nep-geo New Economics Papers
on Economic Geography
Issue of 2012‒04‒03
sixteen papers chosen by
Vassilis Monastiriotis
London School of Economics

  1. Regional investment under uncertain costs of location By Broll, Udo; Roldán-Ponce, Antonio; Wahl, Jack E.
  2. Structural Change and Regional Convergence: The Case of Declining Transport Costs By Trevor Tombe
  3. Does fiscal cooperation increase local tax rates in urban areas By Charlot, S.; Paty, S.; Piguet, V.
  4. Economic Impacts of Cultural Diversity in the Netherlands: Productivity, Utility, and Sorting By Jessie Bakens; Peter Mulder; Peter Nijkamp
  5. Determinants of Transport Costs for Inter-regional Trade By KONISHI Yoko; Se-il MUN; NISHIYAMA Yoshihiko; Ji Eun SUNG
  6. A methodology approach to delineate functional economic market areas: With an iterative three-step spatial clustering procedure By Oberst, Christian A.
  8. Inefficiencies in regional commuting policy By Toon VANDYCK; Stef PROOST
  9. Spatial Commuting Patterns of German Regional Labour Markets: A Sustainability Perspective By F. Tedeschi; A. Reggiani; P. Nijkamp
  10. Local Government Size and Efficiency in Capital Intensive Services: What Evidence is There of Economies of Scale, Density and Scope? By Germà Bel
  11. Sorting and local wage and skill distributions in France By Combes, Pierre-Philippe; Duranton, Gilles; Gobillon, Laurent; Roux, Sébastien
  12. Reallocation of Purchasing Power due to Demographic Change - The Case of North Rhine-Westphalia By Britta Stöver
  13. Developing new roles for higher education institutions in structurally-fragmented regional innovation systems By Kroll, Henning; Schricke, Esther; Stahlecker, Thomas
  14. Does Local Government Size Matter? Privatization and Hybrid Systems of Local Service Delivery By Mildred E. Warner
  15. Reexamining The Determinants Of Fiscal Decentralization: What Is The Role Of Geography? By Gustavo Canavire-Bacarreza; Jorge Martinez-Vazquez
  16. Local Government Cooperation for Joint Provision: The Experiences of Brazil and Spain with Inter-Municipal Consortia By Luiz de Mello; Santiago Lago-Peñas

  1. By: Broll, Udo; Roldán-Ponce, Antonio; Wahl, Jack E.
    Abstract: Due to globalization competitive firms face increasing economic opportunities for locating their activities in countries, regions and cities that provide the best business environment for their specific needs. In our study we focus on the impact of economic risk and risk preferences upon regional allocation of investments. The source of risk stems from the difference in stochastic costs of location across regions. A comparative static analysis shows that capital allocation depends upon the firms' risk preferences. As a result regional agglomeration of investments may occur although the objective of the regional policy is aimed at the opposite. Our findings demonstrate the suitability of the two-moment approach as an alternative to the expected utility approach. The impact of changes in distribution parameters, such as the expected costs of location, the variance of costs of location and the correlation between locational costs, can be fully characterized via the elasticity of risk aversion. Elements of risk preferences beyond risk aversion prove to be very important to evaluate regional politics. This insight is of interest for empirical research in regional economics. --
    Keywords: regional allocation,regional economics,regional policy,agglomeration,two-moment decision model
    JEL: R12 R30 R38
    Date: 2012
  2. By: Trevor Tombe (Wilfrid Laurier University)
    Abstract: Regional income inequality within countries is an important contributor to global inequality. I investigate its relationship to economic growth using the US experience since 1880. I modify a multi-sector general equilibrium growth model and highlight two important forces: (1) structural change, which disproportionately benefit poor agricultural regions; and (2) transport cost reductions, which shrinks regional price and wage differences. Structural change contributes to Southern growth but is offset in the Midwest by transport cost reductions. The Midwest case is of greater relevance for developing countries with high transport costs, and suggests growth may not significantly reduce global income inequality.
    Keywords: Regional Convergence, Dual-Economy Models, Transportation Costs
    JEL: O11 R11
    Date: 2012
  3. By: Charlot, S.; Paty, S.; Piguet, V.
    Abstract: The main purpose of this paper is to assess the effects of fiscal cooperation on local taxation in a decentralized country, using the French experience in urban municipalities. We estimate a model of tax setting for local business tax using spatial and dynamic econometric techniques, for the period 1993-2003 and an unbalanced data set. As predicted by the theory, we find that reducing the number of municipalities is likely to limit tax competition and, as a consequence, increase local business tax rates.
    JEL: H2 H3 H7
    Date: 2012
  4. By: Jessie Bakens (VU University Amsterdam); Peter Mulder (VU University Amsterdam); Peter Nijkamp (VU University Amsterdam)
    Abstract: This paper identifies the role of cultural diversity in explaining spatial disparities in wages and housing prices across Dutch cities, using unique individual panel data of home owners. We distinguish between the effects of interactions-based productivity, consumption amenities and sorting of heterogeneous home owners while controlling for interactions between the labor and housing market. We find that an increase in the cultural diversity of the population positively impacts equilibrium wages and housing prices, particularly in the largest and most densely populated cities. This result is largely driven by spatial sorting of individuals in both the labor and housing market. After controlling for home owner heterogeneity we find that increasing cultural diversity no longer impacts local labor markets and negatively impacts local housing markets. The latter result is likely to be driven by a negative causal effect of increased cultural diversity on neighb orhood quality that outweighs a positive effect of increased cultural diversity in consumption goods.
    Keywords: cultural diversity; immigrants; local amenities; sorting; housing prices; productivity
    JEL: J31 R21 R23 R31
    Date: 2012–03–19
  5. By: KONISHI Yoko; Se-il MUN; NISHIYAMA Yoshihiko; Ji Eun SUNG
    Abstract: This paper presents a microeconomic model of inter-regional freight transportation based on careful formulation of the cost structure in trucking firms and market equilibrium, which takes into account the feature of transport service as a bundle of multiple characteristics. We estimate the parameters of the model using the micro-data of inter-regional freight flows from the 2005 Net Freight Flow Census in Japan. Estimation results show that the determinants of transport cost incorporated in the model have significant effects in the ways that the model predicts. The degree of competition also has significant effect on freight charge. It is shown that there exist significant scale economies with respect to lot size and long-haul economies. Quantitative extents of these effects are also demonstrated.
    Date: 2012–03
  6. By: Oberst, Christian A.
    Abstract: This paper proposes an iterative three-step spatial clustering procedure to define Functional Economic Market Areas (FEMAs) with an evolutionary computational approach using flow data on economic linkages. FEMAs are needed as basic observation units in disaggregated economic data analysis, since those have to be taken at the spatial level at which the markets operate. Only then can analyses provide accurate and consistent results and allow useful interpretations of variables and the measurement of spillover effects between markets. Therefore FEMAs should, besides their use as analysis regions, serve as basic areas for regional policy or coordination of these. Although functional markets are particularly used in regional science, the proposed concept with the spatial clustering procedure is transferable to other economic fields like business management and marketing research, network or competition analyses. The presented methodology approach is a generalized and ubiquitous, disjunctive and contiguous delineation extended application based on the suggestion in RUSCHE (2009) of a joint application of the AMOEBA clustering procedure by ALDSTADT/GETIS (2006) and an interaction indicator on flow data. The methodology will be illustrated with real-world applications on German commuting data. Also presented is a possible way of computation and illustration of fuzzy market borders (differentiated border densities) as an extension to the procedure. --
    Keywords: AMOEBA,functional regional markets,fuzzy set theory,market delineation,regionalisation,labor markets regions,travel-to-work areas
    JEL: R12 R23 J61 M3 Z0
    Date: 2011
  7. By: Martin Lusticky Author_Email: (University of Economics, Prague, Czech Republic)
    Keywords: regional management, planning, quality, Benchmarking, tourism
    JEL: M0
    Date: 2011–06
  8. By: Toon VANDYCK; Stef PROOST
    Abstract: This paper discusses investments in transport infrastructure and incentives for commuting taxes in a multiregional setting. We study the horizontal and vertical interactions between governments. We identify incentives for strategic and tax exporting behavior that might lead to underinvestment in transport infrastructure. Furthermore, we show that the intensity of the strategic behavior is affected by geographic firm ownership structure, the number of labor-supplying regions and the revenue-sharing mechanism in the federation. A numerical example applies the insights on commuting in Belgium.
    Date: 2011–08
  9. By: F. Tedeschi; A. Reggiani; P. Nijkamp
    Abstract: This paper aims to investigate the relationship between commuting and spatial labour market developments in the framework of sustainability issues. To do so, we propose, first, an exploratory investigation of the effects of inbound commuter flows on employment in regional labour markets in Germany. Next, we address sustainability issues as a common umbrella for the relationship ‘economy-transportation’. In this context, we show that the German production system is faced with negative environmental externalities, which are clearly associated with a specific transport mode, viz. the private car. Negative environmental externalities as a result of modal choices in Germany are confirmed by data from EU-15 countries. Public transport, in particular the train, appears to be more environmentally-benign. Our results bring to light that, on average, commuter flows have a positive and robust effect on employment in the receiving German labour market districts, while, for commuting flows, public transport, especially the train, is a more environmentally-benign mode of transport, compared with the car, in reducing greenhouse gas emissions and energy consumption. In the light of possible policy strategies, the paper argues that sustainability may lead to positive economic effects; in particular, the improvement of the public transport system, which can provide more opportunities for sustainable commuting patterns, may lead to favourable employment perspectives for the local or regional labour force.
    JEL: R41 R23 J61
    Date: 2012–03
  10. By: Germà Bel (Universitat de Barcelona & GiM-IREA)
    Date: 2012–03–23
  11. By: Combes, Pierre-Philippe; Duranton, Gilles; Gobillon, Laurent; Roux, Sébastien
    Abstract: This paper provides descriptive evidence about the distribution of wages and skills in denser and less dense employment areas in France. We confirm that on average, workers in denser areas are more skilled. There is also strong overrepresentation of workers with particularly high and low skills in denser areas. These features are consistent with patterns of migration including negative selection of migrants to less dense areas and positive selection towards denser areas. Nonetheless migration, even in the longrun, accounts for little of the skill differences between denser and less dense areas. Finally, we find marked differences across age groups and some suggestions that much of the skill differences across areas can be explained by differences between occupational groups rather than within.
    Keywords: skill distribution; sorting; wage distribution
    JEL: J31 J61 R12 R23
    Date: 2012–03
  12. By: Britta Stöver (GWS - Institute of Economic Structures Research)
    Abstract: The ageing process of populations due to demographic change affects the economy in various ways. The study at hand focuses on the reallocation of income and changes in consumption expenses caused by demographic change. Local disparities on NUTS 3 level are of special interest as the demographic effects can vary considerably between regions depending on their initial position such as population density, age structure, and economic condition. By means of data for the regions of North-Rhine-Westphalia (Germany) a dynamic purchasing power indicator is built that takes the development of different age groups into account and gives a first impression of the effects of ageing on the development of income and consumption behaviour. Regional discrepancies can be identified. While some regions are characterised by a static income situation, i.e. a more or less age independent development, others show distinct increases/decreases in their income caused by their specific structure of demographic change.
    Keywords: demographic change, purchasing power, age groups, income, consumption
    JEL: R20
    Date: 2012
  13. By: Kroll, Henning; Schricke, Esther; Stahlecker, Thomas
    Abstract: Over the course of the last decade, increasing political emphasis has been placed on the 'third role' of universities and universities of applied sciences in German higher education policy, i.e. to these institutions socio-economic contribution their regional environment. Against this background it is the first central aim of this study to take account of the existing regional activities of higher education institutions in Germany and to establish whether any effects of regional policymakers' and university management efforts to support such activities are already felt at the level of the individual researcher. Based on survey data, we find that a large array of decentralised projects is being performed by individual academics for multiple reasons, but also that evidence of effective centralised incentive-setting for such activities remains limited. Nonetheless, universities have undoubtedly become integrated into strategic considerations of regional co-operation to a stronger degree, as evidenced by a number of publicly supported programmes and the long time implicit 'third role' of universities of applied sciences. Consequently, the second main aim of the paper is to illustrate how such strategic approaches could be designed against the background of the concrete regional demand of the industrial sector in a case study region. With a view to the example of Upper Palatinate in Bavaria, our paper demonstrates how the formerly strict separation of missions and tasks between universities and universities of applied sciences has resulted in a certain structural fragmentation of competences that hinders the development of a substantial third role in the region. Additionally, it suggests some tentative approaches how this situation could be overcome by an increased co-operation between formerly quite separate institutions. --
    Date: 2012
  14. By: Mildred E. Warner (Cornell University)
    Date: 2012–02–10
  15. By: Gustavo Canavire-Bacarreza (International Center for Public Policy. Andrew Young School of Policy Studies, Georgia State University); Jorge Martinez-Vazquez (International Center for Public Policy. Andrew Young School of Policy Studies, Georgia State University)
    Abstract: This paper contributes to the existing literature on the determinants of fiscal decentralization by motivating theoretically and exploring in depth the empirical relevance that geography has as determinant of fiscal decentralization. The relationship between decentralization and geography is based on the logic that more geographically diverse countries show greater heterogeneity among their citizens, including their preferences and needs for public goods and services provision. Communications and physical distance are also a very important issue and play a key role on the effect of geography over time. The theoretical model builds on the work by Arzaghi and Henderson (2002) and Panizza (1999). For the empirical estimation we use a panel data set for approximately 91 countries for the period 1960-2005. Physical geography is measured along several dimensions including elevation, land area, and climate. We construct a geographical fragmentation index and test its effect on fiscal decentralization. In addition, we interact the geographical fragmentation index with time variant infrastructure variables, in order to test the effect that infrastructure and communications have on the relationship between geography and fiscal decentralization. For robustness, we construct Gini coefficients for in-country elevation and climate. We find a positive and strong correlation between geographical factors and fiscal decentralization. We also find that while the development of infrastructure (in transportation, communications, etc.) tends to reduce the effect of geography on decentralization, this effect is rather small and mostly statistically insignificant, meaning that the impact of geography survives over time. The additional value added of this strategy is that geography and its interaction with infrastructure development may be used as an instrument for decentralization in future econometric estimations, where decentralization is used as an explanatory variable but it may be suspected to be endogenous to the economic process being studied (economic growth, political instability, macroeconomic stability, income distribution, etc.)
    Keywords: revenue mobilization, fiscal decentralization, Peru
    Date: 2012–02–08
  16. By: Luiz de Mello (OECD Economics Department); Santiago Lago-Peñas (REDE. IEB, and University of Vigo)
    Abstract: Local governments often set up inter-municipal consortia to provide public services jointly, rather than individually. The main benefits of joint provision include the potential for improved cost-effectiveness arising from gains from economies of scale and the internalisation of costs and/or benefits of provision, which could otherwise spill over inter-municipal borders and discourage provision. To shed further light on this issue, this paper tests for the presence of scale and spillover effects in local government provision and estimates the determinants of the probability of local government participation in inter-municipal consortia in Brazil and Spain. Empirical evidence suggests that in some cases smaller jurisdictions operate at sub-optimal scale and are indeed more likely than their larger counterparts to participate in inter-municipal consortia. In the case of Brazil, governance arrangements between the municipalities and the state governments and/or private-sector providers, but not the federal government, are also associated with a higher probability of participation in inter-municipal consortia, suggesting the presence of “participation spillovers” among governance arrangements.
    Keywords: inter-municipal cooperation, local public finance, Brazil, Spain, federalism, probit
    Date: 2012–03–23

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