nep-geo New Economics Papers
on Economic Geography
Issue of 2016‒04‒04
fifteen papers chosen by
Andreas Koch
Institut für Angewandte Wirtschaftsforschung

  1. EU structural funds and regional income convergence: A sobering experience By Breidenbach, Philipp; Mitze, Timo; Schmidt, Christoph M.
  2. The Localization of Interfirm Transaction Relationships and Industry Agglomeration By Nakajima, Kentaro; Saito, Yukiko Umeno; Uesugi, Iichiro
  3. Urban cultural amenities and the migration of the creative class By Dalvai, Wilfried
  4. The economics of density: evidence from the Berlin Wall By Gabriel M. Ahlfeldt; Stephen Redding; Daniel M. Sturm; Nikolaus Wolf
  5. Spatial panel data models using Stata By Federico Belotti; Gordon Hughes; Andrea Piano Mortari
  6. Local and Spatial Cointegration in the Wage Curve – A Spatial Panel Analysis for German Regions By Reinhold Kosfeld; Christian Dreger
  7. More bucks, more growth, more justice? The effects of regional structural funds on regional economic growth and convergence in Germany By Jonathan Eberle; Thomas Brenner
  8. Do large departments make academics more productive? Sorting and agglomeration economies in research By Clément Bosquet; Pierre-Philippe Combes
  9. The effect of local taxes on firm performance: evidence from geo referenced data By Federico Belotti; Edoardo di Porto; Gianluca Santoni
  10. Spatial mismatch through local public employment agencies Answers from a French quasi-experiment Spatial Mismatch through Local Public Employment Agencies? Answers from a French Quasi-Experiment By Mathieu Bunel; Elisabeth Tovar
  11. Urban costs, wages, and selection By Dalvai, Wilfried
  12. Innovation and collaboration patterns between research establishments By Inoue, Hiroyasu; Nakajima, Kentaro; Saito, Yukiko Umeno
  13. Racial Sorting and the Emergence of Segregation in American Cities By Allison Shertzer; Randall P. Walsh
  14. How Outward Looking is Smart Specialisation? Results from a survey on inter-regional collaboration in Smart Specialisation Strategies (RIS3) By Jens Sörvik; Inger Midtkandal; Chiara Marzocchi; Elvira Uyarra
  15. Scale versus Scope in the Diffusion of New Technology By Daniel P. Gross

  1. By: Breidenbach, Philipp; Mitze, Timo; Schmidt, Christoph M.
    Abstract: The European Structural and Investment Funds (ESIF) are the prime instrument of EU regional policy. European policy makers place considerable hope into their growth stimulating funding measures to overcome current economic stagnation. Consequently, there is a strong need for credible evidence regarding the programs' effectiveness. Based on an empirical identification strategy linked to modern growth theory, we find that the disbursement of EU structural funds is negatively correlated with regional growth. Incorporating spatial dynamics and decomposing this correlation into a direct and a spatially-indirect component, it is particularly the latter which determines this 'sobering' finding. Regarding the economics behind these results, the obtained negative spatial effect may reflect the role played by policy-induced spatial competition among neighboring regions. It could also highlight the backwardness in technological endowment and economic structures of highly funded regions. In any case, EU structural funding does not seem to contribute effectively to foster income convergence across regions.
    Abstract: Die europäischen Struktur und Investmentfonds (ESIF) sind das wichtigste Instrument der EU-Regionalpolitik; die europäische Politik setzt große Hoffnungen in die wachstumsstimulierende Wirkung dieser Fördermaßnahmen zur Überwindung der aktuellen wirtschaftlichen Stagnation. Basierend auf einer empirischen Identifikationsstrategie können in diesem Papier keine Belege für positive Förderwirkungen gefunden werden. Werden räumliche Strukturen berücksichtigt, zeigt sich, dass räumlich indirekte Effekte dieses Ergebnis beeinflussen - also solche Regionen weniger wachsen, deren Nachbarn stark gefördert werden. Neben der potenziellen Erklärung, dass Nachbarn gegenseitig ihre Investoren abwerben, legt dieses Resultat nahe, dass hochgeförderte regionale Cluster unter struktureller und technologischer Rückständigkeit leiden, die durch Wachstumsprogramme nicht überwunden werden. Beide möglichen Erklärungen lassen den Schluss zu, dass die Förderung ihr eigentliches Ziel, die Konvergenz der Regionen, verfehlt.
    Keywords: EU regional policy,Solow growth model,spatial spillovers,panel data
    JEL: C21 R12 R58
    Date: 2016
  2. By: Nakajima, Kentaro; Saito, Yukiko Umeno; Uesugi, Iichiro
    Abstract: Using a unique and massive dataset on firms' suppliers and customers, we examine the localization of transaction relationships to find the following. First, based on a counterfactual that controls for the location of firms and their potential partners, transaction relationships in about 90 to 95% of the three-digit manufacturing industries are localized within 40km. Second, based on a counterfactual that controls for the average distance of transaction relationships in the entire manufacturing sector, in about 40% of industries transaction relationships are localized. Third, the extent of industry agglomeration and the extent of the localization of transaction relationships are positively correlated.
    Keywords: Interfirm transactions, agglomeration, transaction distance
    JEL: R11
    Date: 2016–03
  3. By: Dalvai, Wilfried
    Abstract: This paper models the migration of the Creative Class (Florida, 2003) in a New-Economic-Geography framework. Beside wage differentials, urban cultural amenities play an important role on the choice of location. A public cultural good, financed by taxes, is introduced as an agglomeration force. The public-good is purely consumed by skilled workers. Additionally urban cultural diversity across cities is taken into account to model exogenous differences between cities. I analyze the political equilibrium of tax competition. Furthermore the effects of asymmetries of cities and trade liberalization is examined. There is an optimal level of provision of public cultural goods. In the dispersion-scenario the equilibrium tax rate for workers is hump-shaped with respect to trade integration while for skilled workers it is u-shaped. In the core-periphery scenario the equilibrium tax rate for the core decreases with increasing trade freeness.
    Keywords: Creative Class,New Economic Geography,Agglomeration,Urban Cultural Amenities,Public Cultural Goods,Tax Competition
    JEL: F12 H87 J24 R1
    Date: 2016
  4. By: Gabriel M. Ahlfeldt; Stephen Redding; Daniel M. Sturm; Nikolaus Wolf
    Abstract: This paper develops a quantitative model of internal city structure that features agglomeration and dispersion forces and an arbitrary number of heterogeneous city blocks. The model remains tractable and amenable to empirical analysis because of stochastic shocks to commuting decisions, which yield a gravity equation for commuting flows. To structurally estimate agglomeration and dispersion forces, we use data on thousands of city blocks in Berlin for 1936, 1986 and 2006 and exogenous variation from the city’s division and reunification. We estimate substantial and highly localized production and residential externalities. We show that the model with the estimated agglomeration parameters can account both qualitatively and quantitatively for the observed changes in city structure. We show how our quantitative framework can be used to undertake counterfactuals for changes in the organization of economic activity within cities in response for example to changes in the transport network.
    Keywords: agglomeration; cities; commuting; density; gravity
    JEL: N34 O18 R12
    Date: 2015
  5. By: Federico Belotti (CEIS,University of Rome "Tor Vergata"); Gordon Hughes (University of Edinburgh); Andrea Piano Mortari (CEIS, University of Rome "Tor Vergata")
    Abstract: xsmle is a new command for spatial analysis using Stata. We consider the quasi-maximum likelihood estimation of a wide set of both fixed- and random-effects spatial models for balanced panel data. Of special note is that xsmle allows to handle unbalanced panels thanks to its full compatibility with the mi suite of commands, to use spatial weight matrices in the form of both Stata matrices and spmat objects, to compute direct, indirect and total effects according to the procedure outlined in LeSage and Pace (2009), and to exploit a wide range of postestimation features, extending to the panel data case the predictors proposed by Kelejian and Prucha (2007). This paper describes the command and all its functionalities using both simulated and real data.
    Keywords: Spatial analysis, panel data, maximum likelihood estimation.
    JEL: C23 C33 C87
    Date: 2016–03–25
  6. By: Reinhold Kosfeld (University of Kassel); Christian Dreger (University of Kassel)
    Abstract: The wage curve introduced by Blanchflower and Oswald (1990, 1994) postulates a negative correlation between wages and unemployment. Empirical results focus on particular theoretical channels establishing the relationship. Panel models mostly draw on unionized bargaining or the efficiency wage hypothesis. Spatial econometric approaches can be rationalized by monopsonistic competition. However, the approaches either ignore the issue of nonstationarity or treat the data as if it were nonspatial. In this paper, we adopt a global cointegration approach recently proposed by Bienstock and Felsenstein (2010) to account for nonstationarity of regional data. By specifying a spatial error correction model (SpECM), equilibrium adjustments are considered in both space and time. Applying the methodology for West German labour markets, we find strong evidence for the existence of a long-run wage curve with spatial effects.
    Keywords: wage curve, regional labour markets, spatial panel models, global cointegration analysis
    JEL: J30 J60 C33 R15
    Date: 2016
  7. By: Jonathan Eberle (Philipps University Marburg, Deutschhausstr. 10, 35032 Marburg, Germany); Thomas Brenner (Philipps University Marburg, Deutschhausstr. 10, 35032 Marburg, Germany)
    Abstract: This paper analyzes the impact of the German structure program "Joint Task for the Improvement of Regional Economic Structure" (GRW) on regional economic growth. The paper extends the existing literature by several aspects. First of all, using the popular augmented Solow model by Mankiw et al. (1992) as starting point, we develop an enhanced growth model by including employment as well as technological spatial spillovers to the model. Secondly, the program has not been analyzed within a dynamic spatial panel framework on the level of the 402 German small scale regions before. We used a detailed dataset on this regional level and adress the problem of endogeneity by using a System Generalized Method of Moments (GMM) estimator. Finally, we investigate the impact of regional conditions on the effects of the GRW program. The result illustrates that the impact of public subsidies is overestimated in the current literature. In fact, the infrastructure program even emanates a negativ direct impact on regional economic growth, especially in sparely populated regions as well as in non-innovative regions.
    Keywords: Regional economic growth, ß-convergence, Structural funds, Spatial panel econometrics, Generalized Methods of Moments (GMM) Estimation
    JEL: C23 R11 R48 O47
    Date: 2016–03–18
  8. By: Clément Bosquet (Spatial Economic Research Center); Pierre-Philippe Combes (Département d'économie)
    Abstract: We study how departments’ characteristics impact academics’ quantity and quality of publications in economics. Individual time-varying characteristics and individual fixed-effects are controlled for. Departments’ characteristics have an explanatory power at least equal to a fourth of that of individual characteristics and possibly as high as theirs. An academic’s quantity and quality of publications in a field increase with the presence of other academics specialised in that field and with the share of the field’s output in the department. By contrast, department’s size, proximity to other large departments, homogeneity in terms of publication performance, presence of colleagues with connections abroad, and composition in terms of positions and age matter at least for some publication measures but only when individual fixed effects are not controlled for. This suggests a role for individual positive sorting where these characteristics only attract more able academics. A residual negative sorting between individuals’ and departments’ unobserved characteristics is simultaneously exhibited.
    Keywords: Research productivity; Peer effects; Local externalities
    Date: 2016–03
  9. By: Federico Belotti; Edoardo di Porto; Gianluca Santoni
    Abstract: This paper investigates the impact of business property taxation on firms' performance using a panel of italian manufacturing firms. To account for endogeneity in local taxation, we exploit a pairwise spatial differenced generalized method of moments estimator. As well as providing robust inference, we also improve on existing work by exploiting the exogenous variation in local taxes generated by the political alignment of each local government with the central one. We find that property taxation exerts a negative impact on firms' employment, capital and sales to such an extent as to significantly affect total factor productivity.
    Keywords: local taxation;endogeneity;spatial differencing;two-way clustering
    JEL: H22 H71 R38
    Date: 2016–02
  10. By: Mathieu Bunel (TEPP - Travail, Emploi et Politiques Publiques - UPEM - Université Paris-Est Marne-la-Vallée - CNRS - Centre National de la Recherche Scientifique, LEDi - Laboratoire d'Economie de Dijon - UB - Université de Bourgogne - CNRS - Centre National de la Recherche Scientifique); Elisabeth Tovar (TEPP - Travail, Emploi et Politiques Publiques - UPEM - Université Paris-Est Marne-la-Vallée - CNRS - Centre National de la Recherche Scientifique, EconomiX - UP10 - Université Paris 10, Paris Ouest Nanterre La Défense - CNRS - Centre National de la Recherche Scientifique)
    Abstract: Using the unanticipated creation of a new agency in the French region of Lyon as a quasi-natural experiment, we question whether distance to local public employment agencies (LPEAs) is a new channel for spatial mismatch. Contrary to past evidence based on aggregated data and consistently with the spatial mismatch literature, we find no evidence of a worker/agency spatial mismatch, which pleads for a resizing of the French LPEA network. However, echoing with the literature on the institutional determinants of the local public employment agencies' efficiency, we do find detrimental institutional transitory effects.
    Keywords: spatial mismatch,unemployment,public employment service,quasi-experiment
    Date: 2015–10
  11. By: Dalvai, Wilfried
    Abstract: In most countries housing and commuting costs amount for one-third or more of households' budgets. These urban costs have substantial effects on wages and income inequality. Urban costs play an important role for locational and economic decisions of individuals and firms. This paper enriches the topic on urban costs with cornerstones in much recent micro-modeling in international trade and regional and urban economics by analyzing the effects of urban costs and firm heterogeneity with endogenous markups on wages and selection. With increasing commuting technology only more productive and less firms survive. Firms have higher costs because they have to pay higher wages to compensate workers for the higher urban costs. Despite higher wages welfare decreases with larger urban costs because consumer surplus decreases an there are larger expenses for housing and commuting. Wage premia are hump-shaped with respect to urban costs.
    Keywords: urban costs,heterogenous firms,wages,selection,college wage premium,inequality
    JEL: F12 R12 E24
    Date: 2016
  12. By: Inoue, Hiroyasu; Nakajima, Kentaro; Saito, Yukiko Umeno
    Abstract: This study empirically investigates the determinants of the productivity of knowledge creation by collaboration. By using the Japanese patent database, we extracted establishment-level patent co-invention information, and found the following results. First, we find an inverse U-shaped pattern in the relationship between the similarity of knowledge stocks and the quality of patents. That is, moderate diversity in knowledge stocks between establishments rather than extreme similarity or extreme diversity is important for knowledge creation. Second, focusing on the differences in technology class, we find inverse U-shaped pattern only in the high-technology class. This implies that the common knowledge between establishments is important in the invention of high technology patents. Third, we find that the physical distance between collaborating establishments has a negative effect on the quality of patents.
    Keywords: Diversity, Knowledge creation
    JEL: O31 R11 D23
    Date: 2016–03
  13. By: Allison Shertzer; Randall P. Walsh
    Abstract: Residential segregation by race grew sharply in the United States as black migrants from the South arrived in northern cities during the early twentieth century. The existing literature emphasizes discriminatory institutions as the driving force behind this rapid rise in segregation. Using newly assembled neighborhood-level data, we instead focus on the role of “flight” by whites, providing the first systematic evidence of the role that prewar population dynamics played in the emergence of the American ghetto. Leveraging exogenous changes in neighborhood racial composition, we show that white departures in response to black arrivals were quantitatively large and accelerated between 1900 and 1930. Our preferred estimates suggest that white flight was responsible for 34 percent of the increase in segregation over the 1910s and 50 percent over the 1920s. Our analysis suggests that segregation would likely have arisen in American cities even without the presence of discriminatory institutions as a direct consequence of the widespread and decentralized relocation decisions of white urban residents.
    JEL: J15 N32 R23
    Date: 2016–03
  14. By: Jens Sörvik (European Commission – JRC - IPTS); Inger Midtkandal (Royal Norwegian Embassy, New Delhi (India), commercial section Innovation Norway); Chiara Marzocchi (Manchester Institute of Innovation Research, Manchester Business School, Manchester (UK)); Elvira Uyarra (Manchester Institute of Innovation Research, Manchester Business School, Manchester (UK))
    Abstract: Smart specialisation (S3) emphasises the identification of niches, cross-sectorial innovation and solving societal challenges. With this comes a need for an outward-looking dimension, to find a region’s potential advantages in international markets, and to identify partners to help deliver new solutions and solve common challenges. This is the case not only for industry and academia, but also for regional policy-makers who need to engage in inter-regional collaboration processes. The purpose of the survey presented in this report was to increase our understanding of the factors underlying successful inter-regional cooperation within S3. It builds on an analytical framework to better understand the multiple dimensions of inter-regional collaboration, developed in a previous working paper (Uyarra et al., 2014). The objectives of this study were to increase our knowledge of inter-regional collaboration in research and innovation (R&I), with the aim of supporting regions and Member States in their collaborative efforts in S3, but also to inform the S3 Platform (S3P) and other European Commission (EC) services on how to best support inter-regional collaboration in R&I policy. The answers from the survey respondents indicate that the EU’s new cohesion policy has led some regions and Member States to change their behaviour in collaboration in R&I policy. More than half of the respondents reported having prior collaboration experiences, of which 67 % reported increased collaboration in the previous 2 years and 30 % reported a stable level of collaborative effort. The factors driving collaboration and the perceived benefits of collaboration include information sharing, meeting a new orientation of regional policy and supporting linkages between R&I and industry. Collaboration largely involves low-intensity activities that bring direct and immediate benefits. Collaboration is most prominent in the first steps of the RIS3 process, analysis, design and decision-making. The criteria underlying the choice of partners are in line with the RIS3 concept; they are based on industry composition (similar or complementary), research capabilities that are complementary or similar, as well as similar societal challenges. In contrast, the survey findings regarding the geographical location of partnering regions, as regions most often collaborate with other regions in their own country. The main barriers to collaboration seem to be inter-related and include lack of resources, insufficient political commitment, insufficient engagement of regional stakeholders and lack of clarity of objectives. One interpretation is that it is challenging to communicate clearly to stakeholders and politicians the outcomes of an intervention, with the result that stakeholders are unwilling commit or mobilise resources. The rationale for innovation policy interventions quite often is to support activities that provide indirect and dynamic benefits that are not easily measured, divisible or attributable to individual actors or activities. In contrast, the least problematic barriers are socio-cultural issues, legal or administrative barriers and lack of trust. It is recommended that regions and Member States better prepare the evidence base for their projects and improve the materials they use to communicate to stakeholders the potential benefits of collaboration and how to achieve them. Regions should also engage more with private sector actors and civil society. The paper indicates the importance of the EC communicating a more complex picture of the dynamics of inter-regional collaboration. An oversimplification of the message might lead to underinvestment and less intensive collaboration than that which is needed to address the larger challenges with potential for longer-term benefits for Europe. The recommendations for S3P include that it should focus on learning activities and support the initiation of collaborative processes. However, it appears that the regions and Member States want S3P support to implement thematic collaboration, but then to be left to themselves to carry it out. Likewise, respondents considered it important that S3P should provide guidance, act as a knowledge hub and offer expert assistance. This indicates that S3P should continue to develop knowledge around inter-regional collaboration and assist regions and Member States in establishing and developing this.
    Keywords: Inter-regional collaboration, Smart Specialisation, innovation policy, regional development, dimensions of collaboration, transnational collaboration.
    Date: 2016–03
  15. By: Daniel P. Gross (Harvard Business School, Strategy Unit)
    Abstract: Using the farm tractor as a case study, I show that lags in technology diffusion arise along two distinct margins: scale and scope. Though tractors are now used in nearly every agricultural field operation and in the production of nearly all crops, they first developed with much more limited application, and early diffusion was accordingly limited in scope until tractor technology generalized. The results are consistent with theory and other historical examples, suggesting that the key to understanding technology diffusion lies not only in explaining the number of different users, but also in explaining the number of different uses.
    Keywords: Technology diffusion; Spatial technology diffusion; Farm tractors; R&D; General-purpose technologies
    JEL: N52 O13 O32 O33 Q16
    Date: 2016–03

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