nep-geo New Economics Papers
on Economic Geography
Issue of 2016‒02‒23
seventeen papers chosen by
Andreas Koch
Institut für Angewandte Wirtschaftsforschung

  1. Bottleneck congestion and residential location of heterogeneous commuters By Takayama, Yuki; Kuwahara, Masao
  2. Beyond urban form: How Masahisa Fujita shapes us By Berliant, Marcus; Mori, Tomoya
  3. Regional Housing Supply Elasticity in China 1999-2013: A Spatial Equilibrium Analysis By Dan S. Rickman; Hongbo Wang
  4. Creativity, Clusters and the Competitive Advantage of Cities By Martin, Roger; Florida, Richard; Pogue, Melissa; Mellander, Charlotta
  5. Spatial Distribution of US Employment in an Urban Wage-Efficiency Setting By Gimenez-Nadal, J. Ignacio; Molina, José Alberto; Velilla, Jorge
  6. The (Displacement) Effects of Spatially Targeted Enterprise Initiatives: Evidence from UK LEGI By Einiö, Elias; Overman, Henry G
  7. Offshoring and the geography of jobs in Great Britain By Luisa Gagliardi; Simona Iammarino; Andrés Rodríguez-Pose
  9. Is insularity a locational disadvantage? Insights from the New Economic Geography By F. Cerina
  10. The spatial decay in commuting probabilities: employment potential vs. commuting gravity By Gabriel M. Ahlfeldt; Nicolai Wendland
  11. Regional Housing Supply Elasticity in Spatial Equilibrium Growth Analysis By Dan S. Rickman; Hongbo Wang
  12. The urban wage premium in imperfect labour markets By Hirsch, Boris; Jahn, Elke J.; Oberfichtner, Michael
  13. Bells in Space: The Spatial Dynamics of US Interpersonal and Interregional Income Inequality By Rey, Sergio
  15. Finland’s regional GDPs 1880-2010: estimates, sources and interpretations By Enflo, Kerstin
  16. Understanding the "regional policy mix": A classification and analysis of European regions' support policies By Kroll, Henning
  17. Dynamic Spatial Autoregressive Models with Autoregressive and Heteroskedastic Disturbances By Leopoldo Catania; Anna Gloria Bill\'e

  1. By: Takayama, Yuki; Kuwahara, Masao
    Abstract: This study examines effects of bottleneck congestion and an optimal time-varying congestion toll on the spatial structure of cities. To this end, we develop a model in which heterogeneous commuters choose departure times from home and residential locations in a monocentric city with a bottleneck located between a central downtown and an adjacent suburb. We then show three properties of our model by analyzing equilibrium with and without congestion tolling. First, commuters with a higher value of travel time choose to live closer to their workplace. Second, congestion tolling causes population to increase in the suburb and generates urban sprawl. Third, commuters with a higher (lower) value of travel time gain (lose) from imposing the congestion toll without toll-revenue redistribution. Our findings are opposite to the standard results of traditional location models, which consider static traffic flow congestion, and differ fundamentally from the results obtained by Arnott (1998), who considers homogeneous commuters.
    Keywords: bottleneck congestion; residential location; congestion toll; urban sprawl
    JEL: D62 R21 R41 R48
    Date: 2016–01–21
  2. By: Berliant, Marcus; Mori, Tomoya
    Abstract: Literature from several phases of the career of Masahisa Fujita is surveyed chronologically, with a view toward future contributions in these areas. First we address the economic structure of the interior of a city with mobile consumers, adding production. Next we provide a critical discussion of the New Economic Geography, in particular distinguishing between recent approaches employing two regions and more than two regions, both in theory and in application to data. Finally, we discuss knowledge creation in groups and briefly touch on his current work in artificial intelligence.
    Keywords: New urban economics; New economic geography; Knowledge creation; Knowledge diversity; Robot economist
    JEL: D83 O31 R12 R13 R14
    Date: 2016–01–29
  3. By: Dan S. Rickman (Oklahoma State University); Hongbo Wang (Oklahoma State University)
    Abstract: In this paper, we apply a spatial equilibrium growth model (Glaeser and Tobio, 2008) to examine relative housing price growth across the provinces and municipalities of mainland China for 1999-2013. The spatial equilibrium growth model is built upon the traditional static Rosen- Roback spatial equilibrium model. A distinguishing feature is the addition of a regionally- varying elasticity of housing supply. A primary finding is the significant geographical differences in housing price growth and the importance of differences in regional housing supply in explaining the differences in housing price growth. Regions in the East had the most inelastic housing supply, while northern regions had the most elastic housing supply.
    Keywords: Chinese housing markets, Housing supply elasticity, Urban economics, Economic geography,
    JEL: R00
    Date: 2016–02
  4. By: Martin, Roger (Martin Prosperity Institute & University of Toronto); Florida, Richard (Martin Prosperity Institute & University of Toronto); Pogue, Melissa (Martin Prosperity Institute & University of Toronto); Mellander, Charlotta (Jönköping International Business School, & Centre of Excellence for Science and Innovation Studies)
    Abstract: Purpose – The article marries Michael Porter’s industrial cluster theory of traded and local clusters to Richard Florida’s occupational approach of creative and routine workers to gain a better understanding of the process of economic development. By combining these two approaches, four major industrial-occupational categories are identified. The shares of U.S. Employment in each – creative-in-traded, creative-in-local, routine-in-traded and routine-in-local – are calculated and a correlation analysis is used to examine the relationship of each to regional economic development indicators. Our findings show that economic growth and development is positively related to employment in the creative-in-traded category. While metros with a higher share of creative-in-traded employment enjoy higher wages and incomes overall, these benefits are not experienced by all worker categories. The share of creative-in-traded employment is also positively and significantly associated with higher inequality. After accounting for higher median housing costs, routine workers in both traded and local industries are found to be relatively worse off in metros with high shares of creative-in-traded employment, on average.
    Keywords: Creativity; clusters; cities; metros; occupations; regional development
    JEL: J30 O10 R10
    Date: 2015–06–24
  5. By: Gimenez-Nadal, J. Ignacio (University of Zaragoza); Molina, José Alberto (University of Zaragoza); Velilla, Jorge (University of Zaragoza)
    Abstract: In this paper, we analyze the spatial distribution of US employment and earnings against an urban wage-efficiency background, where leisure and effort at work are complementary. Using data from the American Time Use Survey (ATUS) for the period 2003-2014, we analyze the spatial distribution of employment across metropolitan areas. We also empirically study the relationship between individual earnings and commuting and leisure. Our empirical results show that employment is mostly concentrated in metropolitan cores, and that earnings increase with "expected" commuting time, which gives empirical support to our urban wage-efficiency theory. Furthermore, we use Geographical Information System models to show that there is no common pattern of commuting and the employees-to-unemployed rate, although we find higher wages in comparatively crowded states, where average commuting times are also higher.
    Keywords: urban wage-efficiency, earnings, commuting, leisure, American Time Use Survey
    JEL: J21 J22 J31 R12 R41
    Date: 2016–02
  6. By: Einiö, Elias; Overman, Henry G
    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: displacement; employment; place-based policy; programme evaluation
    JEL: H25 J20 O40 R11
    Date: 2016–02
  7. By: Luisa Gagliardi; Simona Iammarino; Andrés Rodríguez-Pose
    Abstract: This paper investigates the impact of the offshoring of production activities on domestic jobs in Great Britain. The paper considers both the spatial heterogeneity across local labour markets and variations in the intensity of outward flows of investments abroad (OFDI) across industries in order to shed new light on the job creation/destruction implications of offshoring. The results suggest that offshoring may generate significant job losses in routine occupations in areas that have been more exposed to the relocation of production abroad, regardless of whether the relocation has been to developed or developing/emerging countries. Offshoring to developing/emerging countries has, by contrast, a positive effect on the generation of non-routine jobs. Efficiency gains accruing from the international reorganization of production increase in the long-run, with compensation mechanisms operating through growth of employment in higher value added activities at home. Overall, our results uncover important spatial and interpersonal inequalities in job creation, which provide new challenges for public policy.
    Keywords: offshoring; local labour market; job creation and destruction; routine and non-routine occupatins
    JEL: F21 J23 J24 J42
    Date: 2015–10
  8. By: Marusca De Castris (Roma Tre, University of Rome); Guido Pellegrini (Sapienza, University of Rome)
    Abstract: The focus of our paper is the identification of the regional effects of industrial subsidies when the presence of subsidized firms is spatially correlated. In this case the stable unit treatment value assumption (SUTVA) in the Rubin model is not valid and some econometric methods should be used in order to detect the consistent policy impact in presence of spatial dependence. We propose a new methodology for estimating the unbiased “net” effect of the subsidy, based on novel “spatial propensity score matching” technique that compare treated and not treated units affected by similar spillover effects due to treatment. We offer different econometrical approaches, where the “spatial” propensity score is estimated by standard or spatial probit models. Some robustness tests are also implemented, using different instrumental variable spatial models applied to a probit model. We test the model using an empirical application, based on a dataset that incorporates information on incentives to private capital accumulation by Law 488/92, mainly devoted to SME, and Planning Contracts, created for large projects, in Italy. The analysis is carried out on a disaggregated territorial level, using the grid of the local labour system. The results show a direct effect of subsidies on subsidized firms. The sign of the impact is generally positive, the output effect outweighing the substitution effect. Confronting the standard and the “spatial” estimation, we observed a positive but small crowding out effect across firms in the same area and across neighbouring areas, mostly in the labour market. However, due to the small sample, the difference in impacts estimated by the standard and the “spatial” effect of subsidies is not statistically significant.
    Keywords: spatial propensity score, policy evaluation, propensity score matching, spatial analysis
    JEL: R12 R23 C21
    Date: 2015
  9. By: F. Cerina
    Abstract: This paper investigates the economic implications of being an island from the perspective of the New Economic Geography (NEG) literature. We review and discuss some existing NEG models which can be useful to generate empirical predictions for the insular territories and we outline a theoretical framework aiming at explicitly modeling the problem of insularity. We propose answers to the following research questions - Is insularity a threat for economic performances? In which cases and why does it represent a disadvantage? Which are, if any, the optimal policies able to compensate for this disadvantage?
    Keywords: Insularity, New Economic Geography, Industry Location, trade
    JEL: R12 R23 R40
    Date: 2015
  10. By: Gabriel M. Ahlfeldt; Nicolai Wendland
    Abstract: We show that an employment potential capitalisation model, which establishes a spatial relationship between the price of land and the spatial distribution of employment through a transport matrix, produces estimates of the spatial decay in bilateral commuting probabilities that are very close to the decay observed in commuting data.
    Keywords: accessibility; commuting; employment; gravity; potential
    JEL: R38 R48
    Date: 2015–11
  11. By: Dan S. Rickman (Oklahoma State University); Hongbo Wang (Oklahoma State University)
    Abstract: The spatial equilibrium growth model of Glaeser and Tobio (2008) is built upon the traditional static Rosen-Roback spatial equilibrium model. A distinguishing feature is the addition of a regionally-varying elasticity of housing supply, which was found empirically for the U.S. in a number of studies. Applications of the framework have been limited. But it is sufficiently flexible to be used in a wide variety of settings. Numerous policies and site characteristics of areas have the potential to simultaneously influence household amenity demand, firm productivity and elasticity of housing supply. The spatial equilibrium growth model not only ascertains the growth effects of policies and site characteristics, but it also assesses the channels through which they affect regional growth.
    Keywords: regional housing supply, spatial equilibrium, regional growth, urban economics, economic geography
    JEL: R00
    Date: 2015–06
  12. By: Hirsch, Boris; Jahn, Elke J.; Oberfichtner, Michael
    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.
    Abstract: Mit administrativen verknüpften Betriebs-Beschäftigtendaten für Westdeutschland untersucht diese Studie, ob ein Teil des Urban Wage Premiums durch eine geringere Lohnsetzungsmacht von Arbeitgebern auf dichteren Arbeitsmärkten erklärt werden kann. Wir zeigen zunächst, dass das Arbeitsangebot an Firmen in dichteren Arbeitsmärkten lohnelastischer ist, die Lohnsetzungsmacht der Arbeitgeber also weniger ausgeprägt ist. Diese Unterschiede lassen eine Lohnprämie von 1,1 bis 1,6 Prozent bei einem Anstieg der Bevölke-rungsdichte um 100 Log-Punkte erwarten. Anschließend zeigen wir, dass die geschätzte Lohnprämie bei Kontrolle für unbeobachtete, zeitkonstante Personenheterogenität um 1,1 bis 1,4 Prozentpunkte fällt, wenn wir auf die regionalen Suchfriktionen bedingen. Unsere Ergebnisse legen nahe, dass ein wesentlicher Teil des Urban Wage Premiums auf geringere Suchfriktionen in dichteren Arbeitsmärkten zurückzuführen ist.
    Keywords: urban wage premium,imperfect labour markets,monopsony,search frictions
    JEL: R23 J42 J31
    Date: 2016
  13. By: Rey, Sergio
    Abstract: Social and interregional inequality patterns across US states from 1929-2012 are analyzed using exploratory space-time methods. The results suggest complex spatial dynamics for both inequality series that were not captured by the stylized model of Alonso (1980). Interpersonal income inequalities of states displayed a U-shaped pattern ending the period at levels that exceeded the alarmingly high patterns that existed in the 1920s. Social inequality is characterized by greater mobility than that found for state per capita incomes. Spatial dependence is also distinct between the two series, with per capita incomes exhibiting strong global spatial autocorrelation, while state interpersonal income inequality does not. Local hot and cold spots are found for the per capita income series, while local spatial outliers are found for state interpersonal inequality. Mobility in both inequality series is found to be influenced by the local spatial context of a state.
    Keywords: convergence, inequality, spatial distribution dynamics
    JEL: C23 R11 R12
    Date: 2015–07–15
  14. By: Alessia (University of Barcelona); Paolo Naticchioni (Roma Tre University and Iza)
    Abstract: This paper aims at disentangling the role played by different explanations on the urban wage premium along the wage distribution. We analyze the wage dynamics of migrants from lower to higher density areas in Italy, using quantile regressions and individual data. The results show that unskilled workers benefit more from a wage premium accruing over time, while skilled workers enjoy a wage premium when they migrate as well as a wage increase over time. Further, we find that for unskilled workers the wage growth over time is mainly due to human capital accumulation in line with the “learning” hypothesis, while for skilled workers the wage growth is mainly explained by the “coordination” hypothesis, i.e., cities enhance the probability of better matches between workers and firms.
    Keywords: Urban Wage Premium, Human Capital, Spatial Sorting, Wage Distribution, Quantile Fixed Effects
    JEL: J31 J61 R23
    Date: 2015
  15. By: Enflo, Kerstin (Department of Economic History, Lund University)
    Abstract: This paper provides the first consistent long-run estimates of Finnish regional GDPs, from 1880 to 2010. Estimates are provided for 12 historical counties as well as for the 5 current-border NUTS 2-regions. The main results from the analyses of the long-run evolution of regional GDPs are the following. Firstly, it is clear that Finland’s geographical position, in the intersection between Eastern and Western Europe, has led to a history of balancing between the two powers. A long-run economic decline of the historically important regions of the west is documented. Simultaneously access to Russian markets advanced the East, but trade was subject to several large shocks, notably with the Finnish independence of 1917 and the collapse of the Soviet Union in 1991. Over the long run, the paper finds that the southern part of the country has been the winner in the Finnish regional growth league. Secondly, the paper analyses regional inequality and finds that Finland’s counties and regions were relatively unequal in European comparison during early industrialization. Rapid convergence in GDP per capita only took place after the Second World War, but was interrupted by the 1980s and replaced by a new tendency for divergence.
    Keywords: Industrialization; Regional inequality; Regional income; Economic growth;
    JEL: N93 N94 R11
    Date: 2014–09–11
  16. By: Kroll, Henning
    Abstract: In recent years, no small number of studies have emphasised the importance of "getting the policy mix right". What that term, "policy mix" relates to, however, remained less than clear, not least as a result of the absence of an appropriate database on regional policies. With the Regional Innovation Monitor repository, such a database has now become available. Using this novel source of data, this paper identifies specific types of "policy mixes" common among European regions as well as external and internal factors that determine regional policy makers' choices of policy mixes. Finally, it demonstrates that regions' choice of a particular policy mixes may have influenced their economic resilience during the recent years of crisis.
    Date: 2016
  17. By: Leopoldo Catania; Anna Gloria Bill\'e
    Abstract: We propose a new class of models specifically tailored for spatio-temporal data analysis. To this end, we generalize the spatial autoregressive model with autoregressive and heteroskedastic disturbances, i.e. SARAR(1,1), by exploiting the recent advancements in Score Driven (SD) models typically used in time series econometrics. In particular, we allow for time-varying spatial autoregressive coefficients as well as time-varying regressor coefficients and cross-sectional standard deviations. We report an extensive Monte Carlo simulation study in order to investigate the finite sample properties of the Maximum Likelihood estimator for the new class of models as well as its flexibility in explaining several dynamic spatial dependence processes. The new proposed class of models are found to be economically preferred by rational investors through an application in portfolio optimization.
    Date: 2016–02

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