nep-geo New Economics Papers
on Economic Geography
Issue of 2017‒04‒02
fifteen papers chosen by
Andreas Koch
Institut für Angewandte Wirtschaftsforschung

  1. The pattern of structural change: testing the Product Space framework By Nicola Daniele Coniglio; Raffaele Lagravinese; Davide Vurchio; Massimo Armenise
  2. Agglomeration economies in Vietnam : a firm-level analysis By Gokan, Toshitaka; Kuroiwa, Ikuo; Nakajima, Kentaro
  3. Regional Growth Differences in China for 1995-2013: An Empirical Integrative Analysis of their Sources By Hongbo Wang; Dan Rickman
  4. Gauging two sides of regional economic resilience in Western Germany. Why resitance and recovery should not be lumped together By Franziska Pudelko; Christian Hundt
  5. Two Tales of Two U.S. States: Regional Fiscal Austerity and Economic Performance By Dan S. Rickman; Hongbo Wang
  6. Does ethnic segregation matter for spatial inequality? A cross-country analysis By Ezcurra, Roberto; Rodríguez-Pose, Andrés
  7. A New Measure of Inter-Industry Distance and Its Application to the U.S. Regional Growth By Yoon, Yeo Joon; Whang, Unjung
  8. Elastic Labor Supply and Agglomeration By Takanori Ago; Tadashi Morita; Takatoshi Tabuchi; Kazuhiro Yamamoto
  9. R&D cooperation within Italian technological districts: A microeconometric analysis By Otello Ardovino; Maria Rosaria Carillo; Luca Pennacchio
  10. Identifying Productivity Spillovers Using the Structure of Production Networks By Bazzi, Samuel; Chari, Amalavoyal V.; Nataraj, Shanthi; Rothenberg, Alexander D.
  11. The Workforce of Pioneer Plants By Ricardo Hausmann; Franke Neffke
  12. Growth Policy, Agglomeration and (the Lack of) Competition By Wyatt J. Brooks; Joseph Kaboski; Yao Amber Li
  13. Cities and Spatial Interactions in West Africa By Rafael Prieto Curiel; Philipp Heinrigs; Inhoi Heo
  14. Culture in local and regional development: A Mediterranean perspective on the culture/economy nexus By Benner, Maximilian
  15. “Computing Functional Urban Areas Using a Hierarchical Travel Time Approach: An Applied Case in Ecuador” By Moisés Obaco A; Vicente Royuela; Xavier Vítores

  1. By: Nicola Daniele Coniglio (Università degli Studi di Bari "Aldo Moro"); Raffaele Lagravinese (Università degli Studi di Bari "Aldo Moro”); Davide Vurchio (Università degli Studi di Bari "Aldo Moro"); Massimo Armenise (ISTAT)
    Abstract: The set of available local ‘capabilities’ determines what an economy produces today (its static comparative advantage) and, at the same time, defines the trajectories that the process of structural change may take in the future. The Product Space (PS) framework developed in recent seminal works by economists and physicists suggests that path dependence characterizes the evolution of the production basket (Hausmann and Klinger, 2007; Hidalgo et al. 2007). These authors represent economies as sets of productive capabilities that can be combined in different ways to produce different products. Countries progressively change their production baskets and move towards goods that require capabilities that are already available; on the contrary radical structural change rarely happens. In this paper, we analyse the evolution over time of the production baskets in 107 Italian provinces (NUTS 3) and perform the first test on the PS hypothesis of path dependence. We investigate whether new products entering the provincial production baskets are non-randomly related to initial production baskets. We confirm the general tendency of path dependence, but highlight at the same time that a sizable share of ‘new products’ are an exception to this general pattern. These ‘random entries’ over the PS are particularly interesting for industrial policy since they represent radical deviations from the initial comparative advantage. In the final part of the paper, we investigate using parametric analysis the product and provincial characteristics that determine these deviations from the PS pattern.
    Keywords: product space; structural change; trade specialisation, Italy
    JEL: F1 R3 R11 R13
    Date: 2017–03
  2. By: Gokan, Toshitaka; Kuroiwa, Ikuo; Nakajima, Kentaro
    Abstract: This paper examines the effects of agglomeration economies on firm†level productivity in Vietnam. By using Vietnamese firm†level data and the cluster detection method proposed by Mori and Smith (2013), we estimate the agglomeration economies for firm†level productivity. Specifically, we consider the different effects of agglomeration economies for localization and urbanization, as well as across types of firms; state†owned, private, and foreign†owned firms. Furthermore, we decompose the agglomeration economies into the three sources of the effect; inter†industry transaction relationships, knowledge spillovers, and labor pooling. We find the following results. First, localization economies actually improve firm†level productivity in Vietnam, with firms in the clustered areas having higher productivities. However, the localization economies do not improve the productivity of the state†owned firms. Second, urbanization economies improve productivity only for foreign†owned firms. State†owned and private firms do not benefit from urbanization economies. From the decomposition of agglomeration economies, we find that agglomeration economies formed through transactions work only for private firms. On the other hand, agglomeration economies formed through knowledge spillovers and labor pooling work for foreign†owned firms.
    Keywords: Local economy, Economic conditions, Economic geography, Productivity, Agglomeration Economies, Economic Geography
    JEL: R12
    Date: 2017–03
  3. By: Hongbo Wang (Oklahoma State University); Dan Rickman (Oklahoma State University)
    Abstract: An integrative analysis of several regional economic outcome variables in China for the period of 1995-2013 reveal the major sources of regional growth differences in China. Patterns of growth in population, per capita income, gross regional product, housing prices and changes in unemployment rates are identified using principal components analysis. Regression analysis of principal component scores is applied to identify geographic patterns in the sources of the growth. The analysis suggests that shifts in labor supply largely were responsible for the regional growth differences over the period, though shifts in labor demand were nearly equally as important. The results have implications for evaluating the success of regional development policies such as the Western Development Strategy.
    Keywords: China, Regional growth, Western Development Strategy
    JEL: R11 R12 R23 R58
    Date: 2017–03
  4. By: Franziska Pudelko (Department of Geography, Philipps University Marburg); Christian Hundt (Department of Geography, Ruhr University Bochum)
    Abstract: The paper empirically investigates the economic resilience of Western German regions in the wake of the Great Recession of 2008/2009. In particular, the focus is laid on the influence of regional agglomeration economies (arising from specialization, related and unrelated variety) and the explicit sudivision of short-term resilience into resistance and recovery. The necessity to distinguish between different factors and phases is well documented by means of the OLS regression results as all three types of agglomeration economies reveal varying, if not opposing directions of influences across the resistance and recovery phase. A pregnant example refers to regional specialization. Not only does it show a negative impact on resistance while exerting a positive influence during the recovery phase, but it is also mediated by the regional share in manufacturing workforce. This workforce reveals opposing phase-specific facts itself. hence, ignoring the two-component structure of short-term resilience entails the risk of imprecise, if not false conclusions on the driving mechanisms stabilizing and/or destabilizing regional economies in times of crisis.
    Keywords: regional economic resilience, resistance, recovery, agglomeration economies, industry structure
    JEL: R11 R12 E32
    Date: 2017–03
  5. By: Dan S. Rickman (Oklahoma State University); Hongbo Wang (Oklahoma State University)
    Abstract: The recent fiscal austerity experiments undertaken in the states of Kansas and Wisconsin have generated considerable policy interest. Using a variety of identification approaches within a difference-in-differences framework and examining a wide range of economic indicators, this paper assesses whether the experiments have spurred growth in the states as promised by the governors and legislatures which enacted them into law. The overall conclusion from the paper is that the fiscal experiments did not spur growth, and if anything, harmed state economic performance. Among the identification approaches used, the Synthetic Control Method (Abadie and Gardeazabal 2003; Abadie et al., 2010) is demonstrated to provide the most compelling evidence.
    Keywords: Fiscal austerity; State taxes; Synthetic Control Method
    JEL: H71 R12 R23
    Date: 2017–03
  6. By: Ezcurra, Roberto; Rodríguez-Pose, Andrés
    Abstract: The paper examines the link between ethnic segregation and spatial inequality in 71 countries with different levels of economic development. The results reveal that ethnic segregation is associated with significantly higher levels of spatial inequality. This finding is not affected by the inclusion of various covariates that may influence both spatial inequality and the geographical distribution of ethnic groups, and is confirmed by a number of robustness tests. The results also suggest that political decentralization and the quality of government could act as transmission channels linking ethnic segregation and spatial inequality.
    Keywords: ethnic segregration; spatial inequality
    JEL: J15 O11 O18 R11
    Date: 2017–03
  7. By: Yoon, Yeo Joon (Korea Institute for International Economic Policy); Whang, Unjung (Korea Institute for International Economic Policy)
    Abstract: We propose a new measure of inter-industry 'distance'. This is constructed a la Antras et al. (2012). While they measure the distance of an industry from its final use - what they call 'downstreamness' of an industry - we measure the distance between a pair of industries. Our proposed index is a measure of input-output linkages between industries that incorporates a 'distance' flavor. Our measure distinguishes the number of vertical production stages that an industry's product goes through until it is finally used by another industry by assigning larger weights to the value of input use with longer production chains. Hence our measure contains more information on the relation between two industries along the vertical production chain. We use this index to construct an aggregate measure of 'industry connectedness' of regions in the U.S. It measures the degree of industrial linkages of a region. We then empirically establish that each region's labor productivity is positively associated with the 'industry connectedness'. The result contributes to the large literature of agglomeration economies that the industrial linkage is one of the main sources of agglomeration economies and productivity growth, as emphasized by Marshall (1920). It also suggests that our index can serve as an alternative measure of the industrial linkages.
    Keywords: Inter-industry Distance; Regional Growth; Input-Output Linkages
    JEL: F43 F63 O11
    Date: 2016–12–30
  8. By: Takanori Ago (ySchool of Commerce, Senshu University); Tadashi Morita (Faculty of Economics, Kindai University); Takatoshi Tabuchi (Faculty of Economics, University of Tokyo); Kazuhiro Yamamoto (Graduate School of Economics, Osaka University)
    Abstract: This study analyzes the interplay between the agglomeration of economic activities and interregional diverences in working hours, which are typically longer in large cities, as they are normally more developed than small cities. For this purpose, we develop a two-region model with endogenous labor supply. Although we assume a symmetric distribution of immobile workers, the symmetric equilibrium breaks in the sense that firms may agglomerate when trade costs are intermediate and labor supply is elastic. We also show that the price index is always lower, while labor supply, per capita income, real wages, and welfare are always higher in the more agglomerated region.
    Keywords: elastic labor supply; agglomeration; symmetry break
    JEL: R23 F16
    Date: 2017–03
  9. By: Otello Ardovino; Maria Rosaria Carillo; Luca Pennacchio (-)
    Abstract: The purpose of this paper is to investigate the determinants of inter-firm R&D collaborations in a particular type of innovation network, the technological districts created in Italy under a specific public policy to foster innovation and economic development at the local level. Using an original database containing information on the collaborative research projects activated by the districts, we find that the structural characteristics of the individual districts play an important role upon firms’ collaboration choices: the probability of cooperating is higher in districts in which universities have a major weight and in districts with governance more oriented towards market logic. As regards the governance, the estimates also reveal a strong moderating effect on other important determinants of R&D cooperation, such as geographical proximity and absorptive capacity.
    Keywords: : R&D cooperation, innovation networks, firm behaviour, dyadic regession model
    JEL: L14 O31 O32
    Date: 2016–09–05
  10. By: Bazzi, Samuel; Chari, Amalavoyal V.; Nataraj, Shanthi; Rothenberg, Alexander D.
    Abstract: Despite the importance of agglomeration externalities in theoretical work, evidence for their nature, scale, and scope remains elusive, particularly in developing countries. Identification of productivity spillovers between firms is a challenging task, and estimation typically requires, at a minimum, panel data, which are often not available in developing country contexts. In this paper, we develop a novel identification strategy that uses information on the network structure of producer relationships to provide estimates of the size of productivity spillovers. Our strategy builds on that proposed by Bramoulle et al. (2009) for estimating peer effects, and is one of the first applications of this idea to the estimation of productivity spillovers. We improve upon the network structure identification strategy by using panel data and validate it with exchange-rate induced trade shocks that provide additional identifying variation. We apply this strategy to a long panel dataset of manufacturers in Indonesia to provide new estimates of the scale and size of productivity spillovers. Our results suggest positive productivity spillovers between manufacturers in Indonesia, but estimates of TFP spillovers are considerably smaller than similar estimates based on firm-level data from the U.S. and Europe, and they are only observed in a few industries.
    Date: 2017–02
  11. By: Ricardo Hausmann (Center for International Development at Harvard University); Franke Neffke (Center for International Development at Harvard University)
    Abstract: Is labor mobility important in technological diffusion? We address this question by asking how plants assemble their workforce if they are industry pioneers in a location. By definition, these plants cannot hire local workers with industry experience. Using German social-security data, we find that such plants recruit workers from related industries from more distant regions and local workers from less-related industries. We also show that pioneers leverage a low-cost advantage in unskilled labor to compete with plants that are located in areas where the industry is more prevalent. Finally, whereas research on German reunification has often focused on the effects of east-west migration, we show that the opposite migration facilitated the industrial diversification of eastern Germany by giving access to experienced workers from western Germany.
    Date: 2016–01
  12. By: Wyatt J. Brooks (University of Notre Dame); Joseph Kaboski (University of Notre Dame); Yao Amber Li (Hong Kong University of Science and Technology)
    Abstract: Industrial clusters are promoted by policy and generally viewed as good for growth and development, but both clusters and policies may also enable non- competitive behavior. This paper studies the presence of non-competitive pricing in geographic industrial clusters. We develop, validate, and apply a novel test for collusive behavior. We derive the test from the solution to a partial cartel of perfectly colluding firms in an industry. Outside of a cartel, a firm’s markup depends on its market share, but in the cartel, markups across firms converge and depend instead on the total market share of the cartel. Empirically, we validate the test using plants with common owners, and then test for collusion using data from Chinese manufacturing firms (1999-2009). We find strong evidence for non-competitive pricing within a subset of industrial clusters, and we find the level of non-competitive pricing is about four times higher in Chinese special economic zones than outside those zones.
    JEL: L11 O10 O25 R11
    Date: 2017–03
  13. By: Rafael Prieto Curiel (University College London); Philipp Heinrigs (Sahel and West Africa Club); Inhoi Heo (Sahel and West Africa Club)
    Abstract: Over the past 60 years, urbanisation and cities have fundamentally transformed the social, economic and political geography of West Africa. The number of people living in cities increased from 5 million in 1950 to 133 million in 2010. During the same period, the number of towns and cities with more than 10 000 inhabitants grew from 159 to close to 2 000. A large majority of these agglomerations are secondary cities and small towns that act as hubs and catalysts for local and regional production and supply chains, as well as for the transfer of goods, people and information, linking the local and regional economies to the global economy. The intensity of the spatial interactions of cities has strongly increased with population growth, urbanisation and higher urban density. This paper, part of ongoing work within the Sahel and West Africa Club Secretariat to integrate urbanisation and city growth into analyses of major trends in the region, lays the foundation for the development of a systematic method to capture and describe these spatial interactions. It does so by examining four variables: city size, market potential, urbanisation level and local dominance. These variables, in turn, help to define seven different city groups that can be used to classify West African agglomerations. The initial results of this work reveal the diversity and distinctive behaviours of cities in the region, providing a new perspective on urbanisation dynamics and the influence of spatial variables on urban growth rates, the emergence of new agglomerations and the clustering of cities.
    Keywords: mega cities, metropolitan areas, secondary towns, urbanisation
    JEL: C31 C38 J11 R12 R58
    Date: 2017–03–31
  14. By: Benner, Maximilian
    Abstract: This policy paper discusses the direct and indirect role of culture as a driver of local and regional development. It identifies the interactions between local framework conditions, culture, creative industries, culturally relevant products and local development, and discusses the systemic role of culture in translating local framework conditions such as diversity, creativity and experimentation into local or regional development impacts such as economic growth and employment. Case studies from two Mediterranean countries, Cyprus and Israel, illustrate the link between culture and local development. In the final part of the paper, conclusions for local and regional policy are drawn and key recommendations are presented with a particular focus on Mediterranean countries.
    Keywords: culture; creative industries; local development; regional development; Mediterranean countries; Cyprus; Israel
    JEL: O31 O34 O35 O38 O43 R58
    Date: 2017–03–21
  15. By: Moisés Obaco A (AQR-IREA, University of Barcelona); Vicente Royuela (AQR-IREA, University of Barcelona); Xavier Vítores (Independent Statistical Researcher)
    Abstract: Identifying integrated urban areas is an important issue for urban analysis and policy evaluation. In this paper, we extend the OECD’s methodology to identify Functional Urban Areas to countries where there is not commuting data. We do so substituting such socioeconomic flows by available information on road structure, which allow us to work with accessibility based on travel time. The main advantage of our procedure is its applicability to most countries in the world, as it only uses GIS data. In this paper we apply the procedure two border countries: Colombia, which has a recent census with commuting data, to calibrate our approach, and Ecuador, where there is not commuting census. We perform several sensitivity analysis and robustness checks to Ecuador with alternative sources of socioeconomic flows.
    Keywords: Functional Urban Areas. GIS data. Ecuador. Colombia. Travel time. JEL classification: R12, R14, R52.
    Date: 2017–03

This nep-geo issue is ©2017 by Andreas Koch. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.