nep-geo New Economics Papers
on Economic Geography
Issue of 2011‒08‒09
eight papers chosen by
Vassilis Monastiriotis
London School of Economics

  1. A solvable agglomeration model with unemployment By vom Berge, Philipp
  2. Impact of Economic Development on Provincial Relative Price of Agricultural Product to Industrial Product in China: A Note for the Analysis of Regional Income Differences by Provincial Economic Characteristics By Keiya Eto
  3. Fiscal equalization and regions' (un)willingness-to-tax: Evidence from Germany By Bönke, Timm; Jochimsen, Beate; Schröder, Carsten
  4. Regional Indexes of Activity: Combining the Old with the New By Edda Claus; Chew Lian Chua; G. C. Lim
  5. Productivity in China's high technology industry: Regional heterogeneity and R&D By Zhang, Rui; Sun, Kai; Delgado, Michael; Kumbhakar, Subal
  6. Analysis of Regional Innovation Performance in Portugal - Results from an External Logistic Biplot Method By Purificacion Vicente Galindo; Teresa de Noronha Vaz; Peter Nijkamp; Eric de Noronha Vaz
  7. Hedonic Predicted House Price Indices Using Time-Varying Hedonic Models with Spatial Autocorrelation By Alicia Rambaldi; Prasada Rao
  8. Inefficiencies from Metropolitan Political and Fiscal Decentralization: Failures of Tiebout Competition By Stephen Calabrese; Dennis N. Epple; Richard Romano

  1. By: vom Berge, Philipp
    Abstract: This paper develops a solvable general equilibrium agglomeration model, where search frictions for low-skilled immobile workers generate regional unemployment differentials. Contrary to other work in this field, the model yields a higher long-run unemployment rate in the core region. This is because low-skilled manufacturing jobs are more valuable there and unemployment works as a compensating differential. It therefore more closely resembles the classical result of Harris and Todaro (1970). One main difference is that here regions are ex ante equal. I derive expressions for the break and sustain point and analyze the effect of search frictions on their location.
    Keywords: Regional labor markets; New Economic Geography; job matching; unemployment
    JEL: F12 J61 J64 R12
    Date: 2011–07–04
  2. By: Keiya Eto
    Date: 2011–08
  3. By: Bönke, Timm; Jochimsen, Beate; Schröder, Carsten
    Abstract: Under cooperative federalism, when an identical tax tariff applies to all regions of a federation, usually redistribution rules are implemented to smooth fiscal differences. The administration of tax collection, however, is sometimes delegated to the regional level, leaving the regional administrations some discretion concerning the auditing of tax returns. Building on a stylized model, we show that under such conditions granted discretionary tax deductions at the level of tax units is positively related to state-specific marginal rates of loss (MRL), i.e., the fraction of an additional tax Euro raised in a region that the fiscal-equalization system redistributes to other jurisdictions. We empirically test the model's presumption using administrative income-tax micro data from Germany. Regression estimates comply with the implications of our model. --
    Keywords: Fiscal federalism,rate of loss,income tax returns
    JEL: C21 H21 H77
    Date: 2011
  4. By: Edda Claus (Melbourne Institute of Applied Economic and Social Research, The University of Melbourne); Chew Lian Chua (Melbourne Institute of Applied Economic and Social Research, The University of Melbourne); G. C. Lim (Melbourne Institute of Applied Economic and Social Research, The University of Melbourne)
    Abstract: This paper proposes a framework to construct indexes of activity which links two strands of the index literature – the traditional business cycle analysis and the latent variable approach. To illustrate the method, we apply the framework to Australian regional data, namely to two resource-rich and two service-based states. The results reveal differences in the evolution and drivers of economic activity across the four states. We also demonstrate the value of the Index in a broader context by using a structural vector autoregression (SVAR) approach to analyse the effects of shocks from the US and from China. This Index-SVAR approach facilitates a richer analysis because the unique feature of the index method proposed here allows impulse responses to be traced back to the components.
    Keywords: Regional economic activity, coincident indicators, dynamic latent factor model
    JEL: C43 E32
    Date: 2011–06
  5. By: Zhang, Rui; Sun, Kai; Delgado, Michael; Kumbhakar, Subal
    Abstract: This paper analyzes the impact of Research and Development (R&D) on the productivity of China's high technology industry. In order to capture important differences in the effect of R&D on output that arise from geographic and socioeconomic differences across three major regions in China, we use a novel semiparametric approach that allows us to model heterogeneities across provinces and time. Using a unique provincial level panel dataset spanning the period 2000-2007, we find that the impact of R&D on output varies substantially in terms of magnitude and significance across different regions. Results show that the eastern region benefits the most from R&D investments, however it benefits the least from technical progress, while the western region benefits the least from R&D investments, but enjoys the highest benefits from technical progress. The central region benefits from R&D investments more than the western region and benefits from technical progress more than the eastern region. Our results suggest that R&D investments would significantly increase output in both the eastern and central regions, however technical progress in the central region may further compound the effects of R&D on output within the region.
    Keywords: China; Research and Development; Productivity; Semiparametric smooth coefficient model
    JEL: C14 L00
    Date: 2011–06–30
  6. By: Purificacion Vicente Galindo (University of Salamanca, Spain, and CIEO, University of the Algarve, Faro, Portugal); Teresa de Noronha Vaz (CIEO, University of the Algarve, Faro, Portugal); Peter Nijkamp (VU University Amsterdam, The Netherlands); Eric de Noronha Vaz (Institute of Statistics and Information Management, Universidade Nova de Lisboa, and CIEO, University of the Algarve, Faro, Portugal)
    Abstract: Portuguese strategic choices regarding innovation and R&D policy have, over the past two decades, produced various positive achievements, in which the regions of Lisbon and Algarve have taken the lead, and are the only ones in the country to converge towards the European average growth rate. Regarding the other Portuguese regions - despite significant national growth rates in the 1990s as well as a successful attempt to cope with the EMU -, these are lagging behind the EU average with respect to gross production, investment or employment generation. Meanwhile, one of the greatest public policy efforts was to diffuse much of the European funds across the entrepreneurial sector. After a long pathway, it is now timely to evaluate the firms' contribution to national and regional growth, their obstacles and impacts. For the purpose of this paper, innovation is used here as a major contributor to the policy evaluation process referred to above. Our investigation aims to explain the present performance of Portuguese firms located throughout the country and to explore those innovation determinants that have a region-specific connotation. To provide a thorough investigation, our analysis defines, on a regional basis, a set of firmsâ?T behavioural patterns regarding innovation. In our modelling, we employ a new methodology, viz. the External Logistic Biplot method, which is applied to an extensive sample of innovative institutions in Portugal. Variables such as 'Promoting knowledge', 'Management skills', 'Promoting R&D', 'Knowledge transfer', 'Promoting partnership & cooperation', and 'Orientation of public measures' have been identified as crucial determinants in earlier studies and are now used to describe regional institutional profiles. Such profiles exhibit a great variety in the way they combine these determinants to promote regional innovation. The creation of a <I>gradient of capacity to dynamically innovate</I> associated with each firm makes it possible to analyse the innovation gradient of each region in Portugal. Our paper presents and systematically investigates these findings and then reaches some policy conclusions.
    Keywords: Innovation; Firms' Performance; Regional Innovation Systems; Principal Coordinates Analysis; External Logistic Biplot; Voronoi Diagram; Dissimilarity Matrix
    JEL: O31 R11
    Date: 2011–07–28
  7. By: Alicia Rambaldi (School of Economics, The University of Queensland); Prasada Rao (School of Economics, The University of Queensland)
    Abstract: Hedonic housing price indices are computed from estimated hedonic pricing models. The commonly used time dummy hedonic model and the rolling window hedonic model fail to account for changing consumer preferences over hedonic characteristics and typically these models do not account for the presence of spatial correlation in prices reflecting the role of locational characteristics. This paper develops a class of models with time-varying hedonic coefficients and spatially correlated errors, provides an assessment of the predictive performance of these compared to the commonly used hedonic models, and constructs and compares corresponding price index series. Alternative weighting systems, plutocratic versus democratic, are considered for the class of hedonic imputed price indices. Accounting for seasonality in house sales data, monthly chained indices and annual chained indices based on averages of year-on-year monthly indexes are presented. The empirical results are based on property sales data for Brisbane, Australia over the period 1985 to 2005. On the basis of root mean square prediction error criterion the time-varying parameter with spatial errors is found to be the best performing model and the rolling-window model to be the worst performing model.
    Date: 2011
  8. By: Stephen Calabrese; Dennis N. Epple; Richard Romano
    Abstract: We examine the welfare effects of provision of local public goods in an empirically relevant setting using a multi-community model with mobile and heterogeneous households, and with flexible housing supplies. We characterize the first-best allocation and show efficiency can be implemented with decentralization using head taxes. We calibrate the model and compare welfare in property-tax equilibria, both decentralized and centralized, to the efficient allocation. Inefficiencies with decentralization and property taxation are large, dissipating most if not all the potential welfare gains that efficient decentralization could achieve. In property tax equilibrium centralization is frequently more efficient! An externality in community choice underlies the failure to achieve efficiency with decentralization and property taxes: Poorer households crowd richer communities and free ride by consuming relatively little housing thereby avoiding taxes.
    JEL: H1 H4 H7 H73 R1
    Date: 2011–07

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