nep-geo New Economics Papers
on Economic Geography
Issue of 2012‒09‒16
eighteen papers chosen by
Vassilis Monastiriotis
London School of Economics

  1. The Growth in Inter-connectedness in the Scottish Economy, 1998-2007; a disaggregated analysis. By J. H. Ll. Dewhurst
  2. A gravity equation for commuting By Damiaan Persyn; Wouter Torfs
  3. Markups and Agglomeration: Price Competition versus Externalities By Liqiu Zhao
  4. Strategic interactions in public R&D across EU-15 countries : A spatial econometric analysis By Hakim Hammadou; Sonia Paty; Maria Savona
  5. Introducción a la econometría espacial: Una aplicación al estudio de la fecundidad en la Argentina usando R. By Herrera Gómez, Marcos; Cid , Juan Carlos; Paz , Jorge Augusto
  6. The effect of effective tax rate differentials and clustering on investment in Belgium By Tim Goesaert
  7. The Determinants of VAT Introduction: A Spatial Duration Analysis By Cizek, P.; Lei, J.; Ligthart, J.E.
  8. New Road Infrastructure: the Effects on Firms By Stephen Gibbons; Teemu Lyytikäinen; Henry Overman; Rosa Sanchis-Guarner
  9. The Geography of Knowledge Relatedness and Technological Diversification in U.S. Cities By David Rigby
  10. Energy endowments, barriers to trade and industry location in Chinese provinces By Irina Hotz
  11. Does the Common Agricultural Policy Reduce Farm Labour Migration? Panel data analysis across EU regions By Olper,Alessandro,; Raimondi,Valentina; Cavicchioli,Daniele; Vigani,Mauro
  12. Migration, congestion externalities, and the evaluation of spatial investments By Taryn Dinkelman; Sam Schulhofer-Wohl
  13. Spending within limits: Evidence from municipal fiscal restraints By Leah Brooks; Yosh Halberstam; Justin Phillips
  14. Do Absolute Majorities Spend Less?: Evidence from Germany By Ronny Freier; Christian Odendahl
  15. Assessing the evidence on neighborhood effects from> moving to opportunity By Dionissi Aliprantis
  16. The co-evolution of proximities - a network level study By Tom Broekel
  17. Do homeowners benefit urban neighborhoods? Evidence from housing prices By Mika Kortelainen; Tuukka Saarimaa
  18. The effect of market access on the labor market: Evidence from German reunification By Ulrich Zierahn

  1. By: J. H. Ll. Dewhurst
    Abstract: The measurement of inter-connectedness in an economy using input-output tables is not new, however much of the previous literature has not had any explicit dynamic dimension. Studies have tried to estimate the degree of inter-relatedness for an economy at a given point in time using one input-output table, some have compared different economies at a point in time but few have looked at the question of how interconnectedness within an economy changes over time. The publication in 2010 of a consistent series of input-output tables for Scotland offers the researcher the opportunity to track changes in the degree of inter-connectedness over the seven year period 1998 to 2007. The paper is in two parts. A simple measure of inter-connectedness is introduced in the first part of the paper and applied to the Scottish tables. In the second part of the paper an extraction method is applied to sector by sector to the tables in order to estimate how interconnectedness has changed over time for each industrial sector.
    Keywords: Extraction method, Input-Output Analysis, Inter-connectedness, Scottish economy
    JEL: R11 R12 R15
    Date: 2012–09
  2. By: Damiaan Persyn; Wouter Torfs
    Abstract: This paper derives a gravity equation for commuter flows from a simple spatial labor market model, and uses it to identify the effect of regional borders on commuting. This structural approach allows us to identify the relevant control variables and sources of potential omitted variable bias. The model is estimated by means of a negative binomial regression using Belgian data on intermunicipality commuting. We find that regional borders exert a sizable residual deterrent effect on commuting. This border-effect differs significantly between regions and depends on the direction in which the border is crossed.
    Date: 2012
  3. By: Liqiu Zhao
    Abstract: Agglomeration can affect markups through two potential channels: agglom- erated regions toughen competition (price competition effect) and firms are more productive on average in agglomerated regions (agglomeration exter- nalities and firm selection effect). However, the literature is inconclusive on which force dominates. This paper models these two channels by in- troducing agglomeration economies to the model of Melitz and Ottaviano (2008). Under parameters from the empirical studies, I demonstrate that the price competition effect tends to dominate the others, i.e., firms in more agglomerated regions charge lower markups. Using a unique Chinese firm- level data from 2002 to 2004, I investigate the effect of spatial agglomeration on markups of firms. By addressing the potential endogeneity problems us- ing instrumental-variable method, I find that in China an increase in the number of own-industry firms in the same region has a negative causal ef- fect on markups of firms and a positive effect on productivity. But firms in agglomerated regions have higher output and profit.
    Date: 2011
  4. By: Hakim Hammadou (EQUIPPE - ECONOMIE QUANTITATIVE, INTEGRATION, POLITIQUES PUBLIQUES ET ECONOMETRIE - Université Lille 1 - Sciences et Technologies); Sonia Paty (GATE Lyon Saint-Etienne - Groupe d'analyse et de théorie économique - CNRS : UMR5824 - Université Lumière - Lyon II - École Normale Supérieure - Lyon); Maria Savona (CLERSE - Centre lillois d'études et de recherches sociologiques et économiques - CNRS : UMR8019 - Université Lille 1 - Sciences et Technologies, SPRU - Science and Technology Policy Research - University of Sussex)
    Abstract: The aim of this paper is to test the presence of strategic interactions in government spending on Research and Development (R&D), among EU-15 countries. We add to the literature on public choice strategic interactions in general, and to work on R&D spending in particular. We take account of traditional and some rather overlooked factors related to countries' public R&D spending, including (i) the international context - i.e. Lisbon strategy ; (ii) country characteristics - the National System of Innovation ; (iii) national similarities in relation to (a) trade and economic size and (b) sectoral specialization. Sectoral specialization is likely to affect government spending, depending on the mechanisms of complementarity or substitution between public and private R&D. Using a dynamic spatial panel model in which spatial matrices are specified in terms of traditional Euclidean distance, and sectoral specialization proximity, we confirm the existence of strategic interactions in relation to R&D spending among European countries with similar economic, international trade and sectoral structure perspectives. Unlike the results for strategic interactions in public choice, geographic proximity seems not to affect interactions related to public spending on R&D.
    Keywords: Public R&D expenditures ; National Systems of Innovation ; complementarity public and private R&D ; spatial interactions ; EU countries ; spatial dynamic panel data
    Date: 2012–09–03
  5. By: Herrera Gómez, Marcos; Cid , Juan Carlos; Paz , Jorge Augusto
    Abstract: Spatial econometrics is a relatively young branch econometric but with a great growth in the last decades. The complexity of spatial analysis and the estimation of spatial models has been the major obstacle for applied studies. The aim of this paper is to contribute to the diffusion of spatial tools developed. Specifically, this paper performs a concise review of the theoretical aspects that involve the spatial treatment. We also present an empirical application of the techniques discussed. Using the statistical program R, we analyze the determinants of fertility in Argentina.
    Keywords: Econometría Espacial; Autocorrelación Espacial; Fecundidad; Programa Estadístico R
    JEL: J13 R12 C21
    Date: 2012
  6. By: Tim Goesaert
    Abstract: This paper looks at the effect of agglomeration economies on the tax sensitivity of investments in Belgian firms using detailed firm-level data. We find a negative effect of taxation on investment. However, this is dampened by the presence of agglomeration externalities. Our results hint to the importance of local labor market and supplying industries for firm investment decisions and follow the more nuanced view on tax competition of the New Economic Geography models.
    Date: 2012
  7. By: Cizek, P.; Lei, J.; Ligthart, J.E. (Tilburg University, Center for Economic Research)
    Abstract: Abstract: The spatial survival models typically impose frailties, which characterize unobserved heterogeneity, to be spatially correlated. This specification relies highly on a pre-determinate covariance structure of the errors. However, the spatial effect may not only exist in the unobserved errors, but it can also be present in the baseline hazards and the dependent variables. A new spatial survival model with these three possible spatial correlation structures is explored and used to investigate the determinants of value-added tax implementation in 92 countries over the period 1970–2008 using the proposed model. The estimation results suggest the presence of a significant copycat effect among neighboring countries for both contiguity and distance weight matrices.
    Keywords: Spatial duration;MCMC;Metropolis-Hastings algorithm;Value-added tax.
    JEL: C11 C23 C41 H20 H70
    Date: 2012
  8. By: Stephen Gibbons; Teemu Lyytikäinen; Henry Overman; Rosa Sanchis-Guarner
    Abstract: This paper estimates the impact of road improvements on firm employment and productivity using plant level longitudinal data for Britain. Exposure to transport improvements is measured by changes in employment accessibility along the road network. These changes are constructed using data on employment for small geographical units, details of the main road network and of road construction schemes carried out between 1998 and 2007. We deal with the central problem of endogenous scheme placement by using changes due to new road links and exploiting the spatial detail in our data to focus on accessibility changes close to new schemes. We find substantial effects on employment and numbers of plants for small-scale geographical areas (electoral wards), but no employment response at plant level. This suggests that road construction affects firm entry and exit, but not the employment of existing firms. We also find effects on labour productivity and wages at the firm level, although these results are less robust.
    Keywords: Productivity, employment, accessibility, transport
    JEL: D24 O18 R12
    Date: 2012–09
  9. By: David Rigby
    Abstract: U.S. patent data and patent citations are used to build a measure of knowledge relatedness between all pairs of 438 major patent classes in the USPTO. The knowledge relatedness measures, constructed as the probability that a patent in class j will cite a patent in class i, form the links of a patent network. Changes in this U.S. knowledge network are examined for the period 1975 to 2005. Combining the knowledge network with patent data for each of the CBSAs in the United States permits analysis of the evolution of the patent knowledge base within metropolitan areas. Measures of knowledge relatedness are employed to explain technological diversification and abandonment in U.S. cities.
    Keywords: knowledge relatedness, technological diversification, patents, citations
    Date: 2012–10
  10. By: Irina Hotz (Institute of economic research IRENE, Faculty of Economics, University of Neuchâtel, Switzerland)
    Abstract: This study analyzes the determinants of manufacturing activity across Chinese provinces with emphasis on the important role of energy endowments on the location of industries. The data set consists of a panel of 28 Chinese provinces and 13 manufacturing industries for the years 1994, 1997 and 1999-2009. A model of production location is estimated, including comparative advantage and economic geography dynamics. The effects of trade impediments and changes in economic policies on the distribution of economic activity are also considered. Results validate energy as a driving force of industry location. They further show that provincial protectionism poses a problem to market mechanisms, but indicate an increase of concentration of economic activity through time.
    Keywords: China, factor endowments, industry location, energy, externalities, protectionism
    JEL: F18 P2 R14
    Date: 2012–09
  11. By: Olper,Alessandro,; Raimondi,Valentina; Cavicchioli,Daniele; Vigani,Mauro
    Abstract: This paper deals with the determinants of labour out-migration from agriculture across 149 EU regions over the 1990–2008 period. The central aim is to shed light on the role played by payments from the common agricultural policy (CAP) on this important adjustment process. Using static and dynamic panel data estimators, we show that standard neoclassical drivers, like relative income and the relative labour share, represent significant determinants of the intersectoral migration of agricultural labour. Overall, CAP payments contributed significantly to job creation in agriculture, although the magnitude of the economic effect was rather moderate. We also find that pillar I subsidies exerted an effect approximately two times greater than that of pillar II payments.
    Date: 2012–07
  12. By: Taryn Dinkelman; Sam Schulhofer-Wohl
    Abstract: Evaluations of new infrastructure in developing countries typically focus on direct effects, such as the impact of an electrification program on household energy use. But if new infrastructure induces people to move into an area, other local publicly provided goods may become congested, offsetting the benefit of the infrastructure. We use a simple model to show how to measure the net benefit of a place-based program without data on land prices—an indicator that is commonly used to measure congestion in developed countries but that often cannot be used in poor countries because land markets are missing or land prices are badly measured. Our model shows that congestion externalities are especially large when land markets are missing. To illustrate, we estimate the welfare impact of a recent household electrification program in South Africa. Congestion externalities from migration reduced local welfare gains by half.
    Keywords: South Africa
    Date: 2012
  13. By: Leah Brooks; Yosh Halberstam; Justin Phillips
    Abstract: This paper studies the role of a constitutional rule new to the literature: a limit placed by a city on its own ability to tax or spend. We find that such a limit exists in at least 1 in 8 cities, and that limits are not adopted in response to high levels of or variability in taxation. After limit adoption, municipal revenue growth declines by 16 to 22 percent. Our results suggest that institutional constraints may be effective when representative government falls short of the median voter ideal.
    Date: 2012
  14. By: Ronny Freier; Christian Odendahl
    Abstract: The number of parties in government is usually considered to increase spending. We show that this is not necessarily the case. Using a new method to detect close election outcomes in multi-party systems, we isolate truly exogenous variation in the type of government. With data from municipalities in the German state of Bavaria, we show in regression discontinuity-type estimations that absolute majorities spend more, not less, and increase the property tax rate. We also find weakly significant results for increases in debt. Politically, our results show that the mayor that heads an absolute majority of his own party gains the most, but the party itself does not.
    Keywords: fiscal spending, local election, absolute majority, municipality data, regression discontinuity
    JEL: H11 H71 H72 H74
    Date: 2012
  15. By: Dionissi Aliprantis
    Abstract: This paper investigates the assumptions under which various parameters can be identified by the Moving to Opportunity (MTO) housing mobility experiment. Joint models of potential outcomes and selection into treatment are used to clarify the current interpretation of empirical evidence, distinguishing program effects from neighborhood effects. It is shown that MTO only identifi es a restricted subset of the neighborhood effects of interest, with empirical evidence presented that MTO does not identify effects from moving to high quality neighborhoods. One implication is that programs designed around measures other than poverty might have larger effects than MTO.
    Keywords: Housing policy ; Poverty
    Date: 2012
  16. By: Tom Broekel
    Abstract: Despite the growing number of studies, still little is known about how network structures and proximity relations between linked actors evolve over time. Arguments are put forward for the existence of co-evolution dynamics between different types of proximity configurations within networks. An empirical investigation tests these arguments using information on the development of 280 networks. Amongst others, it is shown that institutional and cognitive proximity configurations coevolve in the short as well as in the long-run. While institutional and social proximity configurations are only related in the long run. Moreover, temporal auto-correlation dynamics characterizes the development of cognitive proximity configurations.
    Keywords: proximities, co-evolution, R&D subsidies, knowledge networks, network evolution
    Date: 2012–09
  17. By: Mika Kortelainen; Tuukka Saarimaa
    Abstract: Homeownership is heavily subsidized in many countries mainly through the tax code. The adverse effects of lenient tax treatment of owner-occupied housing on economic efficiency and growth are large and well documented in the economics literature. The main argument in favor of subsidizing owner-occupied housing is that it creates positive externalities that offset these adverse effects. This paper tests whether homeowners create positive externalities to their immediate neighborhood that capitalize into housing prices in multi-storey buildings. Using semiparametric hedonic regressions with and without instrumental variables we find no evidence of positive externalities from neighborhood homeownership rate. This result is robust to relaxing the identification assumptions of our instrument using a recently developed set identification method. Our results suggest that the adverse efficiency effects of lenient tax treatment of owneroccupied housing are not offset by positive externalities.
    Keywords: Homeownership, neighborhood effects, partial linear model, set identification
    JEL: R21 D62
    Date: 2012–09–03
  18. By: Ulrich Zierahn (University of Kassel/ HWWI)
    Abstract: The New Economic Geography predicts a positive effect of market access on wages, as represented by the wage equation. Several studies provide empirical evidence in favor of the wage equation. However, a key problem is the endogeneity of market access: it is challenging to identify the causal effects of market access on wages, since market access itself depends on wages. Whereas most approaches rely on instrumental variables and strong assumptions on exogeneity, the present analysis relies on German reunification as an exogenous variation of market access in order to identify the effects. Since the market access shock due to reunfication was accompanied by a labor supply shock due to migrants and commuters from eastern Germany, the effects on wages, employment and unemployment are analyzed. The results provide evidence in favor of a labor demand shock due to the increase in market access and a labor supply shock due to migrants and commuters from eastern Germany.
    Keywords: New Economic Geography, wage equation, market access, natural experiment, differences-in-differences
    JEL: F15 R12 R23
    Date: 2012

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