nep-geo New Economics Papers
on Economic Geography
Issue of 2013‒09‒28
twelve papers chosen by
Andreas Koch
Institute for Applied Economic Research

  1. A spatial and sectoral analysis of firm demography in Italy By Giuseppe Espa; Danila Filipponi; Diego Giuliani; Davide Piacentino
  2. Overcoming localization of knowledge: The role of professional service firms By Stefan Wagner; Karin Hoisl; Grid Thoma
  3. Trade, economic geography and the choice of product quality By PICARD, Pierre M.
  4. The Gravity Equation in International Trade: An Explanation By Chaney, Thomas
  5. “Do labour mobility and technological collaborations foster geographical knowledge diffusion? The case of European regions” By Ernest Miguélez; Rosina Moreno
  6. Employment, transport infrastructure and rural depopulation: a new spatial equilibrium model By McArthur, David Philip; Thorsen, Inge; Ubøe, Jan
  7. Universities as local knowledge hubs under different technology regimes – New evidence from academic patenting By Friedrich Dornbusch; Thomas Brenner
  8. Spatial issues on a hedonic estimation of rents in Brussels By PHOLO BALA, Alain; PEETERS, Dominique; THOMAS, Isabelle
  9. Employer education, agglomeration and workplace training: poaching vs knowledge spillovers By Giuseppe Croce; Edoardo Di Porto; Emanuela Ghignoni; Andrea Ricci
  10. Agglomeration Economies in Classical Music By Karol J. Borowiecki
  11. Role of Hub Firms in Geographical Transaction Network By SAITO Yukiko
  12. Relationship-specific Investment as a Barrier to Entry By Hiroshi Kitamura; Akira Miyaoka; Misato Sato

  1. By: Giuseppe Espa; Danila Filipponi; Diego Giuliani; Davide Piacentino
    Abstract: This paper looks at spatial and sectoral effects on firm entry and exit in Italian NUTS-3 regions, over the period 2004-2009. We use a new version of spatial shift-share decomposition which looks more effectively at the neighbourhood influence, beyond traditionally looking at national, industrial mix and regional-shift components. We separately analyse the sub-periods 2004-2007 and 2007-2009, in order to take into account the 2007 crisis. Results seem to be substantially divergent between the Southern regions, i.e. the poorest areas, and the rest of Italy. The firm demography seems to manifest higher instability over time, i.e. more entries but also more exits, in the Southern regions and this is associated with the presence of industrial mix disadvantage. On other hand, the firm demography is more stable, i.e. less entries but also less exits, in the rest of Italy and this reflects an industrial mix advantage. Such results seems to be widespread within the two macro-areas as the analysis of neighbourhood influence points out. externalities.
    Keywords: firm demography, crisis, spatial shift-share, Italian regions
    JEL: C21 L26 R12
    Date: 2013
  2. By: Stefan Wagner (ESMT European School of Management and Technology); Karin Hoisl (University of Munich); Grid Thoma (University of Camerino)
    Abstract: The literature on organizational learning asserts that external learning is often limited geographically and technologically. We scrutinize to what extent organizations acquire external knowledge by accessing external knowledge repositories. We argue that professional service firms (PSFs) grant access to nonlocalized knowledge repositories and thereby not only facilitate external learning but also help to overcome localization. Focusing on patent law firms, we test our predictions using a unique dataset of 544,820 pairs of EP patent applications. Analyzing patterns of knowledge flows captured in patent citations we find that accessing a PSF’s repository facilitates the acquisition of external knowledge. As the effect is more pronounced for knowledge that is distant to a focal organization we conclude that having access to a knowledge repository compensates for localization disadvantages.
    Keywords: Learning, knowledge acquisition, localization, patent citations, professional service firm
    Date: 2013–09–06
  3. By: PICARD, Pierre M. (CREA, University of Luxembourg; Université catholique de Louvain, CORE, Belgium)
    Abstract: The present paper studies the effect of the choice of product quality on trade and location of firms. We discuss a model where consumers have preferences for the quality of a set of differentiated varieties. Firms do not only develop and sell manufacturing varieties in a monopolistic competitive market but also determine the quality level of their varieties by investing in research and development. We explore the price and quality equilibrium properties when firms are immobile. We then consider a footloose capital model where capital is allocated to the manufacturing firms in the region offering the highest return. We show that the larger region produces varieties of higher quality and that the quality gap increases with larger asymmetries in region sizes and with larger trade costs. Finally, the home market effect is mitigated when firms choose their product quality.
    Keywords: monopolistic competition, endogenous quality, economic geography
    Date: 2013–07–23
  4. By: Chaney, Thomas
    Abstract: The gravity equation in international trade is one of the most robust empirical finding in economics: bilateral trade between two countries is proportional to size, measured by GDP, and inversely proportional to the geographic distance between them. While the role of size is well understood, the role of distance remains a mystery. I propose the first explanation for the gravity equation in international trade, based on the emergence of a stable network of input-output linkages between firms. Over time, a firm acquires more suppliers and customers, which tend to be further away. I show that if, as observed empirically, (i) the distribution of firm sizes is well approximated by Zipf’s law and (ii) larger firms export over longer distances on average, then aggregate trade is inversely proportional to distance. Data on firm level, sectoral, and aggregate trade support further predictions of the model.
    Keywords: Gravity
    JEL: F1
    Date: 2013–08
  5. By: Ernest Miguélez (Economics and Statistics Division, WIPO and AQR-IREA); Rosina Moreno (Faculty of Economics, University of Barcelona)
    Abstract: The goal of this paper is twofold: first, we aim to assess the role played by inventors’ cross-regional mobility and collaborations in fostering knowledge diffusion across regions and subsequent innovation. Second, we intend to evaluate the feasibility of using mobility and co-patenting information to build cross-regional interaction matrices to be used within the spatial econometrics toolbox. To do so, we depart from a knowledge production function where regional innovation intensity is a function not only of the own regional innovation inputs but also external accessible knowledge stocks gained through interregional interactions. Differently from much of the previous literature, cross-section gravity models of mobility and co-patents are estimated to use the fitted values to build our ‘spatial’ weights matrices, which characterize the intensity of knowledge interactions across a panel of 269 regions covering most European countries over 6 years.
    Keywords: inventors’ spatial mobility, co-patenting, gravity models, weights matrix, knowledge production function. JEL classification: C8, J61, O31, O33, R0.
    Date: 2013–07
  6. By: McArthur, David Philip (Dept. of Health Management and Health Economics, University of Oslo); Thorsen, Inge (Dept. of Economics, Stord/Haugesund University College); Ubøe, Jan (Dept. of Business and Management Science, Norwegian School of Economics)
    Abstract: In this paper we propose a new spatial equilibrium model, and use it to discuss issues related to rural depopulation. The discussion focuses on how investments in transport infrastructure and the spatial distribution of basic sector jobs can promote a relatively balanced growth of peripheral and central areas of a region. Through interdependencies in individual migration decisions and an economic base multiplier mechanism, negative exogenous shocks may take a peripheral zone beyond a bifurcation point, into an equilibrium of dramatically lower population and employment. We study how the location of bifurcation points depend on spatial interaction behavioural parameters and variables subject to regional policy. We also discuss the issue of the timing of interventions intended to prevent a process of rural depopulation.
    Keywords: Employment; transport infrastructure; rural depopulation; spatial equilibrium model
    JEL: R00 R10
    Date: 2013–09–16
  7. By: Friedrich Dornbusch (Fraunhofer Institute for Systems and Innovation Research ISI, Competence Center Policy and Regions); Thomas Brenner (Economic Geography and Location Research, Philipps-Universität Marburg)
    Abstract: It is often claimed that universities act as local knowledge factories. Although this function is largely analyzed in previous research, there still is a knowledge gap regarding the role of a technological match between the profiles of partners in university-industry interactions. In addition, the effects of different knowledge dynamics in technological regimes remain under-researched. In this paper, we thus draw special attention to the question how geographical distance and the specific role of a technological fit between the knowledge provided by the university and the technological needs of the local industry affects interactions between universities and firms. Thereby, we differentiate between six technological regimes constituted by different knowledge dynamics. Our analyses are based on a unique dataset containing all German universities’ academic patenting and publication activities. As these are further enriched by secondary data, they enable us to show that the technological fit between a university and its surrounding region (in terms of local industry needs) indeed has a significant influence on a university’s innovation-related research interactions, especially with small firms. We further show that this effect additionally depends on the underlying knowledge base in heterogeneous technological regimes.
    Keywords: university-industry interaction, technological fit, knowledge base, academic patenting, technology regime, local knowledge hub
    JEL: O31 R12 L14
    Date: 2013–10–09
  8. By: PHOLO BALA, Alain (Department of Economics and Econometrics, University of Johannesburg, South Africa); PEETERS, Dominique (Université catholique de Louvain, CORE, Belgium); THOMAS, Isabelle (Université catholique de Louvain, CORE, Belgium)
    Abstract: Using Belgian microdata, we assess the impact, on a hedonic regression, of the distortions arising from the choice of either a specific zoning system or the delineation of the study area. We also evaluate the biases that arise when spatial effects are not accounted for. Given that the dependent variable is interval-coded, controlling for spatial dependence in this context is challenging. We address this problem with two alternative strategies. Firstly, we use the Gibbs Sampling algorithm to estimate spatial econometric models which extends the interval regression model. A major drawback of this approach is that the implied estimation is proned to the endogeneity biases inherent to our hedonic regression model. To circumvent the endogeneity issues triggered by the first estimation strategy, we also use a two-stage estimation procedure with locational fixed effects. In all specifications, results are sensitive to the Modifiable Areal Unit Problem (MAUP) and to the choice of the delineation of the study area. Moreover, they confirm the existence of substantive spatial dependence. Conversely to the previous results with a negative elasticity for the percentage of the area covered by agriculture and a positive elasticity for the potential accessibility to jobs, the second approach implies opposite effects for those two variables. This indicates that dwellings close to agricultural areas and with a lower accessibility to the main employment centers are highly demanded and that endogeneity biases are not negligible.
    Keywords: MAUP, interval regression, spatial dependence, spatial heterogeneity, Brussels
    JEL: C21 C24 C25 C34 Q53 R21
    Date: 2013–07–23
  9. By: Giuseppe Croce; Edoardo Di Porto; Emanuela Ghignoni; Andrea Ricci
    Abstract: This paper analyzes the role of the employer in workplace training, a novelty with respect to the literature on this topic. Taking advantage of a unique dataset on Italy, we study how individual employer profile and the agglomeration of employers influence firms’ propensity to invest in training. Our findings show that highly educated employers have a greater propensity to invest in workplace training. Moreover, we are able to capture the effect of employers’ human capital agglomeration on the training decision. We assert that such agglomeration leads to two different alternative scenarios: 1) a poaching effect may prevail, therefore competition among employers induces less propensity to train workers; 2) a positive knowledge spillover effect may prevail leading to a greater propensity to engage in training. We test these two options discovering that in the Italian case, where small businesses are prominent, the first effect is stronger. Several econometrics issues are considered in our empirical strategy: the skewed and bounded nature of the training decision indicator, the endogeneity issues derived from the agglomeration effect as well as the cross section dependence problems affecting standard errors.
    Keywords: workplace training; poaching; knowledge spillovers; entrepreneurship cluster, employer’s education, social capital, proximity.
    JEL: J24 O15 O18 R23
    Date: 2013–09
  10. By: Karol J. Borowiecki (Department of Business and Economics, University of Southern Denmark, Odense, Denmark)
    Abstract: This study investigates agglomeration effects for classical music production in a wide range of cities for a global sample of composers born between 1750 and 1899. Theory suggests a trade-off between agglomeration economies (peer effects) and diseconomies (peer crowding). I test this hypothesis using historical data on composers and employ a unique instrumental variable - a measure of birth centrality, calculated as the average distance between a composer´s birthplace and the birthplace of his peers. I find a strong causal impact of peer group size on the number of important compositions written in a given year. Consistent with theory, the productivity gain eventually decreases and is characterized by an inverted U-shaped relationship. These results are robust to a large series of tests, including checks for quality of peers, city characteristics, various measures of composers´ productivity, and across different estimations in which also time-varying birth centrality measures are used as instrumental variables.
    Keywords: agglomeration economies, density effects, peer effects, productivity, urban history, cities, composer
    JEL: D24 J24 N90 R12 Z11
    Date: 2013–09
  11. By: SAITO Yukiko
    Abstract: In this study, we investigate the role of geographical proximity in an inter-firm transaction network and the role of hub firms on geographical spread of regional impact. By using inter-firm micro transaction data of over 800 thousands firms, we found that indirect transaction is geographically dispersed mainly due to a few hub firms, although firm's direct transactions mostly occur within geographically narrow areas. More precisely, median distance between indirect transaction partners (partners' partners) is 255km, which is much larger than that between direct transaction partners (29km). In a counterfactual transaction network without hub firms, whose transaction relations are no less than 100, median distance between indirect transaction partners is reduced to 70km, thereby suggesting the important role of hub firms in a geographical transaction network. We confirm this suggestion through an analysis of regional impact of the Great East Japan Earthquake.
    Date: 2013–09
  12. By: Hiroshi Kitamura (Faculty of Economics, Kyoto Sangyo University); Akira Miyaoka (Graduate School of Economics, Osaka University); Misato Sato (Department of Economics, The George Washington University)
    Abstract: In this paper, we construct an interregional trade model that has en- dogenous fertility rates in the manner of Helpman and Krugman (1985). The presented model shows that fertility rates in a large region become lower than those in a small region because of the agglomeration of man- ufacturing firms in the former. The agglomeration of firms in a region lowers the relative price of manufactured goods to child rearing costs, which raises the fertility rates. We also find that a decline in transportation costs results in the ag- glomeration of manufacturing firms, which lowers fertility rates in both large and small regions. Finally, we extend our two-region model to a multi-region model and find that the number of manufacturing firms in larger regions is always greater than that in smaller regions, meaning that fertility rates in the former are always lower than those in the latter.
    Keywords: Vertical Relation; Entry Deterrence; Relationship-Specific Investment; Switch- ing Costs
    JEL: L12 L41 L42
    Date: 2013–09

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