nep-geo New Economics Papers
on Economic Geography
Issue of 2017‒03‒05
thirteen papers chosen by
Andreas Koch
Institut für Angewandte Wirtschaftsforschung

  1. The empirics of agglomeration economies: the link with productivity By Ana Gouveia; Sílvia Santos; Marli Fernandes
  2. The changing distribution of firms and workers across cities By Diego Puga
  3. Geography and Media – Does a Local Editorial Office Increase the Consumption of Local News? By Kekezi, Orsa; Mellander, Charlotta
  4. Bankruptcy Spillovers By Shai Bernstein; Emanuele Colonnelli; Xavier Giroud; Benjamin Iverson
  5. Identifying the effects of place-based policies – Evidence from Germany By Titze, Mirko; Dettmann, Eva; Brachert, Matthias
  6. A critical review of entrepreneurial ecosystems research: towards a future research agenda By Borissenko, Janna; Boschma, Ron
  7. The Geography of the Global Super-Rich By Florida, Richard; Mellander, Charlotta
  8. Ready for Take-off? - The Economic Effects of Regional Airport Expansion By Breidenbach, Philipp
  9. Optimal Spatial Taxation: Are Big Cities too Small? By Jan Eeckhout; Nezih Guner
  10. Government and Governance of Regional Triple Helix Interactions By Danson, Michael; Todeva, Emanuela
  11. First, Second and Third Tier Universities: Academic Excellence, Local Knowledge Spillovers and Innovation in Europe By Cristian Barra; Ornella Wanda Maietta; Roberto Zotti
  12. When Regional Policies Fail: An Evaluation of Indonesia's Integrated Economic Development Zones By Rothenberg, Alexander D.; Bazzi, Samuel; Nataraj, Shanthi; Chari, Amalavoyal V.
  13. Human Capital Sorting: The ‘When’ and ‘Who’ of Sorting of Talents to Urban Regions By Ahlin, Lina; Andersson, Martin; Thulin, Per

  1. By: Ana Gouveia (GPEARI - Research and Economic Policy Division); Sílvia Santos; Marli Fernandes
    Abstract: There is a large branch of literature providing empirical evidence on the positive effects of agglomeration economies on productivity. However, for policy makers it is important to understand the role of agglomeration economies at a more micro level, disentangling the effects across industries, firm-level characteristics and time. The present survey reviews this literature, outlining the econometric approaches and methodological challenges. In general, results show that the magnitude of agglomeration economies differ substantially across industries and point to the presence of non-linear effects, also depending on the industry and product life cycles. The channels through which these effects operate may also differ – resulting from specialization externalities (within industries in the same region) and/or urbanisation externalities (across industries in the same region). Overall, the evidence reviewed in this survey highlights the need for policy makers to follow tailor-made approaches and to complement existing evidence with national level studies, maximizing potential productivity gains.
    Keywords: Agglomeration economies, Specialization externalities, Urbanization externalities, Productivity
    JEL: R1 O3 L6 D24
    Date: 2017–02
  2. By: Diego Puga (CEMFI and CEPR)
    Abstract: This paper explores the changing distribution of firms and workers across cities. Cities have become increasingly specialized by function rather than sector, with business services, management and innovation concentrating in large urban areas and manufacturing dispersing across smaller cities instead. Big cities attract more educated workers, but the main factor distinguishing big cities is not so much who goes there but what happens to them as a result: locating in a big city allows firms to become more productive and workers to increase their earnings. And yet, as cities have become more different, they have also become more interdependent with important life-cycle patterns emerging. Many new firms and products start up in big diverse cities but eventually relocate, making up space for the next generation of new firms and products. Workers are often willing to pay the higher living cost of bigger cities not just to get higher wages today, but in the hope of learning and acquiring skills that, depending on their own characteristics and luck, they may exploit there or somewhere else.
    Keywords: cities, heterogeneity
    JEL: R14
    Date: 2017–02–21
  3. By: Kekezi, Orsa (Jönköping International Business School (JIBS)); Mellander, Charlotta (Jönköping International Business School (JIBS))
    Abstract: Urbanization and new digital technologies have significantly altered the news media industry. One major change is the disappearance of local editorial offices in many regions. This paper examines if there is a relation between access to local media in terms of editorial offices and journalists, and the likelihood of the public consuming local news. The study builds on fine level data for Sweden in 2006 and in 2013, allowing for a comparison of trends. Our results suggest that the existence of an editorial office in the municipality is not significantly related to the consumption of local newspapers but that accessibility to employed journalists who live in the municipality is.
    Keywords: urbanization; digitization; editorial offices; journalist location; local media access; media consumption
    JEL: O33 R22 R23
    Date: 2017–02–23
  4. By: Shai Bernstein; Emanuele Colonnelli; Xavier Giroud; Benjamin Iverson
    Abstract: How do different bankruptcy approaches a affect the local economy? Using U.S. Census microdata at the establishment level, we explore the spillover effects of reorganization and liquidation on geographically proximate firms. We exploit the random assignment of bankruptcy judges as a source of exogenous variation in the probability of liquidation. We find that within a five year period, employment declines substantially in the immediate neighborhood of the liquidated establishments, relative to reorganized establishments. Most of the decline is due to lower growth of existing establishments and, to a lesser extent, reduced entry into the area. The spillover effects are highly localized and concentrate in the non-tradable and service sectors, particularly when the bankrupt firm operates in the same sector. These results suggest that liquidation leads to a reduction in consumer traffic to the local area and to a decline in knowledge spillovers between firms. The evidence is inconsistent with the notion that liquidation leads to creative destruction, as the removal of bankrupt businesses does not lead to increased entry nor the revitalization of the area.
    Date: 2017–01
  5. By: Titze, Mirko; Dettmann, Eva; Brachert, Matthias
    Abstract: The German government provides discretionary investment grants to structural weak regions to allow them to overcome disadvantages. The legislatives of the European Union (EU) however restrict the number of supported regions: The share of population in assisted regions is not allowed to exceed an arbitrarily defined threshold. We use a regression-discontinuity design that exploits a discrete jump in the probability to receive investment grants. Thus, we identify causal effects of the investment grant treatment on area level economic outcomes. We find positive effects for regional gross value added and productivity growth but no effects for employment and gross wages growth.
    JEL: Z00 A11 D61
    Date: 2016
  6. By: Borissenko, Janna (CIRCLE, Lund University); Boschma, Ron (CIRCLE, Lund University)
    Abstract: The Entrepreneurial Ecosystem (EE) literature has attracted much attention, especially in policy circles. However, the concept suffers from a number of shortcomings: (1) it lacks a clear analytical framework that makes explicit what is cause and what is effect in an entrepreneurial ecosystem; (2) while being a systemic concept, the EE has not yet fully exploited insights from network theory, and it is not always clear in what way the proposed elements are connected in an entrepreneurial ecosystem; (3) it remains a challenge what institutions (and at what spatial scale) impact on the structure and performance of EE; (4) studies have often focused on the EE in single regions or clusters, but lack a comparative and multi-scalar perspective; (5) the EE literature tends to provide a static framework taking a snapshot of EE without considering systematically their evolution over time. For each of these shortcomings, we make a number of suggestions to take up in future research on EE.
    Keywords: Entrepreneurial ecosystem; Entrepreneurial system; Networks; Entrepreneurship; Clusters
    JEL: L26 M21 O33
    Date: 2017–02–23
  7. By: Florida, Richard (University of Toronto & New York University); Mellander, Charlotta (Jönköping University & Centre of Excellence for Science and Innovation Studies (CESIS))
    Abstract: Over the past decade or so, there has been increasing concern over rising inequality and the growth of the 1 percent of super-rich people who sit atop the global economy. While studies have charted the super-rich by industry and nation, there is very little research on their location by city or metro area. Our research uses detailed data from Forbes (2015) on the world’s billionaires to test a series of hypotheses about the location of the super-rich across the world’s cities and metro areas. We find that the super-rich are concentrated in a small number of metros around the world and that their location is primarily related to the size of metros: Large metros offer more people bigger markets, more diversified industries and more opportunity that help produce and attract billionaires. The location of the super-rich is more modestly associated with living standards (measured as economic output per capita) and less so with the presence of finance and tech industries, and city competitiveness. Their location is not related to quality of life, which is somewhat surprising in light of the level of mobility the super-rich enjoy, as well as research that finds that affluent and talented people are attracted to higher quality, higher amenity places.
    Keywords: Super-rich; billionaires; 1 percent; geography; size; quality of life; competitiveness; spatial division of labor
    JEL: O15 R12
    Date: 2017–03–01
  8. By: Breidenbach, Philipp
    Abstract: This paper analyzes whether the expansion of regional airports in Germany caused positive spillover effects on the surrounding economies, exploiting the deregulation of the European aviation market as a quasi-experiment. Such potential spillovers are often used as an argument for the substantial annual subsidies to airports. Previous evaluations often suffer from the problem of reverse causality, since Investment decisions are based on the economic conditions of the region. By contrast, the aviation deregulation under the Single European Market-initiative provides an exogenous incentive for investing in the expansion of existing regional airports. A difference in- differences approach is used to estimate the causal effects of this expansion on regional growth. The results are sobering, though, as there is no evidence for any positive spillover effects.
    JEL: R51 R42 H54
    Date: 2016
  9. By: Jan Eeckhout (UCL and Barcelona GSE-UPF-ICREA); Nezih Guner (CEMFI, Centro de Estudios Monetarios y Financieros)
    Abstract: We analyze the role of optimal income taxation across different local labor markets. Should labor in large cities be taxed differently than in small cities? We find that a planner who needs to raise a given level of revenue and is constrained by free mobility of labor across cities does not choose equal taxes for cities of different sizes. The optimal tax schedule is location specific and tax differences between large and small cities depends on the level of government spending, the concentration of housing wealth and the strength of agglomeration economies. Our estimates for the US imply higher optimal marginal rates in big cities than in small cities. Under the current Federal Income tax code with progressive taxes, marginal rates are already higher in big cities which have higher wages, but the optimal difference we estimate is lower than what is currently observed. Simulating the US economy under the optimal tax schedule, there are large effects on population mobility: the fraction of population in the 5 largest cities grows by 7.6% with 3.4% of the country-wide population moving to bigger cities. The welfare gains however are smaller. This is due to the fact that much of the output gains are spent on the increased costs of housing construction in bigger cities. Aggregate goods consumption goes up by 1.51% while aggregate housing consumption goes down by 1.70%.
    Keywords: Misallocation, taxation, population mobility, city size, general equilibrium.
    JEL: H21 J61 R12 R13
    Date: 2017–01
  10. By: Danson, Michael; Todeva, Emanuela
    Abstract: This conceptual paper contributes to the discussion on the role of regional government and regional triple helix constellations driving economic development and growth within regional boundaries. We investigate the impact of regionalism and subsidiarity on regional triple helix constellations and the questions of governmentality, governance and institutional development at regional level. We put emphasis on the fact that the position of regional authorities in the structure of government and policy boundaries are best implemented at a regional level (the principles of regionalism and subsidiarity), and that localised policy practices represent a more precise view on the government-industry-university interactions (the principle of governmentality). We look at the regional triple helix context as a prerequisite for stakeholder engagement, enhancing innovation capabilities and entrepreneurial behaviour. The paper identifies the drivers behind regional competitiveness and economic development, and investigates the positive externalities from strong triple helix constellations, as well as the impact of government support and institutionalised cooperation on value creation and value capture at the level of the locale. The paper offers a stylized model (Fig. 1) of the conditions for value creation and value capture and offers a critical overview of the debates around the rationale for regional governments. Examples are drawn from Scotland, England and some comparable parts of Europe.
    Keywords: regional development agencies; triple helix; regional governance; public policy; regional economic development
    JEL: H7 L0
    Date: 2016
  11. By: Cristian Barra (Università di Salerno); Ornella Wanda Maietta (Università di Napoli Federico II and CSEF); Roberto Zotti (Università di Salerno)
    Abstract: This paper aims to study the drivers of innovation and of university-industry collaboration in the European manufacturing sector, specifically focusing on the extent to which academic excellence may enhance the capacity of firms to develop new products and processes. It shows that academic research has an important direct impact on the firm’s propensity to develop innovation, apart from the indirect effect of academic excellence on partner choice in university-industry R&D collaboration. The results also suggest that the research at lower tier universities has an impact on business innovation and that there is a strong case in favour of public funding also to less prestigious academic institutions.
    Keywords: University–industry interaction; R&D collaboration; Product and process innovation; Academic research quality; University education
    JEL: O3 I23 D22 R1
    Date: 2017–02–25
  12. By: Rothenberg, Alexander D.; Bazzi, Samuel; Nataraj, Shanthi; Chari, Amalavoyal V.
    Abstract: Throughout the developing world, many countries have created special economic zones to attract investment and spur industrial growth. In some cases, these zones are designed to promote development in poorer regions with limited market access and lower quality infrastructure, an example of a "big push" development strategy. In this paper, we study the effects of Indonesia's Integrated Economic Development Zone (KAPET) program. This program provided substantial tax-breaks for firms that locate in certain districts in the Outer Islands of Indonesia, a country with large regional differences in per-capita income and a history of policies to promote inclusive growth. We find that along many dimensions, KAPET districts experienced no better development outcomes, and in some cases fared even worse, than their non-treated counterparts. If anything, the strongest finding is that firms in KAPET districts paid lower taxes, but these tax reductions neither encouraged greater firm entry, increased migration, nor raised local measures of output or welfare. Overall, the KAPET program does not appear to have achieved the intended outcome of promoting growth in lagging regions. While there are many possible reasons that the KAPET program failed, our findings suggest caution in spending scarce resources to subsidize development in lagging regions.
    JEL: R12 R32 O14
    Date: 2017–02
  13. By: Ahlin, Lina (CIRCLE); Andersson, Martin (Department of Industrial Economics); Thulin, Per (KTH Royal Institute of Technology)
    Abstract: Sorting of high-ability workers is a main source of urban-rural disparities in economic outcomes. Less is known about when such human capital sorting occurs and who it involves. Using data on 15 cohorts of university graduates in Sweden, we demonstrate significant sorting to urban regions on high school grades and education levels of parents, i.e. two attributes typically associated with latent abilities that are valued in the labor market. A large part of this sorting occurs already in the decision of where to study, because top universities are predominantly located in urban regions. Estimates from a selection model show that even after controlling for sorting prior to labor market entry, the ‘best and brightest’ are still more likely to start working in urban regions, and are also more likely to remain there over long time periods. We conclude that a) urban regions are true magnets for high-ability graduates, and that b) studies of human capital sorting need to account for selection processes to and from universities, because neglecting mobility prior to labor market entry is likely to lead to underestimation of the extent of sorting to urban regions.
    Keywords: Human capital; University graduates; Spatial sorting; Migration; Labor mobility; Ability; Geography of talent; Spatial selection
    JEL: I23 J24 J61 R12
    Date: 2017–02–23

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