nep-geo New Economics Papers
on Economic Geography
Issue of 2014‒12‒29
thirty-two papers chosen by
Andreas Koch
Institut für Angewandte Wirtschaftsforschung

  1. Agglomeration theory with heterogeneous agents By Behrens, Kristian; Robert-Nicoud, Frédéric
  2. The Geography of Development within Countries By Desmet, Klaus; Henderson, J Vernon
  3. Economic Geography and Networks: Role of local and non-local ties in Cluster Evolution By Karna, Amit; Florian A. Taeube; Petra Sonderegger
  4. The Geography of Average Income and Inequality: Spatial Evidence from Austria By Mathias Moser; Matthias Schnetzer
  5. Agglomeration economies and global activities: impact on firm survival By Anna Maria Ferragina; Fernanda Mazzotta
  6. Clusters and industrial districts: where is the literature going? Identifying emerging sub-fields of research By Hervas Oliver,Jose Luis; Gonzalez,Gregorio; Caja,Pedro
  7. Location choices of newly created establishments: spatial patterns at the aggregate level By Sabina Buczkowska; Matthieu de Lapparent
  8. Benchmark Value Added Chains and Regional Clusters in German R&D Intensive Industries By Reinhold Kosfeld; Mirko Titze
  9. Spatial evolution of economic activity in Russia: New economic geography perspective By Evgeniya Kolomak
  10. Knowledge Spillovers in Cities: The Role of Imitation and Innovation By Dirk Assmann; Johannes Stiller
  11. Do we go shopping downtown or in the 'burbs? Why not both? By Philip Ushchev; Igor Sloev; Jacques-Francois Thisse
  12. Regional Transformation: Institutional Change and Economic Evolution in Regions By Markus Grillitsch
  13. Location choices of highly-educated foreign workers: the importance of urban amenities By Or Levkovich; Jan Rouwendal
  14. What drives regional unemployment convergence? By Vicente Rios Ibañez
  15. Location of research-based spin-offs: how relevant are regional effects? By Oscarina Conceição; Ana Paula Faria; Margarida Fontes
  16. Services, Comparative Advantage and Agglomeration of Economic Activity: A Ricardo-Marshall Model By Michael Pflüger
  17. Place-Based Policies By Neumark, David; Simpson, Helen
  18. Recessions, recoveries and regional resilience: Evidence on Italy By Di Caro, Paolo
  19. Impact of crisis on regional development in Croatia By Irena Dokic; Ivana Rasic Bakaric; Zlatan Fröhlich
  20. Enhancing the innovativeness of local production systems - Polish experiences By Mariusz E. Sokolowicz; Aleksandra Nowakowska; Zbigniew Przygodzki
  21. Constructing a Novel Competitiveness Index for European Regions By Marko Danon
  22. The entrepreneurial performance of the Central and Eastern European regions By Balázs Páger
  23. Intra-urban disparities in the quality of life in the city of Porto: a spatial analysis contribution By Luis Delfim Santos; Isabel Martins
  24. Does History Fully Determine the Spatial Distribution of Human Capital ? By Henri Busson
  25. Do agglomeration forces bring productivity gains to manufacturing firms in Russian urban agglomerations? By Tatiana Ratnikova; Ksenia Gonchar
  26. Winner Picking in Urban Revitalization Policies: Empirical Evidence from Berlin By Felix Richter
  27. Identifying Clusters of Regions in the European South, based on their Economic, Social and Environmental Characteristics By Vasileios Angelis; Athanasios Angelis-Dimakis; Katerina Dimaki
  28. Symmetric and asymmetric effects of proximities. The case of M&A deals in Italy By Emanuela Marrocu; Ron Boschma; Raffaele Paci
  29. Electoral politics and regional development: assessing the geographical allocation of public investment in Turkey By Luca, Davide; Rodriguez-Pose, Andres
  30. Market Potential and Regional Economic Growth in Spain, 1860-1930 By Rafael González-Val; Julio Martínez-Galarraga; Daniel A. Tirado-Fabregat
  31. Cluster evolution in mature Industrial cluster. The case of Prato Marshallian ID after the entrance of Chinese firm populations (1945-2011) By Luciana Lazzeretti; Francesco Capone
  32. Smart specialization and the manufacturing sector in the city regions of Hungary By Zsofia Vas; Imre Lengyel; Izabella Szakalne Kano

  1. By: Behrens, Kristian; Robert-Nicoud, Frédéric
    Abstract: This chapter surveys recent developments in agglomeration theory within a unifying framework. We highlight how locational fundamentals, agglomeration economies, the spatial sorting of heterogeneous agents, and selection effects affect the size, productivity, composition, and inequality of cities, as well as their size distribution in the urban system.
    Keywords: agglomeration; city-size distribution; heterogeneous agents; inequality; selection; sorting
    JEL: D31 R12
    Date: 2014–10
  2. By: Desmet, Klaus; Henderson, J Vernon
    Abstract: This chapter describes how the spatial distribution of economic activity changes as economies develop and grow. We start with the relation between development and rural-urban migration. Moving beyond the coarse rural-urban distinction, we then focus on the continuum of locations in an economy and describe how the patterns of convergence and divergence change with development. As we discuss, these spatial dynamics often mask important differences across sectors. We then turn our attention to the right tail of the distribution, the urban sector. We analyze how the urban hierarchy has changed over time in developed countries and more recently in developing countries. The chapter reviews both the empirical evidence and the theoretical models that can account for what we observe in the data. When discussing the stylized facts on geography and development, we draw on empirical evidence from both the historical evolution of today's developed economies and comparisons between today's developed and developing economies.
    Keywords: developed countries; developing countries; development; economic geography; growth; space; urban economics
    JEL: O1 O18 R1 R11 R12
    Date: 2014–09
  3. By: Karna, Amit; Florian A. Taeube; Petra Sonderegger
    Abstract: The organization of geographic clusters plays an increasingly significant role due to the presence of network ties that exist within the location and beyond. This has proven to be particularly true for knowledge-intensive industries, where the organization of resources – people and technology – has been a primary driver for firm and regional performance. With the help of a longitudinal case study of the IT cluster in Bangalore (India), we investigate the effect of local and non-local network ties on its evolution. We argue that local and non-local networks play a clear role in cluster evolution. We propose a U-shaped relationship between cluster evolution phases and the distance among the network tie members. Our study also outlines the role that embedding, expansion, and extension of ties plays in transitioning cluster from one phase to the other. The consideration of non-local ties is rather nascent in the cluster literature and promises to enhance the understanding of how clusters develop at both levels - policy as well as firm.
  4. By: Mathias Moser (Department of Economics, Vienna University of Economics and Business); Matthias Schnetzer (Austrian Chamber of Labour Vienna)
    Abstract: This paper investigates the nexus between regional income levels and inequality. We present a novel small-scale inequality database for Austrian municipalities to address this question. Our dataset combines individual tax data of Austrian wage tax payer on regionally disaggregated scale with census and geographical information. This setting allows us to investigate regional spillover effects of average income and various measures of income inequality. Using this data set we find distinct regional clusters of both high average wages and high earnings inequality in Austria. Furthermore we use spatial econometric regressions to quantify the effects between income levels and a number of inequality measures such as the Gini and 90/10 quantile ratios.
    Keywords: Regional inequality, spatial dependence, spatial autoregressive model
    JEL: C21 D31 J31
    Date: 2014–11
  5. By: Anna Maria Ferragina; Fernanda Mazzotta
    Abstract: The focus of our contribution is to shed light on the importance of firm agglomerations and FDI as drivers of firm survival in Italy. We focus upon different types of agglomeration economies related to the geographical context checking how these economies impact differently on heterogeneous firms survival and whether effects are robust to different estimators (Probit, Cox hazard models, Probit Heckman) and to different assumptions about inter-and intra-regional spillovers. The novelty our paper with respect to previous studies is twofold. First of all, we focus both on external economies and on firm internationalization, two crucial determinants of firm productivity and competitiveness and ultimately of firm survival. Hence, we consider the intertwined role of firm global activities with respect to the local drivers of firm dynamics by comparing foreign investors in Italy and Italian firms' investing abroad to domestic firms to catch a crucial source of heterogeneity of firm behavior with respect to external economies (correcting for the endogeneity of the FDI variables and for sample selection). Secondly, we use a very large dataset at firm level which takes into account several different dimensions at firm, industry and province level (previous studies are mostly at sectoral or at province/regional level) for more than 500,000 observations concerning Italian manufacturing corporate firms disaggregated by sector and by 103 provinces over a long span of time (2002-2010) which allows to also catch the effect of the crisis. With respect to agglomeration economies the paper analyses whether and how firms' exit choices are influenced by five different agglomeration indicators related to the geographical context: 1) External economies arising from localization economies due to the spatial concentration of firms in the same industry (GLAESER et al., 1992) and to 2) local production systems (Industrial districts); 3) External economies available to all local firms irrespective of sector and arising from urban size and density (urbanization economies); 4) External economies available to all local firms stemming from specialisation of firms in different varieties which may favour intra- and inter industry knowledge spillovers via Jacobs externalities (JACOBS, 1969); 5) diversification due to unrelated variety to capture the portfolio effect arising from the spatial concentration of firms belonging to different and non-complementary industries which may protect the region from sector-specific shocks (FRENKEN et al., 2007). We check whether the relevance of these agglomeration economies differ substantially between Italian firms and firm which invest in active or passive FDI. We get evidence on three issues: 1) Benefits from geographically and industry bounded specialisation for survival; 2) Industrial districts economies impact on firm survival 3) Diversification economies relevance.
    JEL: C41 F21 F23 L25
    Date: 2014–11
  6. By: Hervas Oliver,Jose Luis; Gonzalez,Gregorio; Caja,Pedro
    Abstract: The industrial district and cluster literature has generated an extraordinary quantity of articles, debates, and topics for discussion, and encompasses one of the most vibrant lines of research in the field of economics, geography, management and related disciplines. The literature, however, is fairly fragmented. In this paper, bibliometric methods are used to analyze cluster literature published between 1957 and 2014 in order to explore prospective research priorities through the method of bibliographic coupling. Beyond focusing on foundational works in the past, this approach shifts the focus away from the practice of analyzing co-citations and seminal contributions to one of looking at current and emerging trends in the literature. Using the ISI-Web of Knowledge (Web of Science) as a database, examination of two samples of 3,955 and 2,419 articles is made. Results reveal the existence of sub-fields of inquiry that are following their own particular research agendas, which remain distinct yet interconnected to one another.
    Keywords: cluster, industrial district, bibliometric analysis, Web of Science, bibliographic coupling
    JEL: R1
    Date: 2014–11–27
  7. By: Sabina Buczkowska; Matthieu de Lapparent
    Abstract: Location choices of newly created establishments: Spatial patterns at the aggregate level Keywords: location choice model, count data models, hurdle model, spatial effects JEL Classification: C35, D21, R12 This paper explores the problems associated with the location choice of newly created establishments at the aggregate level. Much work has been done in this domain, however, several issues arise when analyzing involved phenomena, which scholars have yet to fully explore: 1) addressing the excess of zeros problem in the location choice model in highly heterogeneous geographic areas and 2) determining an appropriate way to accommodate spatial effects for location decisions. We tested models that include both stocks of pre-existing establishments and variables that represent measures of accessibility to the workforce and population, proximity to shops, services, transport infrastructure, availability of land, as well as prices and tax levels. We concluded that an estab- lishment does not act in isolation during its decision-making processes and that it is likely to be influenced by other establishments located nearby. When selecting the appropriate location in which to set up in the market, an establishment may consider not only the characteristics of a particular area, but also the characteristics of neighboring zones. Having estimated 84 nested and non-nested count data models, we found that the hurdle models are preferred for taking into account the presence of excess zeros. Hurdle models offer greater flexibility in modeling zero outcomes and relax the assumption that the zero observations and the positive observations come from the same data generating process. In addition, the paper finds that the models tested with the distance matrix indicate that the incorporation of spatial spillovers leads to an enhancement in the models' performance.
    Keywords: location choice model; count data models; hurdle model; spatial effects
    JEL: C35 D21 R12
    Date: 2014–11
  8. By: Reinhold Kosfeld; Mirko Titze
    Abstract: Strong regional clusters are increasingly seen as a response to economic globalization by policy makers and regional development agencies. The reasoning of competitive advantages of countries and regions with enterprises organized in clusters has mainly been popularized by Porter (1990, 1998, 2000). As well-working clusters are associated with high productivity growth and innovation potential, the cluster approach has become appealing in different fields of economic policy. In particular cluster-based instruments are in integral part of EU regional policy (Christensen et al., 2011). In most EU countries cluster-oriented policy plays an important role at the national and regional level (Oxford Research, 2008). This also holds for Germany where diverse national and regional programmes were set up to promote cluster development (Török, 2012). Although the cluster approach is based on the agglomeration theory, a variety of definitions of a cluster exists (Martin/Sunley, 2003). The present paper aims at improving the strategy of regional cluster identification. First, at the national level, the dominant related sectors of R&D intensive industries are basically discovered by qualitative input-output analysis (QIOA). Yet it has to be allowed for the fact that usually not all enterprises of these sectors belong to the respective value added chains. Thus, QIOA has to be supplemented by quantitative input-output analysis in order to avoid distortion effects that arise from defining too heterogeneous clusters. Here downstream and upstream sectors are considered according to their involvement in the production activities of the key industry. Secondly, at the local level, it has to be settled whether and how spatial externalities and spillovers should be allowed for in locating regional clusters. Most applied cluster studies ignore the presence of spatial interaction between interrelated geographical units. If geographical units are considered to be spatially independent in the presence of spillover, however, spatial clustering tends to be underestimated (Guillain/Le Gallo, 2007). Feser/Koo/Renski/Sweeney (2001) and Feser/Sweeney (2002) were the first to explicitly accounting for spatial interaction between regions in an applied cluster study for the US state of Kentucky. In a follow-up study, Feser/Sweeney/Renski (2005) extended spatial analysis to the United States as a whole. Both studies make use of the Getis-Ord statistic to measure and test for local spatial clustering (Ord/Getis, 1995). Recently, Pires et al. (2013) utilize the local Moran test for localizing industrial clusters in Brazil. A major drawbacks of both local methods is the necessity of fixing the environments of the regions in advance. reach of the geographical extent of potential spillover effects in advance. To allow for varying reaches of the geographical extent of regional interaction, here the flexible approach of spatial scanning is adopted (Kulldorff, 1997). On the basis of Kulldorff's scan test, the variable extent of potential regional clusters is accurately captured.
    Keywords: National cluster templates; regional clusters; Qualitative Input-Output Analysis (QIOA); spatial scanning
    JEL: R12 R15
    Date: 2014–11
  9. By: Evgeniya Kolomak
    Abstract: We study the dynamics of inter-regional economic disparities for a number of development characteristics, test the hypothesis of the new economic geography and connect the results with the prediction of the bell curve describing spatial concentration over time. The results of our analysis suggest that the concentration of economic activity continues in Russia and that the pace of the interregional divergence is rather high. These findings bring us to the conclusion that the country rests at the left side of the bell-shaped relationship between interaction costs and spatial distribution. Both the western and eastern regions experience centripetal tendencies; however, despite predictions, no essential redistribution of the production factors and outputs from the East to the West is revealed. In other words, first nature (the East's natural resources and raw materials, which are highly valued in the global market) is balanced by second nature (the West's better infrastructure and large markets). The significant factors in spatial concentration and total productivity growth are density, the size of and access to markets and the diversity of the economy. Insensitivity to the diversification is specific to the eastern regions of Russia. There are also sectorial peculiarities: population density and proximity to markets negatively influences; due to the immobility of supply. External markets have no significant effect on construction. Due to fierce competition, sectorial specialization decreases both productivity and the rate of concentration. These results of the estimates are in accordance with the predictions of the new economic geography. One of the practical ideas suggested by this analysis is the conclusion that in the near future, we will observe further concentration of economic activity and interregional divergence in Russia. The forces behind the agglomeration economy and regional disparities are market-based (increasing returns to scale and imperfect competition), and they are beginning to play a major role in the country in the transition and in the post-transition period. Despite the active regional policy and the massive redistribution efforts undertaken by the central government, regional disparities continue to grow. The new economic geography theory describes the mechanisms of agglomeration and provides suggestions for the pro-dispersion forces to countervail centripetal tendencies. Translated into the language of the practical recommendations, they include essential improvement of transport and communication infrastructure, radical decreases in trade cost and the elimination of regional institutional barriers, as well as an active social policy supporting lagging regions.
    Keywords: regional disparities; economic geography; empirical estimates; Russia;
    JEL: R12 O18
    Date: 2014–11
  10. By: Dirk Assmann; Johannes Stiller
    Abstract: The aim of this paper is to develop a spatial model that explicitly incorporates the different types of knowledge spillovers taking place in cities and to show how they affect the migration decision of individuals and the size of cities. We use a static general equilibrium framework with two types of labor (highly and less educated) and two asymmetric locations: The city and the periphery, where only the city provides highly educated workers with the opportunity to exchange knowledge via face-to-face interactions. Our model incorporates two forms of knowledge spillovers happening in these meetings whose intensities are dependent on the similarity of knowledge background of the interacting individuals: First, the individual build-up of skills through the process of learning increases in the similarity of knowledge backgrounds. And second, innovative output generated in a meeting decreases in the similarity of knowledge backgrounds. This reflects the general sentiment that diversity stimulates the emergence of groundbreaking innovations. We see that highly educated workers only focus on the build-up of their personal skills when deciding about the range of individuals in the city they accept to be matched with, whereas innovative output is seen as a by-product of the process of learning. The interplay of agglomeration and dispersion forces determines the allocation of workers in the spatial equilibrium. Moving to the city gives them the chance to increase their personal effectiveness through the process of learning in face-to-face meetings. On the other hand there are two dispersion forces at work: First, the crowding effect in the regional housing and decreasing returns to scale to supplied work. However, the equilibrium allocation of workers across the two regions is socially inefficient. As mentioned above highly educated workers only focus on the build-up of personal skills since the increase in personal effectiveness is directly compensated by firms. A Social Planner however, would recognize that meetings between more diverse individuals in the city would have a positive impact on innovative output. This inefficient decision additionally implicates that agglomeration forces do not reach their optimal extent and create cities that are smaller than socially optimal. The intuition behind this result is simple. People move to the city to maximize their personal outcome, but do not take into account their impact on the emergence of innovations, that are available for everyone. We are the first to explicitly model the impact of different forms of knowledge spillovers on agglomeration forces. We believe that our model's insights on the microfoundations of different types of knowledge spillovers provide a valuable contribution to the understanding of empirical observations like the skill and urban wage premium, because it offers the possibility to look at the forces at work affecting the empirical findings.
    Keywords: Imitation; Innovation; Matching; Knowledge Spillovers;
    JEL: R12 J24
    Date: 2014–11
  11. By: Philip Ushchev; Igor Sloev; Jacques-Francois Thisse
    Abstract: We combine spatial and monopolistic competition to study market interactions between downtown retailers and an outlying shopping mall. Consumers shop at either marketplace or at both, and buy each variety in volume. The market solution stems from the interplay between the market expansion eff_x001B_ect generated by consumers seeking more opportunities, and the competition eff_x001B_ect. Firms' profi_x001C_ts increase (decrease) with the entry of local competitors when the former (latter) dominates. Downtown retailers swiftly vanish when the mall is large. A predatory but effi_x001E_cient mall need not be regulated, whereas the regulator must restrict the size of a mall accommodating downtown retailers.
    Keywords: shopping behavior; retailers; shopping mall; spatial competition; monopolistic competition
    JEL: D43 L81 R10
    Date: 2014–11
  12. By: Markus Grillitsch
    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. The concept of institutional layering contributes to the literature on institutional change and institutional complementarity. Important mechanisms and drivers of institutional change within and between institutional layers are discussed. The emphasis in this paper lies on the dynamic interplay between institutional layers. One of the main advantages of the concept of institutional layering is that it illuminates the causality of institutional change. It demands to identify which institutional layer changes how and because of what reason, appreciating also the role of agency and power. In this context, the literature on institutional complementarity underlines the importance of interdependencies between different types of institutions for institutional change as well as economic outcomes. The concept of institutional layering contributes by providing an analytical framework for studying these interdependencies. Furthermore, several mechanisms are identified how the concept of institutional layering contributes to our understanding of regional transformation. The variety and connectedness of institutional layers in a region have an effect on learning and knowledge exchange, the probability to benefit from related variety, the forming of collective interests and resources, the exploration of path plasticity as well as institutional dynamics. Depending on the degree of variety and connectedness of institutional layers, regions will therefore experience differences in the speed of economic evolution, resilience, and the likelihood for continuous or disruptive changes. Using the two dimensions, variety and connectedness of institutional layers, the paper moves towards a typology of regions and relates it to existing empirical literature.
    Keywords: Institutions; evolutionary economic geography; geography; regional transformation;
    JEL: B52 O43
    Date: 2014–11
  13. By: Or Levkovich; Jan Rouwendal
    Abstract: Current developed economies' growth becomes increasingly dependent on the performance of innovation and skill-intensive industries. Therefore, the ability of cities to attract skilled or highly-educated individuals becomes more and more important for their growth and economic development. In this research we estimate a residential sorting model in order to shed light on the factors that determine the location choices of foreign skilled workers. We do so by estimating their valuation of various urban amenities in the municipalities of the densely populated Randstad area in the west of the Netherlands, and investigating which amenities increase the attractiveness of these municipalities. We also consider heterogeneity in individual preferences, and compare housing preferences and marginal willingness to pay for amenities between groups based on skill levels and origin. We find that job opportunities, accessibility, natural amenities and presence of historic monuments and buildings are highly valued by both domestic and migrants with high-education. Our results also provide evidence that social amenities, such as an existing community of migrants in a municipality, have an important role in determining the attractiveness of a location.
    JEL: J61 R11 R21 R23
    Date: 2014–11
  14. By: Vicente Rios Ibañez
    Abstract: This paper investigates the evolution of the geographical distribution of unemployment rates in a sample of 258 NUTS-2 European regions between 2000 and 2011. In particular, I explore the role played by market equilibrium, disequilibrium and institutional factors shaping regional unemployment disparities. To that end, the present analysis uses recently developed spatial panel econometric techniques that integrate spatial and temporal dynamics. Important methodological issues such as region-speci_x000C_c and time-speci_x000C_c _x000C_xed e_x000B_ects, spatial estimation methods, speci_x000C_cation and the selection of the spatial matrix are addressed. In conjunction with spatio-temporal panel data regression model estimates, stochastic kernels are used to analyze the e_x000B_ect of the various factors in the shape of the whole distribution of unemployment rate. Empirical results suggest that regional unemployment rate di_x000B_erences have decreased and that such regional convergence process has been driven by regional market equilibrium factors.
    Keywords: Unemployment; Spatial Dynamic Lag; Stochastic Kernels
    Date: 2014–11
  15. By: Oscarina Conceição (DINÂMIA-CET, University Institute of Lisbon, Lisbon, Portugal & Polytechnic Institute of Cavado and Ave); Ana Paula Faria (Universidade do Minho - NIPE); Margarida Fontes (LNEG – National Laboratory of Energy and Geology. Lisbon, Portugal & DINÂMIA-CET, University Institute of Lisbon, Lisbon, Portugal)
    Abstract: Using a unique self-collected dataset that comprehends the population of research-based spin-offs created in Portugal from 1995 until to 2007, we investigate the location choices of these firms. In order to do so we control for both university- and region-related mechanisms. Our results suggest that the latter play a lesser role than university-related mechanisms. Although the availability of qualified human capital and urbanization economies seem to exert some effect on the location choices of research-based spin-offs, our results suggest that the quality and prestige of the universities located in a region, as well as the presence of university-affiliated incubators and/or university research parks have a stronger impact on the intensity of RBSO location across regions.
    Keywords: academic spin-offs; firm creation; location decision; count data analysis
    Date: 2014
  16. By: Michael Pflüger
    Abstract: The last one and a half centuries have witnessed dramatic changes in the world economy. The service (tertiary) sector, which at the beginning of the 20th century was of little importance relative to agriculture and manufacturing, has become the dominant sector today, accounting for 80% and more of value added in advanced countries and around 70% and of employment. Innovations in transport technologies and in information and communications technologies have radically reduced the costs of trading goods and have also made an increasing share of services tradeable. We propose a tractable micro-founded Ricardo-Marshall model to study the implications of the rise of the service sector and its interaction with international trade and factor mobility for the location of economic activity. Our model highlights a tension between nontradeable services which exert an agglomerative force and trade costs and comparative advantage which act as dispersion forces.
    Keywords: services; comparative advantage; labor mobility; symmetry breaking; agglomeration structural change
    JEL: F12 F22 R11 R12 R13
    Date: 2014–11
  17. By: Neumark, David; Simpson, Helen
    Abstract: Place-based policies commonly target underperforming areas, such as deteriorating downtown business districts and disadvantaged regions. Principal examples include enterprise zones, European Union Structural Funds, and industrial cluster policies. Place-based policies are rationalized by various hypotheses in urban and labor economics, such as agglomeration economies and spatial mismatch – hypotheses that entail market failures and often predict overlap between poor economic performance and disadvantaged residents. The evidence on enterprise zones is very mixed. We need to know more about what features of enterprise zone policies make them more effective or less effective, who gains and who loses from these policies, and how we can reconcile the existing findings. Some evidence points to positive benefits of infrastructure expenditure, and also investment in higher education and university research – likely because of the public-goods nature of these policies. However, to better guide policy, we need to know more about what policies create self-sustaining longer-run gains.
    Keywords: discretionary grants; employment; enterprise zones; higher education; industrial clusters; infrastructure; place-based policies
    JEL: R1 R23 R3 R5
    Date: 2014–09
  18. By: Di Caro, Paolo
    Abstract: This paper analyses regional resilience and local economic growth patterns in Italy over the past four decades. Place-specific transient and permanent effects of aggregate employment shocks are studied. Geographical asymmetries in engineering and ecological resilience are found, providing auxiliary insights on the rooted Italian regional inequalities. The territorial impact of different crises is investigated and a direct comparison with the UK case is offered. The importance of manufacturing activities for explaining economic resilience is assessed, finding out a positive relation between the resilience of the industrial sector and the overall local economic development. Some policy implications are conclusively discussed.
    Keywords: recessions, recoveries, regional resilience, local economic growth
    JEL: E32 R1
    Date: 2014
  19. By: Irena Dokic; Ivana Rasic Bakaric; Zlatan Fröhlich
    Abstract: The economic crisis has affected the EU regions very differently over the last five years, depending on the region's strengths or weaknesses, its sectoral structure and the response of national and regional governments. In some countries, downturns can lead to narrower interregional disparities, while in some can trigger regional divergence. Previous empirical studies indicate that there is a tendency for regional disparities to grow during recessions, and diminish in the period of economic growth (Dunford and Parron, 1994; Evans and MacCormic, 1994, Audas and Mackay, 1997). Although the reduction of regional disparities represents one of the priorities of EU regional policy and of Croatian regional policy, regional disparities within the Croatia are still significant. The current economic crisis that has emerged in the Croatian economy has already an enormous negative effect on several national and regional development indicators like GDP per capita, unemployment, and productivity. Some areas are coping with structural changes such as de-industrialization. In line with that the main aim of the paper is to find out if regional imbalances within Croatia have been more exposed by the current crises? This paper analyses the disparities between economic developments of Croatian counties before the crisis (before 2009) in comparison with the recession period. The analysis focuses on regional development index and other available socio-economic indicators (GDP per capita, unemployment rate). Obtained results can serve as a ground for improvements in Croatian regional economic policy. Keywords: economic crisis, regional disparities, convergence and divergence
    JEL: R11 R58
    Date: 2014–11
  20. By: Mariusz E. Sokolowicz; Aleksandra Nowakowska; Zbigniew Przygodzki
    Abstract: Interest in territorial forms of organisation of production is currently at its peak, both among researchers striving to describe and explain various phenomena and among practitioners - representatives of authorities, entrepreneurs or experts involved in developing the idea. On this basis, the concept of so called local production systems (LPS) is being more and more popular among regional scientists as well as regional and industrial policy makers. LPS are usually defined as systems of businesses centred in geographical proximity around one core industrial activity, maintaining relations among themselves and with their territorial socio-cultural environment, and are considered as one of the key territorial form of organization of production, which can efficiently contribute to the regional development and regional innovativeness. Among policy makers of most of the European countries, local production systems are usually considered as conceptual equivalent of the notion of cluster, while the latter, together with cluster supporting policy, is treated as of one the most important forms of enhancing the innovativeness of economies on the local and regional level. Also in the case of Poland, clusters as a form of local production systems, represent a very important part of the economy, triggering endogenous development potential. However, the level of innovativeness of Polish clusters is a difficult subject to clear assessment. Innovation commitment of clusters in Poland largely varies and depends mainly on the structure of their membership, development stage, industry and regions of activity. However, for the last 5 years Polish cluster supporting policy has developed a valuable tool for monitoring the situation in this area, which is benchmarking of clusters. The aim of the paper is to present the level of innovativeness of Polish local production systems, based on the benchmarking results', with the emphasis of the dynamic aspect of this phenomena. Together with the review of the instruments of supporting innovativeness of LPS in Poland, these results gives an answer about both positive trends concerning the innovativeness of Polish economy and negative aspects, listed as main challenges and dilemmas of Polish regional policy for the next years.
    Keywords: local production systems; regional innovativeness; regional innovation policy; benchmarking
    JEL: O25 O R10
    Date: 2014–11
  21. By: Marko Danon (GREDEG CNRS; University of Nice Sophia Antipolis)
    Abstract: Space has only recently become a terrain of strenuous economic research. With the New Economic Geography (NEG) integrating into mainstream, many spatial subjects, including territorial, or regional, competitiveness are being increasingly inquired. In line with Krugman (2003), we argue that it is plausible to discuss competitiveness on a regional level, as a capacity of territories to attract and retain mobile factors of production, which is an increasingly important subject in an ever integrating global economy. However, this branch of economic geography is relatively underdeveloped, while it even lacks a universally accepted definition and metrics. In order to overcome this shortcoming, we propose a novel definition, along with a new index on territorial competitiveness tailored for the case of European regions at NUTS 2 level. This paper is structured as follows. In the first part, we provide a short discussion on theoretical background of the study on regional competitiveness and present in brief the key notions used in the literature. It is in that part where we propose and interpret our definition of regional competitiveness. Next, we discuss on ways of quantifying regional competitiveness and on some of the key attempts taken so far. In the third part, we present our index for European regions, by describing the territorial, temporal and methodological choices, theoretical justifications, as well results and their interpretation in the light of the NEG. The fourth part concludes and the fifth contains annexes.
    Keywords: Regional Competitiveness, Composite Index, New Economic Geography, Agglomerations, Clustering
    JEL: R11 R12
    Date: 2014–12
  22. By: Balázs Páger
    Abstract: The theoretical concepts about entrepreneurship have changed since the last three decades. It has become one of the most crucial factors in the economic processes. These changes in the theories about entrepreneurships have been supported by the shift in the whole economic environment. If we look the comparison of the managed economy and the entrepreneurial economy (Audretsch and Thurik 2001), it can be seen clearly those shifts which contributed to become entrepreneurship an important factor in the economic development. Entrepreneurships are embedded in that socio-economic environment, where they continue their economic activity. The entrepreneurship is influenced by those negative and positive factors (for example other institutions and actors, connections, externalities) which can be attributed to regional factors. It can be assumed that the regional context of the institutional and individual factors has a crucial role in the entrepreneurial performance of a given territory. If the definition of entrepreneurship has been looked, it can be observed that entrepreneurship is a multi-dimensional concept. This multi-dimensional character would require a complex view and measure of entrepreneurship. The Global Entrepreneurship and Development Index (GEDI) is a measure of entrepreneurship based on a system view (Ãcs et al 2013). Its methodology has been applied for the regional measurement of entrepreneurial performance which is called Regional Entrepreneurship and Development Index (REDI) (Szerb et al 2014). The REDI components, so-called pillars, have two components, and consequently two types of variables reflecting to the parts of the individual and institutional context of entrepreneurship. This paper focuses on the entrepreneurial performance of Central and Eastern European (CEE) regions which have been measured by the REDI. The performances of the CEE countries are compared with other European regions and they have been analysed on their own as well. It can be observed that CEE regions have relatively poor entrepreneurial performance amongst the European regions. As the regions' performance were compared to one another it can be observed that there are some factors which are weak not only on the regional but on the national level as well. One of the most important characters in the CEE regions is the high difference between the capital city and the other regions. It could mean that the economic weight and the entrepreneurial performance of the non-capital regions are relatively small.
    Keywords: entrepreneurship; regional development; CEE regions;
    JEL: L26 O18
    Date: 2014–11
  23. By: Luis Delfim Santos; Isabel Martins
    Abstract: Geographical Information Systems (GIS) are an essential tool to integrate and manage large amounts of data (statistical and graphical) and to visualise the modelling efforts of the contemporary city. The further use of spatial analysis methods, in particular the exploratory analysis of data and spatial econometric models, is a promising way forward to analyse urban reality. In this analysis, we used a conceptual model and a geographical database developed for the city of Porto (Portugal) under a previous research on the topic of intra-urban disparities in the local quality of life. The aim of this paper is to contribute to the interdisciplinary debate on the relevance and use of this type of techniques, which enable us to describe spatial distributions, identifying patterns of spatial association, concentration areas or hot spots, in order to look into distributive features such as concentration, persistence and transitions that might provide interesting interpretations of complex territorial structures, such as the cities.
    Keywords: urban disparities; spatial analysis; quality of life
    JEL: R58 O21
    Date: 2014–11
  24. By: Henri Busson
    Abstract: In the United States, regions with more human capital tend to attract skilled workers (e.g., see Glaeser and Berry, 2005), and as a result, convergence between regions does not occur (e.g., see Barro and Sala-i-Martin, 1992). Presently, many of the most productive European workers try to migrate to the United States. As a consequence, economic growth in Europe could be affected by such migrations (e.g., see G Saint Paul, 2008). Futhermore, Indian and Chinese entrepreneurs are recently coming back to their home countries despite higher wages in the United States. The main explanations are the lack of economic opportunities in the US and the costs of the labour force (e.g., see Saxenian et al., 2011). To comprehend these problems, we develop a theoretical Economic Geography model with heterogeneous skills for workers. It is an extension of Krugman's famous model "History versus expectations". This two regions model describes an economy with one input assuming two levels of skills for labor force, where workers have the opportunity to migrate. The question is whether history completely determines the final equilibrium or whether is it possible to attract skilled workers to areas with less human capital. This is a dynamic model, which is able to explain the location choices of workers between countries or within countries. The model could be extended to more complex new economic geography model with utility functions instead of wages (e.g., see Ottaviano, Tabuchi and Thisse, 2002). With the heterogeneity of workers, several equilibriums appear that were not present in Krugman's model. Dispersion of human capital is now a possibility where all the skilled workers are located in one area and all the unskilled workers are in the other region. Our results suggest that history does not determine the final outcome even with high interest rates conditional on economies scales that are sufficiently high contrary to Krugman. At least one equilibrium path emerges that was not present in Krugman's model. Under certain conditions, the final equilibrium is stable. This finding contradicts previous papers, which demonstrated that heterogeneity was a stabilizing force (e.g., see Morris and Shin, 2006; Herrendorf et al., 2000).
    Keywords: Economic geography; location choice; equilibrium paths; linear differential systems
    JEL: J61 C62 R12
    Date: 2014–11
  25. By: Tatiana Ratnikova; Ksenia Gonchar
    Abstract: The difficulties of agglomeration effects estimation are caused by the problem of unobserved features of heterogeneous cities, industries, enterprises and even employees, related to both the dependent variable (enterprise-level labor productivity) and the specific characteristics of agglomerations. The selection of an enterprise for the analysis of agglomeration effect may result in identification errors, given that an enterprise located in an urban community in a densely populated Western region of Russia will be observationally equivalent to an enterprise in the Siberian rarefied space in terms of its external scale economy if their sizes, specialization, political status and other urban characteristics correspond. We consider that our subject of analysis is nested in several external environments, i.e., that the enterprise is located within a city, that the city is located within a region, and that it is likely that these environments, similar by nature, would work differently, modified in turn by the nature of the enterprise. Another form of self-selection, the exit of less productive firms driven out by intense competition in urban agglomerations, can hardly be disregarded. This form of self-selection is controlled in our research with help of truncated regressions. Therefore, at the regional level of analysis, a measure of the region's involvement in international trade (exports plus imports as a percentage share of the Gross Regional Product (GRP)) is included in regression and then it is analyzing to what extent the power of urban agglomeration effects depend on the location within the region opened to trade and competition. The results suggest that plants in urban agglomerations enjoy 17-21% higher labor productivity. Productivity gained from urban agglomeration is the highest in towns with populations of 100,000 to 250,000 people. This benefit arises as a result of urbanization and external scale economy. Localization and clustering in the city is not associated with higher labor productivity. While regional own-industry clustering satisfactorily explains the productivity premium, suggesting that efficient clustering requires a scale economy larger than only a city. Another result: the urban agglomeration benefit is statistic significant in the firms with middle labor productivity and is absent in high- and low- productive firms. JEL classification: R10, R12, D24 Key words: productivity, city, urban, agglomeration
    Date: 2014–11
  26. By: Felix Richter
    Abstract: Urban revitalization programs are widespread used but empirically understudied place-based policy instruments which attract increasing attention in recent years. This study adds to the existing literature by evaluating the selection process which led to the designation of a set of five urban revitalization areas in Berlin, Germany in the beginning of 2010. Moreover, the study addresses the question whether the choice of the location of potential urban revitalization areas is influenced by a winner picking strategy, i.e. whether policy makers select areas that would prosper even in absence of the policy to make the policy seem more successful. We attempt to model this hypothesis by evaluating the influence of long run past trends of selected key characteristics (the unemployment rate and the share of residents with immigration background) on the probability of being selected as a target area of the revitalization policy, conditional on the current levels of these characteristics and a comprehensive set of housing and location controls. The empirical evidence is in line with our expectations and is quite stable across different specifications and several estimation approaches: we find evidence that policy makers indeed seem to base their choice to some extent on their expectation of the future performance of the areas. Specifically, they seem to choose the target areas from a pool of areas, which have high levels of unemployment and a high share of residents with immigration background. From this pool, however, they preferably choose areas which have undergone a positive development in the past years. While high current levels of the unemployment rate and the share of residents with an immigration background increase the probability of being selected as a target area, an increase in the six year change of the unemployment rate and the share of residents with immigration background, i.e. a further negative development, decreases the probability of being selected into a target area. This effect is interpreted as a winner picking strategy, as the local authorities do not simply choose the areas which have the greatest need for revitalization, but instead prefer areas which show first signs of a revitalization or gentrification process.
    Keywords: Winner picking; place-based policy; evaluation; urban; revitalization; renewal;
    JEL: R11 R21 R28 R58
    Date: 2014–11
  27. By: Vasileios Angelis; Athanasios Angelis-Dimakis; Katerina Dimaki
    Abstract: Regional development has been in the centre of interest among both academics but also decision makers in the central and local governments of many European countries. Identifying the key problems that regions face and considering how these findings could be effectively used as a basis for planning their development process are essential in order to improve the conditions in the European Union regions. For a long period of time a country's or a region's development has been synonymous with its economic growth. Over the last years, however, economies and societies have been undergoing dramatic changes. These changes have led to the concept of sustainable development, which refers to the ability of our societies to meet the needs of the present without sacrificing the ability of future generations to meet their own needs. Measuring sustainable development means going beyond a purely economic description of human activities; requires integration of economic, social and environmental concerns. New techniques are required in order to benchmark performance, highlight leaders and laggards on various aspects of development and facilitate efforts to identify best practices. Furthermore, new tools have to be designed so as to make sustainability decision-making more objective, systematic and rigorous. The growth or decline of a country or region depends on its power to pull and retain both business and the right blend of people to run them. Working in this context, we have so far defined a variable which is called the image of a region and quantifies this pulling power. The region's image is a function of a multitude of factors physical, economic, social and environmental, some common for all potential movers and some specific for particular groups of them and expresses its present state of development and future prospects. The paper examines a number of south European countries and focuses on their NUTS 2 level regions. Its objective is to: * Estimate the Basic Image values of those regions. * Group those regions into different clusters on the basis of the values of the various factors used to define their respective Basic Images. * Present and discuss the results.
    Keywords: Development; Region?s Image; Cluster Analysis; European Regions
    JEL: C02 C65 Q01 R58
    Date: 2014–11
  28. By: Emanuela Marrocu; Ron Boschma; Raffaele Paci
    Abstract: It is widely recognized that most economic activities show a tendency to agglomerate in space and, therefore, economic interactions among firms are likely to be influenced by their geographical proximity. Recently, the literature (Boschma, 2005) has remarked that other dimensions of proximity among economic agents, in addition to the spatial one, can play a relevant role in shaping their relationships. Thus, a growing number of contributions are investigating how proximities among agents - in terms of cognitive and technological bases, cultural and institutional similarity and organizational background - affect their exchanges. In this study we focus on a specific form of firms' inter-relationship - Mergers and Acquisitions (M&A) - which represents one of the most effective tools used by firms to achieve their strategic goals (increasing market shares, entering new markets, acquiring new competencies). M&A deals represent an interesting set-up to assess the decisive role of proximities. The acquisition of a potential target involves a prolonged and costly search process, often conditioned by the limited amount of managerial resources available to the acquiring firm because of physical, cognitive and monetary constraints. Thus, on average, only the small proportion of the most proximate and similar targets ? in terms of geographical location, technological relatedness and organizational factors ? are evaluated by the acquirer in the search process. In this paper we investigates the effect of geographical, industrial, organizational and institutional proximity on the probability that any two firms located in Italy engage in a M&A deal. Within a logistic rare event framework, we investigate 4,261 actual deals completed over the period 2000-2011 and around 3.8 million potential deals. We find robust evidence that all forms of proximity have a positive effect, especially industrial relatedness. Moreover, we find evidence that proximities generate asymmetric effects on M&A deals, depending on the location of bidders and targets and on whether some specific individual characteristics are featured by the acquirer or by the target firm. More specifically, we find that the probably decreases when the acquirer is located in the North of Italy and the target in the South, while the opposite case does not affect the estimated baseline probability; this is reasonably due to the much lower level of social capital featured by Southern Italian regions with respect to the Northern ones, which increases uncertainty and transactions costs, making more difficult the search process for Northern acquirers targeting Southern firms. An additional positive (negative) effect is associated to the acquirer (target) belonging to the financial sector and the target (acquirer) to the manufacturing one; finally, an additional effect is found when the target is listed and the acquirer is a private firm, whereas the reverse status pattern does not yield a significant effect.
    Keywords: M&A; geographical proximity; industrial relatedness; rare events models; asymmetry;
    JEL: G34 R12 C21
    Date: 2014–11
  29. By: Luca, Davide; Rodriguez-Pose, Andres
    Abstract: One of the most important decisions that governments face is how to allocate the public resources necessary for development, given each country’s budget constraints. According to the literature on the links between wealth and institutional performance, highly kleptocratic countries are expected to show higher levels of politicisation of the public purse. The article tests the extent to which socioeconomic criteria (equity and efficiency) or electoral concerns determined the geographical distribution of public investment in the 81 provinces of Turkey between 2004 and 2012. Our results show that, although electoral concerns mattered for the allocation, socioeconomic measures remained the most relevant predictors of investment. Moreover, in contrast to official regional development policy principles, the Turkish state tended to favour areas with a higher level of development over those with greater ‘socioeconomic need’. Our results therefore challenge much of the distributive politics literature, which has overly emphasised the role of pork-barrel in public policy-making. At the same time, they underline the need of paying more attention to the political economy of regional development strategies.
    Keywords: distributive politics; political geography; public investments; regional development policies; Turkey
    JEL: H76 O12 O53 R12 R58
    Date: 2014–06
  30. By: Rafael González-Val; Julio Martínez-Galarraga; Daniel A. Tirado-Fabregat
    Abstract: In this paper we employ parametric and nonparametric techniques to analyse the effect of the changes registered on regional market potential on the growth of Spanish regions during the period 1860-1930. The study of the Spanish experience during these years conforms a case study that allows analyzing whether the construction of new transport infrastructure, as well as the changes in trade policy, that affected the relative market potential of the Spanish regions, ended up shaping regional growth trajectories. In order to carry out the analysis we make use of new evidence on regional inequality patterns in the long term based on recent estimations of per capita GDP for NUTS III Spanish regions (provinces) and an a la Harris measure of regional market potential that takes into account the economic distance between territories according to the changes registered in transport networks, the variations in the actual transport costs and the tariff policy followed over the period. Our results show a clear positive influence of market potential on regional economic growth, particularly along the years 1900-1930.
    Keywords: market potential; New Economic Geography; regional growth; economic history
    JEL: R0 N9 O18 N64 F14
    Date: 2014–11
  31. By: Luciana Lazzeretti; Francesco Capone
    Abstract: The aim of the present research is to participate to the recently resurged debate on cluster life cycle theory among scholars of New Evolutionary Geography and Industrial Economics, starting from the seminal contributions of Menzel and Fornhal (2010). Authors pointed out how the very cluster dynamics is both the driver for the movement of a cluster through a life cycle and the reason why this movement differs from the industry life cycle. Cluster life cycle is recently attracting increasing attention and notwithstanding some authors as Martin and Sunley (2011) showed some criticism, proposing alternative approaches, they agreed the cluster evolution literature is still in search of an appropriate analytical frame work and is necessary to follow an evolutionary approach instead of a deterministic perspective, considering also the analysis of local contexts. Boschma and Fornahl (2011) reaffirming this position, indicate a ?roadmap for future research' able to integrate different approaches and promote the production of a coherent mass of longitudinal empirical study necessary to verify theoretical hypothesis, at the moment not sufficiently adequate. The work deals with the evolution of textile-clothing Marshallian Industrial District (MID) in Prato, focusing on last twenty years, characterised by the settlement of a large numbers of Chinese firms. The Prato MID is in a transformation/decline phase due for many scholars to the entrance of Chinese immigrants as well as the recent economic crisis and the effects of globalization (Johnson et al., 2009). We contribute to this debate following an evolutionary approach according to the Organisational Ecology and density dependence (Hannan and Freeman, 1989; Hannan and Carroll, 1992). The analysis is carried out on Italian and Chinese firms in Prato MID. Data are collected elaborating the Registry of Economic Activity held by the Province of Prato (1990-2011) and integrated with a previous database constructed from REA from Chambers of Commerce of Prato and Florence (1945-1998) (Lazzeretti and Storai, 2003; Lazzeretti and Terchi, 2002). We carried out demographic analysis on the natality and mortality of firms of Prato MID and we tested ecological models in order to establish relationships between legitimation and competition ecological processes and different life cycle phases. Results allow us to reconstruct the internal dynamics of Prato MID from its birth till today and identify in which stage of the life cycle it is currently, providing a theoretical and empirical contribution to the study of cluster evolution, through the Organisational Ecology.
    Keywords: Cluster evolution; cluster life cycle; organisation ecology approach; Prato; textile-clothing; Industrial District; Chinese firms population.
    JEL: R12 L67 R23
    Date: 2014–11
  32. By: Zsofia Vas; Imre Lengyel; Izabella Szakalne Kano
    Abstract: By today smart specialization has become a crucial part of the growth strategy of the European Union. Smart specialization is an innovative approach for the economic transformation of regions, a complex development strategy that builds on the unique characteristics and values of regions, and contributes to increasing the competitiveness of regions. The basis of Smart Specialization Strategy (S3) is identifying the competitive advantages of regions, including the identification of all economic activities that have determining weight, show growth and stand out due to their innovation capacity and performance in a region. In traded sectors capable of dynamic development, enterprises are able to continuously expand their production and satisfy substantial local and extra-regional demand. In Hungary a significant part of the traded sector consists of the manufacturing sector. The manufacturing sector is one of the determining scopes of economic activities, which provides a considerable proportion of the Gross National Product, and involves economic activities that are associated with consumer expenditures, persons employed, exports and a substantial part of technological innovations. The present study aims to prove the significance of the manufacturing sector in the city regions of Hungary. Given that place-based policies place a particular emphasis on the spatiality of economic activities, we examine the spatial distribution of the manufacturing sector by means of employment location quotient (LQ). The study centres on 13 sub-sections distinguished in the manufacturing sector and the analysis of their geographical concentration in the Hungarian city regions at the time of and following the accession to the European Union. The results show which activities in the manufacturing sector are worth specializing in by the city regions and whose support contributes to the further development of the regions.
    Keywords: specialization; city regions; manufacturing industries; Hungary
    JEL: O14 R12
    Date: 2014–11

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