nep-geo New Economics Papers
on Economic Geography
Issue of 2013‒11‒09
eleven papers chosen by
Andreas Koch
Institute for Applied Economic Research

  1. THE GROWTH OF CITIES By Gilles Duranton; Diego Puga
  2. Constructing Regional Advantage and Smart Specialization: Comparison of Two European Policy Concepts By Ron Boschma
  3. On the Notion of Regional Economic Resilience: Conceptualisation and Explanation By Ron Martin; Peter Sunley
  4. Measuring Economic Growth from Outer Space: A Comment By Berliant, Marcus; Weiss, Adam
  5. The impact of regional and sectoral productivity changes on the U.S. economy By Pierre-Daniel G. Sarte; Esteban Rossi-Hansberg; Fernando Parro; Lorenzo Caliendo
  6. Transportation Technology and Economic Change: The Impact of Colonial Railroads on City Growth in Africa By Remi Jedwab; Alexander Moradi
  7. Trade, market integration and spatial price transmission on EU pork markets following Eastern enlargement By Holst, Carsten; von Cramon-Taubadel, Stephan
  8. Governance Mode Choice in Collaborative PhD Projects By Negin Salimi; Rudi Bekkers; Koen Frenken
  9. An alternative to the standard spatial econometric approaches in hedonic house price models By Kathrine Lausted Veie; Toke Emil Panduro
  10. Geographical factors, Growth and Divergence By Nguyen Thang DAO; Julio DÁVILA
  11. Why Do Japanese Non-Local Regional Banks Enter Other Prefectures Under the Region-Based Relationship Banking Policy? By Kondo, Kazumine; Harimaya, Kozo

  1. By: Gilles Duranton (University of Pennsylvania); Diego Puga (CEMFI, Centro de Estudios Monetarios y Financieros)
    Abstract: Why do cities grow in population, surface area, and income per person? Which cities grow faster and why? To these questions, the urban growth literature has offered a variety of answers. Within an integrated framework, this chapter reviews key theories with implications for urban growth. It then relates these theories to empirical evidence on the main drivers of city growth, drawn primarily from the United States and other developed countries. Consistent with the monocentric city model, fewer roads and restrictions on housing supply hinder urban growth. The fact that housing is durable also has important effects on the evolution of cities. In recent decades, cities with better amenities have grown faster. Agglomeration economies and human capital are also important drivers of city growth. Although more human capital, smaller firms, and a greater diversity in production foster urban growth, the exact channels through which those effects percolate are not clearly identified. Finally, shocks also determine the fate of cities. Structural changes affecting the broader economy have left a big footprint on the urban landscape. Small city-specific shocks also appear to matter, consistent with the recent wave of random growth models.
    Keywords: Urban growth, Agglomeration economies, Land use, Transportation, amenities.
    JEL: C52 R12 D24
    Date: 2013–07
  2. By: Ron Boschma
    Abstract: This paper discusses two influential policy concepts at the European level that aim to promote economic diversification of regions, that is the Constructing Regional Advantage concept (CRA) and the Smart Specialization concept (SS). Both approaches are in favour of policy intervention but defy ‘one-size-fits-all’ policies as well as ‘stand-alone’ policies that create new activities in regions from scratch. Although ‘picking-the-winner’ policies are rejected, both policy frameworks identify and prioritise ‘promising’ targets for policy intervention, but they do so differently. The SS concept organizes this identification process through entrepreneurial discovery in which entrepreneurs select the domains of future specialization. The CRA concept focuses on identifying related variety and bottlenecks that prevent related industries in regions to connect and interact. Crucial in both frameworks is the strong involvement of local stakeholders. However, both approaches also agree that rent-seeking behavior, corruption and lock-in are potential threats to effective policy making. To avoid this, both are in favor of an open and inclusive approach and a policy implementation process that is closely monitored. The paper argues that the two policy concepts can provide useful inputs to develop a smart and comprehensive policy design that focuses on true economic renewal in regions and that avoids rent-seeking behaviour of vested players.
    Keywords: smart specialization, constructing regional advantage, Regional Cohesion Policy
    Date: 2013–11
  3. By: Ron Martin; Peter Sunley
    Abstract: Over the past few years a new buzzword has entered academic, political and public discourse: the notion of resilience, a term invoked to describe how an entity or system responds to shocks and disturbances. Although the concept has been used for some time in ecology and psychology, it is now invoked in diverse contexts, both as a perceived (and typically positive) attribute of an object, entity or system and, more normatively, as a desired feature that should somehow be promoted or fostered. As part of this development, the notion of resilience is rapidly becoming part of the conceptual and analytical lexicon of regional and local economic studies: there is increasing interest in the resilience of regional, local and urban economies. Further, resilience is rapidly emerging as an idea ‘whose time has come’ in policy debates: a new imperative of ‘constructing’ or ‘building’ regional and urban economic resilience is gaining currency. However, this rush to use the idea of regional and local economic resilience in policy circles has arguably run somewhat ahead of our understanding of the concept. There is still considerable ambiguity about what, precisely, is meant by the notion of regional economic resilience, about how it should be conceptualized and measured, what its determinants are, and how it links to patterns of long-run regional growth. The aim of this paper is to address these and related questions on the meaning and explanation of regional economic resilience and thereby to outline the directions of a research agenda.
    Keywords: Shocks, Resilience, Robustness, Adaptability, Regional economies
    JEL: R10 R11 B52
    Date: 2013–10
  4. By: Berliant, Marcus; Weiss, Adam
    Abstract: We examine econometric and elementary economic theory issues arising from the model specification in Henderson, Storeygard and Weil (2012), that uses night light data to proxy for missing or unreliable GDP growth data. An alternative approach based on the expenditure function is outlined. It can accommodate prices as well as quantity information from other commodity markets.
    Keywords: GDP, Night light data, Omitted variable, Expenditure function, Spatial autocorrelation
    JEL: D11 D61 O47 O57
    Date: 2013–10–29
  5. By: Pierre-Daniel G. Sarte; Esteban Rossi-Hansberg; Fernando Parro; Lorenzo Caliendo
    Abstract: We study the impact of regional and sectoral productivity changes on the U.S. economy. To that end, we consider an environment that captures the effects of interregional and intersectoral trade in propagating disaggregated productivity changes at the level of a sector in a given U.S. state to the rest of the economy. The quantitative model we develop features pairwise interregional trade across all 50 U.S. states, 26 traded and non-traded industries, labor as a mobile factor, and structures and land as an immobile factor. We allow for sectoral linkages in the form of an intermediate input structure that matches the U.S. input-output matrix. Using data on trade flows by industry between states, as well as other regional and industry data, we calibrate the model and carry out a variety of counterfactual experiments that allow us to gauge the impact of regional and sectoral productivity changes. We find that such changes can have dramatically different effects depending on the sectors and regions affected. In extreme cases, increases in productivity can have negative effects on real GDP (although welfare effects remain positive).
    Date: 2013
  6. By: Remi Jedwab; Alexander Moradi
    Abstract: What is the impact of modern transportation technology on long-run economic change in poor countries with high trade costs? Rail construction in colonial Sub-Saharan Africa provides a natural experiment: 90% of African railroad lines were built before independence, in a context where headloading was the dominant transportation technology. Using new data on railroads and cities over one century within one country, Ghana, and Africa as a whole, we find large permanent effects of transportation technology on economic development. First, colonial railroads had strong effects on commercial agriculture and urban growth before independence. We exploit various identification strategies to ensure these effects are causal. Second, using the fact that African railroads fell largely out of use post-independence, due to mismanagement and lack of maintenance, we show that colonial railroads had a persistent impact on cities. While colonial sunk investments (e.g., schools, hospitals and roads) partly contributed to urban path dependence, evidence suggests that railroad cities persisted because their early emergence served as a mechanism to coordinate contemporary investments for each subsequent period. Railroad cities are also wealthier than non-railroad cities of similar sizes today. This suggests a world where shocks to economic geography can trigger an equilibrium in which cities will emerge to facilitate the accumulation of factors, and thus have long-term effects on economic growth.
    Keywords: Transportation Technology; Development; Path Dependence; Growth
    JEL: R4 R1 O1 O3 N97
    Date: 2013
  7. By: Holst, Carsten; von Cramon-Taubadel, Stephan
    Abstract: The accession of ten countries to the EU in May 2004, and of Bulgaria and Romania in January 2007, eliminated barriers to trade between old and new, and among new member states. We analyse the effects of this accession on the integration of pork markets in the EU. Our results show that the speed of price transmission is positively related to the volume of pork trade between two countries. Our results also reveal that intra-regional price transmission between old or between new member states is more rapid than inter-regional price transmission between old and new member states, and that producer prices in the new member states adjust more rapidly to price changes in the old member states than vice versa. Price transmission is also more rapid between Euro-zone members and member states that share a common border. Finally, our results show that the strengths of these effects have changed in predictable ways in the years since accession took place, as a single, increasingly integrated European pork market has evolved. --
    Keywords: spatial price transmission,market integration,cointegration,European pork market
    Date: 2013
  8. By: Negin Salimi; Rudi Bekkers; Koen Frenken
    Abstract: Joint PhD projects are a promising form of research collaboration, connecting universities to firms and public research organizations. Entering into such collaborations, however, requires decisions in terms of governance. This paper investigates how a university and its partners govern such projects, including decision-making, daily management and disclosure policies. Earlier studies show that shared governance modes have had a higher success rate than centralized governance modes. Nevertheless, more than two thirds of the 191 joint PhD projects we investigated opted for centralized rather than shared governance. Our findings show that: (i) geographical and cognitive distance render the adoption of a shared governance mode less likely; (ii) the partner controlling critical resources tends to centralize governance, and (iii) partnering firms are more likely to put restrictions on publication output than public research organizations. We therefore recommend that universities and their partners take these aspects into account when selecting such projects.
    Keywords: university-industry collaboration, collaborative PhD project, shared governance, centralized governance, proximity, resource imbalances, publication disclosure.
    Date: 2013–10
  9. By: Kathrine Lausted Veie (Department of Food and Resource Economics, University of Copenhagen); Toke Emil Panduro (Department of Food and Resource Economics, University of Copenhagen)
    Abstract: Hedonic models are subject to spatially correlated errors which are a symptom of omitted spatial variables, mis-specification or mismeasurement. Methods have been developed to address this problem through the use of spatial econometrics or spatial fixed effects. However, often spatial correlation is modeled without much consideration of the theoretical implications of the chosen model or treated as a nuisance to be dealt with holding little interest of its own. We discuss the limitations of current standard spatial approaches and demonstrate, both empirically and theoretically the generalized additive model as an alternative. The generalized additive model is compared with the spatial error model and the fixed effects model. We find the generalized additive model to be a solid alternative to the standard approaches, having less restrictive assumptions about the omitted spatial processes while still being able to reduce the problem of spatial autocorrelation and provide trustworthy estimates of spatial variables. However, challenges connected with spatially varying data remain. The choice of flexibility in the spatial structure of the model affects estimated parameters of some spatially varying characteristics markedly. This suggests that omitted variable bias may remain an important problem. We advocate for an increased use of sensitivity analysis to determine robustness of estimates to different models of the (omitted) spatial processes.
    Keywords: hedonic valuation, spatial econometrics, generalized additive model
    JEL: Q51 R30 R52
    Date: 2013–10
  10. By: Nguyen Thang DAO (CORE, Université catholique de Louvain, B-1348 Louvain-la-Neuve, Belgium and Vietnam Centre for Economic and Policy Research (VEPR), Hanoi, Vietnam); Julio DÁVILA (CORE, Université catholique de Louvain, B-1348 Louvain-la-Neuve, Belgium and Paris School of Economics, Paris, France)
    Abstract: This paper develops a unied growth model capturing issues of endogenous economic growth, fertility, and technological progress considering the effects of geographical conditions to interpret the long transition from Malthusian stagnation, through demographic transition to modern sustained growth, and the great divergence in GDP per capita across societies. The paper shows how the interplay of size of "land" and its "accessibility" and technological progress play a very important role for an economy to escape Malthusian stagnation and to take off. Thus differences in these geographical factors lead to differences in take off timings, generating great divergence across societies.
    Keywords: Geographical land, land accessible, level of technology, human capital, fertility
    JEL: J11 O11 O33
    Date: 2013
  11. By: Kondo, Kazumine; Harimaya, Kozo
    Abstract: In this study, we investigate the market characteristics of prefectures in which non-local regional banks of other prefectures choose to enter and the motivations of such banks for doing so, considering the Japanese government’s requirements for regional financial institutions to play an active role in stimulating local economies. In particular, by pooling prefecture-level data, the market characteristics of prefectures that experience more entrances by non-local regional banks compared with other prefectures are examined. It was found that entrance by non-local regional banks is more common in prefectures where high-performing companies are active. Therefore, it can be considered that non-local regional banks that are not satisfied with lending opportunities in their home prefectures enter other prefectures to increase their lending opportunities to high-performing companies. This study contributes by clarifying why many regional banks do not concentrate on businesses within their local regions and intentionally enter other prefectures, which is in contrast with the intent of the region-based relationship banking policy.
    Keywords: region-based relationship banking, non-local regional banks, entries into other prefectures, characteristics of regional markets, expanding lending opportunities.
    JEL: G21
    Date: 2013–11–01

This nep-geo issue is ©2013 by Andreas Koch. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.