nep-geo New Economics Papers
on Economic Geography
Issue of 2013‒04‒13
twenty-one papers chosen by
Andreas Koch
Institute for Applied Economic Research

  1. Knowledge spillovers and economic performance of firms located in depressed areas: does geographical proximity matter? By Liliana Araújo; Sandra T. Silva; Aurora A.C. Teixeira
  2. The Geography of Trade and Technology Shocks in the United States By David H. Autor; David Dorn; Gordon H. Hanson
  3. Economic Growth and Regional Labor Market Development in German Regions: Okun’s Law in a Spatial Context By Oberst, Christian; Oelgemöller, Jens
  4. Growth in Regions By Nicola Gennaioli; Rafael La Porta; Florencio Lopez de Silanes; Andrei Shleifer
  5. High-Impact Minimum Wages and Heterogeneous Regions By Philipp vom Berge; Hanna Frings; Alfredo R. Paloyo
  6. Task Specialization in U.S. Cities from 1880-2000 By Michaels, Guy; Rauch, Ferdinand; Redding, Stephen J.
  7. Which Firms are Left in the Periphery? - Spatial Sorting of Heterogeneous Firms with Scale Economies in Transportation By Forslid, Rikard; Okubo, Toshihiro
  8. Geographical reallocation and unemployment during the Great Recession: the role of the housing bust By Fatih Karahan; Serena Rhee
  9. The efect on firms' Productivity of accessibility. The Spanish manufacturung sector By David, Martín-Barroso; Juan Andres, Nuñez; Francisco J., Velazquez
  10. Cost inefficiency and Optimal Market Structure in Spatial Cournot Discrimination By Ricardo Biscaia; Paula Sarmento
  11. Spatial patterns of organic agriculture adoption: evidence from Honduras By Wollni, Meike; Andersson, Camilla
  12. Place Based Policies with Unemployment By Kline, Patrick; Moretti, Enrico
  13. Race-Specific Agglomeration Economies: Social Distance and the Black-White Wage Gap By Elizabeth Ananat; Shihe Fu; Stephen L. Ross
  14. Does Culture Affect Local Productivity and Urban Amenities? By Brahim Boualam
  15. Do large departments make academics more productive? Agglomeration and peer effects in research By Bosquet, Clément; Combes, Pierre-Philippe
  16. Geography and the Determinants of Firm Exports in Indonesia By Farole, Thomas; Rodríguez-Pose, Andrés; Tselios, Vassilis; Winkler, Deborah
  17. Portuguese Trade and European Union: The Gravity Model By Leitão, Nuno Carlos; Tripathi, Sabyasachi
  18. Geography and Intra-National Home Bias: U. S. Domestic Trade in 1949 and 2007 By Crafts, Nicholas; Klein, Alexander
  19. Urbanisation and Migration Externalities in China By Combes, Pierre-Philippe; Démurger, Sylvie; Li, Shi
  20. The Settlement of the United States, 1800 to 2000: The Long Transition towards Gibrat's Law By Desmet, Klaus; Rappaport, Jordan
  21. Conflict, Climate and Cells: A Disaggregated Analysis By Harari, Mariaflavia; La Ferrara, Eliana

  1. By: Liliana Araújo (Faculdade de Economia, Universidade do Porto); Sandra T. Silva (CEF.UP, Faculdade de Economia, Universidade do Porto); Aurora A.C. Teixeira (CEF.UP, Faculdade de Economia, Universidade do Porto; INESC Porto, OBEGEF)
    Abstract: Extensive literature on the contribution of knowledge spillovers to growth and development at the regional level exists but these studies mainly features regions characterised by a high level of economic development. This paper assesses the importance of knowledge spillovers for firms located in relatively small, peripheral and economically depressed areas. Based on both primary (direct surveys to 257 firms) and secondary data, we concluded that the more relevant knowledge spillovers for firms located in a depressed region of northern Portugal (Vale do Ave) are inter-regional and international. This suggests that the contacts established with sources of knowledge from outside the region under analysis and abroad are crucial for the performance of firms. Despite the innovative intra-industry environment impacts positively on the economic performance of firms, our results convey that in such peripheral and depressed region geographical proximity is not critical for the firms’ economic performance.
    Keywords: Depressed areas; Evolutionary Economic Geography; Knowledge Spillovers, Innovation.
    JEL: R11 B52 D80 O3
    Date: 2013–03
  2. By: David H. Autor; David Dorn; Gordon H. Hanson
    Abstract: This paper explores the geographic overlap of trade and technology shocks across local labor markets in the United States. Regional exposure to technological change, as measured by specialization in routine task-intensive production and clerical occupations, is largely uncorrelated with regional exposure to trade competition from China. While the impacts of technology are present throughout the United States, the impacts of trade tend to be more geographically concentrated, owing in part to the spatial agglomeration of labor-intensive manufacturing. Our findings suggest that it should be possible to separately identify the impacts of recent changes in trade and technology on U.S. regional economies.
    JEL: F16 O3 R1
    Date: 2013–04
  3. By: Oberst, Christian (E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN)); Oelgemöller, Jens (Institute for Spatial and Housing Economics)
    Abstract: The inverse relationship between economic growth and labor market developments in the form of changes in the unemployment rate is known in economic literature as Okun’s law. The objectives of this paper are to estimate a regionalized Okun coefficient and its associated (regional) unemployment thresholds. The suitability and limitations of Okun’s law as a rule of thumb for regional economic growth and labor market policy are also discussed. Motivated by “Germany’s Jobs Miracle” in face of the economic crisis of 2008 and 2009, the existence of an uncoupling effect between economic and unemployment growth is questioned and whether regional economic growth is a driving force for regional labor market development. A regional dataset for the years 2002 to 2009 is employed for this study. The spatial dimension is pursued in two ways: a non-parametric approach using functionally defined labor markets as study areas and the application of spatial econometric panel data models, in particular the Spatial Durbin Error Model. The rationale is that functionally defined regional study areas are the appropriate spatial reference level for the analysis. It is found that, without accounting for spatial dependence, regionalized Okun coefficients are likely to be overestimated. The empirical results confirm a positive impact of economic growth on labor market performance; however, the estimated effect of regional economic growth is far lower than would have been expected. The paper illustrates the limited transferability of Okun’s law as a rule of thumb for growth dynamics on a regional level as well as limitations of regional growth dynamics for regional labor market development.
    Keywords: Okun’s Law; Spatial Econometrics; Regional Labor Markets; Regional Growth
    JEL: C21 C23 E24 E32 R12
    Date: 2013–03
  4. By: Nicola Gennaioli; Rafael La Porta; Florencio Lopez de Silanes; Andrei Shleifer
    Abstract: We use a newly assembled sample of 1,503 regions from 82 countries to compare the speed of per capita income convergence within and across countries. Regional growth is shaped by similar factors as national growth, such as geography and human capital. Regional convergence is about 2.5% per year, not more than 1% per year faster than convergence between countries. Regional convergence is faster in richer countries, and countries with better capital markets. A calibration of a neoclassical growth model suggests that significant barriers to factor mobility within countries are needed to account for the evidence.
    JEL: O43 O47 R11
    Date: 2013–04
  5. By: Philipp vom Berge; Hanna Frings; Alfredo R. Paloyo
    Abstract: We estimate the effects on wage and employment growth rates of the introduction and subsequent increases of a substantial minimum wage in the main construction industry of Germany. Using a regional dataset constructed from individual employment histories, we exploit the spatial dimension and border discontinuities of the regional data to account for spillovers between districts and unobserved heterogeneity at the local level. The results indicate that the minimum wage increased the wage growth rate for East Germany but did not have a significant impact on the West German equivalent. The estimated eff ect on the employment growth rate reveals a contraction in the East of about 2.6 to 3.1 percentage points for a one-standard-deviation increase in the minimum-wage bite, amounting to roughly half of the overall decline in the growth rate, but no significant change is observed for the West.
    Keywords: Construction sector; Germany; minimum wage; spatial heterogeneity; spatial panel data
    JEL: J31 J38
    Date: 2013–03
  6. By: Michaels, Guy; Rauch, Ferdinand; Redding, Stephen J.
    Abstract: We develop a new methodology for quantifying the tasks undertaken within occupations using 3,000 verbs from around 12,000 occupational descriptions in the Dictionary of Occupational Titles (DOTs). Using micro-data from the United States from 1880-2000, we find an increase in the employment share of interactive occupations within sectors over time that is larger in metro areas than non-metro areas. We provide evidence that this increase in the interactiveness of employment is related to the dissemination of improvements in transport and communication technologies. Our findings highlight a change in the nature of agglomeration over time towards an increased emphasis on human interaction.
    Keywords: economic development; human interaction; urbanization
    JEL: N92 O18 R12
    Date: 2013–01
  7. By: Forslid, Rikard; Okubo, Toshihiro
    Abstract: This paper introduces scale economies or density economies in transportation in a trade and geography model with heterogeneous firms. This relatively small change to the standard model produces a new pattern of spatial sorting among firms. Contrary to the existing literature, our model produces the result that firms of intermediate productivity relocate to the large core region, whereas high and low productivity firms remain in the periphery. Trade liberalisation leads to a gradual relocation to the core, with the most productive firms remaining in the periphery.
    Keywords: heterogeneous firms; scale economies in transportation
    JEL: F12 F15
    Date: 2013–03
  8. By: Fatih Karahan; Serena Rhee
    Abstract: This paper quantitatively evaluates the hypothesis that the housing bust in 2007 decreased geographical reallocation and increased the dispersion and level of unemployment during the Great Recession. We construct an equilibrium model of multiple locations with frictional housing and labor markets. When house prices fall, the amount of home equity declines, making it harder for homeowners to afford the down payment on a new house after moving. Consequently, the decline in house prices reduces migration and causes unemployment to rise differently in different locations. The model accounts for 90 percent of the increase in geographical dispersion of unemployment and the entire decline in net migration. However, despite large effects on migration and geographical dispersion of unemployment, the effect on aggregate unemployment is moderate: Our findings suggest that, absent the housing bust, aggregate unemployment would have been 0.5 percentage point lower.
    Keywords: Housing - Prices ; Unemployment ; Geography ; Labor market ; Labor mobility
    Date: 2013
  9. By: David, Martín-Barroso; Juan Andres, Nuñez; Francisco J., Velazquez
    Abstract: This paper evaluates the impact of accessibility on the productivity of Spanish manufacturing firms. We suggest the use of accessibility indicators to workers and commodities, integrating transport, land use, and individual components in their measurement, and computing real distances or travelling times using the Spanish full road network. The estimation is carried out in two steps. In the first one we estimate almost a hundred production functions using a panel of 155,937 firms along the 1999-2009 period from SABI database, applying Levinsohn and Petrin technique. From these estimations we derive the Total Factor Productivity function for year 2009, which is then explained in the second estimation step as a function of the accessibility indicators and additional control variables. Results evidence the crucial role of the accessibility to commodities, and a lesser but significant effect of workers’ accessibility on firms’ productivity.
    Keywords: Accessibility, Firm Productivity, Transport Infrastructures.
    JEL: D24 R12 R40
    Date: 2013–04–04
  10. By: Ricardo Biscaia (CIPES - Centro de Investigação de Políticas de Ensino Superior); Paula Sarmento (FEP - Faculdade de Economia do Porto)
    Abstract: This paper analyzes the location patterns of firms in Cournot spatial discrimination setting. The innovation step is that firms are allowed to have different marginal costs of the production. When analyzing the two-stage location-quantity game, we conclude that firms choose the central agglomeration outcome whatever the marginal cost difference between them. When maximizing social welfare, the social planner chooses the central location for both firms as well if the marginal cost differences are not too big. When allowed to decide if the inefficient firm should be in the market or not, the social planner removes the inefficient firm from the market if its cost is too high.
    Keywords: Spatial Competition, Cournot Discrimination, Market Structure, Cost Differentials
    JEL: D21 L11 L13
    Date: 2012–08
  11. By: Wollni, Meike; Andersson, Camilla
    Abstract: In low potential agricultural areas like the Honduran hillsides characterized by soil degradation and erosion, organic agriculture can provide a means to break the downward spiral of resource degradation and poverty. We use original survey data to analyze the factors influencing the decision to convert to organic agriculture. Previous studies have emphasized the role of spatial patterns in the diffusion and adoption of agricultural technologies in general and organic agriculture in particular. These spatial patterns can result from a variety of underlying factors. In this article we test various potential explanations, including the availability of information in the farmer's neighborhood, social conformity concerns and perceived positive external effects of the adoption decision, in a spatially explicit adoption model. We find that farmers who believe to act in accordance with their neighbors' expectations and with greater availability of information in their neighborhood network are more likely to adopt organic agriculture. Furthermore, perceived positive productivity spillovers to neighboring plots decrease the probability of adoption. We discuss the implications of our findings for the dissemination of sustainable agricultural technologies in low-potential agricultural areas in developing countries.
    Keywords: neighborhood effects, social conformity, spatial autoregressive probit model, organic agriculture, technology adoption, Central America, Agricultural and Food Policy, International Development, Land Economics/Use, Production Economics, Research and Development/Tech Change/Emerging Technologies, Research Methods/ Statistical Methods, O13, O33, Q12, Q16,
    Date: 2013–03
  12. By: Kline, Patrick; Moretti, Enrico
    Abstract: Many countries have policies aimed at creating jobs in depressed areas with high unemployment rates. In standard spatial equilibrium models with perfectly competitive labor and land markets, local job creation efforts are distortionary. We develop a stylized model of frictional local labor markets with the goal of studying the efficiency of unemployment differences across areas and the potential for place based policies to correct local market failures. Our model builds on the heavily studied Diamond - Mortensen - Pissarides framework, adapted to a local labor market setting with a competitive housing market. The result is a simple search analogue of the classic Roback (1982) model that provides a tractable environment for studying the effects of local job creation efforts. In the model, workers are perfectly mobile and the productivity of worker-firm matches may vary across metropolitan areas. In equilibrium, higher local productivity results in higher nominal wages, higher housing costs, and lower unemployment rates. Although workers can move freely to arbitrage away differences in expected utility across metropolitan areas, equilibrium unemployment rates are not equalized across space. We find that if hiring costs are excessive, firms may post too few vacancies. This problem may be offset via local hiring subsidies of the sort found in many place based policies. The optimal hiring subsidy is city specific in the sense that it depends upon the local productivity level.
    Keywords: cities; spatial equilibrium
    JEL: J6
    Date: 2013–02
  13. By: Elizabeth Ananat (Duke University); Shihe Fu (Xiamen University); Stephen L. Ross (University of Connecticut)
    Abstract: We demonstrate a striking but previously unnoticed relationship between city size and the black-white wage gap, with the gap increasing by 2.5% for every million-person increase in urban population. We then look within cities and document that wages of blacks rise less with agglomeration in the workplace location, measured as employment density per square kilometer, than do white wages. This pattern holds even though our method allows for non-parametric controls for the effects of age, education, and other demographics on wages, for unobserved worker skill as proxied by residential location, and for the return to agglomeration to vary across those demographics, industry, occupation and metropolitan areas. We find that an individual’s wage return to employment density rises with the share of workers in their work location who are of their own race. We observe similar patterns for human capital externalities as measured by share workers with a college education. We also find parallel results for firm productivity by employment density and share college-educated using firm racial composition in a sample of manufacturing firms. These findings are consistent with the possibility that blacks, and black majority firms, receive lower returns to agglomeration because such returns operate within race, and blacks have fewer same-race peers and fewer highly-educated same-race peers at work from whom to enjoy spillovers than do whites. Data on self-reported social networks in the General Social Survey provide further evidence consistent with this mechanism, showing that blacks feel less close to whites than do whites, even when they work exclusively with whites. We conclude that social distance between blacks and whites preventing shared benefits from agglomeration is a significant contributor to overall black-white wage disparities.
    Keywords: Black White Wage Gap, Agglomeration Economies, Human Capital Externalities, Information Networks, Total Factor Productivity
    JEL: J15 J24 J31 R23 R32
    Date: 2013–03
  14. By: Brahim Boualam
    Abstract: Does a better cultural milieu make a city more livable for residents and improve its business environment for firms? To address this question, I compute a measure of cultural specialization based on detailed occupational data for 362 U.S. metropolitan areas. I then estimate hedonic wage and rent equations and ask if differences in the cultural environment across cities capitalize into housing price and wage differentials. Simple correlations replicate standard results from the literature: cities that are more specialized in cultural and artistic occupations enjoy higher factor prices. Using time-series data, controlling for observable and unobservable city characteristics and implementing alternative specifications strongly alter this result. Even though the arts and culture might be appealing for some people and firms, such determinants are not strong enough to affect factor prices at the metropolitan level.
    Keywords: Urban economics, location choice, local amenities, culture.
    Date: 2013–03
  15. By: Bosquet, Clément; Combes, Pierre-Philippe
    Abstract: We study the effect of a large set of department characteristics on individual publication records. We control for many individual time-varying characteristics, individual fixed-effects and reverse causality. Department characteristics have an explanatory power that can be as high as that of individual characteristics. The departments that generate most externalities are those where academics are homogeneous in terms of publication performance and have diverse research fields, and, to a lesser extent, large departments, with more women, older academics, star academics and foreign co-authors. Department specialisation in a field also favours publication in that field. More students per academic does not penalise publication. At the individual level, women and older academics publish less, while the average publication quality increases with average number of authors per paper, individual field diversity, number of published papers and foreign co-authors.
    Keywords: economic geography; economics of science; networks; productivity determinants; selection and endogeneity
    JEL: I3 J24 R12
    Date: 2013–03
  16. By: Farole, Thomas; Rodríguez-Pose, Andrés; Tselios, Vassilis; Winkler, Deborah
    Abstract: This paper uses data from the Indonesian manufacturing census in order to uncover the determinants of firm exports over the period 1990-2005. We examine to what extent differences in firm export propensity and intensity are a consequence of firm-level (microeconomic), of place-based (macroeconomic) first- and second-nature geography characteristics, or of a combination of the two. The results indicate that both internal and external factors matter. Second-nature, rather than first-nature, geography makes an important difference. The conditions of a firm’s province and those of neighboring provinces shape firm exports. Agglomeration effects, education and transport infrastructure endowment play a particularly relevant role in Indonesian firms’ export propensity, while export spillovers increase export intensity.
    Keywords: Asia; Export intensity; Export propensity; Geography; Indonesia; Macro-factors; Micro-factors
    JEL: F1 F2 R1
    Date: 2013–02
  17. By: Leitão, Nuno Carlos; Tripathi, Sabyasachi
    Abstract: This research examines the determinants of bilateral trade between Portugal and European Union countries (EU-27) for the period 2000-2010, using a panel data. In this study we revisited the recent contribution as in Charoensukmongkol and Sexton (2011), Samy and Dehejia (2011), Serrano and Pinilla (2012), and Faustino and Proença (2011). The findings show that Portuguese trade flows are according the Linder hypothesis. The international trade is explained by Heckscher-Ohlin theorem. The empirical results demonstrate that geographical distance has a negative and significant effect on bilateral trade, i.e., there is a bilateral trade increase when trade partners are close. The economic dimension and common border are positively correlated with bilateral trade. Our results also support the hypothesis that physical capital endowment has a positive effect on bilateral trade.
    Keywords: Gravity model, panel data, common border, geographical distance and factor endowment.
    JEL: C20 C30 F12
    Date: 2013–04
  18. By: Crafts, Nicholas; Klein, Alexander
    Abstract: This paper examines home bias in U. S. domestic trade in 1949 and 2007. We use a unique dataset of 1949 carload waybill statistics produced by the Interstate Commerce Commission and 2007 Commodity Flow Survey data. The results show that home bias was considerably smaller in 1949 than in 2007 and that home bias in 1949 was even negative for several commodities. We argue that the difference between the geographical distribution of manufacturing activities in 1949 and that of 2007 is an important factor explaining the differences in the magnitudes of home-bias estimates in those years.
    Keywords: gravity equation; intra-national home bias; manufacturing belt; spatial clustering
    JEL: F14 N72
    Date: 2013–01
  19. By: Combes, Pierre-Philippe; Démurger, Sylvie; Li, Shi
    Abstract: We evaluate the role that cities play on individual productivity in China. First, we show that location explains a large share of nominal wage disparities. Second, even after controlling for individual and firms characteristics and instrumenting city characteristics, the estimated elasticity of wage with respect to employment density is about three times larger than in Western countries. Land area and industrial specialisation also play a significant role whereas the access to external markets does not. Therefore, large agglomeration economies prevail in China and they are more localised than in Western countries. Third, we find evidence of a large positive impact of the local share of migrants on local workers' wages. Overall, these results strongly support the productivity gains that can be expected from further migration and urbanisation in China.
    Keywords: agglomeration economies; China; migration; urban development; wage disparities
    JEL: J31 O18 O53 R12 R23
    Date: 2013–02
  20. By: Desmet, Klaus; Rappaport, Jordan
    Abstract: This paper studies the long run development of U.S. counties and metro areas from 1800 to 2000. In earlier periods smaller counties converge whereas larger counties diverge. Over time, due to changes in the age composition of locations and net congestion, convergence dissipates and divergence weakens. Gibrat's law emerges gradually without fully attaining it. Our findings suggest that orthogonal growth is a consequence of reaching a steady state population distribution, rather than an explanation of that distribution. A simple one-sector model, with entry of new locations, a growth friction, and decreasing net congestion closely matches these and related dynamics.
    Keywords: Gibrat's law; growth across space; long-term development; settlement of US; spatial distribution of population
    JEL: N91 N92 O18 R11 R12
    Date: 2013–02
  21. By: Harari, Mariaflavia; La Ferrara, Eliana
    Abstract: We conduct a geographically and temporally disaggregated empirical analysis of civil conflict at the sub-national level in Africa over the period 1997-2011. Our units of observation are cells of 1 degree of latitude by 1 degree of longitude. We exploit within-year variation in the timing of weather shocks and in the growing season of different crops, as well as spatial variation in crop cover, to construct an original measure of shocks that are relevant for agricultural production. Employing a new drought index we show that negative climate shocks which occur during the growing season of the main crop cultivated in the cell have a sizeable and persistent effect on conflict incidence. We also use state-of-the-art spatial econometric techniques to test for the presence of temporal and spatial spillovers in conflict, and we find both to be sizeable and highly statistically significant. Exploiting variation in the type of conflict episode, we find that the impact of climate shocks on conflict is particularly significant when focusing on outcomes such as battles and violence against civilians. Our estimates can be used to predict how future warming scenarios affect the prevalence and diffusion of conflict.
    Keywords: Africa; civil conflict; gridded data; spatial; weather shocks
    JEL: O12
    Date: 2013–01

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