Moments technique. Our findings suggest that banking reform facilitates entrepreneurship, whereas the size of the state discourages it. Our results confirm a U-shaped relationship between per-capita income and entrepreneurship. We also find that cities with higher concentration of universities are likely to have higher entrepreneurial entry. This provides some evidence for the importance of agglomeration economies in terms of higher concentration of knowledge which may lead to intensified exchange of ideas driving knowledge-based entrepreneurship in the region.
    Keywords: Entrepreneurship, small business, urbanisation, transition, CIS Urban Audit
    Date: 2011–06–24
  13. By: Alessandra Colombelli; Marta Foddi; Raffaele Paci
    Abstract: Since the Lisbon agenda in 2000, Europe stated the goal to become the most advanced knowledge economy in the world relying specifically on the increase and strengthen of its human capital and technological endowments. However, given the presence of localized externalities in the knowledge accumulation process, this policy may produce distortive and unwanted consequences at the territorial level reinforcing the existing high inequalities among regions. Another crucial feature to be considered is the recent enlargement process of the European Union which has brought on stage new players characterized by a low average level of knowledge activity accompanied by a huge degree of internal territorial disparity. The aim of this paper is to identify the “knowledge regions” in Europe and to examine their main territorial features. To this aim we first build, for 287 regions belonging to 31 European countries, a comprehensive picture of the two variables - human capital and technological activity - which constitute the main pillars of the knowledge economy. We compute two synthetic indicators for human capital and technology and, on the basis of these two dimensions, we identify 74 knowledge regions, mainly located in the centre and north of Europe. This results are confirmed by a cluster analysis.
    Keywords: knowledge; human capital; technological activity; regions; Europe
    JEL: R11 J24 O30 O52
    Date: 2011
  14. By: Mark J. Holmes (Department of Economics, Waikato University Management School); Theodore Panagiotidis (Department of Economics, University of Macedonia); Jesus Otero (Facultad de Economia, Universidad del Rosario)
    Abstract: In this paper we examine long-run house price convergence across US states using a novel econometric approach advocated by Pesaran (2007) and Pesaran et al. (2009). Our empirical modelling strategy employs a probabilistic test statistic for convergence based on the percentage of unit root rejections among all state house price differentials. Using a sieve bootstrap procedure, we construct confidence intervals and find evidence in favour of convergence. We also conclude that speed of adjustment towards long-run equilibrium is inversely related to distance.
    Keywords: Panel data, cross-section dependence, pair-wise approach, house prices,convergence.
    JEL: C2 C3 R1 R2 R3
    Date: 2011–06
  15. By: Massimo Florio (DEAS, Universit di Milano); Silvia Vignetti (CSIL Centre for Industrial Studies); Emanuela Sirtori (CSIL Centre for Industrial Studies)
    Abstract: This paper deals with the effects of the transfer of additional funds on the real economy of recipient countries, in particular the European Member States. The intended and unintended effects of additional funds on national public finances and, ultimately, economic performance are discussed. Understanding the real effects of additional public funds and the possible complementarity or substitutability with national public finance is important for shaping the policies for the allocation of Structural Funds. Verification of additionality plays a role in ensuring that additional funds are used to effectively complement national expenditure programmes. In the case of the European Union, it is widely recognised that the current verification mechanism is affected by weaknesses, that prevent it from providing reliable and useful data to effectively assess additionality. For this reason, the paper suggests the European Commission to move away from the current verification approach and to adopt a new one that could more effectively assess to what extent the Structural Funds complement national investments.
    Keywords: Public investment, substitution, displacement
    JEL: H5 H6 H7 O4
    Date: 2011–04–01
  16. By: Eduardo Antonelli
    Abstract: El aparato teórico de la macroeconomía está referido a una nación, no a provincias o regiones de su interior. De tal manera, el producto bruto geográfico (PBG), o la balanza de pagos, por ejemplo, no suelen ser calculados con regularidad, o directamente no son calculados en absoluto por las provincias. El presente trabajo está referido a los procedimientos para la obtención del PBG en Salta, Argentina, en especial para el período 1880-1930.
    Date: 2010–11–30
  17. By: Otsuka, Keijiro; Sonobe, Tetsushi
    Abstract: The need to construct an effective strategy for industrial development in low-income countries has been largely ignored by development economists because industrial policies have failed in many developing countries. This does not imply, however, that industrial development cannot be promoted. This paper attempts to synthesize the conventional wisdom in development economics with recent advancements in various fields of economics (such as theories of endogenous growth and agglomeration economies) to provide a useful framework to design a strategy for industrial development, which consists of investments in managerial human capital followed by the provision of credit and the construction of industrial zones.
    Keywords: Economic Theory&Research,Labor Policies,ICT Policy and Strategies,Access to Finance,Political Economy
    Date: 2011–06–01
  18. By: Coskun, Yener
    Abstract: Housing is one of the major socio-economic problems in Turkey. Widespread spontaneous settlements in urban area may be accepted as the sufficient criterion for the level of housing question in Turkey. Additionally, there are important quality problems in existing housing units. This problematic structure may be also explained by the lack of efficient housing policies and housing finance system. It seems after 2003 that housing policy of Turkey is essentially based on the Housing Development Administration‟s (HDA) pragmatic approaches. In this context, we may argue that the current housing policy is one-dimensional and also would be unsustainable in some perspectives. In this experimental research, the author attempts to analyze limitations and clear/potential problems of the housing policies of HDA. We basically analyze whether affordable housing problem is minimize with alternative policies and required incentives. In this context, we review housing subsidies and PPPs as the instruments of alternative social/private rental housing supply models. In a broader perspective, the original contribution of this paper is to examine private rental housing, social rental housing, urban renewal, micro-finance and housing production of REITs as the alternative housing supply/finance models to improve affordable housing. We conclude that these alternative housing supply/finance models may improve housing affordability and hence minimize the housing question in Turkey, if they can optimally design and required incentives may meet by the central/local governments.
    Keywords: Housing finance; affordable housing; Turkish housing policies; TOKI (Housing Development Administration)
    JEL: R31 R38
    Date: 2011–06–18

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