nep-geo New Economics Papers
on Economic Geography
Issue of 2013‒05‒24
nine papers chosen by
Andreas Koch
Institute for Applied Economic Research

  1. Simultaneous-equations Analysis in Regional Science and Economic Geography By Mitze, Timo; Stephan, Andreas
  2. The Urban Wage Growth Premium: Sorting or Learning? By Sabine D'Costa; Henry G. Overman
  3. Spinoffs and Clustering By Russell Golman; Steven Klepper
  4. Coping with regional inequality in Sweden : structural change, migrations and policy, 1860-2000 By Kerstin Enflo; Joan R. Rosés
  5. Firm Heterogeneity and the Localization of Economic Activities By Pamela Bombarda
  6. Regional Policy: An Alternative Approach By Alexiadis, Stilianos
  7. Forecasting disaggregates by sectors and regions : the case of inflation in the euro area and Spain By Gabriel Pino; Juan de Dios Tena; Antoni Espasa
  8. Local Impact of the Marine Sector in Ireland By Morrissey, Karyn; Farrell, Niall; O'Donoghue, Cathal
  9. The Potential for an Irish Maritime Transportation Cluster: An Input-Output Analysis By Morrissey, Karyn; O’Donoghue, Cathal

  1. By: Mitze, Timo (University of Southern Denmark); Stephan, Andreas (Jönköping International Business School)
    Abstract: This paper provides an overview over simultaneous equation models (SEM) in the context of analyses based on regional data. We describe various modelling approaches and highlight close link of SEMs to theory and also comment on the advantages and disadvantages of SEMs.We present selected empirical works using simultaneous-equations analysis in regional science and economic geography in or-der to show the wide scope for applications. We thereby classify the empirical contributions as either being structural model presentations or vector autoregressive (VAR) models. Finally, we provide the reader with some details on how the various models can be estimated with available software packages such as STATA, LIMDEP or Gauss.
    Keywords: Structural Equation Models; Regional Science and Economics; Empirical Applications; Software
    JEL: C33 C87
    Date: 2013–05–14
  2. By: Sabine D'Costa; Henry G. Overman
    Abstract: This paper is concerned with the urban wage premium and addresses two central issues about which the field has not yet reached a consensus. First, the extent to which sorting of high ability individuals into urban areas explains the urban wage premium. Second, whether workers receive this wage premium immediately, or through faster wage growth over time. Using a large panel of worker-level data from Britain, we first demonstrate the existence of an urban premium for wage levels, which increases in city size. We next provide evidence of a city size premium on wage growth, but show that this effect is driven purely by the increase in wage that occurs in the first year that a worker moves to a larger location. Controlling for sorting on the basis of unobservables we find no evidence of an urban wage growth premium. Experience in cities does have some impact on wage growth, however. Specifically, we show that workers who have at some point worked in a city experience faster wage growth than those who have never worked in a city.
    Keywords: urban wage premium, agglomeration, cities, wage growth, worker mobility
    JEL: R23 J31
    Date: 2013–05
  3. By: Russell Golman; Steven Klepper
    Abstract: Geographic clustering of industries is typically attributed to localized, pecuniary or non-pecuniary externalities. Recent studies across innovative industries suggestthat explosive cluster growth is associated with the entry and success of spinoff firms. We develop a model to explain the patterns regarding cluster growth and spinoff formation and performance, without relying on agglomeration externalities. Clustering naturally follows from spinoffs locating near their parents. In our model, firms grow and spinoffs form through the discovery of new submarkets based on innovation. Rapid and successful innovation creates more opportunities for spinoff entry and drives a region’s growth.
    Keywords: Agglomeration, Clusters, Entry, Innovation, Spinoffs
    JEL: L25 O31 R12 R30
    Date: 2013–05
  4. By: Kerstin Enflo; Joan R. Rosés
    Abstract: In many countries, regional income inequality has followed an inverted Ushaped curve, growing during industrialisation and market integration and declining thereafter. By contrast, Sweden’s regional inequality dropped from 1860 to 1980 and did not show this U-shaped pattern. Accordingly, today’s regional income inequality in Sweden is lower than in other European countries. We note that the prime mover behind the long-run reduction in regional income differentials was structural change, whereas neo-classical and technological forces played a relatively less important role. However, this process of regional income convergence can be divided into two major periods. During the first period (1860-1940), the unrestricted action of market forces, particularly the expansion of markets and high rates of internal and international migrations, led to the compression of regional income differentials. In the subsequent period (1940-2000), the intended intervention of successive governments appears to have also been important for the evolution of regional income inequality. Regional convergence was intense from 1940 to 1980. In this period, governments aided the convergence in productivity among industries and the reallocation of the workforce from the declining to the thriving regions and economic sectors. During the next period (1980-2000), when regional incomes diverged, governments subsidised firms and people in the declining areas.
    Keywords: Convergence, Regional policy, Neo-classical growth model, Labour reallocation
    JEL: N94 N93 R11 R12
    Date: 2012–10
  5. By: Pamela Bombarda (THEMA, Universite de Cergy-Pontoise)
    Abstract: This paper examines how market access strategies, export and FDI, respond to changes in level of integration. Empirical evidence shows that both rm exports and multinational activity are affected by trade liberalization episode. To account for the strong positive correlation between export and FDI, we develop a general equilibrium model that features firm heterogeneity, trade and FDI with final and intermediate products. Dierent spatial networks are considered to quantify the effect of a preferential trade agreement (PTA) on supply mode decisions, for both partner and excluded countries. The model sheds new light on the mechanisms through which geography reshapes the concentration of economic activities inside and outside the PTA area.
    Keywords: Heterogeneous firms; PTA; Spatial networks; Intrafirm trade
    JEL: F12 F15 F23 R12
    Date: 2013
  6. By: Alexiadis, Stilianos
    Abstract: The regional policy problem is often conceived as a trade-off between aggregate efficiency and interregional equity. A policy to allocate investment across regions frequently causes a contradiction in the aims of regional policy, in the sense that it might lead to high rates of aggregate growth accompanied with an unequal distribution of income across regions. On the other hand, a policy to reduce regional inequalities may in fact be inefficient to promote growth of the economy as a whole. It is argued further that under certain conditions the contradiction between aims can be avoided.
    Keywords: Optimal Control Theory, Regional Disparities, Regional Policy
    JEL: R0
    Date: 2013
  7. By: Gabriel Pino; Juan de Dios Tena; Antoni Espasa
    Abstract: We study the performance of different modelling strategies for 969 and 600 monthly price indexes disaggregated by sectors and geographical areas in Spain, regions, and in the EA12, countries, in order to obtain a detailed picture of inflation and relative sectoral prices through geographical areas for each economy, using the forecasts from those models. The study also provides a description of the spatial cointegration restrictions which could be useful for understanding price setting within an economy. We use spatial bi-dimensional vector equilibrium correction models, where the price indexes for each sector are allowed to be cointegrated with prices in neighbouring areas using different definitions of neighbourhood. We find that geographical disaggregation forecasts are very reliable on a regional level in Spain as they improve the forecasting accuracy of headline inflation relative to alternative methods. Geographical disaggregation forecasts are also reliable for the EA12 but only because derived headline inflation forecasting is not significantly worse than alternative forecasts. These results show that regional analysis within countries is appropriate in the euro area. These highly disaggregated forecasts can be used for competitive and other type of macro and regional analysis
    Keywords: Spatial cointegration, Regional and sectoral prices, Regional analysis, Relative prices, Price setting, Competitiveness
    JEL: C2 C5
    Date: 2013–05
  8. By: Morrissey, Karyn; Farrell, Niall; O'Donoghue, Cathal
    Abstract: Much economic policy focuses on increasing or maintaining employment at a national level. However, within the EU, the move to a single market and the increased rate of globalisation has led to a recognition that not all regions would benefit from trade liberalisation. This has led to an increased focus on sub-national policies which require local development strategies. Based on their ability to recreate a complete population distribution across numerous attributes and the need for alternative frameworks to traditional macro-level modelling, spatial microsimulation methodologies have become accepted tools in the evaluation of economic and social policy. Using a spatial microsimulation model this paper seeks to estimate the spatial distribution of marine sector workers and the contribution of their income to the local economy. The spatially references outputs on employment and income generated by the microsimulation model may be used to assess the impact of the sector on the local economy in Ireland. Policy conclusions are then drawn.
    Keywords: economic policy, local development strategies, spatial microsimulation model, Environmental Economics and Policy, Resource /Energy Economics and Policy,
    Date: 2012
  9. By: Morrissey, Karyn; O’Donoghue, Cathal
    Abstract: Economically, Ireland depends heavily upon its shipping sector. However, structural changes arising from the globalisation of shipping fleets and the recent global recession has resulted in a decline in Europe’s shipping sector. Acknowledging the need for direct measures to halt this decline the Irish government introduced a range of policies aimed at developing a maritime transportation cluster in Ireland. Research has indicated that industrial clusters are important for the creation of economic value at the national, regional and sectoral level. Disaggregating the 2007 Input-Output table to include ten additional marine based sectors, this paper examines the potential for developing a maritime transportation cluster given the current characteristics of the sector. The analysis found that given the strength of the maritime transportation linkages with the broader economy, including its intermediate input role in a number of key economic sectors, there is a clear rationale for the development of a cluster for the sector.
    Keywords: Shipping, industrial clusters, Ireland, Environmental Economics and Policy,
    Date: 2012

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