nep-geo New Economics Papers
on Economic Geography
Issue of 2015‒02‒16
nineteen papers chosen by
Andreas Koch
Institut für Angewandte Wirtschaftsforschung

  1. Cities and Ideas By Mikko Packalen; Jay Bhattacharya
  2. Trade, Integration and Interregional Inequality By Hirte, Georg; Leßmann, Christian
  3. Spatial Clubs in European Regions. By Davide Fiaschi; Lisa Gianmoena; Angela Parenti
  4. Ethnic Spatial Dispersion and Immigrant Identity By Zimmermann, Klaus F.; Constant, Amelie; Schüller, Simone
  5. Institutions and the Location Decisions of Highly Skilled Migrants to Europe By Klaus Nowotny
  6. The impact of one of the most highly cited university patents: formalisation and localization By Azagra-Caro,Joaquín M.; Barberá-Tomás,David; Edwards-Schachter,Mónica
  7. History and the sizes of cities By Bleakley, Hoyt; Lin, Jeffrey
  8. The External Effect of Urban Schooling Attainment on Workers’ Incomes in Ecuador By Theodore R. Breton; Juan Pablo Jaramillo
  9. From progress to nightmare - European regional unemployment over time By Robert Beyer; Michael Stemmer
  10. Race to the debt trap? Spatial econometric evidence on debt in German municipalities By Martin, Thorsten; Fossen, Frank M.; Freier, Ronny
  11. “Regional wage gaps, education, and informality in an emerging country. The case of Colombia.” By Paula Herrera-Idárraga; Enrique López-Bazo; Elisabet Motellón
  12. Trade and the Spatial Distribution of Transport Infrastructure By Tarasov, Alexander; Felbermayr, Gabriel
  13. The Effect of Ethnic Clustering on Migrant Integration in Germany By Treude, Barbara
  14. Profiles of local growth and industrial change: Facts and an Explanation By Dauth, Wolfgang; Südekum, Jens
  15. Retail Productivity: Investigating the Influence of Market Size and Regional Hierarchy By Öner, Özge
  16. Unconditional Transformed Likelihood Estimation of Time-Space Dynamic Panel Data Models By Kripfganz, Sebastian
  17. How Reliable Are the Geographical Spatial Weights Matrices? By Davide Fiaschi; Angela Parenti
  18. The A to Z of how to create thematic maps of Italy using spmap By Maurizio Pisati
  19. A location quotient-based interregional input-output (IRIOLQ) framework By Jahn, Malte

  1. By: Mikko Packalen; Jay Bhattacharya
    Abstract: Faster technological progress has long been considered a key potential benefit of agglomeration. Physical proximity to others may help inventors adopt new ideas in their work by increasing awareness about which new ideas exist and by enhancing understanding of the properties and usefulness of new ideas through a vigorous debate on the ideas' merits (Marshall, 1920). We test a key empirical prediction of this theory: that inventions in large cities build on newer ideas than inventions in smaller cities. We analyze the idea inputs of nearly every US patent granted during 1836–2010. We find that a larger city size provided a considerable advantage in inventive activities during most of the 20th century but that in recent decades this advantage has eroded.
    JEL: O18 O31 O32 O33 R12
    Date: 2015–01
  2. By: Hirte, Georg; Leßmann, Christian
    Abstract: We study the effect of international trade and freeness of trade on interregional inequality within countries. We estimate a model derived from a structural economic geography approach where interregional inequality depends on weighted trade shares and trade costs and where we can derive an aggregate freeness of trade measure. These measures are instrumented based on constructed trade shares and trade costs tted from a gravity model of bilateral trade, which covers 208 countries for the period 1948{2006. We analyze a cross country data set of regional inequality within countries, which covers 110 countries (1569 sub-national regions) for the year 2005, and a panel data set, which covers 56 countries (835 sub-national regions) for the period 1980{2009. IV and dynamic panel regressions show that trade increases inter-regional inequality within countries but an increase in freeness of trade is probably neutral. Because the latter is an indicator for integration in the world markets, we conclude that more integration neutralizes the negative interregional distribution e ects of the increase in trade.
    JEL: F15 R10 R12
    Date: 2014
  3. By: Davide Fiaschi; Lisa Gianmoena; Angela Parenti
    Abstract: This paper finds evidence of spatial clubs in a sample of 254 European regions in the period 1991-2008. A dynamic extension of the Moran scatter plot, consisting in a non parametric estimate of the joint dynamics of GDP per worker and its spatial lag, suggests the emergence of three spatial clubs: one populated by regions belonging to the former Eastern Bloc countries, one by regions of PIGS countries (Portugal, Italy, Greece and Spain) and the last one by regions of other EU countries (notably Germany, France, UK and Northern Europe countries). In the long run the convergence process is evident only to two spatial clubs with Eastern regions converging to PIGS regions. Spatial spillovers are present across European regions, and their contribution to the emergence of spatial clubs is crucial. On the contrary, cross-region heterogeneity in human capital has a very limited impact on the distribution of GDP per worker. Finally, unobserved heterogeneity explains a substantial share of inequality and polarization.
    Keywords: Moran scatter plot, spatial panels, spatial spillovers, bipolarization, core-periphery pattern.
    JEL: C21 R11 O52 F41
    Date: 2015–02–01
  4. By: Zimmermann, Klaus F.; Constant, Amelie; Schüller, Simone
    Abstract: Ethnic groups tend to agglomerate and assemble, mostly in urban areas. While ethnic clustering is critically debated in societies and the consequences for economic outcomes are under debate in research, the process is not yet well understood. A separate literature has also examined the cultural and ethnic identity of immigrants and how these affect their economic performance and societal integration. However, an unexplored channel connects ethnic clustering with ethnic identity formation. Therefore this paper examines the role of ethnic geographic clustering in the sociocultural integration of immigrants. It employs survey data from the German Socio-Economic Panel, combined with disaggregated information at a low geographical level from the unexploited German full census of 1970 and 1987. We employ the exogenous placement of immigrants during their recruitment in the 1960s and 1970s and find that local co-ethnic concentration affects immigrants cultural integration. Residential ethnic clustering strengthens immigrants retention of an affiliation with their respective country of origin and weakens identification with the host society. The effects are nonlinear and only become significant at relatively high levels of co-ethnic concentration for the minority identity and at very low levels of local concentration for the majority identity. Our findings are robust to the use of an instrumental variable approach.
    JEL: J15 R23 Z10
    Date: 2014
  5. By: Klaus Nowotny
    Abstract: This paper investigates the economic, labor market and institutional factors that make regions and countries attractive for highly skilled migrants vis-`a-vis lowskill migrants. Based on micro-data for 11 EU countries, a discrete choice model estimated at the NUTS-2 level shows that location decisions are not only determined by factors related to earnings opportunities, distance, networks, common language and colonial relationships, but also by institutional factors such as migration policy, the income tax system, or labor market institutions; it also lends some support to the welfare magnet hypothesis: a higher unemployment replacement rate increases the attractiveness of a country. The empirical analysis however reveals only minor differences in the effects of institutions on location decisions by skill level, limiting the scope for policy makers to affect the skill composition of migration.
    Keywords: Highly skilled migration, regional location decisions, institutions, migration policy
    JEL: F22 R23 C35
    Date: 2015–01
  6. By: Azagra-Caro,Joaquín M.; Barberá-Tomás,David; Edwards-Schachter,Mónica
    Abstract: This paper examines the underlying mechanisms of knowledge diffusion and interrelationships between formal and informal channels attending to the localisation of spillovers between university and industry. With this aim we present a historical in-depth case study centred in one of the most highly cited university patents, developing and applying a theoretical approach that combines formalisation and localisation analytical dimensions. Our findings show how knowledge diffused through channels with different degrees of formalization (patent licenses, “pure” spillovers and consultancy contracts with the inventors). The case also evidences the pervasive delocalization of several knowledge diffusion channels and the complexity of achieving local impact, even at a privileged environment like California. The crucial diffusion mechanism channel stemmed from bidirectional knowledge flows between the university and a non-regional company, which provided the university with the specific fabrication capabilities needed to create an open-lab programme, which ultimately achieved local impact.
    Keywords: Knowledge flows, Academic patenting, Technology transfer, Geographic R&D spillovers
    JEL: O31 O34
    Date: 2015–01–30
  7. By: Bleakley, Hoyt (University of Michigan); Lin, Jeffrey (Federal Reserve Bank of Philadelphia)
    Abstract: We contrast evidence of urban path dependence with efforts to analyze calibrated models of city sizes. Recent evidence of persistent city sizes following the obsolescence of historical advantages suggests that path dependence cannot be understood as the medium-run effect of legacy capital but instead as the long-run effect of equilibrium selection. In contrast, a different, recent literature uses stylized models in which fundamentals uniquely determine city size. We show that a commonly used model is inconsistent with evidence of long-run persistence in city sizes and propose several modifications that might allow for multiplicity and thus historical path dependence.
    Keywords: Multiple equilibria; Locational fundamentals; Path dependence
    JEL: F12 N90 R12
    Date: 2015–01–12
  8. By: Theodore R. Breton; Juan Pablo Jaramillo
    Abstract: We estimate the direct and external effects of levels of schooling on personal income in Ecuador in 2011, using data for 69,653 individuals in 567 municipalities. Using a Mincerian model that includes municipal levels of schooling and the size of the municipality and controls for endogeneity, we find that each year of individual schooling raises individual income by 8.5 percent and each year of municipal schooling raises individual income by 2.2 percent. The external effect of an additional year of schooling is larger for workers with more schooling, for those with higher incomes, and for those in more educated municipalities.
    Keywords: Ecuador; Schooling; External Effects; Regional Economics; Human Capital
    JEL: I25 R1 O
    Date: 2014–12–02
  9. By: Robert Beyer; Michael Stemmer
    Abstract: We analyze the distribution of regional unemployment in Europe over the last three decades using non-parametric kernel densities and stochastic kernels. In addition, we employ a multi-level factor model to separate European, country, and region-specific unemployment fluctuations. Three phases of distributional change of EU relative unemployment rates are detected: they polarized from 1986 to 1996, converged after the introduction of the Euro and have been polarizing again since the outbreak of the financial crisis, having reached the highest levels ever. We find that European fluctuations account for roughly two fifths of the total variance confirming the existence of a European unemployment cycle. Country fluctuations are equally important, which leaves one fifth to be explained by region-specific movements. German regions are found to respond negatively to the European factor and country movements cause diverse responses in particular in Italy and England. The convergence prior to 2007 can be attributed to country affects and the divergence thereafter both to country and region-specific factors. Finally, we also discuss within country heterogeneity.
    Keywords: unemployment; European regions; distribution dynamics; multi-level factor model
    JEL: R12 R23 C14
    Date: 2015–01
  10. By: Martin, Thorsten; Fossen, Frank M.; Freier, Ronny
    Abstract: Through an intertemporal budget constraint, jurisdictions may gain advantages in tax and spending competition by 'competing' on debt. While the existing spatial econometric literature focuses on tax and spending competition, very little is known about spatial interaction via public debt. This paper estimates the spatial interdependence of public debt among German municipalities using a panel on municipalities in the two largest German states from 1999 to 2006. We find signifi cant and robust interaction eff ects between debt of neighboring municipalities, which we compare to spatial tax and spending interactions. The results indicate that a municipality increases its per capita debt by 16-33 Euro as a reaction to an increase of 100 Euro in neighboring municipalities.
    JEL: C23 H63 H74
    Date: 2014
  11. By: Paula Herrera-Idárraga (Department of Econometrics. University of Barcelona); Enrique López-Bazo (Department of Econometrics. University of Barcelona); Elisabet Motellón (Department of Econometrics. University of Barcelona)
    Abstract: This paper uses Colombian micro-data to analyze the role of education and informality on regional wage differentials. Our hypothesis is that apart from differences in the endowment of human capital across regions, regional heterogeneity in the incidence of informality is another important source of regional wage inequality in developing and emerging countries. This is confirmed by the evidence from Colombia, which in addition reveals remarkable heterogeneity across territories in the wage return to individuals’ characteristics. Regional heterogeneity in returns to education is especially intense in the upper part of the wage distribution. In turn, heterogeneity in the informal pay penalty is more relevant in the lower part.
    Keywords: Regions, Wage differentials, Quantile-based decompositions, Formal/Informal Jobs, Economic Development JEL classification: C21, J31, J38
    Date: 2015–01
  12. By: Tarasov, Alexander; Felbermayr, Gabriel
    Abstract: This paper endogenizes the spatial distribution of infrastructure investment and transportation costs. Transportation costs between two addresses depend on cumulative infrastructure investment. In a continuous space setting with several independent countries or regions, consumers demand domestic and foreign goods, while central planners care only about welfare of their own constituencies. The equilibrium of the game between countries features under-investment and excessive spatial variation. The distribution of infrastructure is skewed towards central regions, rationalizing the non-linear trade-impeding role of distance in empirical gravity models and the so called border puzzle. We find that the endogenous allocation of infrastructure investment magnifies small discrete border frictions and creates `border regions' within countries. Privatizing infrastructure provision does not solve the problem. French data on transportation costs and an empirical gravity model for trade between US states motivate and corroborate our theory.
    JEL: F11 R42 R13
    Date: 2014
  13. By: Treude, Barbara
    Abstract: Even though ethnic clustering is common, both economic theory and empirical research have not been able to provide a clear-cut answer on its effects on the integration of immigrants. In this paper, we study the effect of residential clustering on the labour market outcome of immigrants in Germany. Thereby, we use two measures for labour market integration: the employment probability and the wage levels. Our paper contributes to the existing literature twofold: First, we extend it to Germany on which hardly any research has been conducted. Second, we employ a new methodological approach which allows for the identification of smaller ethnic clusters and thus a more precise estimation of its effects. This is achieved by including neighbouring spatial units in the regression model. In order to control for the endogeneity of the location decision, we use a two-step strategy, combining a control function and an instrumental variable (IV) approach. We observe immigrant clustering in Germany, using a Moran s I analysis. In addition, the analysis suggests the importance of residential clustering for the employment probability of immigrants, and for second or higher generation migrants, a positive impact of clustering on wages.
    JEL: J61 J31 R23
    Date: 2014
  14. By: Dauth, Wolfgang; Südekum, Jens
    Abstract: In this paper we take a detailed look at the sectoral anatomy of regional growth in German regions over the period 1978-2008. In the aggregate, the German economy is characterized by a secular decline of the manufacturing sector and a rise of the modern service economy. This trend of structural change (Petty s law) by no means occurs uniformly across space, however. Some regions exhibit this trend even at an accelerated pace, while other regions develop their local economic structures against the trend and expand their manufacturing bases. We first develop a novel empirical approach that allows us to categorize all German regions into one out of three groups with pro-trend , anti-trend or featureless regional growth. Afterwards we show that the differential exposure to international trade is an important cause of the divergent patterns of local industrial change.
    JEL: R11 R12 F16
    Date: 2014
  15. By: Öner, Özge (Research Institute of Industrial Economics (IFN))
    Abstract: This paper investigates the determinants of the productivity of independent retail stores in Sweden by focusing on the impact of market size and regional hierarchy while controlling for several store and employee characteristics over time. The analysis utilizes Swedish store-level data for the years 2002–2008. To capture the urban-periphery interaction in retail markets, the analysis (i) uses an accessible market potential measure, which captures the impact of the potential demand both in close proximity in the region, and from outside the region separately, and (ii) investigates the stores that are located in central and non-central markets respectively. The results show an approximately 10 percent higher productivity premium associated with the market size in close proximity for centrally located independent stores, whereas regional market size is found to play an equally important role for both stores located in central markets and stores located in peripheral markets. The findings also show that employee characteristics do not contribute to the productivity of stores in central markets but that small but significant productivity returns are captured for stores located in peripheral markets. The differences in the impact arising from the market potential measures highlight the importance of taking the spatial continuum and regional hierarchy into account in an examination of the market size–productivity relationship for retailers.
    Keywords: Retail; Productivity; Urban rural hierarchy; Market accessibility
    JEL: D24 L81 R11 R12
    Date: 2014–11–06
  16. By: Kripfganz, Sebastian
    Abstract: I derive the unconditional transformed likelihood function and its derivatives for a fixed-effects panel data model with time lags, spatial lags, and spatial time lags that encompasses the pure time dynamic and pure space dynamic models as special cases. In addition, the model can accommodate spatial dependence in the error term. I demonstrate that the model-consistent representation of the initial-period distribution involves higher-order spatial lag polynomials. Their order is linked to the minimal polynomial of the spatial weights matrix and, in general, tends to infinity with increasing sample size. Consistent estimation requires an appropriate truncation of these lag polynomials unless the spatial weights matrix has a regular structure. The finite sample evidence from Monte Carlo simulations shows that a misspecification of the spatial structure for the initial observations results in considerable biases while the correctly specified estimator behaves well. As an application, I estimate a time-space dynamic wage equation allowing for peer effects within households.
    JEL: C13 C23 J31
    Date: 2014
  17. By: Davide Fiaschi; Angela Parenti
    Abstract: This paper shows how it is possible to estimate the interconnections between regions by a connectedness matrix recently proposed by Diebold and Yilmaz (2014), and discusses how the connectedness matrix is strictly related to the spatial weights matrix used in spatial econometrics. An empirical application using growth rate volatility of per capita GDP of 199 European NUTS2 regions (EU15) over the period 1981-2008 illustrates how our estimated connectedness matrix is not compatible with the most popular geographical weights matrices used in literature.
    Keywords: First-order Contiguity, Distance-based Matrix, Connectedness Matrix, European Regions, Network.
    JEL: C23 R11 R12 O52
    Date: 2015–02–01
  18. By: Maurizio Pisati (University of Milano–Bicocca)
    Abstract: The purpose of this presentation is to present a step-by-step tutorial on how to draw thematic maps of Italy using the Stata user-written command spmap and spatially referenced data freely available on the Internet.
    Date: 2014–11–13
  19. By: Jahn, Malte
    Abstract: The regionalization of national input-output tables is a major issue in regional science as corresponding regional data is often unavailable. In this paper, a framework is developed to estimate intra- and interregional input-output tables. The intraregional estimates are based on the wellaccepted FLQ method. The interregional estimates include gravity model-based estimates to account for geographical distances between the regions. The estimates are embedded in an interregional accounting framework which ensures consistency of regional values with the national aggregates. The framework is applied to the German economy of 2010. We are able to show the importance of taking into account interregional input-output relations in the derivation of (regional) demand multipliers.
    Date: 2015

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