nep-geo New Economics Papers
on Economic Geography
Issue of 2015‒03‒05
twelve papers chosen by
Andreas Koch
Institut für Angewandte Wirtschaftsforschung

  1. Place-based policies By David Neumark; Helen Simpson
  2. Combining knowledge bases in transnational innovation - microfoundations and the geography of organization By Strambach , Simone
  3. Institutions, Smart Specialisation Dynamics and Policy By Grillitsch , Markus
  4. Smart specialisation: Sources for new path development in a peripheral manufacturing region By Asheim , Bjørn; Grillitsch , Markus
  5. Diversity and employment prospects: neighbors matter! By Camille Hémet
  6. Economic Growth and Migration By Jan Ditzen
  7. A Quantitative Analysis of Subsidy Competition in the U.S. By Ralph Ossa
  8. Endogenous unrestricted locations in markets with network effects By Ribeiro, Vitor
  9. How mortgage finance affects the urban landscape By Chan, Sewin; Haughwout, Andrew F.; Tracy, Joseph
  10. The Determinants and Welfare Implications of US Workers' Diverging Location Choices by Skill: 1980-2000 By Diamond, Rebecca
  11. Crecimiento municipal en Colombia: El papel de las externalidades espaciales, el capital humano y el capital físico By Luis Armando Galvis-Aponte; Lucas Wilfried Hahn-De-Castro
  12. Determinants of total factor productivity of Polish districts. The impact of territorial capital By Dorota Ciołek; Tomasz Brodzicki

  1. By: David Neumark (University of California, Irvine); Helen Simpson (University of Bristol)
    Abstract: Place-based policies commonly target underperforming areas, such as deteriorating downtown business districts and disadvantaged regions. Principal examples include enterprise zones, European Union Structural Funds, and industrial cluster policies. Place-based policies are rationalized by various hypotheses in urban and labor economics, such as agglomeration economies and spatial mismatch – hypotheses that entail market failures and often predict overlap between poor economic performance and disadvantaged residents. The evidence on enterprise zones is very mixed. We need to know more about what features of enterprise zone policies make them more effective or less effective, who gains and who loses from these policies, and how we can reconcile the existing findings. Some evidence points to positive benefits of infrastructure expenditure, and also investment in higher education and university research – likely because of the public-goods nature of these policies. However, to better guide policy, we need to know more about what policies create self-sustaining longer-run gains.
    Keywords: place-based policies, employment, enterprise zones, discretionary grants, higher education, industrial clusters, infrastructure
    Date: 2014
  2. By: Strambach , Simone (Department of Geography, Philipps-University of Marburg)
    Abstract: The aim of the paper is to contribute both conceptually and empirically to a deeper understanding of the territorial shaping of knowledge combination and its development dynamics underpinning innovation. The importance of combining and integrating knowledge bases from different sources, geographical scales and heterogeneous actors is increasingly recognized in innovation studies. Yet, the question of what limits or enables knowledge combinations in innovation processes and what generates relatedness among unrelated knowledge bases in time and space is not fully answered. Conceptually the paper suggests a more specific focus on microfoundations and temporality by taking into account the economics of organization in more detail. This appears a particularly promising approach, as the causal relations and mechanisms across and between aggregated levels such as firms, sectors, regions, or nations are not well understood. Empirically the paper explores the micro-dynamics of knowledge combination and its territorial shaping from a transnational perspective. German-Chinese innovation projects in sustainable construction are investigated by using the methodology of innovation biography. This method allows following the time-space path of innovation. It enables capturing knowledge interactions and their unfolding in multi-scalar and cross-sectoral ways. The results underline a very dynamic geography of organization and barriers for knowledge integration at the micro-level rooted in organizational and institutional path dependencies. The investigation in the interplay between more permanent and temporary organizational forms and its geography holds a large potential for further research to provide new insights into the spatiality of combining knowledge bases in innovation processes.
    Keywords: knowledge dynamics; transnational innovation; microfoundations; economics of organization; innovation biography
    JEL: D83 L14 L20 L84 O31
    Date: 2015–02–26
  3. By: Grillitsch , Markus (CIRCLE, Lund University)
    Abstract: Smart specialisation features prominently in the European regional policy context. This paper discusses how the configuration of the regional institutional framework affects smart specialisation dynamics and policy. It elaborates why and how institutional diversity and integration promote entrepreneurial discovery processes, spillovers and agglomeration effects, and thereby structural change in regions. Policy challenges arising from the regional institutional framework are identified, discussed and related to well-research system failures of regional innovation systems.
    Keywords: regional policy; smart specialisation; institutions; regional innovation systems; system failures
    JEL: B52 O17 O43 P48 R10 R11 R58
    Date: 2015–02–26
  4. By: Asheim , Bjørn (UiS Business School/Centre for Innovation Research, University of Stavanger & CIRCLE, Lund University); Grillitsch , Markus (CIRCLE, Lund University)
    Abstract: Smart specialisation as a strategic approach for an innovation-driven regional development policy is extremely important in the European policy context and a precondition for accessing significant amounts of funding. In this paper, we pursue two aims: First, we clarify what smart specialisation means and introduce theoretical perspectives strengthening this policy approach. We will discuss the role of different modes of innovation and knowledge bases for different types of new path development. Second, we aim at identifying the sources for new path development within the smart specialisation framework for a peripheral manufacturing region. We present the key findings from a case study of Møre and Romsdal, in the western parts of Norway, which has been successful economically despite low scores on the typical innovation indicators. The case study was conducted in autumn 2014 and combines an in-depth analysis of relevant policy documents and 17 semi-structured interviews. Thereby, we illustrate to what extent a smart specialisation policy can add value in Norway. As Norway is not part of the EU, it is not compulsory for Norwegian counties to design smart specialisation strategies.
    Keywords: Smart specialisation; new path development; periphery; innovation; regional development
    JEL: P48 R10 R11 R58
    Date: 2015–02–26
  5. By: Camille Hémet (Universidad de Barcelona & IEB)
    Abstract: This paper explores how diversity affects individuals’ employment prospects, using data from the French Labor Force Survey. Employment correlates positively with local labor market diversity, but negatively with neighborhood diversity. Using an instrumental variable approach to deal with local labor market diversity drives the positive correlation to zero, confirming the suspicion of self-selection. Regarding neighborhood diversity, I adopt the strategy of Bayer et al. (2008), taking advantage of the very precise localization of the data: the negative effect of diversity is reinforced. I also show that nationalitybased diversity matters more than parents’ origin-based diversity, giving insights on the underlying mechanisms.
    Keywords: Diversity, employment, neighborhood effects
    JEL: J15 J60 R23 Z13
    Date: 2015
  6. By: Jan Ditzen (Heriot-Watt University)
    Abstract: The literature on growth theory lacks a precise sense of why there are interactions and dependencies between countries. Correspondingly, the spatial econometrics literature on growth empirics accounts for endogenous cross-country interactions, but lacks crucial insights from economic theory as to how such linkages should be precisely modeled. I address this weakness, by proposing a new economic model as a combination of an endogenous Romer-style growth model and a New Economic Geography model. The model admits two distinct sources of interactions between countries: mobility of high skilled workers and inter-country trade. Both of these sources develop from the New Economic Geography models, while the engine of the growth process is adapted from the endogenous growth literature. Motivated by higher wages, highly skilled workers migrate to the richer country, and there they work in the R&D sector. This in turn contributes towards economic growth in the richer country, and leads to divergence between the two countries. Trade in the manufactured good increases the difference between the two countries further. In its focus on both migration of highly skilled labour and its conclusion of divergence, the model captures the phenomenon of the Great Divergence in the 19th century. It is also consistent with evidence of club convergence in the 20th century. The implications of the model are verified by simulation.
    Keywords: Economic growth, New Economic Geography, Cross-country interactions, Convergence, Migration, Trade
    JEL: O41 F22 F43 O31 N10
    Date: 2014
  7. By: Ralph Ossa
    Abstract: What motivates regional governments to subsidize firm relocations and what are the implications of the subsidy competition among them? In this paper, I address these questions using a quantitative economic geography model which I calibrate to U.S. states. I show that states have strong incentives to subsidize firm relocations in order to gain at the expense of other states. I also show that subsidy competition creates large distortions so that there is much to gain from a cooperative approach. Overall, I find that manufacturing real income can be up to 3.9 percent higher if states stop competing over firms.
    JEL: F12 F13 R12 R58
    Date: 2015–02
  8. By: Ribeiro, Vitor
    Abstract: The paper studies indirect network effects in a market composed by two incompatible intermediaries that choose price (short-term issue) in addition to location (long-term issue). The paper first shows that (i) when the network externality is sufficiently weak, only maximum differentiation prevails, (ii) the location equilibrium can be asymmetric for an intermediate level of the network externality, given that the first entrant locates at the city centre while the follower chooses an extreme (niche) positional location and (iii) tipping occurs favouring the leader in the location choice when the intensity of the network externality is sufficiently strong. Moreover, the paper concludes that the likelihood of an asymmetric location equilibrium is higher when there is no mismatch between the product space occupied by consumers and intermediaries. Finally, the author concludes that a penetration pricing strategy conducted by a third intermediary is more successful when the pre-entry condition is not the tipping equilibrium location.
    Keywords: simple network effect,unconstrained spatial competition,location leadership
    JEL: D43 L13 R12
    Date: 2015
  9. By: Chan, Sewin (Federal Reserve Bank of New York); Haughwout, Andrew F. (Federal Reserve Bank of New York); Tracy, Joseph (Federal Reserve Bank of New York)
    Abstract: This chapter considers the structure of mortgage finance in the U.S., and its role in shaping patterns of homeownership, the nature of the housing stock, and the organization of residential activity. We start by providing some background on the design features of mortgage contracts that distinguish them from other loans, and that have important implications for issues presented in the rest of the chapter. We then explain how mortgage finance interacts with public policy, particularly tax policy, to influence a household’s decision to own or rent, and how shifts in the demand for owner-occupied housing are translated into housing prices and quantities, given the unusual nature of housing supply. We consider the distribution of mortgage credit in terms of access and price, by race, ethnicity, income, and over the lifecycle, with particular attention to the role of recent innovations such as non-prime mortgage securitization and reverse mortgages. The extent of negative equity has been unprecedented in the past decade, and we discuss its impact on strategic default, housing turnover, and housing investment. We describe spatial patterns in foreclosure and summarize the evidence for foreclosure spillovers in urban neighborhoods. Finally, we offer some thoughts on future innovations in mortgage finance.
    Keywords: mortgage; cities
    JEL: G21 R21 R31
    Date: 2015–02–01
  10. By: Diamond, Rebecca (Stanford University)
    Abstract: From 1980 to 2000, the rise in the U.S. college-high school graduate wage gap coincided with increased geographic sorting as college graduates concentrated in high wage, high rent cities. This paper estimates a structural spatial equilibrium model to determine causes and welfare consequences of this increased skill sorting. While local labor demand changes fundamentally caused the increased skill sorting, it was further fueled by endogenous increases in amenities within higher skill cities. Changes in cities' wages, rents, and endogenous amenities increased inequality between high-school and college graduates by more than suggested by the increase in the college wage gap alone.
    Date: 2013–12
  11. By: Luis Armando Galvis-Aponte; Lucas Wilfried Hahn-De-Castro
    Abstract: En el presente trabajo se realiza un análisis del crecimiento económico municipal en el período 1993-2012.El objetivo es evaluar la existencia de convergencia teniendo en cuenta las externalidades del capital humano y el capital físico. Siguiendo el análisis propuesto por Mankiw et al. (1992)1, se estiman las ecuaciones de convergencia aumentadas con capital humano. Se realizan pruebas de autocorrelación espacial,y dado que este fenómeno puede afectar los resultados de las estimaciones, se incorporan dichos efectos en las ecuaciones de convergencia. Para ello se sigue la propuesta de Ertur y Koch (2006; 2007), quienes incluyen las externalidades tecnológicas en el análisis del modelo que considera solamente el capital físico (Solow, 1956), y en el modelo aumentado con el capital humano (MRW, 1992).Los resultados indican que cuando no se tienen en cuenta los efectos de los spillovers, existe evidencia de convergencia. Esta, sin embargo, desaparece cuando dichos efectos son añadidos al modelo******ABSTRACT: In this paper we conduct an analysis of economic growth and convergence in the Colombian municipalities during the period 1993-2012. The objective is to evaluate the existence of convergence taking into account the externalities of physical and human capital. According to Mankiw et al. (1992), we estimate convergence equations that are augmented with human capital. Moreover, spatial autocorrelation tests carried out show that this phenomenon can bias the results, leading us to incorporate them in the estimation. We follow the methodology proposed by Ertur and Koch (2006, 2007), who include technological externalities in the analysis of the model which solely considers physical capital (Solow, 1956), and the augmented model with human capital (MRW, 1992). The results show that when spillovers are not taken into account, there is evidence of convergence, however such evidence disappears once they are included in the model
    Keywords: crecimiento económico, convergencia, externalidades espaciales
    JEL: C31 O O54 R11
    Date: 2015–02–23
  12. By: Dorota Ciołek (Institute for Development, Sopot, Poland; University of Gdansk, Faculty of Economics, Department of Macroeconomics, Gdańsk, Poland); Tomasz Brodzicki (University of Gdansk, Faculty of Economics; Institute for Development)
    Abstract: In contrast to most previous analyzes in the present study we have adopted a highly spatially disaggregated NUTS-4 level, or districts, which is particularly relevant for analysis of spatial and territorial interactions and relationships. At this level of aggregation presence of various externalities and spillovers in development processes can be detected. Territorial capital, as a specific carrier concept of territorial cohesion is significantly different from the classical factors of production. We thus can assume that the territorial capital does not affect directly the production, but indirectly through the impact on TFP. The analysis uses different specifications of an econometric model with TFP as the dependent variable. We attempt to identify potential interactions between spatial districts. This requires, however, determination of the value of GDP per capita of Polish districts and, secondly, estimation of TFP for counties. The results are very interesting and to a large extent in line with theoretical postulates. On the basis of in-depth discussion of the results obtained we have developed a series of recommendations for economic policy. The paper uses the results of the project financed by the Polish National Science Centre “Concept of the territorial cohesion in cohesion policy. Implications for Economic Growth" (no. 2012/05/B/HS4/04212).
    Keywords: regional development, estimation of GDP per capita, TFP determinants, territorial capital, spatial econometrics
    JEL: O40 O47 R11 R12 C31
    Date: 2015–01

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