nep-geo New Economics Papers
on Economic Geography
Issue of 2015‒01‒31
eleven papers chosen by
Andreas Koch
Institut für Angewandte Wirtschaftsforschung

  1. Optimal Spatial Taxation By Nezih Guner ; Jan Eeckhout
  2. Gravity for Outsourcing: an Application with Input-Output Dataset. By de Mello-Sampayo, Felipa
  3. Feeding the cities and greenhouse gas emissions: a new economic geography approach By De Cara, Stéphane ; Fournier, Anne ; Gaigné, Carl
  4. Cultural Diversity - A Matter of Measurement By Peter Nijkamp ; Jacques Poot
  5. Regional Economic Development, Social Capital and Governance: A Buchanian Approach By Karlsson, Charlie ; Rouchy, Philippe
  6. Modelling regional labour market dynamics. Participation, employment and migration decisions in a spatial CGE model for the EU By Damiaan Persyn ; d'Artis Kancs ; Wouter Torfs
  7. Migration, Congestion Externalities, and the Evaluation of Spatial Investments By Schulhofer-Wohl, Sam ; Dinkelman, Taryn
  8. Retail City: The Relationship between Place Attractiveness and Accessibility to Shops By Öner, Özge
  9. Territorial capital of Polish local administrative districts By Dorota Ciołek
  10. Dynamics of Business Cycle Synchronization within Turkey By HASAN ENGIN DURAN
  11. Immigration Policy Index By Dmytro Vikhrov

  1. By: Nezih Guner (Universitat Autonoma de Barcelona ); Jan Eeckhout (University College London and GSE-UPF )
    Abstract: We analyze the role of optimal income taxation across different locations. Existing federal income tax schedules have a distortionary effect and result in the misallocation of labor across cities of different size. Because of higher productivity in big cities, wages for identically skilled workers are larger than in small cities. Progressive taxation thus implies that citizens in big cities pay higher taxes than in small cities. With mobility, utility is equalized, and the taxes are reflected in equilibrium wages and house prices. We solve for the optimal level of progressiveness. We find that the optimal level is not zero, but that it is less than what is observed in the US economy. Simulating the US economy under the optimal tax schedule, we find large effects on output and population mobility. GDP increases are in the range of 2.6–8.8%, and the fraction of population in 5 largest cities grows between 1.5–4.9%. The welfare effects however are small, 0.008–0.067%. This is due to the fact that the big output gains are lost in increased costs of living.
    Date: 2014
  2. By: de Mello-Sampayo, Felipa
    Abstract: This paper examines the impact of gravity on outsourcing. We derive a gravity equation from the classical spatial supply problem in which firms purchase some of their inputs from other firms paying the required transport costs. We also allow for different levels of productivity of the firms and build a gravity equation from entropy maximization. Even if the gravity equations look similar, we show that their underlying structures are different. In general terms, countries are viewed as competing with each other for interaction. The competing destinations gravity model represents a step forward in the recognition of interdependencies in spatial choice. Thus, we include a variable to explain the spatial structure of outsourcing countries in a geographical system. We find much stronger support for the gravity equation derived from the probabilistic input demand function than for the deterministic gravity model. The model shows that outsourcing is carried out mostly because of factor cost differentials and technological differences, but that distance and the gravity of other countries adversely affect trade in intermediate goods and services.
    Keywords: Outsourcing, Gravity Model, Trade, MNEs, Poisson regression
    JEL: C21 F1 F23 R15
    Date: 2014
  3. By: De Cara, Stéphane ; Fournier, Anne ; Gaigné, Carl
    Abstract: ’Buying local food’ is sometimes advocated as a means of reducing the ’carbon footprint’ of food products. This statement overlooks the trade-off between inter- and intra-regional food transportation. We investigate this issue by using an m-region, new economic geography model. The spatial distribution of food production within and between regions is endogenously determined. We exhibit cases where locating a significant share of the food production in the least-urbanized regions results in lower transport-related emissions than in configurations where all regions are self-sufficient. The welfare-maximizing allocation of food production does not exclude the possibility that some regions should be self-sufficient, provided their urban population sizes are neither too large nor too small.
    Keywords: Agricultural location, Transport, Greenhouse gas emissions, Food miles, Local food, Environmental Economics and Policy,
    Date: 2014–08
  4. By: Peter Nijkamp (VU University ); Jacques Poot (University of Waikato )
    Abstract: Cultural diversity – in various forms – has in recent years turned into a prominent and relevant research and policy issue. There is an avalanche of studies across many disciplines that measure and analyse cultural diversity and its impacts. Based on different perspectives and features of the available data, a great variety of diversity indicators have emerged. The present paper aims to highlight some critical issues involved in applying such measures of cultural diversity. A selection of commonly used or recently advocated measures are reviewed. Measures of population diversity can be calculated at different spatial scales and used to analyse spatio-temporal heterogeneity. Additionally, there is a growing interest in measuring spatial dependence, particularly in the form of segregation or clusters. We conclude that there will be in the future considerable scope for adopting multidimensional and cultural distance-weighted measures of diversity. Such measures will be increasingly calculated by means of rich geo-referenced longitudinal micro data. However, adopted measures must be better motivated by behavioural theories. Further research on the determinants and impacts of observed measures of diversity is also likely to be fruitful, particularly in a dynamical setting.
    Keywords: diversity, dissimilarity measurement, ethnicity, culture, segregation, polarization, fractionalization
    JEL: C00 D63 J15 R23 Z13
    Date: 2015–01
  5. By: Karlsson, Charlie (Jönköping International Business School (JIBS), Blekinge Institute of Technology & Centre of Excellence for Science and Innovation Studies (CESIS) ); Rouchy, Philippe (Blekinge Institute of Technology )
    Abstract: The purpose of this paper is to consider some of the challenges lying ahead of policy makers in the context of regional development. Regional economic development encompasses the economics and other resources that a region can mobilize for its own sustainable development and competitiveness. It is only recently that regions have developed tools and means for analysing the performance of their firms and organizations. Public and private governance bodies have recognized that ever-changing economic conditions bring renewed externalities, which are difficult to capture. Gaps in regional performances have been attributed to important, but often intangible factors such as social capital. Regional economics has taken on board those concerns by considering networks, trust and local procedures in their studies. Nevertheless, the issue remains that regional governance seems intractable in market terms alone. In this paper, we tackle the issue of governance in the context of regional development thanks to Buchanan’s approach of choices and costs. To provide such an assessment, we contribute by merging economics and sociology, where we shift the cost focus from the classic economic concern for equilibrium towards a concern for social utility.
    Keywords: Regional Development; Social Capital; Governance; Networks; Public Choice; Property Rights; Cooperation; Trust
    JEL: A14 B25 D70 P48 R11 R58
    Date: 2015–01–09
  6. By: Damiaan Persyn (European Commission – JRC - IPTS ); d'Artis Kancs (European Commission – JRC - IPTS ); Wouter Torfs (European Commission – JRC - IPTS )
    Abstract: This paper outlines how regional labour market adjustments to macro-economic and policy shocks are modelled in RHOMOLO through participation, employment and migration decisions of workers. RHOMOLO, being a multi-sectoral, inter-regional general equilibrium model, is complex both in terms of its dimensionality and the modelling of spatial interactions through trade flows and factor mobility. The modelling of the labour market is therefore constrained by the tractability and computational solvability of the model. The labour market module consists of individual labour participation decisions, including the extensive margin (to participate or not) and the intensive margin (hours of work). Unemployment is determined through a wage curve and inter-regional labour migration decisions are modelled in a discrete-choice framework, with backward-looking expectations.
    Keywords: Participation, unemployment, labour migration, wage curve, CGE, new economic geography
    JEL: C68 D58 F22 J20 J61 J64 O15
    Date: 2014–12
  7. By: Schulhofer-Wohl, Sam (Federal Reserve Bank of Minneapolis ); Dinkelman, Taryn (Dartmouth College )
    Abstract: The direct benefits of infrastructure in developing countries can be large, but if new infrastructure induces in-migration, congestion of other local publicly provided goods may offset the direct benefits. Using the example of rural household electrification in South Africa, we demonstrate the importance of accounting for migration when evaluating welfare gains of spatial programs. We also provide a practical approach to computing welfare gains that does not rely on land prices. We develop a location choice model that incorporates missing land markets and allows for congestion in local land. Using this model, we construct welfare bounds as a function of the income and population effects of the new electricity infrastructure. A novel prediction from the model is that migration elasticities and congestion effects are especially large when land markets are missing. We empirically estimate these welfare bounds for rural electrification in South Africa and show that congestion externalities from program-induced migration reduced local welfare gains by about 40%
    Keywords: rural infrastructure; migration; congestion; welfare; program evaluation; South AFrica
    JEL: H23 H43 H54 O15 O18 R13
    Date: 2015–01–09
  8. By: Öner, Özge (Research Institute of Industrial Economics (IFN) )
    Abstract: This paper explores the role of retailers as an urban amenity. Using data for Swedish rural and city municipalities for 2002–2008, ‘accessibility to shops’ measures are constructed for the shops in the municipalities and in the hosting regions separately to examine the relationship between consumption possibilities and place attractiveness in a spatial continuum. Place attractiveness is proxied by a Q ratio for Swedish housing investment based on Tobin’s Q. Access to stores within municipal market boundaries is found to be relevant for the place attractiveness of city municipalities, whereas no such relationship is evident for rural municipalities.
    Keywords: Housing; Urban amenities; Retail; Q theory; Regional hierarchy
    JEL: L81 R12 R14 R31
    Date: 2015–01–12
  9. By: Dorota Ciołek (Institute for Development, Sopot, Poland, University of Gdansk, Faculty of Economics, Department of Macroeconomics, Gdańsk, Poland )
    Abstract: One of the key elements in territorial cohesion conception is idea of territorial capital in specific region. In this article we present an attempt of the territorial capital evaluation for Polish poviats (NTS 4) in period 2003-2011. The starting point was finding variables which in accurate way could reflect the level of such capital and for which official statistics for all regions are available. We implemented a concept of territorial keys (Boheme et al. 2011) according to which the most important components of the territorial capital are: accessibility, availability and quality of services of general economic interest, territorial capacities, the ability of regions to create economic and social networks and finally presence of functional regions. The broadest of these categories are territorial capacities, which include: territory-bound factors (industrial clusters etc.), wise management of cultural and natural assets, human capital and social capital. For each of the variables we present maps showing their spatial diversity in Polish poviats. In the case of variables for which during examined period significant changes were observed two maps are presented: for the beginning and for the last year. It allowed to observe the changes of analyzed categories in Polish poviats.
    Keywords: territorial capital, regional development, territorial statistics
    JEL: R11 R12 C10
    Date: 2014–12
  10. By: HASAN ENGIN DURAN (City and Regional Planning Department, Izmir Institute of Technology, Turkey )
    Abstract: The aim of the present article is to investigate the economic determinants of the synchronization across regional business cycles in Turkey between 1975-2010. The vast majority of studies in this field have concentrated on well known determinants, such as interregional trade, financial integration and industrial specialization, while largely ignoring spatial and geographical factors including differences across regions in agglomeration, localization economies, market size and urbanization In this article, we incorporate these variables into our analysis and evaluate their roles in the comovement of regional business cycles. Our findings indicate two major results: First, low degree of synchronization during 1975-2000 has switched to relatively more correlated and synchronously moving regional cycles during 2004-2010. Second, having tested the variety of determinants, we find that the pairs of regions that have more similar industrial structure and market size, and arbitrary degree of agglomeration and urbanization tend to synchronize more. Significance of these variables is robustly evident regardless of the time period analyzed and of the type of methodology employed.
    Date: 2015
  11. By: Dmytro Vikhrov
    Abstract: I construct an immigration policy index which is heterogeneous across destinationorigin country pairs and variant over time. This index is based on three types of entry visa restrictions: visa required, visa not required for short stays and visa not required at all. When estimated in levels, visa exempt country pairs account for around 15% more migrants than their counterfactual. I show that the effects of migration determinants vary by the type of visa restrictions. Further, I identify country pairs which changed their visa regime during 2000-2010 and find that the weakening of visa policy is associated with a 10% increase in migrant stocks and a significant shift toward male and less skilled migration from policy affected source countries. In contrast, the tightening of visa policy is not related to a significant change in migrant stocks, their gender or skill composition.
    Keywords: immigration policy; visa; difference-in-difference estimation; policy quasi-experiment; group heterogeneity; diaspora effect;
    JEL: F22 R23
    Date: 2014–12

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