nep-geo New Economics Papers
on Economic Geography
Issue of 2017‒01‒15
fifteen papers chosen by
Andreas Koch
Institut für Angewandte Wirtschaftsforschung

  1. Early Urbanization and the Persistence of Regional Disparities within Countries By Areendam Chanda; Dachao Ruan
  2. Trade Costs and Income in European Regions: Evidence from a regional bilateral trade dataset By Fichet de Clairfontaine, Aurélien; Hammer, Christoph
  3. Transportation Cost and the Geography of Foreign Investment By Laura Alfaro; Maggie X. Chen
  4. The impact of broadband and other infrastructure on the location of new business establishments By McCoy, Daire; Lyons, Sean; Morgenroth, Edgar; Palcic, Donal; Allen, Leonie
  5. Research Funding and Regional Economies By Nathan Goldschlag; Stefano Bianchini; Julia Lane; Joseba Sanmartín Sola; Bruce Weinberg
  6. A comprehensive analysis of the wage curve in Brazil: Non-linearities, urban size, and the spatial dimension By Ana Barufi; Eduardo Haddad; Peter Nijkamp
  7. R&D networks and regional knowledge production in Europe. Evidence from a space-time model By Wanzenböck, Iris; Piribauer, Philipp
  8. Relatedness as driver behind regional diversification: a research agenda By Ron Boschma
  9. Structural Change and Income Distribution: Accounting for Regional Inequality in the People’s Republic of China and Its Changes during 1952–2012 By Wan, Guanghua; Wang, Chen; Zhang, Xun
  10. Computing functional urban areas using a hierarchical travel time approach By Moises Lenyn Obaco Alvarez; Vicente Royuela; Xavier Vítores
  11. Creative capital in production, inefficiency, and inequality: A theoretical analysis By Amit Batabyal; Peter Nijkamp
  12. When Buzz and Pipelines Fail By Christopher Esposito; David Rigby
  13. Local Public Service Provision and Spatial Inequality in Chinese Cities: By Weizeng Sun; Siqi Zheng; Yuming Fu
  14. The role of firms? location on persistency of various types of innovation By Charlie Karlsson; Sam Tavassoli
  15. Estonia in Global Value Chains By Ali-Yrkkö, Jyrki; Mattila, Juri; Seppälä, Timo

  1. By: Areendam Chanda; Dachao Ruan
    Abstract: We explore the extent to which present day economic development at the sub-national level captured by GDP per capita, urbanization, and night-time light density is correlated to regional economic development in 1850. Drawing on historical city data, we construct a measure of urban population density and other features of urbanization in 1850 for 2,055 sub-national regions covering 135 countries. We find strong evidence of persistence in regional development. In our baseline estimates, a one standard deviation increase in urban density in 1850 raises 2005 GDP per capita by almost 10%. Further, the presence of the largest national city in 1850 confers significant advantages to the region even 150 years later. While, our findings are robust to a large range of geographic and spatial controls, proximity to the coast and rivers continues to have a significant effect. We also find that while persistence is generally true there is also considerable heterogeneity across subsets of nations with it being strongest in Asia and West Europe. Finally, early urbanization is also associated with human capital and infrastructure differences across regions.
  2. By: Fichet de Clairfontaine, Aurélien; Hammer, Christoph
    Abstract: Using a New Economic Geography (NEG) model, this study estimates the relationship between regional per capita income and the market accessibility of regions. This accessibility cannot be observed directly, so it has to be constructed. We follow a two-step-procedure as suggested by Redding and Venables (2004) and use results of a gravity-type model to infer \real market potential". To this end, we make use of a novel dataset of bi-regional trade ows between (and within) 254 European NUTS-2 regions (for 26 European countries excluding Bulgaria and Romania) for the year 2010. In a second step we test the hypothesis that access to domestic as well as to large foreign markets increases factor incomes. We find evidence that supports this hypothesis on a regional level. This also holds when we control for other potential income determinants. In order for the estimates to be unbiased, we additionally take the spatial structure of the data into account. Our findings indicate that, although the specification derived from theory should be able to capture some spatial spillovers, additionally controlling for spatial autocorrelation in the residuals is necessary to fit the European data. (authors' abstract)
    Keywords: Wage equation; Gravity; European regions; New Economic Geography
    Date: 2016–02
  3. By: Laura Alfaro (Harvard Business School, Business, Government and the International Economy Unit); Maggie X. Chen (George Washington University)
    Abstract: Falling transportation costs and rapid technological progress in recent decades have precipitated an explosion of cross-border flows in goods, services, investments, and ideas led by multinational firms. Extensive research has sought to understand the geographic patterns of foreign direct investment (FDI). This chapter reviews existing theories and evidence specifically addressing questions including: How is FDI distributed across space? Why does the law of gravity apply? How do the costs of transporting goods, tasks, and technologies influence firms' decisions to separate tasks geographically and locate relative to one another? We discuss a variety of theoretical mechanisms through which transport cost and other geographic friction influence FDI and present the key empirical studies and findings.
    Date: 2017–01
  4. By: McCoy, Daire; Lyons, Sean; Morgenroth, Edgar; Palcic, Donal; Allen, Leonie
    Abstract: Can improving local infrastructure in underdeveloped areas encourage entrepreneurial activity? If so, which infrastructures and by how much? This paper analyses the impact on new business establishments of broadband infrastructure, motorways, airports and railways and a range of other local characteristics such as availability of human capital and access to third level educational facilities. The sample period spans the introduction and recent history of broadband in Ireland, and during this period 86% of the current motorway network was constructed. Human capital, measured as the percentage of the population with a third level qualification and proximity to a third level institution prove to be important determinants of new firm establishments. Availability of broadband infrastructure is significant, but its effects may be mediated by the presence of sufficiently high educational attainment in the area. Transport infrastructure access is significant for some sectors. For all sectoral groupings examined, firm establishments seem to favour a more diverse local sectoral mix rather than a concentrated one.
    Keywords: New business establishments,ICT,Infrastructure,Count panel regression model
    JEL: R3 R11 D22
    Date: 2016
  5. By: Nathan Goldschlag; Stefano Bianchini; Julia Lane; Joseba Sanmartín Sola; Bruce Weinberg
    Abstract: Public support of research typically relies on the notion that universities are engines of economic development and that university research is a primary driver of high wage localized economic activity. However, the evidence supporting that notion is based on aggregate descriptive data, rather than detailed links at the level of individual transactions. Here we use new micro-data from three countries—France, Spain and the United States—to examine one mechanism whereby such economic activity is generated, namely purchases from regional businesses. We show that grant funds are more likely to be expended at businesses physically closer to universities than at those farther away. In addition, if a vendor has been a supplier to a grant once, that vendor is subsequently more likely to be a vendor on the same or related grants. Firms behave in a way that is consistent with the notion that propinquity is good for business; if a firm supplies a research grant at a university in a given year, it is more likely to open an establishment near that university in subsequent years than other firms.
    JEL: O31 R1
    Date: 2017–01
  6. By: Ana Barufi; Eduardo Haddad; Peter Nijkamp
    Abstract: Agglomeration economies have a relevant impact on local labour markets. The interaction of workers and firms in dense urban areas may generate productivity advantages that result in higher wages. City size has an important impact on the relative bargaining power of workers and firms in the labour market. When analysing the relationship of local wages and the business cycle, wage flexibility, measured by the wage curve, is higher in informal sectors in less dense areas in Brazil. Therefore, large agglomerations are supposed to provide a higher bargaining power for workers, as they have further job opportunities. In addition, labour market dualism is an essential ingredient in the evaluation of the wage curve in developing economies. However, this type of analysis should be conducted in the adequate regional level (labour market areas), mking it possible to find a relevant impact of city size on the relative bargaining power of workers and firms.
    Keywords: wage curve; city size; labour market
    JEL: R23 J31 J46
    Date: 2016–12
  7. By: Wanzenböck, Iris; Piribauer, Philipp
    Abstract: In this paper we estimate space-time impacts of the embeddedness in R&D networks on regional knowledge production by means of a dynamic spatial panel data model with non-linear effects for a set of 229 European NUTS-2 regions in the period 1999-2009. Embeddedness refers to the positioning in networks where nodes represent regions that are linked by joint R&D endeavours in European Framework Programmes. We observe positive immediate impacts on regional knowledge production arising from increased embeddedness in EU funded R&D networks, in particular for regions with lower own knowledge endowments. However, long-term impacts of R&D network embeddedness are comparatively small.(authors' abstract)
    Keywords: R&D networks; European Framework Programme; regional knowledge production; dynamic spatial panel data model; space-time impacts
    Date: 2015–09
  8. By: Ron Boschma
    Abstract: The regional diversification literature claims that regions diversify in new activities related to their existing activities from which new activities draw on and combine local capabilities. The paper makes a critical assessment and identifies a number of crucial issues for future research. The paper calls for: (1) a disentanglement of the various types of capabilities that make regions diversify; (2) the inclusion of more geographical wisdom in the study of regional diversification, like a focus on the effects of territory-specific contexts (like institutions) and non-local relationships; (3) an investigation in the conditioning factors of related and unrelated diversification in regions; (4) a micro-perspective on regional diversification that assesses the role of economic and institutional agents in a multi-scalar perspective. Length:
    Date: 2017–01
  9. By: Wan, Guanghua (Asian Development Bank Institute); Wang, Chen (Asian Development Bank Institute); Zhang, Xun (Asian Development Bank Institute)
    Abstract: This study explores the relationship between inequality and structural transformation by constructing a theoretical model, developing analytical frameworks, and implementing a case study. The general equilibrium model we develop demonstrates that inequality exhibits an inverted U shape as structural change proceeds from onset to completion. Our analytical frameworks enable decomposition of total inequality into sector contributions and a change in total inequality into a component attributable to structural transformation and the other component to concentration or spatial agglomeration. Applying the decomposition frameworks to data from the People’s Republic of China yield various interesting findings and more importantly confirms the inverted U shape as predicted by our theoretical model.
    Keywords: Structural transformation; structural change; income distribution; income inequality; inequality decomposition; spatial agglomeration; macroeconomics; China; 不均等; 收入分配; 结构变化
    JEL: D63 O18 O53 R12
    Date: 2016–12–31
  10. By: Moises Lenyn Obaco Alvarez; Vicente Royuela; Xavier Vítores
    Abstract: We present a new approach to shape functional urban areas in terms of proximity. It uses travel time from urban cores to connect them and to determine its hinterland. It only needs information that nowadays it is available for most countries. In addition, we test this approach to a developing economy to show that it might be applied to the developing world. We compare it with commuting patterns, which is the common approach in literature. This might be a solution to identify functional areas in the developing world, where the characteristic is the lack of data to apply sophisticated methods. We also test internal migration and gravitational equation as proxies to define hinterland. We hope that this contribution helps to fill the gap at the time to work with developed and developing regions jointly, something impossible so far.
    Keywords: Integrated cities; Ecuador; FUAs; Travel time
    JEL: R12 R14 R52
    Date: 2016–12
  11. By: Amit Batabyal; Peter Nijkamp
    Abstract: We analyze inefficiency and inequality associated with the use of creative capital to produce a final good in a regional economy. Specifically, we first study a case in which the individual creative capital units are perfect substitutes in the production of the final good. We show that the equilibrium outcome is inefficient and that there is too little application of effort. Second, we define an indicator of inequality and show that an increase in inequality enhances efficiency and that it is, in principle, possible to achieve complete efficiency. Third, we focus on the case where the individual creative capital units are perfect complements and show that the equilibrium outcome is, once again, inefficient with too little effort application. Finally, we contend that our theoretical results provide a possible rationale for the observed income inequality in cities and regions in which the activities of the creative class constitute a large part of all economic activities.
    Keywords: Creative Capital; Inefficiency; Inequality
    JEL: R11 D20
    Date: 2016–12
  12. By: Christopher Esposito; David Rigby
    Abstract: Explanations for why some cities outperform others frequently rest on the assumed benefits of local and global interaction. Within the Òbuzz and pipelinesÓ literature, the costs and returns to interaction have rarely been examined in formal settings. In this paper we extend research on knowledge sharing by modeling local and global interactions between firms distributed across city-regions. Our simulation model develops an evolutionary framework where firms explore and exploit knowledge sets that are accumulated over time by recombining technologies held by local and non-local firms. Our results make two contributions to the existing literature. First, we show why too much local interaction can induce technological lock-in and restrict citiesÕ innovative growth. Second, we illustrate that non-local interaction entails opportunity costs that can outweigh its benefits. Together, the results unearth the conditions under which local and non-local interactions strengthen the economies of cities and when they fail to do so. Length:
    Keywords: regional economic growth, innovation, networks, computer simulation
    JEL: R11 D83
    Date: 2017–01
  13. By: Weizeng Sun; Siqi Zheng; Yuming Fu
    Abstract: We study spatial inequality in access to local public services between low-income and high-income households in Chinese cities. We examine the extent to which such inequality is exacerbated by residential sorting with respect to household income that makes neighborhoods with better access to scarce public-service resources more exclusive. Evidence based on cross-city regression analysis indicates increased spatial inequality due to income sorting where public-service resources are scarcer and income sorting is easier. Thus additional provision of public-service resources is found to benefit low-income households more than high-income households as a result of reduced spatial inequality. The housing supply conditions that facilitate income sorting are found to help the rich at the expanse of the poor in taking advantage of local public service resources.
    Keywords: Spatial inequality; income sorting; provision of local public services
    JEL: R14 R58
    Date: 2016–12
  14. By: Charlie Karlsson; Sam Tavassoli
    Abstract: This paper analyzes the role of regional characteristics on innovation persistency among firms. Using five waves of the Community Innovation Survey in Sweden, we have traced the innovative behavior of firms over a ten-year period, i.e. between 2002 and 2012. On the one hand, we distinguish between four types of innovations: process, product, marketing, and organizational innovations. On the other hand, we considered various regional characteristics including knowledge stock, market thickness, and extent of knowledge spillovers. Using a dynamic Probit model, we found that, in general, those firms located in the regions with higher stock of knowledge, thicker market, and higher extent of knowledge spillovers exhibit higher probability of being a persistent innovators. Such higher persistency is mostly pronounced for product innovators.
    Keywords: location; persistence; innovation; product innovations; process innovations; market innovations; organizational innovations; firms; Community Inno¬vation Survey
    JEL: D22 L20 O31 O32
    Date: 2016–12
  15. By: Ali-Yrkkö, Jyrki; Mattila, Juri; Seppälä, Timo
    Abstract: In this study, we analyse Estonia’s position in global value chains using World Input-Output Data and firm-level data. We find that 69% of Estonia’s total exports are intermediate goods and services, exceeding the EU average (65%). Two-thirds of Estonian imports are intermediates. Our findings suggest that Estonia is heavily involved in vertically and geographically fragmented production even though its most significant trading partners are its neighbouring countries. We also analyse the value chains of two significant companies operating in the Estonian economy along with their GDP contributions. According to our findings, the GDP contributions generated by the exports of these two companies vary significantly from one another. The euros generated from exports do not contribute equally to the national economy.
    Keywords: Global value chains, GVC, GDP, exports, gross domestic product, value added, Estonia, granular
    JEL: D22 F14 F6 F62 F68 L2
    Date: 2017–01–11

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