nep-geo New Economics Papers
on Economic Geography
Issue of 2016‒05‒28
seven papers chosen by
Andreas Koch
Institut für Angewandte Wirtschaftsforschung

  1. Estimating Border Effects: The Impact of Spatial Aggregation By Cletus C. Coughlin; Dennis Novy
  2. Collecting new pieces to the regional knowledge spillovers puzzle: high-tech versus low-tech industries By Carlos Carreira; Luís Lopes
  3. How Does a City Benefit from Culture? Evidence from Milan By Riccardo, Borgoni; Alessandra, Michelangeli; Nicola, Pontarollo;
  4. Agglomeration economies, taxable rents, and government capture: evidence from a place-based policy By Daniel Rais
  5. Benefits of dense labour markets: Evidence from transitions to employment in Germany By Hamann, Silke; Niebuhr, Annekatrin; Peters, Cornelius
  6. Inflation and Bubbles in the Japanese Condominium Market By Nagayasu, Jun
  7. What determines the level of local business property taxes? By Merriman, David

  1. By: Cletus C. Coughlin; Dennis Novy
    Abstract: Trade data are typically reported at the level of regions or countries and are therefore aggregates across space. In this paper, we investigate the sensitivity of standard gravity estimation to spatial aggregation. We build a model in which initially symmetric micro regions are combined to form aggregated macro regions. We then apply the model to the large literature on border effects in domestic and international trade. Our theory shows that larger countries are systematically associated with smaller border effects. The reason is that due to spatial frictions, aggregation across space increases the relative cost of trading within borders. The cost of trading across borders therefore appears relatively smaller. This mechanism leads to border effect heterogeneity and is independent of multilateral resistance effects in general equilibrium. Even if no border frictions exist at the micro level, gravity estimation on aggregate data can still produce large border effects. We test our theory on domestic and international trade flows at the level of U.S. states. Our results confirm the model's predictions, with quantitatively large effects.
    Keywords: Gravity, Geography, Borders, Trade Costs, Heterogeneity, Home Bias, Spatial Attenuation, Modifiable Areal Unit Problem (MAUP)
    JEL: F10 F15 R12
    Date: 2016–05
  2. By: Carlos Carreira (GEMF and Faculty of Economics, University of Coimbra, Portugal); Luís Lopes (GEMF and Faculty of Economics, University of Coimbra, Portugal)
    Abstract: This paper revisits the puzzling question regarding the role of spatial agglomeration of production activities and knowledge on firm’s total factor productivity (TFP). In particular, it addresses the overlooked issue of a plausible non-linear effect and different across industries. Using a panel of Portuguese manufacturing firms, we found that specialization economies have a positive impact on firms’ productivity, especially for those operating in medium-high and high-tech sectors. Diversity externalities, for its part, have an inverted U-shaped relationship with firms’ TFP in low, medium-low and medium-high tech sectors. The relationship between regional R&D employment and productivity differs across sectors: in all manufacturing firms and firms from medium-low and high-tech sectors, there is an inverted U-shaped relationship; in low-tech sector, there is a U-shaped relationship and a positive elasticity for any employment level higher than the 20th percentile. Overall, agglomeration economies differ substantially across industries and they are non-linear.
    Keywords: Regional knowledge spillovers, agglomeration economies, low-tech vs. high-tech industries, total factor productivity. JEL Classification:
    Date: 2016–05
  3. By: Riccardo, Borgoni; Alessandra, Michelangeli; Nicola, Pontarollo;
    Abstract: Cultural amenities are the expression of a cultural environment, given by a combination of aesthetics factors, styles, rhythms, behaviours, which contribute to make vibrant and more enjoyable a neighbourhood. Within the theoretical framework of the hedonic approach, we propose an empirical strategy to capture the multiple effects of cultural amenities. The results are used to determine whether cultural amenities are optimally provided by the municipality of Milan. It turns out that government should devote far more resources to culture.
    Keywords: culture, city, hedonic approach, multilevel models
    JEL: R11 R12 R23
    Date: 2016–05–16
  4. By: Daniel Rais
    Abstract: We study how industry-level agglomeration economies affect government policy. Using administrative data on firm subsidies in economically lagging regions of Great Britain, we test two alternative hypotheses. Economic geography models imply that firms at an industry’s core can sustain higher tax burdens or require lower subsidies than firms in more remote locations. Conversely, political economy models predict firms at the industry’s core to be more successful at lobbying government, particularly at the sub-national level, thus obtaining more favourable fiscal treatment. We find that local government agencies structure subsidy offers to favour pre-existing employment in locally agglomerated industries, behaviour more in line with theories of policy capture than with economic geography models.
    Date: 2014–12–01
  5. By: Hamann, Silke (Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany]); Niebuhr, Annekatrin (Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany]); Peters, Cornelius (Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany])
    Abstract: "We analyse whether the size of the local labour market allows for better matching between job seekers and vacancies, which is thought to enhance productivity. This analysis is based on a large data set providing detailed micro-level information on new employment relationships in Germany. Our results suggest rather small matching benefits. Doubling employment density increases the productivity of new employment relationships by 1.1% to 1.2%. Moreover, the findings indicate that the benefits accrue only to persons experiencing job-to-job transitions and short-term unemployed. We detect no important impact of agglomeration on transitions from long-term non-employed." (Author's abstract, IAB-Doku) ((en))
    Keywords: Arbeitsmarktregion, Arbeitsuchende, offene Stellen, Matching, Arbeitsplatzdichte, Produktivitätseffekte, kurzfristige Arbeitslosigkeit, Integrierte Erwerbsbiografien
    JEL: R23 J31
    Date: 2016–04–25
  6. By: Nagayasu, Jun
    Abstract: In this paper, we investigate the dynamics of condominium prices by using recent national and regional data for Japan. First, using left- and right-tailed integration methods to circumvent deficiencies in existing approaches, we propose two definitions of bubbles and show that the condominium market has experienced neither mild nor explosive bubbles since 2008. The perception of bubbles can be influenced by the variables chosen to represent economic fundamentals; however, the standard model specification suggests no bubbles during that period. Second, consistent with this finding, we point to several economic fundamentals including Chinese money that can explain the long-term trend in condominium prices. Third, we find that, among the explanatory variables considered, transaction volume, particularly the volume of purchases by companies, is relevant in explaining condominium price inflation.
    Keywords: Real estate market, condominium prices, market bubble, unit root, cointegration, Japan
    JEL: C5 R1 R3
    Date: 2016–04–01
  7. By: Merriman, David (University of Illinois at Chicago)
    Abstract: Conventional economic theory intuitively holds that local business property taxes, which account for over one-third of the state and local taxes that firms pay, should be efficiently structured in order to recover the exact cost of providing public services to these firms. However, this conceptual thinking does not accord with observed geographic and over-time variation in business taxation. To better explain these discrepancies, the author develops an alternative theoretical model with heterogeneous firms, some of which are more profitable than others in certain locations. This model more precisely captures observed business tax revenues and its implications are empirically tested using a nationally-representative database of effective tax rates for commercial property and owner-occupied housing. The alternative model better reflects the political and policy tradeoffs that local government officials face between balancing the need for government revenue while maintaining an attractive profit-making environment for businesses and attracting firms that will supply jobs for their constituents.
    JEL: H25 H7 R38
    Date: 2016–01–01

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