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on Economic Geography |
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Issue of 2015‒05‒22
fifteen papers chosen by Andreas Koch Institut für Angewandte Wirtschaftsforschung |
| By: | Hsieh, Chang-Tai; Moretti, Enrico |
| Abstract: | We study how growth of cities determines the growth of nations. Using a spatial equilibrium model and data on 220 US metropolitan areas from 1964 to 2009, we first estimate the contribution of each U.S. city to national GDP growth. We show that the contribution of a city to aggregate growth can differ significantly from what one might naively infer from the growth of the city’s GDP. Despite some of the strongest rate of local growth, New York, San Francisco and San Jose were only responsible for a small fraction of U.S. growth in this period. By contrast, almost half of aggregate US growth was driven by growth of cities in the South. We then provide a normative analysis of potential growth. We show that the dispersion of the conditional average nominal wage across US cities doubled, indicating that worker productivity is increasingly different across cities. We calculate that this increased wage dispersion lowered aggregate U.S. GDP by 13.5%. Most of the loss was likely caused by increased constraints to housing supply in high productivity cities like New York, San Francisco and San Jose. Lowering regulatory constraints in these cities to the level of the median city would expand their work force and increase U.S. GDP by 9.5%. We conclude that the aggregate gains in output and welfare from spatial reallocation of labor are likely to be substantial in the U.S., and that a major impediment to a more efficient spatial allocation of labor are housing supply constraints. These constraints limit the number of US workers who have access to the most productive of American cities. In general equilibrium, this lowers income and welfare of all US workers. |
| Keywords: | cities; economic growth |
| JEL: | E00 R1 |
| Date: | 2015–05 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:10604&r=geo |
| By: | Jan Goebel; Martin Gornig |
| Abstract: | The tertiarization, or perhaps more accurately, the deindustrialization of the economy has left deep scars on cities. It is evident not only in the industrial wastelands and empty factory buildings scattered throughout the urban landscape, but also in the income and social structures of cities. Industrialization, collective wage setting and the welfare state led to a stark reduction in income differences over the course of the twentieth century. Conversely, deindustrialization and the shift to tertiary sectors could result in increasing wage differentiation. Moreover, numerous studies on global cities, the dual city, and divided cities have also identified income polarization as a central phenomenon in the development of major cities. Using data from the German Socio-Economic Panel (SOEP), we find an increasing polarization of household income structures since the mid-1990s. In agglomerations, this income polarization is even more pronounced than in the more rural regions. The income polarization in Germany is likely to have multiple causes, some of which are directly linked to policies such as the deregulation of the labor market. But extensive deindustrialization is probably also one of the drivers, that has led directly to the weakening of middle income groups. |
| JEL: | R20 Z13 R11 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:diw:diwsop:diw_sp755&r=geo |
| By: | C. S. Mastinu; M. Del Gatto |
| Abstract: | We study the relationship between economic development, geography and “cultural remoteness” (i.e. distance from the technological frontier(s) driving economic development) at a regional level focusing on the role of “insularity”. The analysis covers all island regions worldwide and documents the presence of economic costs (measured in GDP per capita), due to insularity, in addition to those generally attributed to ‘geographical remoteness’. Cultural remoteness, either measured in terms of linguistic or ethnic distance, is not the only cause that explains these costs. |
| Keywords: | Insularity, geographic remoteness, economic development, cultural distance |
| JEL: | R58 R11 O21 O10 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:cns:cnscwp:201503&r=geo |
| By: | Catini, Roberto; Karamshuk, Dmytro; Penner, Orion; Riccaboni, Massimo |
| Abstract: | In recent years there has been a growing interest in the role of networks and clusters in the global economy. Despite being a popular research topic in economics, sociology and urban studies, geographical clustering of human activity has often studied been by means of predetermined geographical units such as administrative divisions and metropolitan areas. This approach is intrinsically time invariant and it does not allow one to differentiate between different activities. Our goal in this paper is to present a new methodology for identifying clusters, that can be applied to different empirical settings. We use a graph approach based on k-shell decomposition to analyze world biomedical research clusters based on PubMed scientific publications. We identify research institutions and locate their activities in geographical clusters. Leading areas of scientific production and their top performing research institutions are consistently identified at different geographic scales. |
| Keywords: | innovation clusters; network analysis; bio-pharmaceutical industry |
| JEL: | C6 O31 R12 |
| Date: | 2015–05–14 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:64454&r=geo |
| By: | Schmidheiny, Kurt (University of Basel); Suedekum, Jens (Heinrich Heine University Düsseldorf) |
| Abstract: | We analyze the first data set on consistently defined functional urban areas in Europe and compare the European to the US urban system. City sizes in Europe do not follow a power law: the largest cities are "too small" to follow Zipf's law. |
| Keywords: | city size distributions, Zipf's law, functional urban areas, urban systems |
| JEL: | R11 R12 |
| Date: | 2015–04 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp9020&r=geo |
| By: | Boschma, Ron (CIRCLE, Lund University and Regional research centre Utrecht (URU), Utrecht University) |
| Abstract: | Klepper’s theory of industry clustering based on organizational reproduction and inheritance through spinoffs challenged the Marshallian view on industry clustering. The paper provides an assessment of Klepper’s theoretical and empirical work on industry clustering. We explore how ‘new’ his spinoff theory on industry clustering was, and we investigate the impact of Klepper’s theory on the economic geography community. Klepper’s work has inspired especially recent literature on regional branching that argues that new industries grow out of and recombine capabilities from local related industries. Finally, the paper discusses what questions on industry location are still left open or in need of more evidence in the context of Klepper’s theory. |
| Keywords: | Klepper; spinoff dynamics; agglomeration economies; Marshall; industry cluster; evolutionary economic geography |
| JEL: | B15 B52 O18 R11 |
| Date: | 2015–05–14 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:lucirc:2015_018&r=geo |
| By: | Rikard H. Eriksson; Emelie Hane-Weijman |
| Abstract: | By means of Swedish longitudinal micro-data, the aim of this paper is to analyse how regional economies respond to crises. This is made possible by linking gross employment flows to the notion of regional resilience. Our findings indicate that despite a steady national employment growth, only the three metropolitan regions show higher employment figures than before the recession of 1990. Further, we can show evidence of high levels of job creation and destruction in both declining and expanding regions and sectors, and that the creation of jobs is mainly attributable to employment growth in incumbent firms while job destruction is primarily due to exits and micro-plants. Although the geography of resistance to crises and the ability of adaptability in the aftermath vary, our findings suggest that cohesive (i.e., with many skill-related industries) and diverse (i.e., with a high degree of unrelated variety) regions are more resilient over time. We also find that resistance to future shocks (e.g., the 2008 recession) is highly dependent on the resistance to previous crises. In all, this suggests that the long-term evolution of regional economies also influences their future resilience. |
| Keywords: | regional economic evolution, job creation, job destruction, crises, regional resilience |
| Date: | 2015–05 |
| URL: | http://d.repec.org/n?u=RePEc:egu:wpaper:1511&r=geo |
| By: | Balázs Lengyel; Rikard H. Eriksson |
| Abstract: | This paper provides a new empirical perspective for analysing the role of social networks for regional economic growth by constructing large-scale networks from employee-employee co-occurrences in plants in the entire Swedish economy 1990-2008. We calculate the probability of employee-employee ties at plant level based on homophily-biased random network assumptions and trace the most probable relations of every employee over the full period. We argue that these personal acquaintances are important for local learning opportunities and consequently for regional growth. Indeed, the paper provides the first systematic evidence for a central claim in economic geography: social network density has positive effect on regional growth defined as productivity growth. Interestingly, the most robust effect of density on growth was found in a segment of the co-worker network in which plants have never been linked by labour mobility previously. |
| Keywords: | social network, random network with homophily bias, probability of tie, labour mobility, regional productivity growth, panel regression |
| JEL: | D85 J24 J61 R11 R23 |
| Date: | 2015–05 |
| URL: | http://d.repec.org/n?u=RePEc:egu:wpaper:1513&r=geo |
| By: | Aiello, Francesco; Bonanno, Graziella |
| Abstract: | Banking is increasingly a-spatial. However, the environment matters for small banks. Indeed, they are embedded in narrowed markets and hence benefit from proximity to their member-customers. By referring to multilevel approach, this article aims at measuring how much the performance of Italian mutual-cooperative banks is determined by both geographical (provincial level) and individual characteristics (small bank level). The effect of local markets explains 28.27% of bank heterogeneity in the empty multilevel model and 33% in the most extended model. Moreover, it is found that bank efficiency increases with market concentration and demand density and decreases with branching in local markets. |
| Keywords: | Multilevel model; mutual-cooperative banks; local markets; cost efficiency |
| JEL: | C13 C21 D00 G21 R19 |
| Date: | 2015–05–16 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:64399&r=geo |
| By: | Lorenzo Caliendo; Maximiliano Dvorkin; Fernando Parro |
| Abstract: | We develop a dynamic labor search model where production and consumption take place in spatially distinct labor markets with varying exposure to domestic and international trade. The model recognizes the role of labor mobility frictions, goods mobility frictions, geographic factors, and input-output linkages in determining equilibrium allocations. We show how to solve the equilibrium of the model without estimating productivities, reallocation frictions, or trade frictions, which are usually difficult to identify. We use the model to study the dynamic labor market outcomes of aggregate trade shocks. We calibrate the model to 38 countries, 50 U.S. states and 22 sectors and use the rise in China's import competition to quantify the aggregate and disaggregate employment and welfare effects on the U.S. economy. We find that China's import competition growth resulted in 0.6 percentage point reduction in the share of manufacturing employment, approximately 1 million jobs lost, or about 60% of the change in the manufacturing employment share not explained by a secular trend. Overall, China's shock increases U.S. welfare by 6.7% in the long-run and by 0.2% in the short-run with very heterogeneous effects across labor markets. |
| JEL: | E24 F16 J62 R13 R23 |
| Date: | 2015–05 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:21149&r=geo |
| By: | Tom Broekel; Dirk Fornahl; Andrea Morrison |
| Abstract: | This paper investigates the allocation of R&D subsidies with a focus on the granting success of firms located in clusters. On this basis it is evaluated whether firms in these clusters are differently embedded into networks of subsidized R&D collaboration than firms located elsewhere. The theoretical arguments are empirically tested using the example of the German biotechnology firms’ participation in the 6th EU-Framework Programmes and national R&D subsidization schemes in the early 2000s. We show that clusters grant firms another premium to their location, as they are more likely to receive funds from the EU-Framework Programmes and hold more favourable positions in national knowledge networks based on subsidies for joint R&D. |
| Keywords: | Innovation policy, R&D subsidy, collaboration networks, embeddedness, technology cluster |
| JEL: | R11 O33 R58 D85 |
| Date: | 2015–05 |
| URL: | http://d.repec.org/n?u=RePEc:egu:wpaper:1514&r=geo |
| By: | Angela Faßhauer; Katrin Rehdanz |
| Abstract: | This paper is the first to link economic theory with empirical life-satisfaction analyses referring to internal migration. We derive an extension of the Roback (1982) model to account for benefits from regional amenities in the utility function, while controlling for income, housing costs, and migration costs. Using highly disaggregated spatial panel information on people’s migration decisions and their life satisfaction for Germany, we provide an empirical investigation of the theoretical model by applying an individual fixed-effects model to rule out selection bias, while accounting for endogeneity of income. We find that short-term benefits from regional amenities represent about 21 percent of household income. These findings are robust to a number of alternative specifications. |
| Keywords: | Internal migration, regional amenities, life satisfaction, Germany |
| JEL: | A12 C33 R23 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:diw:diwsop:diw_sp748&r=geo |
| By: | Rune Dahl Fitjar; Andrés Rodríguez-Pose |
| Abstract: | The paper assesses the role for innovation of one aspect which has been generally overlooked by evolutionary economic geography: context. It analyses how context shapes the impact of collaboration on firm-level innovation for 1604 firms located in the five largest city regions of Norway. Specifically, the analysis shows how the benefits to firms of collaborating within regional, national, and international innovation networks are affected by the knowledge endowments of the region within which the firm is located. Using a logit regression analysis, we find, first, that only national and international networking have a significant positive impact on the likelihood of innovation (the former only for process innovation), whereas the regional knowledge endowments have no direct effect. Second, regional cooperation is particularly effective in regions with high investments in R&D, whereas international cooperation is important in regions with an educated workforce – and regional and national collaboration may be ineffective in such cases. We conclude that, in the case of Norway, context is essential in determining the capacity of firms to set up networks and innovate. Regions with an educated workforce can use the resulting absorptive capacity to successfully assimilate knowledge being diffused through global pipelines from faraway places. However, this absorptive capacity is likely to be heavily filtered if regional firms mainly rely on internal connections within Norway. |
| Keywords: | Innovation; interaction; networking; context; human capital; R&D; firms; Norway |
| Date: | 2015–05 |
| URL: | http://d.repec.org/n?u=RePEc:egu:wpaper:1516&r=geo |
| By: | Dieter F. Kogler; Jürgen Essletzbichler; David L. Rigby |
| Abstract: | Significant attention has been directed to processes of knowledge production in a spatial context, but little consideration has been given to the type of technological knowledge produced within specific places. In this paper we use patent co-classification data from the European Patent Office (EPO) to measure the distance between all pairs of 629 International Patent Classification (IPC) categories. A multi-dimensional scaling algorithm allows us to visualize these distances in a map of the EU15 knowledge space. We trace the evolution of that space from 1981 to 2005. The patent class distance data are combined with counts of patents by IPC categories to measure the average relatedness (specialization) of knowledge produced within each NUTS2 region. We show that knowledge specialization has increased significantly across EU15 regions over time and we report those regions that have the most specialized and the least specialized knowledge bases. Changes in the average relatedness of regional knowledge cores are decomposed to reveal the contributions of technological entry, exit and selection processes over space and time. In a final section of the paper, technological diversification and abandonment at the NUTS2 level are modeled as a function of proximity to the knowledge core of the region and to knowledge spillovers from neighboring regions that are mediated by social and spatial distance. |
| Keywords: | Evolutionary Economic Geography, Geography of Invention, Technological Change, Technology/Knowledge Space, Patent Data Analysis, Entry/Exit/Selection, Decomposition Analysis |
| JEL: | O33 O52 R12 |
| Date: | 2015–05 |
| URL: | http://d.repec.org/n?u=RePEc:egu:wpaper:1515&r=geo |
| By: | Jonathan Borggren; Rikard H. Eriksson; Urban Lindgren |
| Abstract: | Following the impact on regional renewal and employment ascribed to rapidly growing firms (high-impact firms, HIFs), this paper argues that little is still known in economic geography and business studies today regarding the mechanisms influencing growth of such firms and, hence, the potential impact on regional employment. The aim of this paper is thus to explore how the qualitative content of skills (i.e. the degree of similarity, relatedness and unrelatedness) recruited to a firm during a period of fast growth influences its future success. Our findings, based on a sample of 1,589 HIFs in the Swedish economy, suggest that it is not only the number of people employed that matters in aiding the understanding of the future destiny of the firms –"but also, more importantly, it is the scope of the skills recruited and their proximity to related industries. |
| Keywords: | high-impact firms, skills, relatedness, labor flows |
| JEL: | L25 R12 R23 |
| Date: | 2015–05 |
| URL: | http://d.repec.org/n?u=RePEc:egu:wpaper:1512&r=geo |