nep-geo New Economics Papers
on Economic Geography
Issue of 2013‒01‒19
seventeen papers chosen by
Andreas Koch
Institute for Applied Economic Research

  1. The multiregional core-periphery model: The role of the spatial topology By Barbero, Javier; Zofío, José Luis
  2. Primum vivere… Industrial Change, Job Destruction and the Geographical Distribution of Unemployment By Pastore, Francesco
  3. The Estimation and Testing of a Linear Regression with Near Unit Root in the Spatial Autoregressive Error Term By Badi H. Baltagi; Chihwa Kao; Long Liu
  4. Competitiveness of Port-Cities: The Case of Marseille-Fos - France By Olaf Merk; Claude Comtois
  5. Resource-based Regions, the Dutch Disease and City Development By TAKATSUKA Hajime; Dao-Zhi ZENG; Laixun ZHAO
  6. Distance Effects, Social Class and the Decision to Participate in Higher Education in Ireland By Cullinan, John; Flannery, Darragh; Walsh, Sharon; McCoy, Selina
  7. Entrepreneurship and Creative Professions - A Micro-Level Analysis By Michael Fritsch; Alina Sorgner
  8. Birthplace Diversity and Economic Prosperity By Alberto Alesina; Johann Harnoss; Hillel Rapoport
  9. Comparing Labor Supply Elasticities in Europe and the US: New Results By Olivier Bargain; Kristian Orsini; Andreas Peichl
  10. 10 Years After: EU Enlargement, Closed Borders, and Migration to Germany By Elsner, Benjamin; Zimmermann, Klaus F.
  11. Trade Structure and Belief-Driven Fluctuations in a Global Economy By Yunfang Hu; Kazuo Mino
  12. Revisiting the Minimum Wage-Employment Debate: Throwing Out the Baby with the Bathwater? By David Neumark; J.M. Ian Salas; William Wascher
  13. Trade costs in the developing world : 1995 - 2010 By Arvis, Jean-François; Duval, Yann; Shepherd, Ben; Utoktham,Chorthip
  14. Transborder corporate integration in the Baltic Sea Region By Kuznetsov, Alexey
  15. Isolated Capital Cities and Misgovernance: Theory and Evidence By Campante, Filipe R.; Do, Quoc-Anh; Guimaraes, Bernardo
  16. Does local council size affect land development expenditure? Quasi-experimental evidence from Japanese municipal data By Hirota, Haruaki; Yunoue, Hideo
  17. I patti di sviluppo dei distretti produttivi in Sicilia: 2011-2013 By Schilirò, Daniele

  1. By: Barbero, Javier (Departamento de Análisis Económico (Teoría e Historia Económica). Universidad Autónoma de Madrid.); Zofío, José Luis (Departamento de Análisis Económico (Teoría e Historia Económica). Universidad Autónoma de Madrid.)
    Abstract: We use the multiregional core-periphery model of the new economic geography to analyze and compare the agglomeration and dispersion forces shaping the location of economic activity for a continuum of network topologies characterized by their degree of centrality, and comprised between two extremes represented by the homogenous (ring) and the heterogeneous (star) configurations. Resorting to graph theory, we systematically extend the analytical tools and graphical representations of the core-periphery model for alternative spatial configuration, and study the stability of the alternative equilibria in terms of the sustain and break points. We study new phenomena such as the absence of any stable distribution of economic activity for some range of transport costs, and the infeasibility of the dispersed equilibrium in the heterogeneous space, resulting in the introduction of the concept pseudo flat-earth as a long run-equilibrium corresponding to an uneven distribution of economic activity between regions.
    Keywords: New economic geography; graph theory; degree of centrality; bifurcation; equilibria and stability analysis.
    JEL: C62 C63 F12 R12
    Date: 2012–11
  2. By: Pastore, Francesco (University of Naples II)
    Abstract: This paper aims to provide a frame of mind to understand the link between structural change and regional unemployment, and, based on it, to survey the most recent literature. An overly optimistic view on the ability of the adjustment mechanism to generate convergence in local unemployment rates has long neglected the question of how regional imbalances arise in the first place. The availability of new longitudinal data sets allows us looking again at this issue with a fresh look, starting from patterns of reallocation among labour market statuses. The main conclusion of recent research is that high unemployment regions have a higher, not a lower rate of reallocation; this suggests, in turn, that they do not suffer from low job creation, but, rather, from high job destruction, and this is because of the low competitiveness of any economic activity. Our findings sound as a renowned justification of the need for demand side policy, especially aimed at increasing the life expectancy of private businesses in high unemployment regions.
    Keywords: industrial change, job destruction, labour turnover, adjustment mechanism, regional unemployment
    JEL: J6 P2 R1 R23
    Date: 2013–01
  3. By: Badi H. Baltagi (Center for Policy Research, Maxwell School, Syracuse University, 426 Eggers Hall, Syracuse, NY 13244-1020); Chihwa Kao (Center for Policy Research, Maxwell School, Syracuse University, 426 Eggers Hall, Syracuse, NY 13244-1020); Long Liu (Department of Economics, College of Business, University of Texas at San Antonio)
    Abstract: This paper considers the estimation of a linear regression involving the spatial autoregressive (SAR) error term, which is nearly nonstationary. The asymptotics properties of the ordinary least squares (OLS), true generalized least squares (GLS) and feasible generalized least squares (FGLS) estimators as well as the corresponding Wald test statistics are derived. Monte Carlo results are conducted to study the sampling behavior of the proposed estimators and test statistics. Key Words: Spatial Autocorrelation; Ordinary Least Squares; Generalized Least Squares; Two-stage Least Squares; Maximum Likelihood Estimation JEL No. C23, C33
    Date: 2012–12
  4. By: Olaf Merk; Claude Comtois
    Abstract: This working paper offers an evaluation of the performance of the port of Marseille-Fos, an analysis of the impact of the port on its territory and an assessment of policies and governance in this field. It examines declining port performance over the last decades and identifies the principal factors that have contributed to it. The effect of the ports on economic and environmental questions is studied and quantified where possible. The value added of the port cluster of Marseille-Fos is calculated and its interlinkages with other economic sectors and other regions in France delineated. The paper outlines the impact of the ports? operations, and shows how their activities spill over into other regions than the one in which the port of Marseille-Fos is located. The major policies governing the ports are assessed, along with policies governing transport and economic development, the environment and spatial planning. These include measures instituted by the port authorities, as well as by local, regional and national governments. Governance mechanisms at these different levels are described and analysed. Based on the report?s findings, recommendations are proposed with a view to improving port performance and increasing the positive effects of the port of Marseille-Fos on its territory.
    Keywords: transportation, ports, regional development, regional growth, urban growth, inter-regional trade, input-output
    JEL: D57 L91 R11 R12 R15 R41
    Date: 2012–12–19
  5. By: TAKATSUKA Hajime; Dao-Zhi ZENG; Laixun ZHAO
    Abstract: This paper examines the relationship between resource development and industrialization. When transport costs are high, regions with more valuable natural resources offer higher welfare than other regions. However, when transport costs decrease, firms begin to move out of the region, resulting in the Dutch disease, initially in terms of industry shares, but eventually in terms of welfare too when transportation is sufficiently free. If resource goods are also used as manufacturing inputs as well as final goods, they can substitute for labor when wages rise, which tends to alleviate the Dutch disease by keeping production costs down. The model thus provides helpful insight for cities trying to develop efficiently their limited resources.
    Date: 2013–01
  6. By: Cullinan, John; Flannery, Darragh; Walsh, Sharon; McCoy, Selina
    Abstract: While a number of international studies have attempted to assess the influence of geographic accessibility on the decision to participate in higher education, this issue has not been addressed in detail in an Irish context. The aim of this paper is to fill this gap and to present a higher education choice model that estimates the impact of travel distance on the decision of school leavers to proceed to higher education in Ireland, while also controlling for a range of individual level characteristics and school related variables. To do so we use data from the 2007 wave of the School Leavers' Survey. We find that, on average, travel distance is not an important factor in the higher education participation decision, when factors such as student ability are accounted for. However, further analysis shows that travel distance has a significantly negative impact on participation for those from lower social classes and that this impact grows stronger as distance increases. We also find that the distance effects are most pronounced for lower ability students from these social backgrounds. This has important implications for higher education policy in Ireland, especially in relation to equity of access and the design of the maintenance grant system.
    Keywords: data/education/equity/higher education/Ireland/Policy/Social class
    Date: 2012–12
  7. By: Michael Fritsch (School of Economics and Business Administration, Friedrich-Schiller-University Jena); Alina Sorgner (School of Economics and Business Administration, Friedrich-Schiller-University Jena)
    Abstract: It has widely been recognized that creativity plays an immense role not only for arts, sciences, and technology, but also for entrepreneurship, innovation, and thus, economic growth. We analyze the level and the determinants of self-employment in creative professions at the level of individuals. The analysis is based on the representative micro data of the German Socio-Economic Panel (SOEP). The findings suggest that people in creative professions appear more likely to be self-employed and that a high regional share of people in the creative class increases an individual's likelihood of being an entrepreneur. Investigating the determinants of entrepreneurship within the creative class as compared to non-creative professions reveals only some few differences.
    Keywords: Entrepreneurship, new business formation, creativity, creative class
    JEL: L26 Z1 D03
    Date: 2013–01–10
  8. By: Alberto Alesina; Johann Harnoss; Hillel Rapoport
    Abstract: The diversity of people has economic costs and benefits. Using recent immigration data from 195 countries, we propose an index of diversity based on people’s birthplaces. This new index is decomposed in a “size” (share of foreign born) and a variety (diversity of immigrants) component and is available for 1990 and 2000 and for the overall as well as for the high (workers with college education) and low-skill fractions of the workforce. We show that birthplace diversity is largely uncorrelated with ethnic and linguistic fractionalization and that—unlike fractionalization—it is positively related to economic development even after controlling for education, institutions, ethnic and linguistic fractionalization, trade openness, geography, market size and origin-effects. This positive association appears particularly strong for the diversity of skilled immigrants in richer countries. We make progress towards addressing endogeneity by specifying a gravity model to predict the diversity of immigration based on exogenous bilateral variables. The results are robust across various OLS and 2SLS specifications.
    JEL: F22 F43 O1 O4
    Date: 2013–01
  9. By: Olivier Bargain; Kristian Orsini; Andreas Peichl
    Abstract: We suggest the first large-scale international comparison of labor supply elasticities for 17 European countries and the US, separately by gender and marital status. Measurement differences are netted out by using a harmonized empirical approach and comparable data sources. We find that own-wage elasticities are relatively small and much more uniform across countries than previously thought. Differences exist nonetheless and are found not to arise from different tax-benefit systems or demographic compositions across countries. Thus, we cannot reject that countries have genuinely different preferences. Three other results, important for welfare analysis, are consistent over all countries: the extensive (participation) margin dominates the intensive (hours) margin; for singles, this leads to larger labor supply responses in low-income groups; income elasticities are extremely small everywhere. Finally, the results for cross-wage elasticities in couples are opposed between regions, consistent with complementarity in spouses’ leisure in the US versus substitution in spouses’ household production in Europe.
    Keywords: household labor supply, elasticity, taxation, Europe, US
    JEL: C25 C52 H31 J22
    Date: 2012
  10. By: Elsner, Benjamin (IZA); Zimmermann, Klaus F. (IZA and University of Bonn)
    Abstract: We study how the EU enlargement in 2004 and the Great Recession in the late 2000s have shaped the scale and composition of migration flows from the New Member States to Germany. We demonstrate that immigration increased substantially despite the restrictions on the German labor market, and that net flows decreased to zero at the outset of the recession. The cohorts arriving after 2004 had on average a lower education than the previous arrival cohort, but the wage gap compared to Germans became narrower over time. Almost 10 years after EU enlargement, we re-assess the transitional arrangements, and argue that Germany would have been better off, had it immediately opened its labor market. Finally, the Great recession allows us to study how effective migration within the EU is as an adjustment mechanism. Our data clearly show an increase in immigration from countries that were hit by the crisis, although the annual net flows are still too small to significantly reduce unemployment in the countries hit by the crisis.
    Keywords: EU enlargement, migration, Germany
    JEL: F22
    Date: 2013–01
  11. By: Yunfang Hu (Tohoku University); Kazuo Mino (Kyoto University)
    Abstract: This paper constructs a dynamic two-country model with country-specific production externalities and inspects the presence of equilibrium indeterminacy under alternative trade structures. It is shown that the presence of belief?driven economic fluctuations caused by equilibrium indeterminacy is closely related to the specified trade structure. If investment goods are not internationally traded and international lending and borrowing are allowed, then indeterminacy arises in a wider set of parameter space than in the corresponding closed economy. By contrast, either if both consumption and investment goods are traded in the absence of international lending and borrowing or if only investment goods are traded with financial transactions, then the indeterminacy conditions are the same as those for the closed economy counterpart.
    Keywords: two-country model, non-traded goods, equilibrium indeterminacy, social constant returns
    JEL: F43 O41
    Date: 2013–01
  12. By: David Neumark; J.M. Ian Salas; William Wascher
    Abstract: We revisit the minimum wage-employment debate, which is as old as the Department of Labor. In particular, we assess new studies claiming that the standard panel data approach used in much of the “new minimum wage research” is flawed because it fails to account for spatial heterogeneity. These new studies use research designs intended to control for this heterogeneity and conclude that minimum wages in the United States have not reduced employment. We explore the ability of these research designs to isolate reliable identifying information and test the untested assumptions in this new research about the construction of better control groups. Our evidence points to serious problems with these research designs. We conclude that the evidence still shows that minimum wages pose a tradeoff of higher wages for some against job losses for others, and that policymakers need to bear this tradeoff in mind when making decisions about increasing the minimum wage.
    JEL: J23 J38
    Date: 2013–01
  13. By: Arvis, Jean-François; Duval, Yann; Shepherd, Ben; Utoktham,Chorthip
    Abstract: The authors use newly collected data on trade and production in 178 countries to infer estimates of trade costs in agriculture and manufactured goods for the 1995-2010 period. The data show that trade costs are strongly declining in per capita income. Moreover, the rate of change of trade costs is largely unfavorable to the developing world: trade costs are falling noticeably faster in developed countries than in developing ones, which serves to increase the relative isolation of the latter. In particular, Sub-Saharan African countries and low-income countries remain subject to very high levels of trade costs. In terms of policy implications, the analysis finds that maritime transport connectivity and logistics performance are very important determinants of bilateral trade costs: in some specifications, their combined effect is comparable to that of geographical distance. Traditional and non-traditional trade policies more generally, including market entry barriers and regional integration agreements, play a significant role in shaping the trade costs landscape.
    Keywords: Economic Theory&Research,Free Trade,Emerging Markets,Trade Law,Trade Policy
    Date: 2013–01–01
  14. By: Kuznetsov, Alexey
    Abstract: The paper examines flows of foreign direct investment within the Baltic region. The author demonstrates close investment ties among the EU members, which are of special importance for Estonia, Latvia and Lithuania. Transborder corporate integration in the region is characterized by significant imbalances. In many aspects, it can be viewed as Sweden’s economic expansion or development of domestic markets for northern European companies. Although many German, Polish and Russian companies are involved in corporate integration in the Baltic region, other vectors of their foreign economic relations are still more important for them. As a result, the integration of Russian business in the Baltic part of the European integration area is still rather weak despite Russia’s considerable foreign direct investment in the Baltic States.
    Keywords: foreign direct investment; the Baltic region; European integration; transnational corporations
    JEL: F15 F23 F21
    Date: 2012–01
  15. By: Campante, Filipe R. (Harvard University); Do, Quoc-Anh (Sciences Po, Paris); Guimaraes, Bernardo (Sao Paulo School of Economics)
    Abstract: Motivated by a novel stylized fact--countries with isolated capital cities display worse quality of governance--we provide a framework of endogenous institutional choice based on the idea that elites are constrained by the threat of rebellion, and that this threat is rendered less effective by distance from the seat of political power. In established democracies, the threat of insurgencies is not a binding constraint, and the model predicts no correlation between isolated capitals and misgovernance. In contrast, a correlation emerges in equilibrium in the case of autocracies. Causality runs both ways: broader power sharing (associated with better governance) means that any rents have to be shared more broadly, hence the elite has less of an incentive to protect its position by isolating the capital city; conversely, a more isolated capital city allows the elite to appropriate a larger share of output, so the costs of better governance for the elite, in terms of rents that would have to be shared, are larger. We show evidence that this pattern holds true robustly in the data. We also show that isolated capitals are associated with less power sharing, a larger income premium enjoyed by capital city inhabitants, and lower levels of military spending by ruling elites, as predicted by the theory.
    JEL: D02 D74 R12
    Date: 2012–12
  16. By: Hirota, Haruaki; Yunoue, Hideo
    Abstract: The purpose of this paper is to evaluate a fiscal common-pool problem in a Japanese local government. Especially, we focus on the relationship between council size and land development expenditure of local government using a dataset of 13,989 municipalities in Japan from FY2001 to FY2006. We deal with an identification of causal effects by applying regression discontinuity design’s framework to address problem of endogeneity bias. Our results show that land development expenditure of small municipalities induce the fiscal common-pool problem over public projects.
    Keywords: fiscal common-pool problem; council size; government expenditure; regression discontinuity design
    JEL: H77 H76
    Date: 2013–01
  17. By: Schilirò, Daniele
    Abstract: The euro crisis, the greater European integration, the effects of globalization have affected especially the Sicilian economy. A region in which there is an increased dependency of the economy and employment from politics for the chronic weakness of the market economy and the lack of strong civic culture. This paper, after summarizing the experience of industrial districts in Sicily in the first period of their existence from 2007 to 2010, analyzes the “Patti di Sviluppo” (Development Pacts) of industrial districts for the period 2011-2013 in order to provide an update picture of the Sicilian district system . The work contains a set of data that help to describe the manufacturing districts in Sicily and their characteristics, but also it offers some considerations about the future prospects of the new districts recognized by the Region and the conditions necessary to ensure that the experience of districts in Sicily will result positive.
    Keywords: Distretti produttivi; sviluppo locale; innovazione; internazionalizzazione
    JEL: O18 L20 R11 R38
    Date: 2013–01

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