nep-geo New Economics Papers
on Economic Geography
Issue of 2014‒12‒13
twelve papers chosen by
Andreas Koch
Institut für Angewandte Wirtschaftsforschung

  1. Cities and the Environment By Matthew E. Kahn; Randall Walsh
  2. Temporary Shocks and Persistent Effects in the Urban System: Evidence from British Cities after the U.S. Civil War By W. Walker Hanlon
  3. Immigration and the Economy of Cities and Regions By Ethan Lewis; Giovanni Peri
  4. The Impact of the German Autobahn Net on Regional Labor Market Performance: A Study Using Historical Instrument Variables By Möller, Joachim; Zierer, Marcus
  5. “Income inequality in Europe. Analysis of recent trends at the regional level” By Raul Ramos; Vicente Royuela
  6. Interjurisdictional Competition and Location Decisions of Firms By Hernandez-Murillo, Ruben
  7. Spatial and Cluster Analysis for Multifunctional Agriculture in New England Region By Marasteanu, I. Julia; Liang, Chyi-Lyi (Kathleen); Goetz, Stephan
  8. Innovation and firm collaboration: An exploration of survey data. By Bjerke, Lina; Johansson, Sara
  9. Group Interaction in Research and the Use of General Nesting Spatial Models By Peter Burridge; J. Paul Elhorst; Katarina Zigova
  10. Institutions and Diversification: Related versus Unrelated Diversification in a Varieties of Capitalism framework By Ron Boschma; Gianluca Capone
  11. Innovation of knowledge intensive service firms in urban areas By Hammer, Andrea
  12. The regional impact of EU association agreements: lessons for the ENP from the CEE experience By Vassilis Monastiriotis; Dimitris Kallioras & George Petrakos

  1. By: Matthew E. Kahn; Randall Walsh
    Abstract: This paper surveys recent literature examining the relationship between environmental amenities and urban growth. In this survey, we focus on the role of both exogenous attributes such as climate and coastal access as well as endogenous attributes such as local air pollution and green space. A city's greenness is a function of both its natural beauty and is an emergent property of the types of households and firms that locate within its borders and the types of local and national regulations enacted by voters. We explore four main issues related to sustainability and environmental quality in cities. First, we introduce a household locational choice model to highlight the role that environmental amenities play in shaping where households locate within a city. We then analyze how ongoing suburbanization affects the carbon footprint of cities. Third, we explore how the system of cities is affected by urban environmental amenity dynamics and we explore the causes of these dynamics. Fourth, we review the recent literature on the private costs and benefits of investing in "green" buildings. Throughout this survey, we pay careful attention to empirical research approaches and highlight what are open research questions. While much of the literature focuses on cities in the developed world, we anticipate that similar issues will be of increased interest in developing nation's cities.
    JEL: Q4 Q5 R1 R3 R4
    Date: 2014–09
  2. By: W. Walker Hanlon
    Abstract: Urban economies are often heavily reliant on a small number of dominant industries, leaving them vulnerable to negative industry-specific shocks. This paper analyzes the long-run impacts of one such event: the large, temporary, and industry-specific shock to the British cotton textile industry caused by the U.S. Civil War (1861-1865), which dramatically reduced supplies of raw cotton. Because the British cotton textile industry was heavily concentrated in towns in Northwest England, I compare patterns in these cotton towns to other English cities. I find that the shock had a persistent negative effect on the level of city population lasting at least 35 years with no sign of diminishing. Decomposing the effect by industry, I show that the shock to cotton textiles was transmitted to other local firms, leading to increased bankruptcies and long-run reductions in employment. This transmission occurred primarily through the link to capital suppliers, such as machinery and metal-goods producers. Roughly half of the reduction in city-level employment growth was due to the impact on industries other than cotton textiles.
    JEL: F14 N63 N93 R12
    Date: 2014–09
  3. By: Ethan Lewis; Giovanni Peri
    Abstract: In this chapter we analyze immigration and its effect on urban and regional economies focusing on productivity and labor markets. While immigration policies are typically national, the effects of international migrants are often more easily identified on local economies. The reason is that their settlements are significantly concentrated across cities and regions, relative to natives. Immigrants are different from natives in several economically relevant skills. Their impact on the local economy depends on these skills. We emphasize that to evaluate correctly such impact we also need to understand and measure the local adjustments produced by the immigrant flow. Workers and firms take advantage of the opportunities brought by immigrants and respond to them trying to maximize their welfare. We present a common conceptual frame to organize our analysis of the local effects of immigration and we describe several applications. We then discuss the empirical literature that has tried to isolate and identify a causal impact of immigrants on the local economies and to estimate the different margins of response and the resulting outcomes for natives of different skill types. We finally survey promising recent avenues for advancing this research.
    JEL: F22 J61 R23
    Date: 2014–08
  4. By: Möller, Joachim (Institute for Employment Research (IAB), Nuremberg); Zierer, Marcus (University of Regensburg)
    Abstract: This paper analyzes the impact of the German autobahn net on the economic performance of German regions. To address endogeneity and reverse causation problems, we use historical instrument variables, i.e. a plan of the railroad net in 1890 and a plan of the autobahn net in 1937. We find a statistically and economically significant causal effect of transport infrastructure investments as measured by changes in the length of the autobahn net of West German NUTS 3 areas on regional employment and the wage bill.
    Keywords: transport infrastructure, regional labor market performance, historical instrumental variables, reverse causation, new economic geography
    JEL: L91 N73 N74 R11 R40 R49
    Date: 2014–10
  5. By: Raul Ramos (Department of Econometrics. University of Barcelona); Vicente Royuela (Department of Econometrics. University of Barcelona)
    Abstract: The evolution of income inequality is becoming a great concern all over the World, particularly since the start of the Great Recession. In this work we analyse the main trends of income inequality in Europe over the last decade, both at the national and regional level. Our results point to a large diversity in inequality patterns, as we observe both increases and decreases in inequality both at the regional and at the national level. The EU2020 Strategy aims achieving an inclusive economic growth, benefitting the largest possible number of people. We briefly analyse the main factors impacting inequality and finally derive several policy implications.
    Keywords: Inequality, Globalisation, Technological change, European regions. JEL classification: R11, R12, O15, O3, F61
    Date: 2014–10
  6. By: Hernandez-Murillo, Ruben (Federal Reserve Bank of St. Louis)
    Abstract: We examine the welfare properties of alternative regimes of interjurisdictional competition for heterogenous mobile firms. Firms differ not only in terms of the degree of mobility across jurisdictions but also in terms of productivity. Alternative taxation regimes represent restraints on the discretionary powers of taxation of local governments. We find that average welfare is higher under discretionary and more efficient taxation regimes (in the sense of minimizing deadweight losses from distortionary taxation) when firms are highly mobile. In this situation, further limiting competition by imposing a system of non-discretionary instruments can reduce average welfare by reducing the efficiency of the local governments at raising and allocating public funds. When firms face high moving costs, on the other hand, switching to a non-discretionary and less efficient taxation regime may increase welfare by preventing local governments from engaging in excessive redistribution of resources.
    Keywords: Firms location decisions; jurisdictions; tax competition.
    JEL: C72 H21 H32 H73
    Date: 2014–10–01
  7. By: Marasteanu, I. Julia; Liang, Chyi-Lyi (Kathleen); Goetz, Stephan
    Abstract: The purpose of the research presented in this poster is to investigate factors impacting farmers’ decisions to engage in multifunctional activities, which are hypothesized to enhance the sustainability and prosperity of farms and their communities. To achieve this research goal, we break it up into two specific objectives. The first objective is to identify statistically significant hot spots of farms participating in multifunctional activities (i.e., clusters of zipcodes with highly correlated, large numbers of farms participating in multifunctional activities). To complete this objective, we use the results of a short, postcard survey completed by small and medium sized farms in the northeastern United States. The survey contains four questions related to multifunctional practices (specifically, agritourism, direct sales, value added products and off-farm income) and also provides the zip codes of the respondents. Using the Geographic Information Systems software (GIS), we find statistically significant hot spots of farms participating in multifunctional activities based on the Local Moran’s I test statistic for spatial autocorrelation (Anselin, 1995). We perform these analyses for different types of multifunctional activities. Our second objective is to investigate the variables that are correlated with the distribution of farms participating in multifunctional activities, while controlling for the possibility of spatial autocorrelation. To complete this objective, we use Spatial Autoregressive Models (LeSage, 1998). Our independent variables consist of county/sub-county level variables related to demographics, economics, climate, and policy. Most of these variables can be obtained from publicly available sources such as the Census of Agriculture, the U.S. Census, and the Bureau of Economic Analysis, to name a few. The results of this research may have implications for policies related to encouraging farm participation in multifunctional activities.
    Keywords: Multifunctional Activities, Diversified Farming, Spatial Econometrics, Hotspots, Agribusiness, Agricultural and Food Policy, Community/Rural/Urban Development, Farm Management, Q12, Q13, Q18,
    Date: 2014
  8. By: Bjerke, Lina (Jönköping International Business School (JIBS), Economics, Finance and Statistics.); Johansson, Sara (Jönköping International Business School (JIBS), and Centre of Excellence for Science and Innovation Studies (CESIS).)
    Abstract: Recent literature on firm innovation emphasize the importance of combinations of different knowledge sources in innovation processes. Moreover, the literature on firm collaboration has evolved stepwise: (1) knowledge networks tend to be geographically bounded, and (2) proximity in other dimensions than physical distance, such as cognitive and organisational proximity, may influence the evolution and influences of networks. The results from this empirical study support these ideas by indicating that firms’ probability to innovate is enhanced when they collaborate. However, not all types of collaborations are as important. By using data from a survey on innovation and collaboration of 636 firms in the county of Jönköping, Sweden, we find that extra-regional collaboration matters the most for the innovation performance of these firms. Moreover, collaborations tend to be most favourable for innovation when the collaborators involved has some organisational or cognitive proximity. Collaborations that imply vertical linkages in the value added chain appear to more important than horizontal linkages.
    Keywords: Innovation; innovation networks; innovation survey; proximity; firm collaboration
    JEL: C83 O31 R10
    Date: 2014–11–07
  9. By: Peter Burridge (Department of Economics and Related Studies, University of York, UK); J. Paul Elhorst (Faculty of Economics and Business, University of Groningen, The Netherlands); Katarina Zigova (Department of Economics, University of Konstanz, Germany)
    Abstract: This paper tests the feasibility and empirical implications of a spatial econometric model with a full set of interaction effects and weight matrix defined as an equally weighted group interaction matrix applied to research productivity of individuals. We also elaborate two extensions of this model, namely with group fixed effects and with heteroskedasticity. In our setting the model with a full set of interaction effects is overparameterised: only the SDM and SDEM specifications produce acceptable results. They imply comparable spillover effects, but by applying a Bayesian approach taken from LeSage (2014), we are able to show that the SDEM specification is more appropriate and thus that colleague interaction effects work through observed and unobserved exogenous characteristics common to researchers within a group.
    Keywords: Spatial econometrics, identifcation, heteroskedasticity, group fixed effects, interaction effects, research productivity
    JEL: C21 D8 I23 J24
    Date: 2014–09–17
  10. By: Ron Boschma; Gianluca Capone
    Abstract: The Varieties of Capitalism literature has drawn little attention to industrial renewal and diversification, while the related diversification literature has neglected the institutional dimension of industrial change. Bringing together both literatures, the paper proposes that institutions have an impact on the direction of the diversification process, in particular on whether countries gain a comparative advantage in new sectors that are close or far from what is already part of their existing industrial structure. We investigate the diversification process in 23 developed countries by means of detailed product trade data in the period 1995-2010. Our results show that relatedness is a stronger driver of diversification into new products in coordinated market economies, while liberal market economies show a higher probability to move in more unrelated industries: their overarching institutional framework gives countries more freedom to make a jump in their industrial evolution. In particular, we found that the role of relatedness as driver of diversification into new sectors is stronger in the presence of institutions that focus more on ‘non-market’ coordination in the domains of labor relations, corporate governance relations, product market relations, and inter-firm relations.
    Keywords: varieties of capitalism, institutions, relatedness, diversification, evolutionary economic geography
    JEL: B52 L16 O43 P16 P51
    Date: 2014–11
  11. By: Hammer, Andrea
    Abstract: This paper investigates the agglomeration of Knowledge Intensive Service (KIS) firms in urban areas. In accordance with the Regional Innovation Systems approach it is argued that cities provide crucial innovation advantages working as centripetal forces for KIS. Applying multivariate logit regressions to a company survey of the city of Karlsruhe, the second largest city of the German federal state of Baden-Württemberg, shows positive effects of local cooperation and urban infrastructures on the innovation probability of KIS firms. However, the effects vary with the type of innovation pursued, thus demonstrating a high complexity of local relations conducive to KIS firm innovation.
    Keywords: Knowledge Intensive Services,Regional Innovation Systems,urban innovation,innovation in services,local cooperation,urban infrastructure
    JEL: R48 L92 Q55
    Date: 2014
  12. By: Vassilis Monastiriotis; Dimitris Kallioras & George Petrakos
    Abstract: The Eastern Enlargement of the EU saw a proliferation of association agreements with countries in the ‘near abroad’ under EU’s European Neighbourhood Policy framework. Although such agreements are considered to be strictly welfare-enhancing, there is very little evidence to show their economic effects, including their distributional consequences across space, separately from other concurrent processes (transition, internationalisation, capital deepening, etc). This paper draws on the experience of pre-accession agreements in Central and Eastern Europe to estimate the effect that such agreements had on regional growth, and thus on the long-run evolution of regional disparities, in the associated countries. We apply an event-analysis and exploit the country variation in the timing of these agreements to identify their distinctive effect on regional growth, using regional data at the NUTS3 levels covering the period from the early transition phase (1991/92) until the eruption of the financial crisis (2008). Our results provide strong evidence that EU association agreements accelerate growth; but show that this is far from evenly distributed across space – with denser, larger and more diversified regional economies gaining the most. We discuss what these findings imply for regional growth and spatial imbalances in the new wave of associated countries under the ENP.
    Keywords: East-Central Europe; Europe Agreements; regional development
    Date: 2014–10–16

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