nep-geo New Economics Papers
on Economic Geography
Issue of 2017‒10‒22
six papers chosen by
Andreas Koch
Institut für Angewandte Wirtschaftsforschung

  1. What Drives Spatial Clusters of Entrepreneurship in China? Evidence from Economic Census Data By Zheng, Liang; Zhao, Zhong
  2. Local Secessions, Homophily, and Growth. A Model with some Evidence from the Regions of Abruzzo and Molise (Italy, 1963) By Dalmazzo, Alberto; de Blasio, Guido; Poy, Samuele
  3. Improving productivity in New Zealand's economy By Andrew Barker
  4. Transforming Indonesia: Structural change in a regional perspective 1968-2010 By Axelsson, Tobias; Palacio, Andrés
  5. Global Sourcing and Domestic Production Networks By Taiji Furusawa; Tomohiko Inui; Keiko Ito; Heiwai Tang
  6. What Are You Voting For? Proximity to Refugee Reception Centres and Voting in the 2016 Italian Constitutional Referendum By Bratti, Massimiliano; Deiana, Claudio; Havari, Enkelejda; Mazzarella, Gianluca; Meroni, Elena Claudia

  1. By: Zheng, Liang; Zhao, Zhong
    Abstract: Since Chinese government initiated economic reform in the late 1970s, entrepreneurship and private sectors have emerged gradually and played an increasingly important role in promoting economic growth. However, entrepreneurship is distributed unevenly in China. Using micro data from 2008 economic census and 2005 population census, this paper explains spatial clusters of entrepreneurship for both manufacturing and services. For both sectors, entrepreneurship (measured by new private firms) tends to emerge in places with more relevant upstream and downstream firms. Moreover, Chinitz's (1961) theories are also supported for manufacturing: small upstream and downstream firms seem to be more important for manufacturing entrepreneurship. For both sectors, entrepreneurship is positively related to city size, the share of young adults and the elderly population, and foreign direct investment. More migrants are also found to promote service entrepreneurship. Our paper is the first to consider both manufacturing and service entrepreneurship in China and should be of interest to both local and national policymakers who plan to encourage entrepreneurship.
    Keywords: New Firm Formation,Entrepreneurship,Marshallian Effect,Chinitz Effect,China
    JEL: L26 L60 L80 R10 R12
    Date: 2017
  2. By: Dalmazzo, Alberto; de Blasio, Guido; Poy, Samuele
    Abstract: This paper analyses the case of a local secession, i.e. the birth of a new local jurisdiction by separation from an existing one. We present a stylized model in which society is composed of heterogeneous groups and individuals have an homophily bias. The model predicts that: i) separations, such as the split of a territory into distinct administrative units, occur when the costs of mixed communities are sufficiently large; ii) the smaller community drives the decision to secede; iii) welfare gains from the split are associated with positive population growth; iv) higher payoffs under separations, however, might be related to taste for sameness only, with no (or even negative) effect on economic growth. Then, we bring the model to the data by exploiting the secession of the Italian region of Molise from Abruzzo, a unique event in Italian history, which took place in 1963. Historical records document that the split was the result of pressures from Molise, the smaller community. Our evidence suggests that the split was associated with population inflows in both areas. Finally, the main empirical findings, derived by using a synthetic control approach, show that the split caused significant benefits, in both regions, in terms of per-capita GDP growth.
    Keywords: local jurisdictions,secessions,regional growth
    JEL: H77 H10 R11 R12
    Date: 2017
  3. By: Andrew Barker
    Abstract: New Zealand ranks highly on most indicators of well-being, but incomes are below the OECD average due to low labour productivity. Low labour productivity is only partly explained by the industry composition of the NZ economy and is primarily a consequence of sustained low multi-factor productivity growth within industries, as well as weak investment. Economic geography is an important factor in New Zealand’s poor productivity performance, as the small size and remoteness of the economy diminish its access to global markets, the scale and efficiency of domestic businesses, the level of competition, and the ability to benefit from innovation at the global frontier. Policy and institutions are generally supportive of productivity growth, but there are a number of areas where there is scope for reforms that would help offset the country’s geographical disadvantages and improve the welfare of New Zealanders over the coming decades. This includes promoting international connections, removing barriers to fixed capital investment (including taxation), accessing benefits from agglomeration by improving urban planning and infrastructure provision, enhancing competition and increasing investment in innovation and intangibles. This Working Paper relates to the 2017 OECD Economic Survey of New Zealand ( y-new-zealand.htm).
    Keywords: competition, economic geography, foreign investment, housing, innovation, investment
    JEL: E22 F21 O24 O38 O43 O47 R31
    Date: 2017–10–11
  4. By: Axelsson, Tobias (Department of Economic History, Lund University); Palacio, Andrés (Department of Economic History, Lund University)
    Abstract: Since 1968, Indonesia has been among the few developing countries able to sustain per capita income growth over 5%. However, poverty and surplus labor are still main features of the economy. We ask to what extent the dual nature of growth has stimulated structural change, or just rewarded a particular sector or region. We find that the emblematic State support to agriculture has not untapped the potential growth in labour reallocation. Despite the income diversification within and outside agriculture, the linkages between sectors and regions remain weak. For catching up, the integration of the outer regions into the economy must still go through agriculture, investment in human capital, infrastructure, social policies and local capabilities.
    Keywords: agriculture; regional structural change; growth; stagnation; shrinking; Indonesia
    JEL: O47 R11
    Date: 2017–10–11
  5. By: Taiji Furusawa; Tomohiko Inui; Keiko Ito; Heiwai Tang
    Abstract: This paper studies how firms’ offshoring decisions shape a country’s domestic production net- works. We develop a model in which heterogeneous firms source inputs from multiple industries located in different domestic regions and foreign countries. Input sourcing entails communication with suppliers, which is endogenously increasing in the differentiation of inputs. The model predicts that firms are less likely to source differentiated inputs, especially from distant domestic and foreign suppliers, due to costly communication. Triggered by foreign countries’ export supply shocks, firms start offshoring inputs from foreign suppliers, which displace the less productive domestic suppliers in the same industry (the direct displacement effect). The resulting decline in marginal costs induces firms to start sourcing from the more productive and distant domestic suppliers within industries (the within-industry restructuring effect), but possibly also from nearby suppliers that produce inputs that are more differentiated than those supplied by existing suppliers (the industry composition effect). The net effect of offshoring on a firm’s domestic production networks depends on the relative strength of the three effects, which we verify using data for 4.5 million buyer-seller links in Japan. Based on a firm-level instrument, we find that after offshoring, firms are less likely to drop suppliers on average, but more so for the larger ones. They tend to add nearby suppliers producing differentiated inputs. These results suggest that firms.offshoring may increase the spatial concentration of domestic production networks.
    Keywords: production networks, global sourcing, offshoring, face-to-face communication, industry agglomeration
    JEL: D22 D85 F14 L10 L14 R12
    Date: 2017
  6. By: Bratti, Massimiliano (University of Milan); Deiana, Claudio (University of Essex); Havari, Enkelejda (European Commission, Joint Research Centre); Mazzarella, Gianluca (University of Padova); Meroni, Elena Claudia (European Commission, Joint Research Centre)
    Abstract: In December 2016, in the middle of the "European refugee crisis", the Italian electorate voted for a referendum on crucial constitutional reform promoted by the governing party. The official aims of the reform were both to improve the country's governability and stability and to simplify the institutional setup. Despite not strictly being a political vote, as in the case of Brexit, the referendum was largely perceived as an assessment of the Prime Minister's work and the activity of his government. Using Italian municipality data, we provide novel empirical evidence on the impact of geographical proximity to refugee reception centres on voting behaviour. Our analysis demonstrates that being closer to refugee centres increased (1) the referendum turnout and (2) the proportion of anti-government votes. This evidence is consistent with the fact that the main opposition parties exploited the anti-immigration sentiments that were mounting in the population to influence people's voting. It also casts doubts on the political choice to put key decisions, such as changes in the Constitution of the Italian Republic (or leaving the European Union, as in the case of Brexit), to the popular vote at times when there are significant political emergencies to be faced.
    Keywords: proximity, voting, refugee reception centres, referendum, Constitution, Italy
    JEL: P16 R23 D72
    Date: 2017–09

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