nep-geo New Economics Papers
on Economic Geography
Issue of 2014‒04‒11
twenty papers chosen by
Andreas Koch
Institute for Applied Economic Research

  1. Something New: Where do new industries come from? By Feldman, Maryann; Tavassoli, Sam
  2. Institutional Change and Economic Evolution in Regions By Grillitsch, Markus
  3. Media clusters and metropolitan knowledge economy By Karlsson, Charlie; Rouchy, Philippe
  4. Optimal Agglomerations in Dynamic Economics By William Brock; Anastasios Xepapadeas; Athanasios Yannacopoulos
  5. Unemployment in European Regions: Structural Problems vs. the Eurozone Hypothesis By Andersson, Åke E.; Andersson , David Emanuel; Hårsman, Björn; Daghbashyan, Zara
  6. Consumer flexibility, data quality and location choice By Baye, Irina; Hasnas, Irina
  7. Human Capital and Regional Development By Nicola Gennaioli; Rafael LaPorta; Florencio Lopez-de-Silanes; Andrei Shleifer
  8. Banks and New Firm Formation By Backman, Mikaela
  9. Birds of a feather cannot always flock together: Essays on the socio-economic impacts of local diversity By Camille Hémet
  10. Spatial disparities in hospital performance By Laurent Gobillon; Carine Milcent
  11. Regional Economic Activity in Turkey: A New Economic Geography Approach By Mehmet Burak Turgut
  12. Regional productivity effects of multinational firm affiliates By Andersson, Martin; Gråsjö, Urban; Karlsson, Charlie
  13. The Power of Hydroelectric Dams: Agglomeration Spillovers By Severnini, Edson R.
  14. Beyond the SUTVA: how policy evaluations change when we allow for interactions among firms. By Augusto Cerqua; Guido Pellegrini
  15. Innovation Systems Research in the Italian Food Industry By Ornella Wanda Maietta
  16. Using Spatial Econometric Techniques to Analyze the Joint Employment Decisions of Spouses By Kalenkoski, Charlene M.; Lacombe, Donald J.
  17. UN Interventions: The Role of Geography By Duque, Juan Carlos; Jetter, Michael; Sosa, Santiago
  18. Firm Knowledge, Neighborhood Diversity and Innovation By Wixe, Sofia
  19. Cities, Tasks and Skills By Kok, Suzanne; ter Weel, Bas
  20. Cross-border commuting and consuming: An empirical investigation By Thomas Y. Mathä; Alessandro Porpiglia; Michael Ziegelmeyer

  1. By: Feldman, Maryann (Department of Public Policy, University of North Carolina at Chapel Hill, Chapel Hill, NC, USA); Tavassoli, Sam (CITR, Blekinge Inst of Technology)
    Abstract: The focus of this paper is on the question of how new industries originate in places. There is often confusion between the process of diffusion and the locational factors that give rise to early stage creative discovery. There is a long and distinguished literature that considers the diffusion of ideas. Diffusion is important as it influences the general uptake and implementation of ideas across geography but it is a different process than our focus here. We advance the argument that the creation of new industries is a process that has inherently geographic features. Something new is created out of prior knowledge but a more complex process is required to develop an industry and reap the economic benefits.
    Keywords: new industries; Schmookler scissor; locational factors
    Date: 2014–03–31
  2. By: Grillitsch, Markus (CIRCLE, Lund University)
    Abstract: The overall objective of this paper is to contribute conceptually to the questions why and how regions transform and it joins the debate on economic evolution and institutional change. The paper addresses the challenge of how to conceptualise the interdependencies of institutions of different types and spatial scales. It aims at developing a conceptual framework that i) appreciates the variety of institutional forms and the multi-scalar nature of institutional landscapes, ii) is tangible enough for operationalization in the context of empirical research, and iii) contributes to our understanding about institutional change and economic evolution in regions. The paper offers a review on how institutions have been conceptualised in the context of evolutionary economic geography, a proposal for understanding regional institutional frameworks and institutional change through a novel way of conceptualising institutional layering, a clear distinction between concepts such as agency, networks, social structures and institutional layers, and a discussion about how this can improve our understanding about regional transformation.
    Keywords: Evolutionary economic geography; institutional theory; regional change; institutional layering
    JEL: B52 R11
    Date: 2014–03–25
  3. By: Karlsson, Charlie (CITR, Blekinge Inst of Technology); Rouchy, Philippe (CITR, Blekinge Inst of Technology)
    Abstract: Large media clusters have emerged in a limited number of large cities, characterizing the geographical concentration of the global media industry. This paper starts by exploring the effect of the rapid advancement of Information and Communication Technologies (ICT) had on the media economy. It concludes that the role of the “weightless economy” on media cluster has enhanced its production and distribution functions. We review the specificities of media cluster that ties agglomeration to creative, diversified attributes of production and distribution. The implication is that media firms hold strong tendencies to cluster in urban regions since they make full usage of its resources, namely its export capabilities and import transformation strength. Finally, we invite researchers to consider Jacobs’ metropolitan and global reciprocating system of city growth as a valid unit for analysing media clusters. The question leads envisaging if media clusters' strong metropolitan base allows them to grow further through globalised circuits. The paper concludes that large, media clusters drive on intellectually dense network of information, which can only be cultivated through large agglomerations existing capabilities. Consequently, the research question focuses upon the economic role of knowledge in media creation and export replacement. We emphasize the strength of Jacob’s model of media cluster for understanding its mechanism of value creation and endogenous system of globalisation.
    Keywords: Clustering; media industry; agglomeration; weightless economy; creative industry; globalization; regional development
    JEL: L82 R11
    Date: 2014–03–31
  4. By: William Brock; Anastasios Xepapadeas; Athanasios Yannacopoulos
    Abstract: We study rational expectations equilibrium problems and social optimum problems in innite horizon spatial economies in the context of a Ramsey type capital accumulation problem with geographical spillovers. We identify sufficient local and global conditions for the emergence (or not) of optimal agglomeration, using techniques from monotone operator theory and spectral theory in innite dimensional Hilbert spaces. We show that agglomerations may emerge, with any type of returns to scale (increasing or decreasing) and with the marginal productivity of private capital increasing or decreasing with respect to the spatial externality. This is a fairly general result indicating the importance of the network structure of the spatial externality relative to the properties of the aggregate production function. Our analytical methods can be used to systematically study optimal potential agglomeration and clustering in dynamic economics.
    Keywords: Agglomeration, spatial spillovers, spillover induced instability, rational expectations equilibrium, social optimum, monotone operators.
    Date: 2014–04–01
  5. By: Andersson, Åke E. (Jönköping International Business School); Andersson , David Emanuel (Nottingham University Business School China); Hårsman, Björn (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology); Daghbashyan, Zara (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology)
    Abstract: Unemployment rates differ dramatically across European regions. This paper analyses these differences by integrating institutional and spatial perspectives into a unified theoretical framework. An econometric model is then used to analyse differences among European NUTS2 regions. The results of random-effects models indicate that there are four key factors that explain regional unemployment rates. Flexible labour market regulations and above-average levels of interpersonal trust are institutional factors that reduce unemployment. Accessibility factors such as inter-regional transport connectivity and local access to skilled workers have similarly substantial effects. Whether a region belongs to the Eurozone or not seems to be less important.
    Keywords: unemployment; Euro; institutions; accessibility
    JEL: R10 R15 R23 R28
    Date: 2014–03–26
  6. By: Baye, Irina; Hasnas, Irina
    Abstract: We analyze firms' location choices in a Hotelling model with two-dimensional consumer heterogeneity, along addresses and transport cost parameters (flexibility). Firms can price discriminate based on perfect data on consumer addresses and (possibly) imperfect data on consumer flexibility. We show that firms' location choices depend on how strongly consumers differ in flexibility. Precisely, when consumers are relatively homogeneous, equilibrium locations are socially optimal regardless of the quality of customer flexibility data. However, when consumers are relatively differentiated, firms make socially optimal location choices only when customer flexibility data is perfect. These results are driven by the optimal strategy of a firm on its turf, monopolization or market-sharing, which in turn depends on consumer heterogeneity in flexibility. Our analysis is motivated by the availability of customer data, which allows firms to practice third-degree price discrimination based on both consumer characteristics relevant in spatial competition, addresses and transport cost parameters. --
    Keywords: Location Choice,Price Discrimination,Customer Data
    JEL: D43 L13 R30 R32
    Date: 2014
  7. By: Nicola Gennaioli; Rafael LaPorta; Florencio Lopez-de-Silanes; Andrei Shleifer
    Abstract: We investigate the determinants of regional development using a newly constructed database of 1569 sub-national regions from 110 countries covering 74 percent of the world’s surface and 96 percent of its GDP. We combine the cross-regional analysis of geographic, institutional, cultural, and human capital determinants of regional development with an examination of productivity in several thousand establishments located in these regions. To organize the discussion, we present a new model of regional development that introduces into a standard migration framework elements of both the Lucas (1978) model of the allocation of talent between entrepreneurship and work, and the Lucas (1988) model of human capital externalities. The evidence points to the paramount importance of human capital in accounting for regional differences in development, but also suggests from model estimation and calibration that entrepreneurial inputs and human capital externalities are essential for understanding the data.
  8. By: Backman, Mikaela (Jönköping International Business School, & Centre of Excellence for Science and Innovation Studies (CESIS))
    Abstract: It is natural to assume that the characteristics of the bank sector are important factors for new firm formation when external capital is needed for establishing new firms. The local bank sector acts as the main provider of financial funds in Sweden since other sources of external capital are limited. In addition, the banking services needed in the start-up process tend to be sensitive to distance and are mainly supplied locally. Thus, the structure of the local bank sector is an important factor that determines the conditions for start-ups. The finding in this paper supports the hypothesis that new firm formation is positively influenced by (1) the average size of the bank branches, (2) number of independent banks and bank branches per capita, and (3) the intensity of competition level. Access to independent banks and bank branches has a stronger influence on start-ups in more rural locations.
    Keywords: new firm formation; local bank sector; Sweden
    JEL: G21 L26 R11
    Date: 2014–03–31
  9. By: Camille Hémet (Aix-Marseille School of Economics)
    Abstract: La diversité reflète le fait que les membres d’une communauté diffèrent selon certaines caractéristiques, liées à l'origine ethnique, au statut socio-économique ou à la culture. L’essor du commerce et l'intégration économique placent les sociétés modernes face à des niveaux de diversité croissants. Cette thèse évalue l’impact social et économique de la diversité locale. elle montre comment la diversité d’un quartier influe sur les conditions de vie et les perspectives d'emploi de ses habitants. Ce travail contribue à la littérature de trois façons: il examine des questions inexplorées à un niveau très local, révèle les mécanismes sous-jacents et fournit de nouvelles méthodes pour aborder la question de l'endogénéité. Le chapitre 1 montre que la diversité des origines a un effet négatif sur la qualité des biens publics locaux, du fait d’actes de vandalisme liés à un manque de pression des pairs, et du fait de l'échec de l'action collective qui permettrait une gestion efficace de la propriété. Aucun effet robuste sur la sécurité publique n’est à noter. Le chapitre 2 révèle que l'effet du chômage sur la criminalité a une dimension spatiale. Pour les crimes économiques, le taux de chômage des quartiers environnants a un effet plus fort que celui du voisinage immédiat, l'inverse étant vrai pour vandalisme. Le chapitre 3 montre que les personnes vivant dans un quartier plus diversifié ont des perspectives d'emploi inférieures, cet effet étant plus lié à la dimension culturelle qu’ethnique de la diversité. Le chapitre 4 développe un modèle rationalisant le recours des minorités ethniques à l'économie informelle en réponse à des conditions défavorables sur le marché du travail.
    Keywords: diversité ethnique et culturelle, conditions de vie, relations sociales, chômage; ethnic and cultural diversity, living conditions social, relationships, unemployment
    Date: 2013–11
  10. By: Laurent Gobillon (CEPR - Center for Economic Policy Research - CEPR, PSE - Paris-Jourdan Sciences Economiques - CNRS : UMR8545 - École des Hautes Études en Sciences Sociales (EHESS) - École des Ponts ParisTech (ENPC) - École normale supérieure [ENS] - Paris - Institut national de la recherche agronomique (INRA), EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris, INED - Institut National d'Etudes Démographiques Paris - INED); Carine Milcent (PSE - Paris-Jourdan Sciences Economiques - CNRS : UMR8545 - École des Hautes Études en Sciences Sociales (EHESS) - École des Ponts ParisTech (ENPC) - École normale supérieure [ENS] - Paris - Institut national de la recherche agronomique (INRA), EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris, CEPREMAP - Centre pour la recherche économique et ses applications)
    Abstract: Using a French exhaustive dataset, this article studies the determinants of regional disparities in mortality for patients admitted to hospitals for a heart attack. These disparities are large, with an 80% difference in the propensity to die within 15 days between extreme regions. They may reflect spatial differences in patient characteristics, treatments, hospital characteristics and local healthcare market structure. To distinguish between these factors, we estimate a flexible duration model. The estimated model is aggregated at the regional level and a spatial variance analysis is conducted. We find that spatial differences in the use of innovative treatments play a major role whereas the local composition of hospitals by ownership does not have any noticeable effect. Moreover, the higher the local concentration of patients in a few large hospitals rather than many small ones, the lower the mortality. Regional unobserved effects account for around 20% of spatial disparities.
    Keywords: Spatial health disparities ; Economic geography ; Stratified duration model
    Date: 2013–09
  11. By: Mehmet Burak Turgut (University of Warsaw)
    Abstract: This paper studies the spatial economic activity in Turkey and estimates the correlation between wages and consumer demand across NUTS1 regions of Turkey. First, I estimate simple market potential function to test whether closeness to larger markets has impact on wages. Second, I estimate Krugman (1993) economic geography model to see the agglomeration forces in Turkey. The results suggest that wages are higher in the regions close to larger markets and low trade costs and high share of expenditure on manufactured goods are the forces of agglomeration in Turkey.
    Keywords: Regional economic activity, Turkey, economic geography model
    Date: 2014
  12. By: Andersson, Martin (CITR, Blekinge Inst of Technology); Gråsjö, Urban (University West); Karlsson, Charlie (CITR, Blekinge Inst of Technology)
    Abstract: Multinational firms (MNFs) have been shown to have a set of defining characteristics. Compared to domestic firms, they have a larger fraction of skilled workers, higher R&D to sales ratios and established networks to knowledge sources in several different countries. As illustrated by the so-called ‘anchor-tenant’ hypothesis, they can be described as “knowledge spillover agents”. MNF affiliates, as defined in this paper, are firms that are part of large domestic and foreign MNFs. In this paper we test whether the local presence of MNF affiliates generate spillover effects on the local industry. The empirical analysis focuses on assessing whether the productivity of the regional manufacturing industry of non-affiliated firms is higher in regions with a large fraction of MNF affiliates. The analysis uses data on Swedish firms and is conducted on regional level as well as on firm level. The regressions show that local presence of MNFs in a region has a positive effect on Gross Regional Product (GRP) from non-MNFs. The paper also shows that regions where the low-productive non-MNFs are located appear to benefit the most from local presence of MNFs. The MNFs have, on the other hand, no effect on non-MNF productivity in regions where the high-productive non-MNFs are located.
    Keywords: Multinational firms; affiliates; productivity; R&D; knowledge; spillovers; skilled workers; region
    JEL: F23 J24 O33 R11
    Date: 2014–04–02
  13. By: Severnini, Edson R. (Carnegie Mellon University)
    Abstract: How much of the geographic clustering of economic activity is attributable to agglomeration spillovers as opposed to natural advantages? I present evidence on this question using data on the long-run effects of large scale hydroelectric dams built in the U.S. over the 20th century, obtained through a unique comparison between counties with or without dams but with similar hydropower potential. Until mid-century, the availability of cheap local power from hydroelectric dams conveyed an important advantage that attracted industry and population. By the 1950s, however, these advantages were attenuated by improvements in the efficiency of thermal power generation and the advent of high tension transmission lines. Using a novel combination of synthetic control methods and event-study techniques, I show that, on average, dams built before 1950 had substantial short run effects on local population and employment growth, whereas those built after 1950 had no such effects. Moreover, the impact of pre-1950 dams persisted and continued to grow after the advantages of cheap local hydroelectricity were attenuated, suggesting the presence of important agglomeration spillovers. Over a 50 year horizon, I estimate that at least one half of the long run effect of pre-1950 dams is due to spillovers. The estimated short and long run effects are highly robust to alternative procedures for selecting synthetic controls, to controls for confounding factors such as proximity to transportation networks, and to alternative sample restrictions, such as dropping dams built by the Tennessee Valley Authority or removing control counties with environmental regulations. I also find small local agglomeration effects from smaller dam projects, and small spillovers to nearby locations from large dams.
    Keywords: hydroelectric dams, agglomeration spillovers, employment growth, event-study analysis with synthetic control methods
    JEL: N92 R11 R12 Q42
    Date: 2014–03
  14. By: Augusto Cerqua (Dipartimento di Scienze Sociali ed Economiche, Sapienza University of Rome); Guido Pellegrini (Dipartimento di Scienze Sociali ed Economiche, Sapienza University of Rome)
    Abstract: The shortage of studies on spatial spillovers of industrial policies is rather surprising considering that such policies are usually designed for generating spatial externalities. In this paper we propose a new framework that partially relaxes the SUTVA and allows contrasting the positive agglomeration effects with the negative cross-sectional substitution and the crowding-out effect. The global evaluation of the ATT and the spillover parameters shifts the spotlight from the policy effect on subsidised firms to the global effect of the industrial policy on the targeted territory. Analysing a capital subsidy policy in Italy we find a positive and large effect of the policy on subsidised firms in terms of investment, turnover, and employment; however, the employment growth is in part determined to the detriment of affected untreated firms located in the very proximity of one or more treated firms that belong to the same sector of activity.
    Keywords: SUTVA; spillovers; policy evaluation; public subsidies; business support policy.
    JEL: C14 H23 R58
    Date: 2014–04
  15. By: Ornella Wanda Maietta (DISES and CSEF, University of Naples Federico II.; CSEF, University of Naples)
    Abstract: The objective of the paper is to determine the role that R&D networking, through the collaboration of firms with universities, plays among the determinants of product and process innovation in the Italian food and drink industry and how geographical proximity to a university affects both R&D university-industry collaboration and innovation. The data are sourced from the 7th (1995-1997), 8th (1998-2000), 9th (2001-2003) and 10th (2004-2006) waves of Capitalia survey data. The approach is a triprobit analysis in which the dependent variables are R&D collaboration with a university, process and product innovation; the independent variables are firm, territorial and university characteristics.
    Keywords: product and process innovation, university-industry interaction, geographical distance, food and drink industries
    JEL: O31 D21 R1
    Date: 2014–03–29
  16. By: Kalenkoski, Charlene M. (Texas Tech University); Lacombe, Donald J. (West Virginia University)
    Abstract: Studies of the joint time-use decisions of spouses have relied on joint estimation of time-use equations, sometimes assuming correlated errors across spouses' equations and sometimes directly examining the effects of one spouse's time use on another's, relying on panel data or instrumental variables techniques to account for endogeneity. However, panel data often are not available and available instruments often are not satisfactory, making examination of the direct relationship between spouses' time use difficult. Spatial econometric techniques applied to cross-sectional data do not require instrumental variables. This study estimates a Spatial Autoregressive (SAR) Model to examine the labor hours of husbands and wives in dual-earner couples using the 2012 Annual Social and Economic Supplement to the Current Population Survey (ASEC). In this model, each spouse is treated as a direct “neighbor” of the other in a spatial weight matrix and non-spouses are treated as non-neighbors. Estimates of both the own- and cross-wage effects on labor hours and an estimate of the direct relationship between spouses' labor hours are obtained.
    Keywords: employment, intrahousehold allocation of time, own- and cross-wage effects, spatial econometrics
    JEL: J22 D13
    Date: 2014–03
  17. By: Duque, Juan Carlos (Universidad EAFIT); Jetter, Michael (Universidad EAFIT); Sosa, Santiago (Universidad EAFIT)
    Abstract: This paper argues that UN military interventions are geographically biased. For every 1,000 kilometers of distance from the three Western permanent UNSC members (France, UK, US), the probability of a UN military intervention decreases by 4 percent. We are able to rule out several alternative explanations for the distance finding, such as differences by continent, colonial origin, bilateral trade relationships, foreign aid flows, political regime forms, or the characteristics of the Cold War. We do not observe this geographical bias for non-military interventions and find evidence that practical considerations could be important factors for UNSC decisions to intervene militarily.
    Keywords: United Nations, conflict resolution, international organizations
    JEL: D74 F52 F53 N40 R12
    Date: 2014–03
  18. By: Wixe, Sofia (Centre for Entrepreneurship and Spatial Economics (CEnSE), Jönköping International Business School,)
    Abstract: This paper tests the importance of firm level knowledge and neighborhood diversity, as a source for localized knowledge spillovers, on firms propensity to innovate. Diversity is measured in terms of industries as well as employee education and occupation, of which the results show a positive neighborhood effect from diversity in education. In addition, an added positive effect from neighborhood diversity in education is found for firms with a larger share of highly educated employees, which points to the importance of absorptive capacity. However, firm characteristics, such as the knowledge of the own employees, provide to be the strongest determinants for the innovativeness of firms.
    Keywords: Knowledge; neighborhood diversity; education; skills; innovation
    JEL: J21 J24 O31 R32
    Date: 2014–04–03
  19. By: Kok, Suzanne (CPB Netherlands Bureau for Economic Policy Analysis); ter Weel, Bas (CPB Netherlands Bureau for Economic Policy Analysis)
    Abstract: This research applies a task-based approach to measure and interpret changes in the employment structure of the 168 largest US cities in the period 1990-2009. As a result of technological change some tasks can be placed at distance, while others require proximity. We construct a measure of task connectivity to investigate which tasks are more likely to require proximity relative to others. Our results suggest that cities with higher shares of connected tasks experienced higher employment growth. This result is robust to a variety of other explanations including industry composition, routinisation, and the complementarity between skills and cities.
    Keywords: occupations, tasks, cities, employment
    JEL: J20 J30 O30
    Date: 2014–03
  20. By: Thomas Y. Mathä; Alessandro Porpiglia; Michael Ziegelmeyer
    Abstract: This paper analyses empirically how cross-border consumption varies across product and services categories and across household characteristics. It focuses on the part of crossborder sales that arise due to work-related cross-border crossings; it analyses the crossborder consumption behaviour of cross-border commuter households residing in Belgium, France and Germany and working in Luxembourg. In total, it is estimated that these households spend ?925 million per annum in Luxembourg, reflecting about 17% of their gross annual income from Luxembourg and contributing about 10% to total household final consumption expenditure in Luxembourg. Cross-border consumption expenditure is shown to depend on individual and household characteristics, such as total household income, the number of cross-border commuters in the household, distance between home and work, as well as price level (index) differences between Luxembourg and its neighbouring countries. Cross-border commuters take advantage of existing arbitrage opportunities.
    Keywords: Cross-border shopping, commuting, consumption, expenditure, households
    JEL: F15 R12 R23 J61
    Date: 2014–03

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