nep-geo New Economics Papers
on Economic Geography
Issue of 2015‒02‒22
twenty-one papers chosen by
Andreas Koch
Institut für Angewandte Wirtschaftsforschung

  1. Governance, Firm Size and Innovative Capacity: Regional Empirical Evidence for Germany By Jahn, Vera; Berlemann, Michael
  2. New insights into the development of regional unemployment disparities By Werner, Daniel
  3. Spillover Effects in Local Labor Markets: Evidence from Mass Layoffs By Gathmann, Christina; Helm, Ines; Schönberg, Uta
  4. Warping Space: High-Speed Rail and Returns to Scale in Local Labor Markets By Heuermann, Daniel F.; Schmieder, Johannes F.
  5. Public policies, growth, and agglomeration By Ott, Ingrid; Soretz, Susanne
  6. The persistent effects of regional policy - Evidence from the West-German Zonenrandgebiet By Seidel, Tobias; von Ehrlich, Maximilian
  7. Human capital externalities vs. substitution effects as determinants of regional wages: Evidence from German micro data By Thönnessen, Rasmus
  8. Proximity, knowledge base and the innovation process The case of Unilever’s Becel diet margarine By Davids, Mila; Frenken, Koen
  9. Competitiveness and Clusters: Implications for a New European Growth Strategy By Christian Ketels
  10. Industry location and wages: The role of market size and accessibility in trading networks By Barbero, Javier; Behrens, Kristian; Zofio, Jose L.
  11. The role of universities in the location of innovative start-upsa By Giorgio Calacagnini; Ilario Favaretto; Germana Giombini; Francesco Perugini; Rosalba Rombaldoni
  12. Distant Event, Local Effects? Fukushima and the German Housing Market By Kvasnicka, Michael; Bauer, Thomas K.; Braun, Sebastian
  13. Knowledge base combinations and innovation performance in Swedish regions By Grillitsch, Markus; Martin, Roman; Srholec, Martin
  14. Agglomeration and directional imbalance of freight rates : the role of density economies in the transport sector By Tsubota, Kenmei
  15. Continuous Logit Polycentric City Model By Wrede, Matthias
  16. The Cost of Migrating to a Culturally Different Location By Ruhose, Jens; Falck, Oliver; Lameli, Alfred
  17. Imitate, or innovate and collaborate? On innovation strategy choices in the urban economy By Herstad, Sverre J.
  18. A DMP Model of Intercity Trade By Yannis M. Ioannides
  19. Underestimated Benefits from Periphery: Internal Migration and Subjective Well-being By Kopmann, Angela; Rehdanz, Katrin
  20. Local Directional Moran Scatter Plot - LDMS. By Davide Fiaschi; Lisa Gianmoena; Angela Parenti
  21. Spatial aspects of economic growth. Review of theoretical literature By Tomasz Brodzicki

  1. By: Jahn, Vera; Berlemann, Michael
    Abstract: Successful innovation is a precondition for economic prosperity. While various potential determinants of innovative activity have been considered, little empirical evidence is yet available for the influence of firm governance issues. This paper aims at filling this gap in the literature by studying whether the relative importance of owner-managed small and medium sized enterprises has an effect on regional innovative capacity. We therefore combine patent data with data from the firm database of Creditreform, containing information on the governance structure of regional operating enterprises. Using a cross section of German NUTS-3-regions, we identify a significantly positive relation between the relative importance of owner-managed SMEs and innovative capacity. This finding is highly robust when controlling for various sorts of spatial correlation.
    JEL: O31 C21 D23
    Date: 2014
  2. By: Werner, Daniel
    Abstract: Large regional unemployment disparities are a common feature of the labor market in many countries. This study deals with the question whether regional unemployment disparities in western Germany widen, become narrower or remain constant over time. It examines the hypothesis of convergence for regional unemployment rates of western German Federal States and the time period 1968 to 2009 following different concepts of convergence. Western German regional unemployment rates exhibit beta-convergence but no sigma-convergence. Further, regional unemployment rates show a high degree of intra-distributional dynamics. Panel unit root tests designed for cross-sectional dependent panels are applied to investigate the hypothesis of stochastic convergence. This is necessary because the assumption of cross-sectional independency does not hold. The results do not indicate the existence of stochastic convergence. This is in contrast to previous studies that do not take cross-sectional dependence into account. However, additional robustness checks show that evidence of stochastic convergence depends on the underlying assumption about the shape of the equilibrium relationship between regional unemployment rates and their national counterpart. Western German regional unemployment is not characterized by a catching-up process between high and low unemployment regions. The development of regional unemployment disparities is mainly driven by economic disturbances.
    JEL: C33 J60 R12
    Date: 2014
  3. By: Gathmann, Christina; Helm, Ines; Schönberg, Uta
    Abstract: Governments are often willing to subsidize firms on the verge of bankruptcy. The main economic rationale behind these interventions is that a plant closure would not only harm the workers employed in that plant, but create a domino effect on the regional economy as a whole. Yet, little is still known empirically how important these spillover effects are for economic development in the region. In this paper, we use administrative data of all workers and firms in Germany to quantify the spillover effects of mass layoffs. For the empirical analysis, we combine a difference-in-differences estimator with an event-study approach. We find sizeable negative spillover effects on the regional economy: regions, and especially firms producing in the same sector as the firm hit by a mass layoff, lose many more jobs than in the initial layoff. In contrast, we find few negative effects for workers employed (but not directly affected by the layoff) in the region. As such, mass layoffs seem to have negative spillovers locally, but not nationally.
    JEL: J21 J31 R12
    Date: 2014
  4. By: Heuermann, Daniel F.; Schmieder, Johannes F.
    Abstract: Local returns to scale in the labor market have been notoriously difficult to disentangle from increasing returns in the product market and from the spatial sorting of workers and firms as a source for regional variation in productivity. In this paper we use the introduction of high-speed rail as a natural experiment in order to isolate the impact of labor market size on urban wages from product market and sorting effects. The key idea underlying our identification approach is that high-speed trains reduce commuting times between regions and thereby effectively increase the size of local labor markets without directly affecting product markets. The exact timing of the opening of high-speed rail connections can be regarded as exogenous, as a high-speed rail network is very expensive to build, requires a long planning phase and is mainly the result of political decisions. Furthermore, especially in the second wave of network expansion, several small towns were connected to the high-speed rail network simply because of their location between major metropolitan hubs and in this way got 'lucky' compared to neighboring towns. Drawing on a large and novel panel data set on the introduction of ICE-stations and on connection times between regions in Germany, as well as on a full sample of workers' employment histories, we examine the effect of high-speed trains on commuting behavior and wages. Using case studies, a pooled event study, and gravity equations with instrumental variables and propensity score matching we show that high-speed trains reduce traveling times by sixteen percent on average and significantly raise the number of commuters between local labor markets. We find that commuters incur wage gains of about three percent after the opening of an ICE-station, indicating that improved access to larger urban labor markets is associated with productivity gains for workers living in peripheral regions. In sum, our results suggest that between one third and half of overall agglomeration externalities are rooted in increasing returns to scale in local labor markets.
    JEL: J31 R12 R42
    Date: 2014
  5. By: Ott, Ingrid; Soretz, Susanne
    Abstract: This paper analyzes within a two-region endogenous growth model how different types of public policies affect the equilibrium spatial distribution of economic activity. Integration is modeled as a continuum and enables firms to access the public input of the respective other region. Given a dominance of agglomeration forces, multiple equilibria arise at which spreading becomes unstable and the stable equilibrium is characterized by a core-periphery structure. If only partial coordination of the two goverments decisions is realized, the positive productivity impact of one region s public input on the other region s marginal capital return becomes a positive externality. Then, the concentration of public inputs may end up to be suboptimally high or low, depending on the degree of scale effects. We perform numerical simulations to derive the equilibrium capital distribution and to disentangle the impact of the various determinants on equilibrium agglomeration.
    JEL: O40 R50 D50
    Date: 2014
  6. By: Seidel, Tobias; von Ehrlich, Maximilian
    Abstract: In this paper, we provide novel evidence on the contemporaneous and persistent effects of regional policy. We apply a quasi-experimental identification strategy exploiting the fact that municipalities in the West-German Zonenrandgebiet (ZRG) were eligible for substantial regional transfers between 1971 and 1994. The ZRG was an approximately 40km-band adjacent to the Iron Curtain during the Cold War in West Germany. Apart from determining transfer eligibility, this pure geographic threshold did not have any institutional, cultural or economic relevance. We use regression discontinuity to estimate the causal effects of regional policy on economic activity. Using disaggregated data on the municipality level and satellite night light data (as a proxy for GDP), we find that the ZRG treatment led to an increase of income per square kilometer of about 50 percent in 1986. Importantly, economic density remained high in 2010 although the transfers had phased out in 1994. This speaks against unique equilibria determined by locational advantage, but rather strengthens market externalities as an important explanation for the spatial distribution of economic activity. We also examine several potential channels finding strong contemporaneous and persistent effects of transfers on population density and the business tax base.
    JEL: H25 R12 O18
    Date: 2014
  7. By: Thönnessen, Rasmus
    Abstract: This article reconsiders the empirical evidence on regional human capital externalities using longitudal survey data from the German Socio-Economic Panel (SOEP). It complements the empirical literature on the role of human capital for explaining regional wage differences. Based on the framework by Moretti (2004a), the impact of different proxies of regional human capital intensity on regional wages is estimated while controlling for individual productivity determinants and regional characteristics. The results are compared with the constant-composition approach by Ciccone and Peri (2006) which accounts for imperfect substitution between unskilled and skilled labor. The Mincerian panel results with level data indicate that one additional year of education has an external wage effect of 2%. However, once a difference specification is estimated, external effects are no longer present. The theoretical predictions by Ciccone and Peri (2006) that the Mincerian approach leads to an upward biased estimate cannot be verified.
    JEL: J24 R23 R11
    Date: 2014
  8. By: Davids, Mila (School of Innovation Sciences, Eindhoven University of Technology); Frenken, Koen (Innovation Studies, Copernicus Institute of Sustainable Development, Utrecht University & CIRCLE, Lund University)
    Abstract: The proximity concept refers to types of inter-organizational relationships that are expected to facilitate interactive learning and collaborative innovation. Different forms of proximity include geographical, cognitive, social, institutional and organizational proximity. Following an extensive case study of a new diet margarine developed by Unilever, we extent the proximity framework by theorizing how the relative importance of each proximity dimension depends on the type of knowledge being produced, where we distinguish between analytical, synthetic and symbolic knowledge. We argue that our theoretical framework in principle applies to product innovations in all science-based industries.
    Keywords: innovation; proximity; knowledge; science-based industries; multinational enterprise; management
    JEL: F23 L66 N30 O31 O32
    Date: 2015–02–15
  9. By: Christian Ketels
    Abstract: This paper develops policy recommendations on the use of cluster-based economic policies and the adoption of a new concept of competitiveness in the context of the new growth path that WWWforEurope aims to outline. A first section discusses summarizes key findings from the previous research papers on the role of clusters in the New Growth Path (MS47) and on a new concept of competitiveness that embeds beyond-GDP objectives (MS46). It then extends this work by deriving an initial set of policy implications from this research. For clusters, these implications address both general practices of cluster-based economic development and specific issues related to the use of cluster-based concepts in a transition to a New Growth path. For competitiveness, it specifically discusses the new concept of competitiveness proposed in MS46 and the notion of trade-offs among different dimensions of performance in this new concept. The second section of the paper explores the ways in which beyond-GDP objectives have been integrated into the current practice of cluster-based economic development efforts across Europe. It is based on interviews with policy makers and cluster initiatives as well as the review of relevant policy documents. For cluster programmes, i.e. the policy actions implemented by government, the paper organizes the existing efforts into three categories, differentiated by the extent to which beyond-GDP categories drive the activities supported. For cluster initiatives, i.e. the collaborative efforts by private-public groups focused on enhancing the competitiveness of a specific regional cluster, the existence of a market and the need for systemic changes are identified as key factors that drive the adoptation of beyond-GDP objectives. There is also a discussion of the relevant scope of the activities in beyond-GDP related efforts relative to existing cluster categories. The third section analysis the Europe 2020 Strategy, including its objectives, quantiative performance indicators, and the European Semester as a policy review process, from the perspective of the new definition of competitiveness proposed in MS46. After exploring whether the objectives of the strategy and the new definition of competitiveness are compatible it looks at their ability to drive an effective and transparent policy process towards policies consistend with a New Growth Path. The final section then develops five policy conclusions from the prior analysis. Three are focused on the use of cluster-based economic development tools as instruments to achieve beyond-GDP objectives. The recommendations deal both with the way cluster-based tools can be used and with how they should be structured. Two of the conclusions are focused on the Europe 2020 strategy process. They deal with the need for a shared, explicit definition of competitiveness, proposing the definition developed in MS46 as a candidate. And they deal with creating a more transparent policy process that more clearly separates political decisions from analytical evaluations.
    Keywords: Beyond GDP, Clusters, Competitiveness, Ecological innovation, Economic strategy, European economic policy, European governance, Industrial policy, Innovation policy
    JEL: D04 I31 O25 O44 O52 Q58
    Date: 2015–02
  10. By: Barbero, Javier; Behrens, Kristian; Zofio, Jose L.
    Abstract: We investigate the geographical distribution of economic activity and wages in a general equilibrium model with many asymmetric regions and costly trade. As shown by extensive simulations on random networks, local market size better explains a region’s industry share, whereas accessibility better explains a region’s wage. The correlation between equilibrium wages and industry shares is low, thus suggesting that the two variables operate largely independently. The model replicates well the spatial distribution of industry using Spanish data, yet overpredict changes in that distribution due to changes in 'generalized transport costs'. The latter had only small impacts on changes in the geographical distribution of economic activity in Spain from 1980 to 2007.
    Keywords: generalized transport costs; industry location; size; trading networks; wages
    JEL: C63 F12 R12
    Date: 2015–02
  11. By: Giorgio Calacagnini (Department of Economics, Society & Politics, Università di Urbino "Carlo Bo"); Ilario Favaretto (Department of Economics, Society & Politics, Università di Urbino "Carlo Bo"); Germana Giombini (Department of Economics, Society & Politics, Università di Urbino "Carlo Bo"); Francesco Perugini (Department of Economics, Society & Politics, Università di Urbino "Carlo Bo"); Rosalba Rombaldoni (Department of Economics, Society & Politics, Università di Urbino "Carlo Bo")
    Abstract: Start-ups increasingly find the prospect of university-industry collaborations to be a powerful driver of innovation and entrepreneurship activity. Moreover, at the geographical level, they are attracted by teaching and research institutions, either public or private. This paper focuses on the role played by universities. Our hypothesis is that geographical proximity favors the transfer of knowledge and technology from universities to industries and, consequently, represents a positive factor for regional economic development. Results show that university spillovers are positively correlated with the creation of innovative start-ups. Furthermore, the presence of human capital (graduates) exerts a significant influence on the location decisions of start-ups, being a source for competitiveness for firms close to universities. Research quality, especially in the social sciences area, attracts innovative start-ups, while third-mission activities have a weak impact on locational choice.
    Keywords: CKnowledge transfer, Innovative start-up, University spillovers
    JEL: M13 L20 R30
    Date: 2014
  12. By: Kvasnicka, Michael; Bauer, Thomas K.; Braun, Sebastian
    Abstract: The Fukushima Daiichi accident in Japan in March 2011 caused a fundamental change in Germanys energy policy which led to the immediate shut down of nearly half of its nuclear power plants. Using data from Germanys largest internet platform for real estate and employing a difference-in-differences approach, we find that Fukushima reduced house prices near nuclear power plants that were in operation before Fukushima by almost 5%. House prices near sites that were shut down right after the accident even fell by 9.7%. Our results suggest that economic reasons are of prime importance for this observed fall in house prices.
    JEL: R31 Q48 Q58
    Date: 2014
  13. By: Grillitsch, Markus (CIRCLE, Lund University); Martin, Roman (CIRCLE, Lund University); Srholec, Martin (CIRCLE, Lund University & CERGE-EI, Charles University and Economics Institute of the Academy of Sciences of the Czech Republic)
    Abstract: The literature on geography of innovation suggests that innovation outcomes depend on the type of knowledge base employed by firms. While knowledge bases are distinct categories with regards to the nature and the rational of knowledge creation, existing studies also stress that innovation usually involves more than one knowledge base. In fact, new ideas often occur when analytical, synthetic and symbolic knowledge intertwines. It remains unclear, though, which combinations of knowledge bases are most conducive to innovation at the level of the firm, and how this is influenced by the knowledge bases available in the regional milieu. Therefore the contribution of this paper is threefold: i) to measure knowledge bases of firms and their regional heterogeneity in a more comprehensive way than the existing empirical literature has been able to do so far, ii) to quantitatively assess the impact of combinations of knowledge bases on innovation output, iii) to analyze the interplay between firm- and region-level knowledge bases (and combinations thereof) in generating innovations. Empirically, the paper applies econometric analysis on firm- and region-level data from Sweden. The knowledge base of firms is captured using detailed occupational data derived from linked employer-employee datasets that is merged at the firm-level with information from Community Innovation Surveys. The empirical analysis reveals in a quantitative way the extent to which the knowledge base combinations affect innovativeness of firms.
    Keywords: Knowledge bases; knowledge combination; regions; innovation performance; microdata; cross-level interaction; Sweden
    JEL: O30 O31 R10
    Date: 2015–02–08
  14. By: Tsubota, Kenmei
    Abstract: This paper examines the conventional assumption that bilateral transport costs are symmetric. We develop an economic geography model with transport sector in which asymmetric freight rates can occur as a result of density economies. Comparing this to models without density economies, we show that agglomeration of economic activities is more likely to emerge and that multiple equilibria can emerge for some parameters. Then we show the change in its bifurcation and stability of equilibrium and conclude that economies of density in transport flows can act as an agglomeration force.
    Keywords: Transportation, Economic geography, Costs, Agglomeration, Asymmetric transport costs, Directional imbalance of freight rates, Density economies
    JEL: L91 R12 R41
    Date: 2015–02
  15. By: Wrede, Matthias
    Abstract: This paper analyzes a closed linear polycentric city with homogenous households who probabilistically select their workplace and residence locations. The study utilizes a continuous logit model to describe household location choices. In contrast to the classic urban model with deterministic location choices, the continuous logit model predicts noticeable direct effects of more than one workplace on land rents, asymmetry of the land rent schedule around secondary business districts, incomplete segregation of citizens who work in different business centers and, therefore, cross commuting, and incomplete segregation of workers and farmers.
    JEL: R13 R14 R12
    Date: 2014
  16. By: Ruhose, Jens; Falck, Oliver; Lameli, Alfred
    Abstract: Ever since Sjaastad (1962), researchers have struggled to quantify the psychic cost of migration. We monetize psychic cost as the wage premium for moving to a culturally different location. We combine administrative social security panel data with a proxy for cultural difference based on unique data on historical dialect dissimilarity between German counties. Conditional on geographic distance and pre-migration wage profiles, we find that migrants demand a wage premium of about 1 percent for overcoming one standard deviation in cultural dissimilarity. The effect is driven by males, more pronounced for geographically short moves, and persistent over time.
    JEL: D51 J61 R23
    Date: 2014
  17. By: Herstad, Sverre J. (NIFU Nordic Institute for Studies in Innovation, Research and Education)
    Abstract: This paper explores how the innovation strategies of firms reflect the density, diversity and connectivity of their urban locations. Firms located outside the four large-city regions of Norway are generally more committed to development work than are their urban counterparts. Still, once engaged, firms in certain large-city locations exhibit unique preferences towards geographically dispersed collaboration that are most pronounced within the Western business district of the Capital. This shows that firm-level decisions along interconnected activity dimensions must be considered in order for different strategy choices, and the interdependencies between them that are an essential feature of urban economies, are to be revealed. The study provides new insights into the large-city region knowledge dynamics that are increasingly important to human capital formation, employment and growth.
    Keywords: urbanization; innovation; collaboration; knowledge dynamics; Norway
    JEL: O31 O33 R11
    Date: 2015–02–15
  18. By: Yannis M. Ioannides
    Abstract: The paper presents a model of an economy whose urban structure consists of cities of different types. All cities of different types. All cities produce a non-tradeable final good using both types of tradeable intermediate varieties. Each city has an internal spatial structure: individuals commute to the CBD in order to work, when employed, and to seek jobs, when unemployed. Hiring by each intermediate producing firm is subject to frictions, which are modeled in the Diamond-Mortensen-Pissarides fashion. Job matching requires either travel to the CBD for face to face contacts or, alternatively, referrals from social contacts.City type is conferred by specialization in producing one of the two types of intermediate varieties, diversified cities, where both types are produced, and there is intercity trade in intermediate varieties. The paper examines the properties of equilibrium with intercity trade and its dependence on such parameters as those pertaining to productivity, the matching process, the rate of job destruction and their consequences for unemployment, output and welfare across the economy along a steady state. The model's use of international trade tools confers a central role to labor market tightness, akin to factor intensity. A natural dependence of unemployment on city size is generated. The paper provides a framework for studying spatial mismatch. Equilibrium outcomes generically diverge from the planner's optimum: socially optimal unemployment trades off the probability of employment to search socts of firms independently for each skill type and independently of city size, and city sizes are independent of labor market tightness considerations but reflect both market size effects and the skill composition of the economy.
    JEL: E24 F12 F16 J60 J63 J64 R12
  19. By: Kopmann, Angela; Rehdanz, Katrin
    Abstract: This paper is among the first to link internal migration and subjective well-being in developed countries. Economic theory predicts that individuals migrate towards urban agglomerations, if the potential gain in income is sufficient to cover costs. However, this narrow view cannot explain why migration exists also to the rural periphery. In our analysis, we investigate non-monetary benefits beyond economics from internal migration. Using highly disaggregated spatial information on people s migration decisions and their subjective well-being from 2006 to 2010 for Germany, we control for selection bias by applying an individual fixed effect model with additional controls on the labor market region level. We find positive benefits from migration, which are positive and diminishing with distance. Urban-to-rural migration provides higher benefits than rural-to-urban migration in general. Older generations derive large negative benefits from rural-to-urban migration, but positive benefits from urban-to-rural migration. The latter suggests that economic theory underestimates benefits from migration to the periphery when ignoring non-monetary compensating differentials.
    JEL: A12 C33 R23
    Date: 2014
  20. By: Davide Fiaschi; Lisa Gianmoena; Angela Parenti
    Abstract: This paper propose a novel methodology to estimate the distribution dynamics of income in presence of spatial dependence by representing spatial dynamics as a random vector field in Moran space. Inference on the local spatial dynamics is discussed, including a test on the presence of local spatial dependence. The methodology also allows to compute a forecast of future income distribution which includes also the effects of spatial dependence. An application to US States is used to illustrate the effective capacities of the methodology.
    Keywords: Exploratory data analysis, polarization, random vector field, spatial dynamics, spatial dependence, distribution dynamics, US States.
    JEL: C14 O51 R11
    Date: 2015–02–01
  21. By: Tomasz Brodzicki (University of Gdansk; Institute for Development)
    Abstract: This paper addresses the spatial aspects of economic growth at regional level. We review the theoretical and empirical literature on economic growth and new economic geography (NEG) paying particular attention to dynamic NEG models. Both economic growth and location of economic activity are endogenous. Complex interdependencies exist between them and they are only to a limited extent included in the current theoretical models. A review of the literature leads to the conclusion on the existence of a negative relationship between the rate of economic growth at the national level and the degree of differentiation at regional level. Thus, equalization-oriented policy aimed at equilibrating development opportunities may lead to a general slowdown. Emerging theoretical models a la Melitz in the heterogeneous firms models take into account the stochastic distribution of productivity at the firm level lead to interesting conclusions, but at the same time lose clarity and explicitness of generated recommendations. The ideal theoretical model adapted to Polish conditions should be of a dynamic and multi-sector, multi-regional type with core-periphery setup - allowing for hierarchical policentricity and endogenous economic growth (broadly defined capital accumulation), allowing for the flow of goods and factors of production, taking into account imperfect diffusion of knowledge (localized diffusion) . The ultimate version of the model should envisaged random variation in productivity of firms and consumer preferences. At the same time it would not eliminate the problem of the black-boxes. Due to the complexity of the model does not exist, what is more, it is unlikely to be created in the future. In all likelihood, the model would not lead to clear policy conclusions. Its usefulness from the perspective of regional policy would be thus very limited.
    Keywords: economic growth, new economic geography, regional development
    JEL: O40 O43 R11 R12
    Date: 2014–12

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