nep-geo New Economics Papers
on Economic Geography
Issue of 2015‒01‒09
24 papers chosen by
Andreas Koch
Institut für Angewandte Wirtschaftsforschung

  1. Agglomeration: A Dynamic Approach By Walker Hanlon; Antonio Miscio
  2. Transportation Costs and the Spatial Organization of Economic Activity By Redding, Stephen J.; Turner, Matthew A
  3. Urban land use By Duranton, Gilles; Puga, Diego
  4. Agglomeration, Segmentation and Technology Choice By yukiko sawada
  5. Technological Progress and Economic Geography_x0003_ By Jacques Thisse; Takatoshi Tabuchi; Xiwei Zhu
  6. Spatial Dependence in House Prices: Evidence from China¡¯s Interurban Housing Market By Yunlong Gong; Peter Boelhouwer; Jan de Haan
  7. Geographical labour mobility and cross-border labour movements between neighbouring countries By Tiiu Paas; Mart Kaska
  8. Culture Concentration By Stephen Sheppard
  9. Do Market-Based Tax Incentives Attract New Businesses? Evidence from the New Markets Tax Credit By Amanda Ross; Kaitlyn Wolf
  10. Housing Market and Agglomeration of Rent-Seeking Activities: Implications for Regional Development By Shin-Kun Peng
  11. Agglomerations and firm performance: how does it work, who benefits and how much? By Hervas-Oliver,Jose-Luis; Sempere-Ripoll,Francisca
  12. Who turns to entrepreneurship later in life? - Push and pull in Finnish rural and urban areas By Hannu Tervo
  14. Transition and path-dependence in knowledge-intensive industry location: Case of Russian professional services By Denis Ivanov
  15. Hub Airports, the knowledge economy and how close is close? Evidence from Europe By Alain Thierstein; Sven Conventz
  16. Patterns of FDI in Southern European Periphery: a Tale of Missing FDI? By Laura Resmini
  17. Why did Spanish regions not converge before the Civil War? Agglomeration and (regional) growth revisited: Spain, 1870-1930 By Alfonso Díez-Minguela; Julio Martínez-Galarraga; Daniel A. Tirado Fabregat
  18. “The Spatial effects of transportation on industrial employment ” By Xavier Fageda; Marta Gonzalez-Aregall
  19. A new regional balance: Challenges and opportunities for intermediate city regions in Europe. By Andreas P. Cornett
  20. Regional recessions and recoveries in theory and practice: a resilience-based overview By Di Caro, Paolo
  21. Emergence of clusters: by chance or by design.The rise of the Oslo Cancer Cluster By Arne Isaksen; James Karlsen
  22. FDI and Growth: Can different regional identities shape the returns to foreign capital investments? By Laura Resmini; Laura Casi
  23. FDI Spillovers in Chinese Urban Agglomerations: Comparative Analysis of the Yangtze River Delta and the Pearl River Delta By Yuyuan WEN
  24. Determinants of technological innovation in SMEs. Firm-level factors, agglomeration economies and the role of KIBS providers By Roberto Ganau; Eleonora Di Maria

  1. By: Walker Hanlon; Antonio Miscio
    Abstract: This paper studies the sources of agglomeration economies in cities. We begin by introducing a simple dynamic spatial equilibrium model that incorporates spillovers within and across industries, as well as city-size effects. The model generates a dynamic panel-data estimation equation. We implement the approach using detailed new data describing the industry composition of 31 English cities from 1851-1911. We find that industries grow faster in cities where they have more local suppliers or other occupationally-similar industries. Industries do not grow more rapidly in locations in which they are already large, though there can be exceptions. Thus, dynamic agglomeration appears to be driven by cross-industry effects. Once we control for these cross-industry agglomeration effects, we find a strong negative relationship between city size and city-industry growth. This allows us to construct the first estimate of the aggregate strength of the cross-industry agglomeration forces. Our results suggest a lower bound estimate of the overall strength of agglomeration forces equivalent to a city-size divergence rate of 2.1-3.3 % per decade.
    JEL: N9 R11 R12
    Date: 2014–12
  2. By: Redding, Stephen J.; Turner, Matthew A
    Abstract: This paper surveys the theoretical and empirical literature on the relationship between the spatial distribution of economic activity and transportation costs. We develop a multi-region model of economic geography that we use to understand the general equilibrium implications of transportation infrastructure improvements within and between locations for wages, population, trade and industry composition. Guided by the predictions of this model, we review the empirical literature on the effects of transportation infrastructure improvements on economic development, paying particular attention to the use of exogenous sources of variation in the construction of transportation infrastructure. We examine evidence from different spatial scales, between and within cities. We outline a variety of areas for further research, including distinguishing reallocation from growth and dynamics.
    Keywords: highways; market access; railroads; transportation
    JEL: F15 R12 R40
    Date: 2014–06
  3. By: Duranton, Gilles; Puga, Diego
    Abstract: We provide an integrated treatment of the theoretical literature on urban land use inspired by the monocentric model, including extensions that deal with multiple endogenous business centres, various dimensions of heterogeneity, and durable housing. After presenting the theory and distilling its key empirical implications, we critically review the empirical literature on differences in prices and development across urban locations, patterns of location choices of heterogeneous households in cities, sprawl and residential decentralization, and employment decentralization.
    Keywords: land use; urban structure
    JEL: R14
    Date: 2014–12
  4. By: yukiko sawada
    Abstract: This paper presents a simple two country model in which firms in manufacturing sector choose a technology level (high or low). I show how trade integration and productivity differential affect technology choice clearly. In particular, if the gap of productivity of high technology is medium, firms locating in country employ high technology and other firms in developing country do low technology. In this case, increasing productivity of high technology makes the welfare level of a consumer in low technology country decrease.
    JEL: F10 F12
    Date: 2014–11
  5. By: Jacques Thisse; Takatoshi Tabuchi; Xiwei Zhu
    Abstract: New economic geography focuses on the impact of falling transport costs on the spatial distribution of activities. However, it disregards the role of technological innovations, which are central to modern economic growth, as well as the role of migration costs, which are a strong impediment to moving. We show that this neglect is unwarranted. Regardless of the level of transport costs, rising labor productivity fosters the agglomeration of activities, whereas falling transport costs do not affect the location of activities. When labor is heterogeneous, the number of workers residing in the more productive region increases by decreasing order of productive efficiency when labor productivity rises.
    Keywords: new economic geography; technological progress; labor productivity; migration costs; labor heterogeneity. Classifcation:
    JEL: J61 R12
    Date: 2014–11
  6. By: Yunlong Gong; Peter Boelhouwer; Jan de Haan
    Abstract: ¡°Spatial thinking¡± is increasingly popular in housing market studies and spatial dependence across properties has been widely investigated in the intra-city housing market. The contribution of this paper is to study the spatial dependence and spillover effect of house prices from an interurban perspective, referring to the spatial interaction across local housing markets. The extensive literature study concludes that following behavior, migration and equity transfer and spatial arbitrage of capital are the main behavioral reasons for interurban spatial interaction. Using a cross-sectional data set in eastern China, our empirical results from both parametric and nonparametric approaches provide strong evidence of spatial interaction in the interurban housing market. The parametric results suggest that the spatial lag model (SAR) is the best model specification to describe the interurban house price process, indicating an endogenous interaction pattern. Ignoring such interaction effect in the house price model will produce biased coefficients estimators and misleading interpretation. In SAR model, Spillover effects of explanatory variables caused by spatial interaction are calculated by partial derivative interpretation approach and are demonstrated to have the magnitude as much as half of their direct effects. Moreover, the comparison between different spatial weighted matrices reveals that the spatial interaction depends not only on distances, but also on the economic situation of each jurisdiction. Meanwhile, nonparametric approach draws a flexible relationship between spatial dependence and geographical distances. Using spline correlogram, we find monotonically declined spatial autocorrelation of house prices and explanatory variables within larger distances, whereas the significant spatial autocorrelation of OLS residuals can only be observed at short distance (60 Km). The spillover effect, being obtained from spatial covariance decomposition, is highly significant and declines within the radius of 250 Km. All the nonparametric results imply that though the house price determinants can satisfyingly account for the interurban house prices, the importance of spillover effect cannot be neglected within certain distances. That is the neighbor¡¯s housing market situation is quite useful in predicting the house price of a particular city. This study provides a good insight into explaining why the house prices in some cities always run above the level indicated by fundamentals, and highlights the importance of cooperation between local governments in making the housing policy.
    Keywords: Spatial autocorrelation; spillover effect; interurban housing market; spatial econometrics; nonparametric estimation; China;
    JEL: R31 C21
    Date: 2014–11
  7. By: Tiiu Paas (University of Tartu); Mart Kaska (University of Tartu, Estonia)
    Abstract: The paper focuses on examining cross-border labour mobility between the neighbouring countries looking for the answer to the question whether cross-border labour mobility can pursue win-win expectations of increasing international labour movement after the EU eastward enlargement. The aim of the paper is to outline differences in the socio-demographic and employment characteristics of Estonian people who have worked in a neighbouring country – Finland and Sweden (East-West mobility) and Latvia or Russia (East-East mobility). The results of the study show that the possible consequences of cross-border labour mobility are twofold. Cross-border labour mobility can support economic development of both source and target country but also generate some threats of brain waste taking into account the sharp increase of lower-skilled jobs of people who are working in economically well-developed neighbouring countries.
    Keywords: geographic labour mobility, neighbouring countries, cross-country labour flows, East-West and East-East mobility, Estonia
    JEL: J61 O57 R23 P52
    Date: 2014–11
  8. By: Stephen Sheppard (Williams College)
    Abstract: Many cities contain local agglomerations of cultural organizations. The “Museum Mile†portion of 5th Avenue in New York, the Museumplein in Amsterdam, Exhibition Road in South Kensington, London are famous examples, and there are hundreds of others large and small. These clusters may arise for some of the same reasons that other agglomerations occur, although the cultural organizations that comprise them have more complex objective functions than the proï¬t-maximizing ï¬rms whose agglomeration is more frequently studied. In this paper we assemble micro-geographic data on cultural non-proï¬ts in US urban areas from 1989 through 2009. We calculate several indices of concentration and dispersion, and assemble a panel data set to explore the impact of these concentrations on local economic well-being. We also present evidence consistent with a hypothesis that there are real agglomeration economies at work, lowering production costs and permitting a larger number of cultural organizations per capita in urban areas where the organizations are more clustered.
    JEL: R30 L30 Z18
    Date: 2014–01
  9. By: Amanda Ross; Kaitlyn Wolf
    Abstract: Policy makers at all levels of government believe that one of the key drivers of local economic growth is new businesses. Therefore, governments design policy with the intention of attracting businesses with the hopes that this will create future growth in struggling areas. Over the past few decades, the federal government has adjusted its approach to aid low-income communities to be based on market-based policies that encourage private investment in low-income communities. The underlying logic of these programs is that the best way to help local areas develop is to set up incentives for businesses at a local level to attract these drivers of growth to disadvantaged communities. By bringing new businesses and employment opportunities to a struggling area, there will be increased employment opportunities and the market will operate to reach an efficient outcome. In this paper, we use the New Market Tax Credit (NMTC) adopted in 2000 by the U.S. government to determine the effect of market-based, government-sponsored tax credits on the location decisions of new businesses. One issue when looking at the impact of business location decisions on growth is there is an inherent endogeneity issue, as entrepreneurs are likely to open their new establishment in growing areas. To address this endogeneity concern, we draw upon an eligibility cutoff in the NMTC to determine the impact of the tax credit on where businesses locate. By comparing census tracts with income levels that make the tract just eligible for the tax credit versus those that are just not eligible for the credit, we are able to obtain causal estimates. Using business location data from the Dun and Bradstreet MarketPlace Files, we find that in Metropolitan Statistical Areas in particular, the tax credit successfully incentivized businesses to locate in lower income census tracts. In particular, we found that these tax credits, aimed at increasing investment, had particularly strong effects on manufacturing. Our results suggest that these market-based tax incentives are having the intended effect of attracting new businesses to struggling areas. Our research fits into a growing literature on the impact of place-based tax programs on the development of local areas
    Keywords: Place-based programs; tax credits; regression discontinuity; entrepreneurship; agglomeration;
    JEL: H25 J60 R23 R41
    Date: 2014–11
  10. By: Shin-Kun Peng
    Abstract: Rent-seeking is defined as exercising privileges or expending resources in order to obtain uncompensated gain by redistributing the wealth of others without reciprocating any benefits back to society through wealth creation. This paper pioneers in analyzing the agglomeration of rent-seeking activities in geography and the corresponding impact on regional economies. First of all, we construct a theoretical model based on the standard settings in the literature of economic geography with two types of mobile workers. Each agent maximizes his/her utility, whereas the distribution of agents' type corresponds to a map of productive and rent-seeking activities. Next, conditions for the agglomeration of rent-seeking activities are characterized, which constitute partially segregated equilibria. Finally, based on a panel data analysis for the conterminous 48 states in the U.S., we examine by how much the regional per capita real GDP drops when there is an extra 1 percent increase in the rent-seeking activities in the housing market.
    JEL: D50 D72 O18
    Date: 2014–11
  11. By: Hervas-Oliver,Jose-Luis; Sempere-Ripoll,Francisca
    Abstract: Agglomeration can generate gains. If it does, how does it work and how are those gains distributed across agglomerated firms? Despite the existence of an important body of research on this topic, the evidence is inconclusive. We examine the effect of localization externalities on a firm’s innovativeness. By analyzing a large dataset of 6,697 firms integrated with another regional agglomeration-related dataset, we obtain results which show that (i) location in an agglomeration has a positive influence on a firm’s absorptive capacity and innovativeness, and, (ii) firms benefit heterogeneously from being located in agglomerations, with benefits being distributed asymmetrically. Agglomeration gains exist but not all firms benefit equally: the least innovative firms gain the most.
    Keywords: agglomeration, localization externalities, innovation, performance
    JEL: M1
    Date: 2014–11–27
  12. By: Hannu Tervo
    Abstract: Age is an important factor in entrepreneurship. The paths into entrepreneurship at a later age may be varied. Self-employment in later life may be either a form of partial retirement or a career option. Older individuals may also be pushed into self-employment. The focus of this paper is on the career choices of older individuals and their background motivations in Finland. The purpose is to analyse the factors and motives in terms of the push and pull dichotomy that lead individuals to enter self-employment at older ages in different types of labour markets in Finland, viz., rural and urban areas. Although some studies have focused on transitions to self-employment among older workers, questions about the motives and particularly about the background and circumstances of these people, including the regional environment, still need clarification. A large longitudinal data set is utilised to examine the transitions of individuals aged 55-74 to self-employment. The results suggest that due to a lower level of demand and lower educational capital, self-employment is less tempting in rural than in urban areas. As a result, transitions to self-employment at older ages are less frequent in rural areas than in urban areas, although rural areas have strong traditions of entrepreneurship. Seniors with prior experience are more likely to start a business in urban areas: habitual entrepreneurship is more frequent in urban areas, at least in later life. Older workers without prior experience in self-employment, however, start businesses in rural areas as likely as in urban areas. The results also show that most enter self-employment from paid employment, though a small number do enter from non-employment. The results suggest that a career option is often linked with transitions from wage work, whereas those transitioning from non-employment seek a bridge to full retirement. No sharp division between these two options can be made, however. The results suggest that those who are recognised to possess pull motives are characterised to be more likely male and/or highly educated, whereas those who are recognised to possess push motives are more likely female, unmarried and/or less educated with an orientation of business education. An interesting finding is that both necessity- and opportunity-driven self-employed have prior self-employment experience. Independent of whether entrepreneurship is necessity- or opportunity-driven, it is most likely habitual.
    Keywords: self-employment; third age; rural and urban regions; habitual and novice entrepreneurship; necessity vs. opportunity JEL-codes:
    JEL: J14 J24 J26 M13 R23
    Date: 2014–11
  13. By: Joachim Möller (IAB, IZA, University of Regensburg); Marcus Zierer (University of Regensburg)
    JEL: L91 N73 N74 R11 R40 R49
    Date: 2014–11
  14. By: Denis Ivanov
    Abstract: This paper searches for roots of current spatial pattern of professional services in location of Soviet-era R&D sector. The Soviet economy sponsored massive R&D oriented mainly on military purposes. Research was carried out in large institutions affiliated with academia or industry. After the collapse of socialism, military spending and related R&D decreased dramatically. Many researchers left Soviet-style institutions and succeed in the market economy. Did however this process mean anything for geography? Under the centrally planned economy, locational decisions were driven by non-market motives. Moreover, it was near-impossible for planners to anticipate which regions would be more promising under market. I focus on professional services since these industries do not rely on physical capital endowments, so sunk costs are unlikely to impose path-dependence. Professional services in Russia typically hire young educated persons which are expected to be mobile, so imperfect labor market is also unlikely to stick people to places ? unlike human capital externalities which are plausibly to do so. I regress employment in professional services in 2009-2011 by 76 Russian regions on the number of R&D staff in 1991. I consider three industries: architecture and engineering; information technology; accounting, auditing and management consulting. Controls to capture industry location fundamentals include modern-day gross regional product or overall employment, number of employees with university degree, number of R&D staff and urbanization. It should be noted that present-day number of R&D staff comprises primarily employees of state-owned Soviet-style institutions while professional service providers are typically up-to-date privately-owned firms. Results reveal that employment in Soviet R&D positively and significantly affects present-day employment in engineering and in IT. No such evidence is found for accounting, auditing and management consulting in which industries researchers' skills were less relevant. Results remains when shares in employment of professional services and R&D sector are plugged into regression instead of absolute numbers. I consider different explanations for this phenomenon. I attempt to track influence of 1991 R&D-related employment on current output-per-worker in IT and engineering and find positive correlation, although marginally significant. So, it is unlikely that Soviet-era pools of human capital created regional poverty traps due to low migration rates, and human capital externalities theory seems plausible. I also find that regions with greater number of R&D staff in 1991 now have greater number of SMEs both in business services and in the rest of economy, so entrepreneurship is a likely mechanism to impose path-dependence.
    JEL: N74 R12
    Date: 2014–11
  15. By: Alain Thierstein; Sven Conventz
    Abstract: Airports have stepped beyond the stage of being simply pure infrastructure facilities. Hub airports in particular are considered to function as supra-regional and international gateway infrastructure thus having a decisive impact on firms' competitiveness and stimulating urban development. Hub airports have ? through their capability of concentrating different types of flows, from local to global ? morphed into strategic nodes within the networked economy. Recent studies indicate that hub airports increasingly play a significant role for multi-branch multi-location firms with their decision making process about where to locate. Successively, knowledge-intensive companies have settled their regional, national and sometimes supranational branches in close spatial proximity to primary and secondary airports. Simultaneously to their enhanced functionality, hub airports in Europe are increasingly recognized as general urban activity centres; that is, key assets for cities and regions as economic generators and catalysts of investment, in addition to being critical components of efficient city infrastructure. Hub airports thus represent ? against the backdrop of knowledge intensive firms optimizing physical and relational proximity within their knowledge generation efforts ? a crucial case where new urban functionalities co-produce new emerging urban patterns and vice-versa. The paper will shed light on the following questions: Which role does the knowledge generation process of firms and their respective locational needs play for geographical and relational proximity? What role does the hub airport represent within the value chains of knowledge-intensive companies? What role does an airport assume within a multi-branch firm's decision-making process about locating activities? The paper reflects the empirical results of a research project that compares the firm location behavior at the airports of Amsterdam, Munich, Dusseldorf and Frankfurt. We conclude with some recommendations on how airport-linked real estate sites need to be planned in order to reach certain robustness towards the constantly changing spatial needs of its users.
    JEL: R33
    Date: 2014–11
  16. By: Laura Resmini
    Abstract: This paper examines patterns of FDI inflows to Southern European (SE) regions, which seem to be at the margin of the FDI attraction game accounting for a very small share of total inward FDI in the EU. In order to understand why these regions attracted such a low number of foreign investors, this contribution provides the following analysis: i) an overall picture of the main characteristics of patterns of inward FDI in SE regions at geographical and sectoral level; ii) the factors that drive FDI flows into EU regions; iii) as assessment of the potential of attractiveness of SE regions, both in absolute terms and with respect to other EU regions. The main results indicate that SE regions are definitively less attractive than other EU regions, though a lot of variation does exist at both geographical and sectoral level. In order to improve their capacity to attract FDI SE regions should improve their factors of attractiveness by implementing several structural reforms
    Keywords: foreign direct investment; Southern European periphery; spatial econometrics
    JEL: F23 R12 C21
    Date: 2014–11
  17. By: Alfonso Díez-Minguela (Dpto. Análisis Económico); Julio Martínez-Galarraga (Dpto. Análisis Económico); Daniel A. Tirado Fabregat (Dpto. Análisis Económico)
    Abstract: In this paper we explore the relationship between the spatial agglomeration of economic activity and regional economic growth in Spain during the period 1870-1930. The study allows us to revisit the existence of a trade-off between economic growth and territorial cohesion and also to examine whether the agglomeration of production was a key element to explain the upswing in regional income inequality in Spain during the country’s early stages of development. In doing this, we present alternative indicators for agglomeration and estimate conditional growth regressions at province (NUTS3) level. The results show the existence of a positive, robust relationship between the initial levels of regional agglomeration (mainly in the industrial sector) and subsequent growth trajectories. In line with new economic geography (NEG) models, we suggest that the presence of agglomeration economies in a context of market integration favoured the emergence of a cumulative causation process that widened regional inequality in the second half of the 19th century and hindered its reduction during the early decades of the 20th. En este artículo se analiza la existencia de una relación entre la aglomeración espacial de la actividad y el crecimiento económico regional en España durante el periodo 1870-1930. El estudio permite revisitar la existencia de un trade-off entre crecimiento económico y cohesión territorial y, además, examinar si la aglomeración productiva fue un elemento clave a la hora de explicar el incremento de la desigualdad económica regional en España a lo largo de las primeras fases del desarrollo. Para ello, se presentan diferentes indicadores de aglomeración a nivel provincial (NUTS3) que posteriormente se incluyen en la estimación de regresiones de crecimiento condicionadas. Los resultados muestran la existencia de una relación positiva y robusta entre el nivel inicial de aglomeración (principalmente en el sector industrial) y la posterior trayectoria de crecimiento regional. En la línea de los modelos de Nueva Geografía Económica (NEG), sugerimos que la presencia de economías de aglomeración en un contexto de integración de mercado favoreció la aparición de una causación acumulativa que amplió la desigualdad regional en la segunda mitad del siglo XIX y dificultó su reducción durante las primeras décadas del siglo XX.
    Keywords: aglomeración, crecimiento económico, historia económica, España. agglomeration, economic growth, economic history, Spain.
    JEL: N13 N93 O10 O40 R10
    Date: 2013–11
  18. By: Xavier Fageda (Faculty of Economics, University of Barcelona); Marta Gonzalez-Aregall (Faculty of Economics, University of Barcelona)
    Abstract: This paper examines the direct and indirect impacts of transport infrastructure on industrial employment. We estimate regressions with spatial econometric methods using data from the Spanish regions for the period 1995-2008. We find that the density of motorways and the amount of port traffic (particularly general non-containerized and container traffic) are significant determinants of industrial employment in the region, while the effects of railway density and the amount of airport traffic are unclear. Our empirical analysis shows the existence of significant negative spatial spillovers for the density of motorways and levels of container port traffic while the impact of general non-containerized port traffic seems to be mainly local.
    Keywords: transportation, industrial employment, spatial econometrics, motorways, ports, railways, airports. JEL classification: L92, O18, R4
    Date: 2014–11
  19. By: Andreas P. Cornett
    Abstract: A new regional balance: Challenges and opportunities for intermediate city regions in Europe. The regional landscape in Europe has changed during the last decades. After a period of conversion, processes of diversion has reentered the scene. In the aftermath of the economic crisis South European countries and regions have suffered due to declining economic activity. The trend toward regional economic convergence has been interrupted, not only in a regional perspective, but also country wise. In particular the latter is a direct impact of the financial crisis and the European debt crisis. A closer look behind the processes of conversion and disparities in the last decades unveils a more complex pattern, also before the current crisis. In most EU countries the trend toward conversion of economic performance between countries disguised an intraregional trend toward polarization, with growing metropolitan regions and shrinking rural areas. Prominent features of this process were outmigration, aging population and a shrinking economic base. Central explanations have to be found in new economic growth theories and structural changes in the international system of production. The purpose of the current paper is to investigate these patterns with special attention on intermediate city regions, usually located in the vicinity of the large urban agglomeration or farer away in the country. The project is both explorative and explanatory, aiming at to detect and define types of ?intermediate city regions' and to identify the drivers of change, based on the above mentioned conceptual anchors. The central research question is to what extent the processes characterizing the urban rural cleavages; also apply to the current situation of intermediate cities. Who are the winners or losers in this polarization process, and what characterize the well performing intermediate city regions? Danish evidence points toward a mixed pattern. Central and economically well-structured city-region can maintain growth; more peripheral located city-regions face problems. In the short and medium term some city regions seems to benefit from restructuring of the public sector in the aftermath of the reform of the regional and municipality organization in Denmark, by attracting workplaces and people form their rural neighborhood. In the longer run the fundamental shift in business and industry away form traditional manufacturing and service toward knowledge intensive service and products may become decisive for the success of these regions.
    Keywords: structural change; new economic growth theory; medium-size city regions; processes of conversion and diversion; the new regional (im)-balance
    JEL: R R11
    Date: 2014–11
  20. By: Di Caro, Paolo
    Abstract: This paper surveys recent developments related to regional recessions and recoveries. Building on the idea of regional resilience, selected theoretical and empirical contributions are discussed in order to provide an overview of this area of research that looks at both equilibrium- and out-of-equilibrium approaches. On theoretical grounds, aggregate and disaggregate shocks are identified and separated, and hysteretic behaviours are examined. From an empirical perspective, linear and nonlinear econometric models are described and compared, with a particular focus on their spatial econometrics’ extensions. Possible avenues of both theoretical and empirical future research are explicitly explored.
    Keywords: regional evolution, hysteresis, aggregate shocks, disaggregate effects, spatial econometrics
    JEL: C3 E3 R1
    Date: 2014
  21. By: Arne Isaksen; James Karlsen
    Abstract: The paper is motivated by an interest in how clusters come into being and why they emerge in particular locations. The literature includes two main views on this topic. A first view underlines that new clusters often start out in a particular location more or less by chance, often because some pioneering firms for some reasons choose to locate there in the first place. The second main approach maintains that the emergence of clusters relates to previously developed local capabilities, routines and institutions. The paper proposes a middle ground between these two approaches. It consists first of some pre-existing, regional conditions that must be present if specific industries and clusters are to evolve in some places, i.e. some conditions that exist prior to the emergence of a cluster. Secondly, the paper points at the need for triggering factors that cause clusters to emerge in just some particular places, and first of all factors that stimulate entrepreneurship. The paper will discuss how this theoretical approach stands up when subjected to empirical analyses of the emergence of Oslo Cancer Cluster (OCC). The cluster consists of 60-70 firms and organisations focused on research, development, commercialisation and production of cancer drugs in Oslo. The cluster evolved late 1990s and early 2000 and is still in a very early phase. Mere chance is out of the question to explain the emergence of OCC. The paper demonstrates how high quality and capacity in cancer research in Oslo has evolved over long time and demanded much resource. But nor is OCC ?designed' even if public funds have (partly) financed the building of a knowledge and commercialisation infrastructure in Oslo that are important prerequisites for academic start-ups. These local assets also have to be turned into productive use by entrepreneurs. In the Oslo Cancer Cluster case the initiative by the large Norwegian company Hydro to build new activity in pharmaceuticals, which contributed to combining academic knowledge and industrial know-how, seems to be one important triggering event that is difficult to see in advance and plan. Thus, the analytical framework which includes both pre-existing conditions and triggering events seems as a useful middle road between chance and design in order to explain the emergence and location of regional clusters.
    JEL: O43 R11
    Date: 2014–11
  22. By: Laura Resmini; Laura Casi
    Abstract: Do regional identities determine different levels of FDI-induced growth? This paper analyses the impact of FDI on the growth rates of European regions. In so doing, it discusses the role of different components of territorial capital in magnifying or daunting such an impact. The paper starts from a very simple theoretical framework that clarifies how territorial capital can shape the returns to foreign direct investments. The subsequent empirical analysis uses data from the European Value Study to identify 3 soft components of territorial capital that define the identity of a region and can be relevant in shaping the impact of foreign capital on local growth. Using data from Eurostat and FDIregio database, the paper studies the impact of FDI induced spillovers on regional growth in European regions, controlling for possible endogeneity. Results indicate that technological spillovers are an important source of regional growth, but they take place only if the level of trustworthiness/generalized morality is widespread in the region, supporting the idea that low free-riding attitudes increase efficiency of transaction and effectiveness of cooperation between multinational and the regional economic system. The effect of relational capital is more ambiguous. A more disaggregated analysis reveals that some effects vary depending on the origin (intra vs extra European FDI) and on the type of economic activity (manufacturing vs service FDI).
    Keywords: FDI; regional growth; territorial capital
    JEL: F23 O18 O52
    Date: 2014–11
  23. By: Yuyuan WEN
    Abstract: Using panel data covering 25 cities in the Yangtze River Delta (YRD) and 21 cities in the Pearl River Delta (PRD) over the 1991-2010 period, the paper applies spatial Durbin model with ML estimation techniques to examine the underlying relationship between the productivity of the host cities and FDI spillovers. The main findings are as follows. First, significant positive impacts of FDI on the local city's growth exist and increase over time, while spatial spillovers of FDI on growth present significantly but behave oppositely in YRD and PRD. Second, spatial interaction plays an important and non-negligible role in urban productivity growth; however, in the long term, YRD and PRD have significant but opposite spatial effects of growth. Third, inclusion of FDI raises the speed of conditional convergence of economic growth in YRD and PRD (for the case of single-regime). Fourth, positively spatial spillover of growth occurs in both regimes of YRD, while negatively spatial spillover for the case of PRD. The results here suggest important policy implications for the two regions to attract FDI and promote urban development.
    Keywords: FDI; spillovers; spatial Durbin model; Yangtze River Delta; Pearl River Delta
    JEL: C31 F21 F23
    Date: 2014–11
  24. By: Roberto Ganau; Eleonora Di Maria
    Abstract: The study of the determinants of innovation processes has received great attention in both the economics and the business literature. However, only few contributions have proposed a comprehensive framework able to bring together different but not mutually exclusive research approaches. This paper contributes to the analysis of the determinants of technological innovation - namely, product and process innovations - focusing on Italian manufacturing small and medium sized firms (SMEs) by accounting, simultaneously, for firm-specific characteristics, agglomeration economies and the role of KIBS providers. Specifically, the paper provides an empirical investigation which is built on a multi-dimensional theoretical basis which gathers the resource-based view of the firm and the new economic geography framework together. The empirical exercise employs data of about 4,000 Italian SMEs observed over the period 2004-2006 and drawn from the Unicredit-Capitalia database. Parametric probabilistic models are estimated in order to identify the joint effects of several potential determinants of successful technological innovation. Overall, results suggest that technological innovation in manufacturing SMEs is mainly driven by firm-specific characteristics. It emerges that experience and knowledge accumulated over time (i.e. age) as well as availability of human and capital resources (i.e. size) matter for being innovative firms. Moreover, innovative firms show both higher labour productivity levels and higher investments in R&D activities than non-innovative firms. Results partially support previous findings on the agglomeration-innovation relationship: overall, diversification (specialisation) externalities seem to positively (negatively) affect (high-tech) firms' probability of introducing technological innovations. Finally, results suggest that the spatial agglomeration of KIBS providers - i.e. being located in an area characterised by a high concentration of KIBS firms - does not matter per se: in fact, a positive effect emerges only when firms' heterogeneity in absorptive capacity is explicitly considered. Results show that only (low-tech) SMEs which invest in R&D activities benefit from a high geographic concentration of (professional and technological) KIBS firms.
    Keywords: Technological innovation; Manufacturing SMEs; Resource-Based Theory; Agglomeration Economies; KIBS providers; Italy;
    JEL: D22 O31 R12
    Date: 2014–11

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