nep-geo New Economics Papers
on Economic Geography
Issue of 2015‒02‒05
thirty-two papers chosen by
Andreas Koch
Institut für Angewandte Wirtschaftsforschung

  1. Localized Knowledge Spillovers: Evidence from the Agglomeration of American R&D Labs and Patent Data By Buzard, Kristy; Carlino, Gerald A.; Hunt, Robert M.; Carr, Jake; Smith, Tony E.
  2. Transportation costs and the spatial organization of economic activity By Stephen Redding; Matthew A. Turner
  3. Identifying the Flypaper Effect in the Presence of Spatial Dependence: Evidence from Education in China’s Counties By Yu, Yihua; Wang, Jing; Tian, Xi
  4. Exports, agglomeration and workforce diversity : an empirical assessment for German establishments By Brunow, Stephan; Grünwald, Luise
  5. Culturally clustered or in the cloud? location of internet start-ups in Berlin By Kristoffer Moeller
  6. Mapping the ‘space of flows’: the geography of global business telecommunications and employment specialization in the London mega-city-region By Jonathan Reades; Duncan Smith
  7. Optimal Spatial Taxation: Are Big Cities Too Small? By Eeckhout, Jan; Guner, Nezih
  8. Evaluating spatial policies By Steve Gibbons; Henry G. Overman; Max Nathan
  9. The geography and evolution of complex knowledge By Pierre-Alexandre Balland; David L. Rigby
  10. Cultural Diversity: A Matter of Measurement By Nijkamp, Peter; Poot, Jacques
  11. The urban wage growth premium: sorting or learning? By Sabine D'Costa; Henry G. Overman
  12. The world is not yet flat: Transport costs matter! By Behrens, Kristian; Bougna, Théophile; Brown, W. Mark
  13. Heterogeneous agglomeration By Giulia Faggio; Olmo Silva; William C. Strange
  14. Urban escalators and inter-regional elevators: the difference that location, mobility and sectoral specialisation make to occupational progression By Tony Champion; Ian Gordon
  15. Urbanity By Gabriel M. Ahfeldt
  16. Immigrant diversity and economic development in cities: a critical review By Thomas Kemeny
  17. Non-nested testing of spatial correlation By Miguel A. Delgado; Peter M. Robinson
  18. The Survival of Tuscan Firms By Filippo Randelli; Giorgio Ricchiuti
  19. Do large departments make academics more productive? agglomeration and peer effects in research By Clément Bosquet; Pierre-Philippe Combes
  20. A Simple Model of Functional Specialization of Cities By Nagamachi, Kohei
  21. Improved tests for spatial correlation By Peter M. Robinson; Francesca Rossi
  22. How far do England’s second-order cities emulate London as human-capital ‘escalators’? By Tony Champion; Mike Coombes; Ian R. Gordon
  23. Real wages, amenities and the adjustment of working hours across regional labour markets By Teresa Schlüter
  24. City of dreams By Jorge De la Roca; Gianmarco I. P. Ottaviano; Diego Puga
  25. Improved Lagrange multiplier tests in spatial autoregressions By Peter M. Robinson; Francesca Rossi
  26. Self-employment and entrepreneurship in urban and rural labour markets By Giulia Faggio; Olmo Silva
  27. Measuring Nuclear Power Plant Externalities Using Life Satisfaction Data: A Spatial Analysis for Switzerland By Heinz Welsch; Philipp Biermann
  28. Relocation of public sector workers: evaluating a place-based policy By Giulia Faggio
  29. First-come first-served: identifying the demand effect of immigration inflows on house prices By Rosa Sanchis-Guarner
  30. Everybody needs good neighbours?: evidence from students' outcomes in England By Stephen Gibbons; Olmo Silva; Felix Weinhardt
  31. Do long distance moves discourage homeownership? evidence from England By Sejeong Ha; Christian A. L. Hilber
  32. Settlement patterns of rich- and poor-country migrants into the London metropolitan region since 2001 By Kerwin Datu

  1. By: Buzard, Kristy (Syracuse University); Carlino, Gerald A. (Federal Reserve Bank of Philadelphia); Hunt, Robert M. (Federal Reserve Bank of Philadelphia); Carr, Jake (The Ohio State University); Smith, Tony E. (University of Pennsylvania)
    Abstract: We employ a unique data set to examine the spatial clustering of private R&D labs, and, using patent citations data, we provide evidence of localized knowledge spillovers within these clusters. Jaffe, Trajtenberg, and Henderson (1993, hereafter JTH) provide an aggregate measure of the importance of knowledge spillovers at either the state or metropolitan area level. However, much information is lost regarding differences in the localization of knowledge spillovers in specific geographic areas. In this article, we show that such differences can be quite substantial. Instead of using fixed spatial boundaries, we develop a new procedure — the multiscale core-cluster approach — for identifying the location and size of specific R&D clusters. This approach allows us to better capture the geographic extent of knowledge spillovers. We examine the evidence for knowledge spillovers within R&D clusters in two regions: the Northeast Corridor and California. In the former, we find that citations are from three to six times more likely to come from the same cluster as earlier patents than in comparable control samples. Our results are even stronger for labs located in California: Citations are roughly 10 to 12 times more likely to come from the same cluster. Our tests reveal evidence of the attenuation of localization effects as distance increases: The localization of knowledge spillovers is strongest at small spatial scales (5 miles or less) and diminishes rapidly with distance. At the smallest spatial scales, our localization statistics are generally much larger than JTH report for the metropolitan areas included in their tests.
    Keywords: Spatial clustering; R&D; Knowledge spillover;
    JEL: O31 R12
    Date: 2015–01–01
  2. By: Stephen Redding; Matthew A. Turner
    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: Yu, Yihua; Wang, Jing; Tian, Xi
    Abstract: In the context of China without a median voter system, this study examines whether the “flypaper effect”, an unconditional lump-sum grant from the upper governments to the county governments increases spending in a greater proportion than an equivalent rise in local income, holds true in China. Using China’s county-level education data during 2007, the models have been estimated using a spatial econometric technique that accounts for spatial interaction behavior on public education expenditure across local governments. We find that, in the presence of spatial interdependence, there is no evidence of a “flypaper effect” when different spatial weighting schemes and the endogeneity problem of education grants are accounted for. Rather, the “anti-flypaper effect” is found. Important policy implications are drawn for China’s fiscal decentralization reform.
    Keywords: Flypaper effect, Grants, Local government expenditure, Spatial econometrics
    JEL: C23 H71 H77 R12
    Date: 2013–06
  4. By: Brunow, Stephan (Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany]); Grünwald, Luise
    Abstract: "Theoretical and empirical contributions on export behavior highlight the importance of firms' productivity and their levels of economies of scale on firms' export success in 'foreign' markets. In the context of agglomeration economies, firms enjoy productivity gains when they are located close to competitors or upstreaming industries and they benefit from knowledge spillovers and other positive externalities. In such a stimulating environment, firms become more prone to be exporters. Beyond the role played by externalities, firms may benefit when they employ a diverse workforce and when the interaction of distinct knowledge and related problem-solving abilities increases productivity and secures export success. In this paper, we ask whether German firms (i. e., establishments) benefit from localization and urbanization externalities and face higher export proportions. We also control for a variety of establishment characteristics and workforce diversity. For this purpose, a comprehensive German data set that combines survey data and administrative data is used. While controlling for firm heterogeneity in a fractional response model, we provide evidence that manufacturing establishments and smaller establishments (up to 250 employees) benefit most from externalities and especially from knowledge spillover. There is weak evidence supporting the benefit of workforce diversity; however, that factor could explain between-establishment variation." (Author's abstract, IAB-Doku) ((en))
    Date: 2015–01–20
  5. By: Kristoffer Moeller
    Abstract: Knowledge based firms like IT companies do neither have a capital- nor a land intensive production. They predominantly rely on qualified labour and increasingly depend on the location of its (potential) employees. This implies that it is more likely that firms follow workers rather than the other way around. Contributing to the literature of firm location and consumer cities I empirically test the amenity oriented firm location hypothesis. In particular I investigate whether Berlin internet start-up firms, representing a footloose knowledge-based service industry, locate in urban amenity-rich places. Identification builds on the sudden fall of the Berlin Wall. The intra-city analysis yields a significant impact of urban amenities on the location of internet start-up. A comparison with other service industries suggests that amenities are significant to the location choice of creative sectors whereas no effect can be observed for non-creative firms.
    Keywords: firm location; urban amenities; consumer city; internet start-ups; entrepreneurs; Berlin
    JEL: D20 L20 R30
    Date: 2014–03
  6. By: Jonathan Reades; Duncan Smith
    Abstract: Reades J. and Smith D. A. Mapping the ‘space of flows’: the geography of global business telecommunications and employment specialization in the London mega-city-region, Regional Studies. Telecommunications has radically reshaped the way that firms organize industrial activity. And yet, because much of this technology – and the interactions that it enables – is invisible, the corporate ‘space of flows’ remains poorly mapped. This article combines detailed employment and telecoms usage data for the South-east of England to build a sector-by-sector profile of globalization at the mega-city-region scale. The intersection of these two datasets allows a new empirical perspective on industrial geography and regional structure to be developed.
    Keywords: globalization telecommunications; firm location; land use patterns; distribution of economic activity; England
    JEL: N0 R14 J01 L91 L96
    Date: 2014
  7. By: Eeckhout, Jan (University College London); Guner, Nezih (MOVE, Barcelona)
    Abstract: We analyze the role of optimal income taxation across different local labor markets. Should labor in large cities be taxed differently than in small cities? We find that a planner who needs to raise revenue and is constrained by free mobility of labor across cities does not choose equal taxes for cities of different sizes. The optimal tax schedule is location specific and tax differences between large and small cities depend on the level of government spending and on the concentration of housing wealth. Our estimates for the US imply higher marginal rates in big cities, but lower than what is observed. Simulating the US economy under the optimal tax schedule, there are large effects on population mobility: the fraction of population in the 5 largest cities grows by 8.0% with 3.5% of the country-wide population moving to bigger cities. The welfare gains however are smaller. Aggregate consumption goes up by 1.53%. This is due to the fact that much of the output gains are spent on the increased costs of housing construction in bigger cities. Aggregate housing consumption goes down by 1.75%.
    Keywords: misallocation, taxation, population mobility, city size, general equilibrium
    JEL: H21 J61 R12 R13
    Date: 2015–01
  8. By: Steve Gibbons; Henry G. Overman; Max Nathan
    Abstract: In most countries economic prosperity is very unevenly distributed across space: regions, cities and neighbourhoods seem to be very unequal, whether we look at average earnings, employment, education or almost any other socio-economic outcome. Regional, urban and neighbourhood policies are often based on concerns about these kinds of disparities, and reducing such disparities is a key policy objective in many countries. This paper considers the role of empirical analysis in informing the development of these policies. It is particularly concerned with issues arising in the quantitative evaluation of the impact of policy, the major barriers to more effective evaluation and how these might be addressed in future.
    Keywords: spatial economics; evaluation; impact evaluation; econometrics; research design; public policy; economic development
    JEL: N0
    Date: 2014–03
  9. By: Pierre-Alexandre Balland; David L. Rigby
    Abstract: There is consensus among scholars and policy makers that knowledge is one of the key drivers of long-run economic growth. It is also clear from the literature that not all knowledge has the same value. However, too often in economic geography and cognate fields we have been obsessed with counting knowledge inputs and outputs rather than assessing the quality of knowledge produced. In this paper we measure the complexity of knowledge across patent classes and we map the distribution and the evolution of knowledge complexity across U.S. cities from 1975 to 2004. We build on the 2-mode structural network analysis proposed by Hidalgo and Hausmann (2009) to develop a knowledge complexity index (KCI) for Metropolitan Statistical Areas (MSAs). The KCI is based on more than 2 million patent records from the USPTO, and combines information on the technological structure of 366 MSAs with the 2-mode network that connects cities to the 438 primary (USPTO) technology classes in which they have Relative Technological Advantage (RTA). The complexity of the knowledge structure of cities is based on the range and ubiquity of the technologies they develop. The KCI indicates whether the knowledge generated in a given city can be produced in many other places, or if it is so sophisticated that it can be produced only in a few select locations. We find that knowledge complexity is unevenly distributed across the U.S. and that cities with the most complex technological structures are not necessarily those that produce most patents.
    Keywords: Knowledge complexity, cities, patents, network analysis, economic geography, United States
    Date: 2015–01
  10. By: Nijkamp, Peter (VU University Amsterdam); Poot, Jacques (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
  11. By: Sabine D'Costa; Henry G. Overman
    Abstract: This paper is concerned with the urban wage premium and addresses two central issues about which the field has not yet reached a consensus: first, the extent to which sorting of high ability individuals into urban areas explains the urban wage premium and second, whether workers receive this wage premium immediately, or through faster wage growth over time. Using a large panel of worker-level data from Britain, we first demonstrate the existence of an urban premium for wage levels, which increases in city size. We next provide evidence of a city size premium on wage growth, but show that this effect is driven purely by the increase in wage that occurs in the first year that a worker moves to a larger location. Controlling for sorting on the basis of unobservables we find no evidence of an urban wage growth premium. Experience in cities does have some impact on wage growth, however. Specifically, we show that workers who have at some point worked in a city experience faster wage growth than those who have never worked in a city.
    Keywords: urban wage premium; agglomeration; cities; wage growth; worker mobility
    JEL: J31 R23
    Date: 2014–09
  12. By: Behrens, Kristian; Bougna, Théophile; Brown, W. Mark
    Abstract: We provide evidence for the effects of changes in transport costs, international trade exposure, and input-output linkages on the geographical concentration of Canadian manufacturing industries. Increasing transport costs, stronger import competition, and the spreading out of upstream suppliers and downstream customers are all strongly associated with declining geographical concentration of industries. The effects are large: changes in trucking rates, in import exposure, and in access to intermediate inputs explain between 20% and 60% of the observed decline in spatial concentration over the 1992–2008 period.
    Keywords: geographical concentration; input-output linkages; international trade exposure; transport costs; trucking rates
    JEL: C23 L60 R12
    Date: 2015–01
  13. By: Giulia Faggio; Olmo Silva; William C. Strange
    Abstract: Many prior treatments of agglomeration either explicitly or implicitly suppose that all industries agglomerate for the same reasons, with traditional Marshallian (1890) factors affecting all industries similarly. An important instance of this approach is the extrapolation of the agglomeration experience of one key sector or cluster to the larger economy. Another is the pooling of data to look at common tendencies in agglomeration. This paper uses UK establishment level data on coagglomeration to document heterogeneity across industries in the microfoundations of agglomeration economies. The pattern of heterogeneity that we document is consistent with both traditional Marshallian theories and with alternative approaches that emphasize the adaptive and organizational aspects of agglomeration. *Disclaimer: This work was based on data from the Business Structure Database and the Quarterly UK Labour Force Survey, produced by the Office for National Statistics (ONS) and supplied by the Secure Data Service at the UK Data Archive. The data are Crown Copyright and reproduced with the permission of the controller of HMSO and Queen's Printer for Scotland. The use of the data in this work does not imply the endorsement of ONS or the Secure Data Service at the UK Data Archive in relation to the interpretation or analysis of the data. This work uses research datasets which may not exactly reproduce National Statistics aggregates.
    Keywords: agglomeration; microfoundations; heterogeneity; clusters
    JEL: R0 R2
    Date: 2014–01
  14. By: Tony Champion; Ian Gordon
    Abstract: This paper uses evidence from the (British) Longitudinal Study to examine the influence on occupational advancement of the city-region of residence (an escalator effect) and of relocation between city-regions (an elevator effect). It shows both effects to be substantively important, though less so than the sector of employment. Elevator effects are found to be associated with moves from slacker to tighter regional labour markets. Escalator effects, on the other hand, are linked with residence in larger urban agglomerations, though not specifically London, but also across most of the Greater South East and in second/third order city-regions elsewhere. Sectoral escalator effects are found to be particularly strong in knowledge-intensive activities, with concentrations of these, as of other advanced job types (rather than of graduate labour), contributing strongly to the more dynamic city-regional escalators. The impact of the geographic effects is found to vary substantially with both observed and unobserved personal characteristics, being substantially stronger for the young and for those whose unobserved attributes (e.g. dynamic human capital) generally boost rates of occupational advance.
    JEL: J1
    Date: 2013–09
  15. By: Gabriel M. Ahfeldt
    Abstract: I define a composite amenity that provides aesthetic and consumption value to local residents: Urbanity. A novel data set of geo-tagged photos shared in internet communities serves as a proxy for urbanity. From the spatial pattern of house prices and photos I identify the value of urbanity in two of the largest cities in Europe: Berlin and London. I find an elasticity of indirect utility with respect to urbanity of about 1%. The aggregated willingness-to-pay equates to about $1bn per year in each city. The results demonstrate the important role cities play as centers of leisure, consumption, and beauty.
    Keywords: amenities; consumer city; hedonic analysis; photography geography; property prices
    JEL: N0
    Date: 2013–05
  16. By: Thomas Kemeny
    Abstract: This paper reviews a growing literature investigating how ‘immigrant’ diversity relates to urban economic performance. As distinct from the labor-supply focus of much of the economics of immigration, this paper reviews work that examines how growing heterogeneity in the composition of the workforce may beneficially or harmfully affect the production of goods, services and ideas, especially in regional economies. Taking stock of the existing literature, the paper argues that the low-hanging fruit in this field has now been picked, and lays out a set of open issues that need to be taken up in future research in order to fulfil the promise of this work.
    Keywords: diversity; immigration; cities; regional economic performance
    JEL: J28 J31 O15 O18 O31 O4 R0
    Date: 2013–11
  17. By: Miguel A. Delgado; Peter M. Robinson
    Abstract: We develop non-nested tests in a general spatial, spatio-temporal or panel data context. The spatial aspect can be interpreted quite generally, in either a geographical sense, or employing notions of economic distance, or even when parametric modelling arises in part from a common factor or other structure. In the former case, observations may be regularly-spaced across one or more dimensions, as is typical with much spatio-temporal data, or irregularly-spaced across all dimensions; both isotropic models and non-isotropic models can be considered, and a wide variety of correlation structures. In the second case, models involving spatial weight matrices are covered, such as "spatial autoregressive models". The setting is sufficiently general to potentially cover other parametric structures such as certain factor models, and vector-valued observations, and here our preliminary asymptotic theory for parameter estimates is of some independent value. The test statistic is based on a Gaussian pseudo-likelihood ratio, and is shown to have an asymptotic standard normal distribution under the null hypothesis that one of the two models is correct. A small Monte Carlo study of …finite-sample performance is included.
    Keywords: on-nested test; spatial correlation; pseudo maximum likelihood estimation
    JEL: J1
    Date: 2013–11–20
  18. By: Filippo Randelli (Dipartimento di Scienze per l'Economia e l'Impresa); Giorgio Ricchiuti (Dipartimento di Scienze per l'Economia e l'Impresa)
    Abstract: In this paper we analyze the survival probability of firms in Tuscany (Italy) in the first decade of the $21^{st}$ century. Using the Official Register of Firms, held by Unioncamere Toscany, we build a panel for the period 1998-2010. Taking into account both individual and context variables, we find that a higher institutional complexity and a lower population density have a positive and significant effect on probability to survive. Moreover, both MAR and Jacob externalities have a nonlinear effect on the probability to survive: it must be reached a minimum level so that the negative effects of competition are more than offset by the positive effects of networking.
    Keywords: Survival Analysis, Regional Studies, Economic Geography, Tuscany
    JEL: C41 L0 R1
    Date: 2015
  19. By: Clément Bosquet; Pierre-Philippe Combes
    Abstract: We study the effect of a large set of department characteristics on individual publication records. We control for many individual time-varying characteristics, individual fixed-effects and reverse causality. Department characteristics have an explanatory power that can be as high as that of individual characteristics. The departments that generate most externalities are those where academics are homogeneous in terms of publication performance and have diverse research fields, and, to a lesser extent, large departments, with more women, older academics, star academics and foreign co-authors. Department specialisation in a field also favours publication in that field. More students per academic does not penalise publication. At the individual level, women and older academics publish less, while the average publication quality increases with average number of authors per paper, individual field diversity, number of published papers and foreign co-authors.
    Keywords: productivity determinants; economic geography; networks; economics of science; selection and endogeneity
    JEL: I3 J24 R12
    Date: 2013–04
  20. By: Nagamachi, Kohei
    Abstract: Resorting to the method proposed by Matsuyama (2013), this paper develops a static equi- librium model of a system of cities in which ex ante identical locations specialize in stages of production different in the degree of dependence on routine and nonroutine local services sec- tors, the latter of which is tied to an agglomeration force due to monopolistic competition a ́ la Dixit and Stiglitz (1977). The model is simple in that the system is summarized by a second-order differential equation, which has a unique non-degenerate city size distribution with the comove- ment of income, population, factor prices, and urban diversity as observed for the U.S. cities. Two examples of use of the model are then illustrated: analyses of welfare gain from functional specialization and optimal income redistribution, the latter of which provides an important impli- cation of an increasing importance of interactive activities in a modern developed economy for income redistribution. Although extending the model makes the model analytically intractable, it is still characterized by a differential equation easily solved with a numerical method and thus useful for further analyses.
    Keywords: functional specialization, system of cities, optimal income redistribution policy
    JEL: F12 R12 R13
    Date: 2015–01–21
  21. By: Peter M. Robinson; Francesca Rossi
    Abstract: We consider testing the null hypothesis of no spatial autocorrelation against the alternative of first order spatial autoregression. A Wald test statistic has good first order asymptotic properties, but these may not be relevant in small or moderate-sized samples, especially as (depending on properties of the spatial weight matrix) the usual parametric rate of convergence may not be attained. We thus develop tests with more accurate size properties, by means of Edgeworth expansions and the bootstrap. The finite-sample performance of the tests is examined in Monte Carlo simulations.
    Keywords: spatial autocorrelation; ordinary least squares; hypothesis testing; edgeworth expansion; bootstrap
    JEL: J1
    Date: 2013–05–22
  22. By: Tony Champion; Mike Coombes; Ian R. Gordon
    Abstract: In the urban resurgence accompanying the growth of the knowledge economy, second-order cities appear to be losing out to the principal city, especially where the latter is much larger and benefits from substantially greater agglomeration economies. The view that any city can make itself attractive to creative talent seems at odds with the idea of a country having just one ‘escalator region’ where the rate of career progression is much faster, especially for in-migrants. This paper takes the case of England, with its highly primate city-size distribution, and tests how its second- order cities (in size order, Birmingham, Manchester, Leeds, Newcastle, Bristol, Sheffield, Liverpool, Nottingham and Leicester) compare with London as human- capital escalators. The analysis is based on the ONS Longitudinal Study of linked census records, primarily for 1991-2001, and uses one key indicator of upward social mobility, the transition from White Collar Non-core to White Collar Core. For non- migrants, the transition rates for all the second-order cities are found to fall well short of London’s. In only one case – Manchester – is the rate significantly higher than the average for other areas outside the Greater South East (GSE) and its performance is matched by the non-London part of the GSE. Those moving to the second-order cities during the decade experienced much stronger upward social mobility than their non-migrants. This ‘migrant premium’ was generally similar to that for London, suggesting that it results from people moving only after they have secured a better job. If so, second-order cities cannot rely on the speculative migration of talented people but need suitable jobs ready for them to access.
    Keywords: human-capital escalator; second-order cities; England; ONS Longitudinal Study; career progression; city region
    JEL: J24 J61 J62 R23
    Date: 2013–03
  23. By: Teresa Schlüter
    Abstract: This article establishes a link between the traditional labour economics and the urban economics literature by analyzing differences in working hours across regional labour market areas in the UK. Using a real wage index reflecting skill adjusted earnings net of quality adjusted house prices in Britain and panel data on working hours the effect of regional real wages on labour supply is assessed. The identification strategy relies on workers who move across 157 labour market areas in Britain and includes individual fixed effects. The main finding is that working hours are significantly higher in labour market areas that offer lower real wages. Decreasing real wages by £1000 results in an increase of working hours of 0.3 %. Real wage differentials can be seen as a proxy for the local amenity level. I can replicate my finding including a set of amenities instead of the real wage index. The effect is mainly due to labour supply decisions of low skilled workers who work significantly longer hours in low real wage areas than high skilled workers. This indicates that low skilled workers are willing to increase their labour supply in order to afford living in high amenity areas.
    JEL: N0 R14 J01
    Date: 2013–03
  24. By: Jorge De la Roca; Gianmarco I. P. Ottaviano; Diego Puga
    Abstract: Higher ability workers benefit more from bigger cities while housing costs there are higher for everyone, and yet there is little sorting on ability. A possible explanation is that young individuals have an imperfect assessment of their ability, and, when they learn about it, early decisions have had a lasting impact and reduce their incentives to move. We formalize this idea through an overlapping generations model of urban sorting by workers with heterogenous ability and self-confidence, with the latter defined as individuals’ assessment of their own ability. We then test the location patterns predicted by the model over the life cycle on panel data from the National Longitudinal Survey of Youth 1979. We find that the city-size choices of individuals at different stages vary with ability and self-confidence in a way that closely matches our theoretical predictions.
    Keywords: Cities; sorting; agglomeration; self-confidence; learning
    JEL: R10 R23
    Date: 2014–09
  25. By: Peter M. Robinson; Francesca Rossi
    Abstract: For testing lack of correlation against spatial autoregressive alternatives, Lagrange multiplier tests enjoy their usual computational advantages, but the (χ2) first-order asymptotic approximation to critical values can be poor in small samples. We develop refined tests for lack of spatial error correlation in regressions, based on Edgeworth expansion. In Monte Carlo simulations, these tests, and bootstrap tests, generally significantly outperform χ2-based tests.
    Keywords: bootstrap; Edgeworth expansion; finite-sample corrections; Lagrange multiplier test; spatial autocorrelation
    JEL: C0
    Date: 2014–02
  26. By: Giulia Faggio; Olmo Silva
    Abstract: We study the link between self-employment and some salient aspects of entrepreneurship – namely business creation and innovation – in urban and rural labour markets. In order to do so, we combine individual and firm-level data for Britain aggregated at the Travel-to-Work Area level. We find that a higher incidence of self-employment positively and strongly correlates with business creation and innovation in urban areas, but not in rural areas. We also document that more rural than urban workers become self-employed in areas with comparably poor labour market opportunities, although this heterogeneity is not evident when focussing on entrepreneurship. Finally, we show that the misalignment between self-employment and our proxies for entrepreneurship in rural areas disappears once we account for local labour market conditions. Our results suggest that self-employment, business creation and innovation are well lined-up in urban areas because they capture the same economic phenomenon – namely, genuine entrepreneurship. This is not the case for rural areas.
    Keywords: entrepreneurship; self-employment; spatial distribution
    JEL: R14 J01
    Date: 2014–11
  27. By: Heinz Welsch (University of Oldenburg, Department of Economics); Philipp Biermann (University of Oldenburg, Department of Economics)
    Abstract: Conceptualizing externalities from perceived nuclear risk as being related to distance from nuclear facilities, we estimate the relationship between Swiss citizens’ life satisfaction (understood as a proxy of utility) and the distance of their place of residence from the nearest nuclear power plant. Controlling for a rich set of life satisfaction factors, we find a statistically and economically significant satisfaction-distance gradient, whose monetary value amounts to CHF 291 per kilometer of distance, on average. The gradient is smaller for those who may feel protected by wind direction and topographical conditions, and it differs by age, sex, and the level of education. The satisfaction-distance gradient has changed significantly after the nuclear disaster at Fukushima, Japan, indicating a reassessment of distance-dependent nuclear risk. We find no evidence of hedonic locational equilibrium with respect to nuclear risk.
    Keywords: nuclear risk; life satisfaction; non-market valuation; spatial equilibrium; Fukushima
    JEL: Q48 Q51 I31 Q54 R53
    Date: 2015–01
  28. By: Giulia Faggio
    Abstract: This paper assesses the local labour market impact of a UK public sector relocation initiative labeled the Lyons Review. The review resulted in the dispersal of more than 25,000 civil servants out of London and the South East towards other UK destinations. The objective of the paper is to detect whether inflows of public sector jobs have crowded out private sector activity or stimulated the local provision of additional jobs in the private sector. By applying a difference-in-difference approach, I evaluate the policy impact comparing areas in close proximity to a relocation site with areas further away. I find that the dispersal of public sector workers that followed the implementation of the Lyons Review had a positive impact on local services with a negative, but weaker, impact on manufacturing.
    Keywords: economic development; regional labour markets; regional government policy; job displacement
    JEL: J61 O1 R23 R58
    Date: 2014–02
  29. By: Rosa Sanchis-Guarner
    Abstract: An inflow of immigrants into a region affects house prices in three ways. In the short run, housing demand increases due to the increase in foreign-born population. In the long run, immigrants affect native location decisions and housing supply conditions. Previous research on the effect of immigration on local house prices has argued that the impact of immigrant demand cannot be separated from the demand changes due to native relocation or that the impact of immigrants on native mobility has no consequences on the estimates. In this paper I propose a methodology to pin down the immigrant demand effect. I apply it to Spanish data during the period 2002-2010 and I show that overlooking the impact of immigration on native mobility induces a sizeable bias in the short-run estimates. My results are robust to controlling for changes in housing supply.
    Keywords: immigration; housing markets; instrumental variables
    JEL: J61 R12 R21
    Date: 2014–05
  30. By: Stephen Gibbons; Olmo Silva; Felix Weinhardt
    Abstract: We use administrative data to estimate the effect of neighbourhood composition on teenagers’ educational and behavioural outcomes in England. We exploit a unique research design based on changes over time in neighbourhood composition experienced by residentially immobile students, where these changes arise purely through residential migration amongst other students in our dataset. The complete coverage of our data allows investigating heterogeneity and non-linearities in the effect of neighbourhood composition at an unprecedented level. Our results show that changes in neighbourhood composition have no effects on test scores but some effects on behavioural outcomes, which are heterogeneous for boys and girls
    JEL: C21 H75 I20 R23
    Date: 2013–09
  31. By: Sejeong Ha; Christian A. L. Hilber
    Abstract: We hypothesize that as the distance of a residential move increases, the cost of collecting information on the destination housing market rises, the amount and quality of information collected fall, and the chances of making an ill-informed housing purchase decision increases, reducing the likelihood of such a purchase. Since owning relative to renting is associated with a much larger financial commitment and much higher transaction costs, the propensity to own can be expected to decrease with the distance moved. Using data from the Survey of English Housing from 1993 to 2008, we document that, consistent with our prior, an increase in the distance moved by one standard deviation decreases the probability that a household owns the next home by 3.2 percentage points.
    Keywords: residential mobility; distance of residential relocation; information cost; investment risk; homeownership; tenure choice
    JEL: J61 R21 R23
    Date: 2013–09
  32. By: Kerwin Datu
    Abstract: This study of migrants’ settlement into the London area as captured by the latest, 2011 census adopts two approaches to demonstrate a nuanced concentric pattern in the location of migrants from different parts of the world. First, the differentiation of migrants into stylised categories of “rich-country” and “poor-country” migrants reveals distinct patterns of settlement for each; and second, an examination at the scale of the metropolitan region shows that these patterns operate differently inside and outside the Green Belt for both categories of migrants, demonstrating the importance of analysing migrants’ settlement patterns at this scale. The most important change in settlement patterns to have taken place in the ten years since the earlier, 2001 census is the role taken up by a number of commuter town centres outside the Green Belt in receiving recent arrivals of “poor-country” migrants, with implications for the infrastructure and labour economies of these districts.
    JEL: N0
    Date: 2014–03–24

This nep-geo issue is ©2015 by Andreas Koch. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.