nep-geo New Economics Papers
on Economic Geography
Issue of 2014‒05‒09
seventeen papers chosen by
Andreas Koch
Institute for Applied Economic Research

  1. Geography, Economics and Political Systems: A Bird’s Eye View By Elise S. Brezis; Thierry Verdier
  2. Wage Premia in Employment Clusters: How Important is Worker Heterogeneity? By Shihe Fu; Stephen Ross
  3. “I want creative neighbours”. Do creative service industries spillovers cross regional boundaries? By Rafael Boix Domenech; José Luis Hervás Oliver; Blanca De Miguel Molina
  4. Agglomeration of knowledge: A regional economic analysis for the German economy By Krenz, Astrid
  5. Race-Specific Agglomeration Economies: Social Distance and the Black-White Wage Gap By Elizabeth Ananat; Shihe Fu; Stephen L. Ross
  6. Globalization and local profiles of economic growth and industrial change By Dauth, Wolfgang; Suedekum, Jens
  7. The Effect of Regional Entrepreneurship Culture on Economic Development - Evidence for Germany By Michael Fritsch; Michael Wyrwich
  8. The Dynamics of Technical and Business Networks in Industrial Clusters: Embeddedness, status or proximity? By Pierre-Alexandre Balland; José Antonio Belso-Martínez; Andrea Morrison
  9. Economic Growth, Local Industrial Development and Inter-Regional Spillovers from Foreign Direct Investment: Evidence from China By Puman Ouyang; Shihe Fu
  10. How does space affect the allocation of the EU rural development policy's expenditure? An econometric assessment By Beatrice CAMAIONI; Roberto ESPOSTI; Francesco PAGLIACCI; Franco SOTTE
  11. Agglomeration Economies and Local Comovement of Stock Returns By Shihe Fu; Liwei Shan
  12. Searching for the Parallel Growth of Cities By Zhihong Chen; Shihe Fu; Dayong Zhang
  13. Spatial Inequality in Education and Health Care in China By XiaoBo Zhang; Ravi KANBUR
  14. Wealth differences across borders and the effect of real estate price dynamics: Evidence from two household surveys By Thomas Y. Mathä; Alessandro Porpiglia; Michael Ziegelmeyer
  15. Fixed Effects and Random Effects Estimation of Higher-Order Spatial Autoregressive Models with Spatial Autoregressive and Heteroskedastic Disturbances By Harald Badinger; Peter Egger
  16. A Simple Spatial Dependence Test Robust to Local and Distributional Misspecifications By Ying Fang; Sung Y. Park; Jinfeng Zhang
  17. Spatial interactions in agent-based modeling By Marcel Ausloos; Herbert Dawid; Ugo Merlone

  1. By: Elise S. Brezis (Bar-Ilan University); Thierry Verdier
    Date: 2014–04
  2. By: Shihe Fu; Stephen Ross
    Abstract: This paper tests whether the correlation between wages and the spatial concentration of employment can be explained by unobserved worker productivity differences. Residential location is used as a proxy for a worker’s unobserved productivity, and average workplace commute time is used to test whether location-based productivity differences are compensated away by longer commutes. Analyses using confidential data from the 2000 Decennial Census Long Form find that the agglomeration estimates are robust to comparisons within residential location and that the estimates do not persist after controlling for commuting costs suggesting that the productivity differences across locations are not due to productivity differences across individuals.
    Keywords: Agglomeration, Wages, Sorting, Locational Equilibrium, Human Capital Externalities
    JEL: R13 R30 J24 J31
    Date: 2013–10–14
  3. By: Rafael Boix Domenech; José Luis Hervás Oliver; Blanca De Miguel Molina
    Abstract: The occurrence of creative service industries (CSI) is a strong determinant of differences in wealth amongst European regions. However, it is unknown if the strong effects are limited to occurring within regional boundaries or whether there are spillover effects into neighbouring regions. The purpose of this paper is to assess the existence of CSI spillover effects on the wealth of neighbouring regions. CSI and spillovers are integrated into both an empirical model and an endogenous growth model. Both models are estimated for a sample of 250 regions in the European Union in 2008. We find that most of the effects of CSI take place within regions, although there is also evidence that CSI has indirect spillovers across regions.
    Keywords: creative industries; creative services; regional growth; spatial spillovers; spatial econometrics
    Date: 2014–03
  4. By: Krenz, Astrid
    Abstract: We investigate the effects of job-specific knowledge for individual labor earnings of workers in the German economy. The results indicate a positive effect for earnings stemming in particular from high-knowledge in the areas of sales and marketing, computers and electronics, mathematics, biology and law and government. Investigating the geographical concentration of employment reveals, for example, that workers with highknowledge in the field of communication and media are concentrated in just a few places whereas workers with high-knowledge in law and government and administration and management are far more dispersed over the regions. These patterns of geographical localization of employment give evidence for differences in the dissemination of knowledge across peers and customers. --
    Keywords: agglomeration,knowledge,growth,German regional planning units,wages,Heckman selection,Krugman index
    JEL: J31 J61 R11
    Date: 2014
  5. By: Elizabeth Ananat; Shihe Fu; Stephen L. Ross
    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.
    JEL: J15 J24 J31 R23 R32
    Date: 2013–10–14
  6. By: Dauth, Wolfgang; Suedekum, Jens
    Abstract: We analyze how globalization has affected the sectoral anatomy of regional growth in Germany over the period 1978-2008. The aggregate German economy is characterized by a secular decline of manufacturing and a rise of modern service industries. This trend - also known as Petty's law - is not uniform across space, however. Some regions exhibit it at an even accelerated pace, while other regions have reinforced their manufacturing specializations. We first categorize all German regions into one of three groups, with protrend, anti-trend or featureless growth. Afterwards we propose an explanation why a particular region ended up in one of those groups: We argue that the regional profiles of growth and change are systematically related to the initial sizes, and the import and export exposures of the local manufacturing sectors. --
    Keywords: structural change,local industry compositions,trade exposure,local employment growth
    JEL: R11 O14 F16
    Date: 2014
  7. By: Michael Fritsch; Michael Wyrwich
    Abstract: We use the historical self-employment rate as an indicator of a regional culture of entrepreneurship and link this measure to economic growth in recent periods. The results indicate that German regions with a high level of entrepreneurship in the mid-1920s have higher start-up rates about 80 years later. Furthermore, we find that the effect of current start-up activity on regional employment is significantly higher in regions with a pronounced entrepreneurial culture. We conclude that a regional culture of entrepreneurship is an important resource for regional growth.
    Keywords: Entrepreneurship, economic development, self-employment, new business formation, entrepreneurship culture, institutions
    JEL: L26 R11 O11
    Date: 2014–04
  8. By: Pierre-Alexandre Balland; José Antonio Belso-Martínez; Andrea Morrison
    Abstract: Although informal knowledge networks have often been regarded as a key ingredient behind the success of industrial clusters, the forces that shape their structure and dynamics remain largely unknown. Drawing on recent network dynamic models, we analyze the evolution of business and technical informal networks within a toy cluster in Spain. Empirical results suggest that the dynamics of the two networks differ to a large extent. We find that status drives the formation of business networks, proximity is more crucial for technical networks, while embeddedness plays an equally important role in the dynamics of business and technical networks.
    Keywords: Knowledge networks, industrial clusters, network dynamics, toy industry
    JEL: D85 B52 O18
    Date: 2014–04
  9. By: Puman Ouyang; Shihe Fu
    Abstract: In many countries inward foreign direct investment (FDI) typically concentrates in a few regions. However, there is little empirical evidence on whether spatially concentrated FDI boosts economic growth in other regions within the same country. We use a dataset that covers 96% of Chinese cities from 1996–2004 and find that “inter-regional spillovers†from FDI concentrated in China’s coastal cities have a positive and significant effect on the growth of inland cities. In addition, an inland city’s industrial development affects its absorptive capacity to gain such interregional spillovers from coastal FDI.
    Keywords: D124Foreign direct investment, Regional inequality, Inter-regional spillovers, Absorptive capacity, Growth
    JEL: F21 R12 O40 O14 O18
    Date: 2013–10–14
  10. By: Beatrice CAMAIONI (INEA (National Institute for Agricultural Economics), Rome - Italy); Roberto ESPOSTI (Universit… Politecnica delle Marche, Dipartimento di Scienze Economiche e Sociali); Francesco PAGLIACCI (Universit… Politecnica delle Marche, Dipartimento di Scienze Economiche e Sociali); Franco SOTTE (Universit… Politecnica delle Marche, Dipartimento di Scienze Economiche e Sociali)
    Abstract: This paper focuses on the main drivers of the distribution of the Rural Development Policy's expenditure throughout the EU. Ex-post funds distribution across EU NUTS3 regions is considered. Three effects are admitted as major drivers: the "country effect"; the "rural effect" (i.e., the more rural a region the larger the amount of support it is expected to receive); the "pure spatial effect" (i.e. the influence of bordering regions and, in particular, of their degree of rurality). These effects are estimated adopting alternative spatial model specifications: spatial Durbin model, SEM and SAR model. Results differ across alternative specifications and definitions of rurality, but the prevalent evidence suggests that rurality matters in a counterintuitive direction, while also neighbouring regions play a role.
    Date: 2014–05
  11. By: Shihe Fu; Liwei Shan
    Abstract: Existing studies in finance have documented the comovement of stock returns of companies headquartered in the same location. The interpretation is that local investors have a “local bias†due to an information advantage on local companies. This paper argues that localized agglomeration economies affect the fundamentals of local companies, resulting in the local comovement of stock returns. Using the data for China A-share listed companies from 1997-2007, we confirm the local comovement of stock returns of companies headquartered in the same city; moreover, the stock returns of a company headquartered in a city with stronger agglomeration economies are also correlated more highly with stock returns of other companies headquartered in the same city. The local comovement of earnings among companies headquartered in the same city is also found, and the local comovement of stock returns is correlated with the local comovement of earnings. We conclude that correlated local fundamentals due to localized agglomeration economies can explain the local comovement of stock returns.
    Keywords: Stock returns; Local bias; Agglomeration economies
    JEL: G1 R1 R3
    Date: 2013–10–14
  12. By: Zhihong Chen; Shihe Fu; Dayong Zhang
    Abstract: Based on the parallel growth implications of the four urban growth theories (endogenous growth theory, random growth theory, hybrid growth theory, and locational fundamentals theory), this paper uses the Chinese city size data from 1984-2006 and time series econometric techniques to test for parallel growth. The results from various types of stationarity tests show that city growth is generally random. Conditioning on growth trend and structural change, certain groups of cities with common location-specific characteristics, such as similar natural resource endowment or policy regime, grow parallel in the long run, suggesting that locational fundamentals may have persistent impact on city growth.
    Keywords: Urban growth; Parallel growth; Zipf's law; Locational fundamentals; Structural change
    JEL: C22 R11 R12
    Date: 2013–10–14
  13. By: XiaoBo Zhang; Ravi KANBUR
    Abstract: While increasing income inequality in China has been commented on and studied extensively, relatively little analysis is available on inequality in other dimensions of human development. Using data from different sources, this paper presents some basic facts on the evolution of spatial inequalities in education and healthcare in China over the long run. In the era of economic reforms, as the foundations of education and healthcare provision have changed, so has the distribution of illiteracy and infant mortality. Across provinces and within provinces, between rural and urban areas and within rural and urban areas, social inequalities have increased substantially since the reforms began. D 2005 Elsevier Inc. All rights reserved. JEL classification: D63; O15; O18
    Keywords: Illiteracy; Infant mortality rate; Spatial inequality in China; Polarization
    Date: 2013–10–14
  14. By: Thomas Y. Mathä; Alessandro Porpiglia; Michael Ziegelmeyer
    Abstract: Crossing borders, be it international or regional, often go together with price, wage or indeed wealth discontinuities. This paper identifies substantial wealth differences between Luxembourg resident households and cross-border commuter households despite their similar incomes. The average (median) net wealth difference is estimated to be EUR 367,000 (EUR129,000) and increases for higher percentiles. Using several different regression and decomposition techniques, spatial (regional) differences in real estate price developments, and thus differences in accumulated nominal capital gains are shown to be one main driving factor for these wealth differences. Other factors contributing to the observed wealth differences are differences in age, income, education and other household characteristics.
    Keywords: household survey, wealth, real estate price dynamics, cross-border commuting
    JEL: D31 J61 F22 R23 R31
    Date: 2014–05
  15. By: Harald Badinger (Department of Economics, Vienna University of Economics and Business); Peter Egger (Department of Management, Technology and Economics at ETH Zürich)
    Abstract: This paper develops a unified framework for fixed and random effects estimation of higher-order spatial autoregressive panel data models with spatial autoregressive disturbances and heteroskedasticity of unknown form in the idiosyncratic error component. We derive the moment conditions and optimal weighting matrix without distributional assumptions for a generalized moments (GM) estimation procedure of the spatial autoregressive parameters of the disturbance process and define both a random effects and a fixed effects spatial generalized two-stage least squares estimator for the regression parameters of the model. We prove consistency of the proposed estimators and derive their joint asymptotic distribution, which is robust to heteroskedasticity of unknown form in the idiosyncratic error component. Finally, we derive a robust Hausman-test of the spatial random against the spatial fixed effects model.
    Keywords: Higher-order spatial dependence, Generalized moments estimation, Heteroskedasticity, Two-stage least squares, Asymptotic statistics
    JEL: C13 C21 C23
    Date: 2014–04
  16. By: Ying Fang; Sung Y. Park; Jinfeng Zhang
    Abstract: It is well known that the standard Lagrange multiplier (LM) test loses its local optimality when the true non-null model is not correctly specified. In this paper, we derive a score test robust to local and distributional misspecifications for spatial error autocorrelation and spatial lag dependence. The proposed test is general enough to include several popular tests for the spatial dependence as special cases. In our framework, we find that Burridge (1980) and Anselin, Bera, Florax and Yoon (1996)’s tests are automatically robust to distributional misspecification in some special cases. The size and power performances of our proposed score tests are investigated by a Monte-Carlo simulation.
    Keywords: �Spatial�dependence;�Score�test;�Robust�test;�Distribution�misspecification;
    Date: 2013–10–14
  17. By: Marcel Ausloos (Liege & Amsterdam); Herbert Dawid (Bielefeld); Ugo Merlone (Torino)
    Abstract: Agent Based Modeling (ABM) has become a widespread approach to model complex interactions. In this chapter after briefly summarizing some features of ABM the different approaches in modeling spatial interactions are discussed. It is stressed that agents can interact either indirectly through a shared environment and/or directly with each other. In such an approach, higher-order variables such as commodity prices, population dynamics or even institutions, are not exogenously specified but instead are seen as the results of interactions. It is highlighted in the chapter that the understanding of patterns emerging from such spatial interaction between agents is a key problem as much as their description through analytical or simulation means. The chapter reviews different approaches for modeling agents' behavior, taking into account either explicit spatial (lattice based) structures or networks. Some emphasis is placed on recent ABM as applied to the description of the dynamics of the geographical distribution of economic activities, - out of equilibrium. The Eurace@Unibi Model, an agent-based macroeconomic model with spatial structure, is used to illustrate the potential of such an approach for spatial policy analysis.
    Date: 2014–05

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