nep-geo New Economics Papers
on Economic Geography
Issue of 2016‒12‒11
nine papers chosen by
Andreas Koch
Institut für Angewandte Wirtschaftsforschung

  1. Testing for Agglomeration Economies and Firm Selection in Spatial Productivity Differences: The case of Japan By KONDO Keisuke
  2. Recession Propagation in Small Regional Economies: Spatial Spillovers and Endogenous Clustering By Sergei Shibaev
  3. Insurance Against Local Productivity Shocks: Evidence from Commuters in Mexico By Pérez-Cervantes Fernando
  4. The impact of cultural diversity on the German housing market By Bayar, Mehmet
  5. The Production Function for Housing: Evidence from France By Combes, Pierre-Philippe; Duranton, Gilles; Gobillon, Laurent
  6. Regional Concentration of Industry in China: decentralised choices or a central plan? By Stephen Sheppard; Dan Zhao
  7. 'The Resilience of UK Regional Employment Cycles' By Marianne Sensier; Michael Artis
  8. Opportunity to Move: Macroeconomic Effects of Relocation Subsidies By Parkhomenko, Andrii
  9. Optimal Economic Growth Through Capital Accumulation in a Spatially Heterogeneous Environment By Raouf Boucekkine; Giorgio Fabbri; Salvatore Federico

  1. By: KONDO Keisuke
    Abstract: This study explores why firms, on average, are more productive in larger cities. One major explanation is that the higher firm productivity in larger cities is the result of agglomeration economies. However, recent studies have proposed an alternative mechanism of selection; namely, tougher competition in larger cities forces less-productive firms to exit and, as a result, more-productive firms operate in such locations. To distinguish agglomeration economies from firm selection, this study applies a newly suggested quantile approach to the Japanese manufacturing sector. Overall, the empirical results show that agglomeration economies, rather than stronger selection in larger cities, better explain spatial productivity differences in the Japanese manufacturing sector. The findings also show that benefits from agglomeration economies in this sector have decreased as interregional accessibility has increased.
    Date: 2016–11
  2. By: Sergei Shibaev (Queen's University)
    Abstract: This paper develops a statistical model for measuring spatial interactions when estimating macroeconomic regimes and regime shifts. The model is applied to study the contagion and propagation of recessions in small regional economies in the United States from 1990 to 2015. The empirical analysis identifies two geographical concentrations (or clusters) where small regional economies were affected by recessions in similar ways. These clusters are interpreted as groups of regions that are potentially at-risk to collective economic distress, which is useful for national and regional policy makers. The first identified cluster is characterized by regional economies with important roles in the financial sector, while the second cluster is characterized by the oil and gas extraction sector. The empirical findings uncover an important propagation dynamic that would be overlooked if one were to apply the model without the spatial extension developed in this paper. Specifically, the evidence shows significant spatial spillovers between small regional economies, meaning that shocks to regions are expected to be higher, when shocks to neighboring regions are high on average. The magnitude of this effect is amplified for the period spanning and following the Great Recession.
    Keywords: Bayesian statistics, business cycles, endogenous clustering, regime-switching, regional economic analysis, spatial econometrics, time series econometrics
    JEL: C11 C31 C34 E32 R10
    Date: 2016–11
  3. By: Pérez-Cervantes Fernando
    Abstract: I slightly modify the model of Monte et al. (2015) to estimate how workers in Mexican municipalities choose the location of their workplace based on the income gains from commuting to another municipality. Estimates are in line with the intuition: Static estimates for both 2010 and 2015 suggest that those who commute earn an average 30 percent more than their non-commuting counterparts, and that commutes tend to be to municipalities located close to the place of residence. Comparing both years suggests that a reduction in local productivity both decreases the number of workers that come from other municipalities and increases the number of local residents that decide to work somewhere else, mitigating the negative effect of the reduction in local wages with higher earnings from the new work destinations. I find that some municipalities were not able to mitigate the negative productivity shocks on their income.
    Keywords: Commuting;Economic Geography;Mexico
    JEL: F1 R1 J6 O2
    Date: 2016–11
  4. By: Bayar, Mehmet
    Abstract: This paper documents a positive impact of cultural diversity and cultural similarity on rental prices of the German districts for the years between 2004 and 2013. On the one hand, an increase of the Herfindahl index as a measure for cultural diversity of 0.1 would increase rents by over 12 percent after controlling for relevant explanatory variables and city and time fixed effects. On the other hand, an increase in the share of foreign-born individuals is associated with a decrease in rents. These results suggest an economic impact that is an order of magnitude bigger than that found in labor markets. Consequently, cultural diversity can be considered as a city-specific consumption amenity. The positive impact of cultural diversity on the local housing market mirrors the fact that inhabitants are willing to pay higher rents in cities with a high level of diversity. Natives prefer to live in culturally diverse areas, but they avoid to reside in areas where the share of foreigners is too high. These findings show that amenity considerations play a role in residential location decisions.
    Abstract: Die vorliegende Studie identifiziert einen positiven Effekt der kulturellen Vielfalt und der kulturellen Nähe auf die Mietpreise der deutschen Kreise und kreisfreien Städte für die Jahre zwischen 2004 und 2013. Ein Anstieg des Herfindahl-Index, als Maß für die kulturelle Vielfalt, von 0,1 würde die Mieten um mehr als 12 Prozent erhöhen, wenn für relevante erklärende Variablen und unbeobachtete zeitinvariante Effekte kontrolliert wird. Auf der anderen Seite ist ein Anstieg des Ausländeranteils als homogene Gruppe mit einem Rückgang der Mieten verbunden. Diese Ergebnisse deuten auf eine ökonomische Auswirkung hin, die von der Größenordnung her von Effekten der Einwanderung auf den Arbeitsmärkten abweichen. Folglich kann die kulturelle Vielfalt als eine stadtspezifische Annehmlichkeit betrachtet werden. Die positive Auswirkung der kulturellen Vielfalt auf den lokalen Wohnungsmärkten spiegelt die Tatsache wider, dass die Bewohner bereit sind, höhere Mieten in Städten mit einem hohen Maß an Vielfalt zu zahlen. Die Einheimischen ziehen es vor, in kulturell diverzifizierten Gebieten zu leben, aber sie vermeiden, in Gebieten zu wohnen, in denen der Ausländeranteil zu hoch ist. Diese Ergebnisse zeigen, dass Annehmlichkeiten der Städte eine Rolle bei der Wohnortentscheidung spielen.
    Keywords: Housing market,immigration,cultural background,Germany
    JEL: F22 J61 R23
    Date: 2016
  5. By: Combes, Pierre-Philippe (GATE, University of Lyon); Duranton, Gilles (University of Pennsylvania); Gobillon, Laurent (Paris School of Economics)
    Abstract: We propose a new nonparametric approach to estimate the production function for housing. Our estimation treats output as a latent variable and relies on the first-order condition for profit maximisation with respect to non-land inputs by competitive house builders. For parcels of a given size, we compute housing by summing across the marginal products of non-land inputs. Differences in non-land inputs are caused by differences in land prices that reflect differences in the demand for housing across locations. We implement our methodology on newly-built single-family homes in France. We find that the production function for housing is reasonably well, though not perfectly, approximated by a Cobb-Douglas function and close to constant returns. After correcting for differences in user costs between land and non-land inputs and taking care of some estimation concerns, we estimate an elasticity of housing production with respect to non-land inputs of about 0.80.
    Keywords: housing, production function
    JEL: R14 R31 R32
    Date: 2016–11
  6. By: Stephen Sheppard (Williams College); Dan Zhao (Williams College)
    Abstract: The economic growth and development of China during the past 35 years has been associated with profound impacts on the well-being of the Chinese people, on patterns of global trade and prices of manufactured goods, and on industrial location within China itself. Many would view China’s government and its policies as the dominant, perhaps exclusive, force in determining location and concentration of Chinese industry. This raises the question: can a theoretical approach based on decentralised optimization and location choice provide insights concerning the ongoing changes in industrial concentration in China? We address this question, putting forward a simple model and testing it using Chinese data.
    Keywords: Industrial location, China, location quotient
    JEL: R12 R30 P25 O18
    Date: 2016–12
  7. By: Marianne Sensier; Michael Artis
    Abstract: This paper dates the classical business cycle of quarterly UK GDP, unemployment, aggregate and regional employment to assess turning points in the economic cycle. We analyse synchronisation of the regions with UK employment and investigate which regions lead into recession. We perform the McNemar Test on groups of regions and arrive at Northern and Southern regional clusters. We find that the northern regions have had a greater incidence of recession with southern regions suffering more severe recessions (in terms of total jobs lost). Finally we compare the resilience of the regional employment cycle to UK employment. This most resilient region to the 2008 recession was London from our Southern grouping and the least resilient has been the Northern Ireland in our northern grouping.
    Date: 2016
  8. By: Parkhomenko, Andrii
    Abstract: The unemployment insurance system in the U.S. does not provide incentives to look for jobs outside local labor markets. In this paper I introduce relocation subsidies as a supplement to unemployment benefits, and study their effects on unemployment, productivity and welfare. I build a job search model with heterogeneous workers and multiple locations, in which migration is impeded by moving expenses, cross-location search frictions, borrowing constraints, and utility costs. I calibrate the model to the U.S. economy, and then introduce a subsidy that reimburses a part of the moving expenses to the unemployed and is financed by labor income taxes. During the Great Recession, a relocation subsidy that pays half of the moving expenses would lower unemployment rate by 0.36 percentage points (or 4.8%) and increase productivity by 1%. Importantly, the subsidies cost nothing to the taxpayer: the additional spending on the subsidies is offset by the reduction in spending on unemployment benefits. Unemployment insurance which combines unemployment benefits with relocation subsidies appears to be more effective than the insurance based on the benefits only.
    Keywords: unemployment insurance, relocation subsidies and vouchers, local labor markets, moving costs, geographic mobility, internal migration
    JEL: E24 J61 J64 J65 R23
    Date: 2016–11–24
  9. By: Raouf Boucekkine (AMSE - Aix-Marseille School of Economics - CNRS - Centre National de la Recherche Scientifique - AMU - Aix Marseille Université - ECM - Ecole Centrale de Marseille - EHESS - École des hautes études en sciences sociales); Giorgio Fabbri (AMSE - Aix-Marseille School of Economics - CNRS - Centre National de la Recherche Scientifique - AMU - Aix Marseille Université - ECM - Ecole Centrale de Marseille - EHESS - École des hautes études en sciences sociales); Salvatore Federico (Università degli Studi di Siena, Dipartimento di Economia Politica e Statistica)
    Abstract: We design a general set-up for the study of a generic economy whose development process is entirely driven by the spatio-temporal dynamics of capital accumulation. It allows to take into account spatial heterogeneities in technological level and population distribution. We solve analytically, via dynamic programming in infinite dimensions, the optimal control problem associated to the model, finding explicitly the optimal feedback and the value function. The expression of the optimal dynamics of the system in terms of eigenfunctions of an appropriate Sturm-Liouville problem allows to simulate the behavior of the variables and, in particular, their optimal discounted long-run spatial distribution.
    Keywords: dynamical spatial model,growth,agglomeration,infinite dimensional optimal control problems,Sturm-Liouville theory
    Date: 2016–11

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