nep-geo New Economics Papers
on Economic Geography
Issue of 2016‒02‒17
eighteen papers chosen by
Andreas Koch
Institut für Angewandte Wirtschaftsforschung

  1. The Role of Economic Geography in Subnational African Development By Seiffert, Sebastian
  2. Good Firms, Worker Flows and Local Productivity By Serafinelli, Michel
  3. Joint R&D subsidies, related variety, and regional innovation By Broekel, Tom; Brachert, Matthias; Duschl, Matthias; Brenner, Thomas
  4. Border Effects without Borders By Wrona, Jens
  5. Why Does Birthplace Matter So Much? Sorting, Learning and Geography By Clément Bosquet; Henry G. Overman
  6. Deindustrialization and the Polarization of Household Incomes: The Example of Urban Agglomerations in Germany By Gornig, Martin; Goebel, Jan
  7. Exports, agglomeration and workforce diversity: An empirical assessment for German establishments By Brunow, Stephan; Grünwald, Luise
  8. The urban wage premium in imperfect labour markets By Oberfichtner, Michael; Hirsch, Boris; Jahn, Elke J.
  9. Regional Determinants of German FDI in the Czech Republic - Evidence from a gravity model approach By Schäffler, Johannes; Hecht, Veronika; Moritz, Michael
  10. A Wage-Efficiency Spatial Model for US Self-Employed Workers By Gimenez-Nadal, J. Ignacio; Molina, José Alberto; Velilla, Jorge
  11. Types of Spatial Mobility and the Ethnic Context of Destination Neighbourhoods in Estonia By Mägi, Kadi; Leetmaa, Kadri; Tammaru, Tiit; van Ham, Maarten
  12. The (Displacement) Effects of Spatially Targeted Enterprise Initiatives: Evidence from UK LEGI By Elias Einiö; Henry G. Overman
  13. The Urban Wage Premium in Imperfect Labour Markets By Hirsch, Boris; Jahn, Elke J.; Oberfichtner, Michael
  14. Structural change and regional employment development By Blien, Uwe; Sanner, Helge
  15. What Are The Returns To Regional Mobility? Evidence From Mass Layoffs By Findeisen, Sebastian; Dauth, Wolfgang; Lindner, Attila
  16. The Distributional Effect of Commuting Subsidies - Evidence from Geo-Referenced Data and Large-Scale Policy Reform By Freund, Florian; Hawranek, Franziska; vom Berge, Philipp; Heuermann, Daniel F.
  17. New Perspectives on Ethnic Segregation over Time and Space: A Domains Approach By van Ham, Maarten; Tammaru, Tiit
  18. Do immigrants attract FDI? District-level evidence from Germany By Li, Chen

  1. By: Seiffert, Sebastian
    Abstract: This contribution investigates the role spatial agglomeration of economic in explaining difference in comparative development of the African hinterland. In order to overcome the paucity with regards to disaggregated data concerning economic activity as well its spatial distribution, this approach relies on geo-referenced satellite data. Using information about the intensity of nocturnal lights at a spatial resolution of one square kilometre, it integrates the fields of spatial economics and the research concerning the fundamental causes of economic growth. It is shown that introducing measures of spatial dispersion in economic activity can help explaining a considerable amount of unobserved heterogeneity. I show that higher levels of spatial agglomeration are associated with significantly higher levels of local development in the African hinterland. These findings are robust to controlling for both national legal institutions as well as unobservable cross-ethnicity differences.
    JEL: O10 O40 R12
    Date: 2015
  2. By: Serafinelli, Michel
    Abstract: A consensus has emerged that agglomeration economies are an important factor explaining why firms cluster next to each other. Yet disagreement remains over the sources of these agglomeration effects, given non-trivial measurement challenges. This paper is the first to present direct evidence showing how localized knowledge spillovers arise from workers changing jobs within the same local labor market. Specifically, I as-sess the extent to which firm-to-firm labor mobility enhances the productivity of firms located near highly productive firms, using a unique dataset combining Social Security earnings records and balance sheet information for Veneto, a region of Italy with many successful industrial clusters. I first identify a set of highly productive firms, then show that hiring workers with experience at these firms significantly increases the productivity of other firms. To address identification threats, primarily due to unobservable firm-level productivity shocks correlated with hiring, I use a novel instrumental vari- able strategy, which exploits downsizing events at highly productive firms, in addition to control function methods in the spirit of the productivity literature. My findings from both approaches imply that worker flows can explain around 10 percent of the productivity gains experienced by other firms when new highly productive firms are added to a local labor market.
    JEL: R10 D24 J31
    Date: 2015
  3. By: Broekel, Tom; Brachert, Matthias; Duschl, Matthias; Brenner, Thomas
    Abstract: Subsidies for R&D are an important tool of public R&D policy, which motivates extensive scientific analyses and evaluations. The paper adds to this literature by arguing that the effects of R&D subsidies go beyond the extension of organizations monetary resources invested into R&D. It is argued that collaboration induced by subsidized joint R&D projects yield significant effects that are missed in traditional analyses. An empirical study on the level of German labor market regions substantiates this claim showing that collaborative R&D subsidies impact regions innovation growth when providing access to related variety and embedding regions into central positions in cross- regional knowledge networks.
    JEL: L14 O31 R12
    Date: 2015
  4. By: Wrona, Jens
    Abstract: Over the last 20 years the border-effect literature repeatedly documented the trade-reducing effect of inter- and intra-national borders. Thereby, the sheer size and persistence of observed border effects from the beginning raised doubts on the genuine effect of underlying borders. However, when so-called "border effects" result either from statistical artefacts or from differences in fundamentals, why should their spatial dimension then inevitably coincide with the geography of present or past political borders? This paper identifies a discontinuous trade reduction along a geographic dimension that neither existing nor defunct political borders can explain. Trade between the East and the West of Japan is 23.1% - 51.3% lower than trade within both country parts. Including a rich set of explanatory variables, suggests that recent agglomeration trends, reflected by the contemporaneous structure of Japan's business and social networks, rather than cultural differences, shaped by long-lasting historical shocks, can explain the east-west bias in intra-Japanese trade.
    JEL: F14 F15 F12
    Date: 2015
  5. By: Clément Bosquet; Henry G. Overman
    Abstract: We consider the link between birthplace and wages. Using a unique panel dataset we estimate a raw elasticity of wage with respect to birthplace size of 4.6%, two thirds of the 6.8% raw elasticity with respect to city size. We consider a number of mechanisms through which this birthplace effect could arise. Our results suggest that inter-generational transmission (sorting) and the effect of birthplace on current location (geography) both play a role in explaining the effect of birthplace. We find no role for human capital formation at least in terms of educational outcomes (learning). Our results highlight the importance of intergenerational sorting in helping explain the persistence of spatial disparities.
    Keywords: place of birth, spatial sorting, lifetime mobility
    JEL: J61 J62 R23 J31
    Date: 2016–01
  6. By: Gornig, Martin; Goebel, Jan
    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-1990. 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
  7. By: Brunow, Stephan; 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 produc-tivity 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 exter-nalities and face higher export proportions. We also control for a variety of estab-lishment 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 evi-dence 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.
    JEL: D22 F14 M14
    Date: 2015
  8. By: Oberfichtner, Michael; Hirsch, Boris; Jahn, Elke J.
    Abstract: Using administrative data for West Germany, we investigate whether part of the urban wage premium stems from fierce competition in thick labour markets. We first document fewer search frictions in denser labour markets. We further show that controlling for search frictions lowers the wage premium from a one standard deviation rise in log population density by 1.3 1.4pp in specifications including worker fixed effects. We lastly find less monopsony power in denser markets. Regional differences in monopsony power predict a wage premium of 1.4 1.9%, thereby accounting for the observed drop in the premium when controlling for labour market frictions.
    JEL: R23 J42 J31
    Date: 2015
  9. By: Schäffler, Johannes; Hecht, Veronika; Moritz, Michael
    Abstract: On the basis of a unique dataset the regional distribution of German multinationals and their Czech affiliates is analysed for both countries. The investigation covers market size and agglomeration features, distance issues, and labour market characteristics. Apart from the vital role of large markets and a low transport distance there are further crucial findings regarding joint foreign direct investment (FDI) projects that can be revealed from a home-host country perspective: the strong position of the common border region, the non-relevance of a relatively high wage gap between the site of the headquarters and the location of the affiliate in coincidence with the great importance of the availability of high-skilled employees in the target country, and differences in the significance of sectoral employment shares.
    JEL: F15 F23 R12
    Date: 2015
  10. By: Gimenez-Nadal, J. Ignacio (University of Zaragoza); Molina, José Alberto (University of Zaragoza); Velilla, Jorge (University of Zaragoza)
    Abstract: In this paper, we study self-employment in a theoretical setting derived from wage-efficiency spatial models, where leisure and effort at work are complementary. We develop a spatial model of self-employment in which effort at work and commuting are negatively related, and thus the probability of self-employment decreases with "expected" commuting time. We use time-use data from the American Time Use Survey 2003-2014 to analyze the spatial distribution of self-employment across metropolitan areas in the US, focusing on the relationship between commuting time and the probability of self-employment. Our empirical results show that the probability of self-employment is negatively related to the "expected" commuting time, giving empirical support to our theoretical model. Furthermore, we propose a GIS model to show that commuting and self-employment rates are, in relation to unemployment rates, negatively related.
    Keywords: wage-efficiency, self-employment, commuting, leisure, American Time Use Survey
    JEL: J21 J22 R12 R41
    Date: 2016–01
  11. By: Mägi, Kadi (University of Tartu); Leetmaa, Kadri (University of Tartu); Tammaru, Tiit (University of Tartu); van Ham, Maarten (Delft University of Technology)
    Abstract: Most studies of the ethnic composition of destination neighbourhoods after residential moves do not take into account the types of moves people have made. However, from an individual perspective, different types of moves may result in neighbourhood environments that differ in terms of their ethnic composition from those in which individuals previously lived. We investigate how the ethnic residential context changes for individuals as a result of different types of mobility (immobility, intra-urban mobility, suburbanisation, and long-distance migration) for residents of the segregated post-Soviet city of Tallinn. We compare the extent to which Estonian- and Russian-speakers integrate in residential terms. Using unique longitudinal Census data (2000-2011) we tracked changes in the individual ethnic residential context of both groups. We found that the moving destinations of Estonian- and Russian-speakers diverge. When Estonians move, their new neighbourhood generally possesses a lower percentage of Russian-speakers compared with when Russian-speakers move, as well as compared with their previous neighbourhoods. For Russian-speakers, the percentage of other Russian-speakers in their residential surroundings decreases only for those who move to the surburbs or who move over longer distances to rural villages. By applying a novel approach of tracking the changes in the ethnic residential context of individuals for all mobility types, we were able to demonstrate that the two largest ethnolinguistic groups in Estonia tend to behave as 'parallel populations' and that residential integration in Estonia is therefore slow.
    Keywords: residential mobility, migration, suburbanisation, ethnicity, longitudinal data, Estonia
    JEL: J15 J61 R20 R23
    Date: 2015–12
  12. By: Elias Einiö; Henry G. Overman
    Abstract: We investigate the impacts of a significant area-based intervention (LEGI) that aimed to increase employment and entrepreneurial activity in 30 disadvantaged areas across England. We examine the spatial pattern of effects at a fine spatial scale using panel data for small geographic units and a regression discontinuity design that exploits the programme eligibility rule. The results indicate considerable local displacement effects. Employment increases in treated areas close to the treatment area boundary at the cost of significant employment losses in untreated localities just across the boundary. These differences vanish quickly when moving away from the boundary and do not persist after the programme is abolished. These findings support the view that area-based interventions may have considerable negative displacement effects on untreated parts of the economy. This displacement can substantially reduce (or in this case eliminate) any net benefits.
    Keywords: place-based policy, programme evaluation, displacement, employment, industrial policy
    JEL: R11 H25 J20 O40
    Date: 2016–02
  13. By: Hirsch, Boris (University of Erlangen-Nuremberg); Jahn, Elke J. (Institute for Employment Research (IAB), Nuremberg); Oberfichtner, Michael (University of Erlangen-Nuremberg)
    Abstract: Using administrative data for West Germany, this paper investigates whether part of the urban wage premium stems from fierce competition in thick labour markets. We first establish that employers possess less wage-setting power in denser markets. Local differences in wage-setting power predict 1.1-1.6% higher wages from a 100 log points increase in population density. We further document that the observed urban wage premium from such an increase drops by 1.1-1.4pp once conditioning on local search frictions. Our results therefore suggest that a substantial part of the urban wage premium roots in differential imperfections across local labour markets.
    Keywords: urban wage premium, imperfect labour markets, monopsony, search frictions
    JEL: R23 J42 J31
    Date: 2016–01
  14. By: Blien, Uwe; Sanner, Helge
    Abstract: An examination of regional unemployment rates reveals that there are vast differences which cannot be explained by different institutional. Our paper traces these differences in the regions labour market performance back to the regions specialisation in products that are more or less advanced in their product cycle. The model we develop shows how profit maximisation and its interaction with individual preferences endogenously lead to initially increasing and then decreasing employment in the presence of process innovation. We show how processes of structural change develop in time and how they are linked to technological progress.
    JEL: O41 J23 R23
    Date: 2015
  15. By: Findeisen, Sebastian; Dauth, Wolfgang; Lindner, Attila
    Abstract: This paper estimates the effects of regional mobility on individual employment prospects and wages, exploiting rich German social security data spanning over 30 years. Our focus is on unemployed workers with strong labor force attachment who search for employment after being exposed to a mass layoff. By that we concentrate on a group of individuals who are plausibly searching for employment for exogenous reasons. Comparing individuals who stay in the local labor market to movers, we find that employment rates are around 15 percentage points higher for movers three years after the layoff. Large differences in employment rates persist even 10 years after the layoff. In contrast, there are no effects of regional mobility on wages conditional on finding employment.
    JEL: J61 J63 R23
    Date: 2015
  16. By: Freund, Florian; Hawranek, Franziska; vom Berge, Philipp; Heuermann, Daniel F.
    Abstract: Tax legislation in virtually all OECD countries foresees tax breaks for commuters. Such commuting allowances are implemented with the aim to raise matching efficiency in the labor market and / or to promote an equalization of net wages for workers independent of the length of their commute. Despite the fiscal magnitude of these subsidies (e.g. in Germany the sum of foregone tax income from commuting tax breaks amounts to 6 billion Euros annually) little is known about their effects on worker and firm behavior. In this paper we use the unexpected repeal of commuting subsidies in Germany between 2007 and 2009, which has affected different groups of workers to a different extent, as a natural experiment. Drawing on a large data set of geo-referenced employer-employee data and applying a difference-in-difference approach, we estimate the effect of commuting subsidies on wages and employment. Beyond the direct effect of the commuting tax break our results allow to draw inference on three key variables in labor economics: wage elasticity of labor supply, bargaining power of workers, and the wage elasticity of locational choice. We find that workers who lose some of their net wage as a result of the reform experience increases in gross wages of .6 per cent. Adjustments in gross wages differ, however, substantially across industries and across educational status, which can be taken as evidence for differential bargaining power across worker groups.
    JEL: J22 J38 R23
    Date: 2015
  17. By: van Ham, Maarten (Delft University of Technology); Tammaru, Tiit (University of Tartu)
    Abstract: The term segregation has a strong connotation with residential neighbourhoods, and most studies investigating ethnic segregation focus on the urban mosaic of ethnic concentrations in residential neighbourhoods. However, there is now a small, but growing, literature, which focusses on segregation in other domains of daily life where inter-ethnic encounters and social interaction might take place, such as: workplaces; family/partner relationship; leisure time; education; transport, and virtual domains such as social media. The focus on residential segregation is understandable. Ethnic residential segregation is easily visible in cities as segregated neighbourhoods often have their own distinct identity and reputation. Residential segregation is also relatively easy to investigate by using register or census data on where different ethnic groups live. However, if the interest in segregation stems from the idea that we want to measure the integration of ethnic minorities in society, and from an interest in social interaction between ethnic groups, then just investigating where people live is far too limited and other domains such as workplaces should be taken into account. In this paper we present an integrated conceptual framework of ethnic segregation in different life domains in which we combine elements from the life course approach and from time geography.
    Keywords: ethnic segregation, neighbourhoods, work places, life course approach, time geography, domains approach
    JEL: I32 J15 R23
    Date: 2016–01
  18. By: Li, Chen
    Abstract: Using novel German district-level data from 1999-2011, this paper analyses whether the presence of immigrants in a particular location helps to attract inward FDI from the immigrants' country of origin. Results show that a one standard-deviation increase in the immigrant share is associated with a 3.3% rise in firm entry. This effect is stronger for an investor's first entry into Germany, and there is indication that firms from developing countries depend more on immigrants. A quasi-natural experiment exploiting the migration of ethnic Germans from the former Soviet Union in the 1990s (`Sp taussiedler') confirms the results.
    JEL: F14 F22 F23
    Date: 2015

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