nep-geo New Economics Papers
on Economic Geography
Issue of 2018‒01‒29
twenty-one papers chosen by
Andreas Koch
Institut für Angewandte Wirtschaftsforschung

  1. Change in urban concentration and economic growth By Frick, Susanne A.; Rodríguez-Pose, Andrés
  2. Alonso and the scaling of urban profiles By DELLOYE, Justin,; LEMOY, Rémi,; CARUSO, Geoffrey,
  3. Shooting Low or High: Do Countries Benefit from Entering Unrelated Activities? By Flavio Pinheiro; Aamena Alshamsi; Dominik Hartmann; Ron Boschma; Cesar Hidalgo
  4. The subsidiarity principle: Turning challenge-oriented innovation policy on its head By Iris Wanzenböck; Koen Frenken
  5. Spatial Patterns of Development: A Meso Approach By Michalopoulos, Stelios; Papaioannou, Elias
  6. The revenge of the places that don?t matter (and what to do about it) By Andres Rodriguez-Pose
  7. Knowledge Interactions in Regional Innovation Networks: Comparing Data Sources By Michael Fritsch; Mirko Titze; Matthias Piontek
  8. Migration restrictions and long-term regional development: evidence from large-scale expulsions of Germans after World War II By Michael Wyrwich
  9. Regional Knowledge, Entrepreneurial Culture and Innovative Start-ups over Time and Space - An Empirical Investigation By Michael Fritsch; Michael Wyrwich
  10. Does the law of one price hold for hedonic prices? By Waights, Sevrin
  11. Churning in thick labor markets. Evidence of heterogeneous responses along the skill and experience gradients By Stefan Leknes
  12. A three dimensional approach to regional Smart Specialization Strategy; An application to Puglia Region By Fiore, Annamaria
  13. The Roles of Increasing Inequality and Divergent Urban Development in Understanding Spatial Polarization in Tel-Aviv By Modai-Snir, Tal; van Ham, Maarten
  14. Commuting and Sickness Absence By Laszlo Goerke; Olga Lorenz
  15. The Impact of Public Employment: Evidence from Bonn By Becker, Sascha O.; Heblich, Stephan; Sturm, Daniel M
  16. Spatial poverty and inequality in South Africa: A municipality level analysis By Anda David; Nathalie Guilbert; Nobuaki Hamaguchi; Yudai Higashi; Hiroyuki Hino; Murray Leibbrandt; Muna Shifa
  17. Three Generations of Intergenerational Transmission of Neighbourhood Context By Hedman, Lina; van Ham, Maarten; Tammaru, Tiit
  18. Do The Countries’ Monetary Policies Have Spatial Impact? By Arikan, Cengiz; Yalcin, Yeliz
  19. Clustering regional business cycles By M. D. Gadea-Rivas; Ana Gómez-Loscos; Eduardo Bandrés
  20. A measure for identifying substantial geographic concentrations of economic activity By Van Egeraat, Chris; Morgenroth, Edgar; Kroes, Rutger; Curran, Declan; Gleeson, Justin
  21. The Estimation and Interpretation of Coefficients in Panel Gravity Models of Migration By Michael P. Cameron; Jacques Poot

  1. By: Frick, Susanne A.; Rodríguez-Pose, Andrés
    Abstract: The paper investigates (1) the evolution of urban concentration from 1985 to 2010 in 68 countries around the world and (2) the extent to which the degree of urban concentration affects national economic growth. It aims to overcome the limitations of existing empirical literature by building a new urban population dataset that allows the construction of a set of Herfindahl-Hirschman-Indices which capture a country's urban structure in a more nuanced way than the indicators used hitherto. We find that, contrary to the general perception, urban concentration levels have on average decreased or remained stable (depending on indicator). However, these averages camouflage diverging trends across countries. The results of the econometric analysis suggest that there is no uniform relationship between urban concentration and economic growth. Urban concentration is beneficial for economic growth in high-income countries, while this effect does not hold for developing countries. The results differ from previous analyses that generally underscore the benefits of urban concentration at low levels of economic development. The results are robust to accounting for reverse causality through IV analysis, using exogenous geographic factors as instruments.
    Keywords: agglomeration; Economic Growth; high-income countries; low-income countries; urban primacy
    JEL: R11 R12
    Date: 2018–01
  2. By: DELLOYE, Justin, (CORE, Université catholique de Louvain); LEMOY, Rémi, (Université du Luxembourg); CARUSO, Geoffrey, (Université du Luxembourg)
    Abstract: Urban characteristics scaling with total population has become an important urban research field since one needs to better understand the benefits and disadvantages of urban growth and further population concentration. Urban scaling research, however, is largely disconnected from the empirics and theory of intra-urban structure for it considers averaged attributes and ignores residential choice trade-offs between transport and housing costs within cities. Using this fundamental trade-off, the monocentric model of Alonso provides theory to urban density profiles. However, it is silent about how these profiles scale with population, thus preventing empirical scaling studies to anchor in a strong micro-economic theory. This paper fixes this gap by introducing power laws for land and for population density in the Alonso model. From an augmented model with land use, we derive the conditions at which equilibrium profiles match recent empirical findings about the scaling of urban land and population density profiles in European cities. We find that the Alonso model is theoretically compatible with the observed scaling of population density profiles and leads to a satisfactory representation of European cities. The conditions for this compatibility refine current understanding of wage and transport costs elasticities with population. Although they require a scaling power of the profile of the share of urbanised land that is different from what is observed, it is argued that alternatives specifications of transport cost functions could solve this issue. Thus our results call for revisiting theories about land development and housing processes as well as the empirics of agglomeration benefits and transport costs.
    Keywords: monocentric model, population density, scaling laws, agglomeration economies
    Date: 2017–12–22
  3. By: Flavio Pinheiro; Aamena Alshamsi; Dominik Hartmann; Ron Boschma; Cesar Hidalgo
    Abstract: It is well known that countries tend to diversify their exports by entering products that are related to their current exports. Yet this average behavior is not representative of every diversification path. In this paper, we introduce a method to identify periods when countries enter relatively more unrelated products. We analyze the economic diversification paths of 93 countries between 1970 and 2010 and find that countries enter unrelated products in only about 7.2% of all observations. Then, we show that countries enter more unrelated products when they are at an intermediate level of economic development, and when they have higher levels of human capital. Finally, we ask whether countries entering more unrelated products grow faster than those entering only related products. The data shows that countries that enter more unrelated activities experience an increase in short-term economic growth of 0.5% per annum compared to those with similar levels of income, human capital, capital stock per worker, and economic complexity.
    Keywords: relatedness, product space, unrelated diversification, economic complexity, catching up, new export products, economic growth
    JEL: R11 O14
    Date: 2018–01
  4. By: Iris Wanzenböck; Koen Frenken
    Abstract: While innovation policy started as national policy, we witness a proliferation both at the sub-national and the supra-national level. This begs the question about subsidiarity: what policies should be organized at sub-national, national and supra-national levels? We argue that innovation policies aimed to solve societal challenges such as climate change or ageing - currently central in EU policies - are better organized at sub-national levels given the contested nature of problem identification and the contextual nature of problem-solving. Regional innovation policy, then, should formulate concrete societal goals relevant to the local community and tailored to the local context.
    Keywords: innovation policy, societal challenges, subsidiarity, regional policy, multi-level governance
    JEL: B52 D78 O38 R5
    Date: 2018–01
  5. By: Michalopoulos, Stelios; Papaioannou, Elias
    Abstract: Over the last two decades, the literature on comparative development has moved from country-level to within-country analyses. The questions asked have expanded, as economists have used satellite images of light density at night and other big spatial data to proxy for development at the desired level. The focus has also shifted from uncovering correlations to identifying causal relations, using elaborate econometric techniques including spatial regression discontinuity designs. In this survey we show how the combination of geographic information systems with insights from disciplines ranging from the earth sciences to linguistics and history has transformed the research landscape on the roots of the spatial patterns of development. We discuss the limitations of the luminosity data and associated econometric techniques and conclude by offering some thoughts on future research.
    JEL: N00 N9 O10 O43 O55
    Date: 2018–01
  6. By: Andres Rodriguez-Pose
    Abstract: Persistent poverty, economic decay, and lack of opportunities are at the root of considerable discontent in declining and lagging-behind areas the world over. Poor development prospects and an increasing belief that these places have 'no future' - as economic dynamism has been posited to be increasingly dependent on agglomeration economies - have led many of these so-called 'places that don't matter' to revolt against the status quo. The revolt has come via an unexpected source: the ballot-box in a wave of political populism with strong territorial, rather than social foundations. I will argue that the populist wave is challenging the sources of existing well-being in both the less-dynamic and the more prosperous areas and that better, rather than more, place-sensitive territorial development policies are needed in order to find a solution to the problem. Place-sensitive development policies need, however, to stay clear of the welfare, income-support, and big investment projects of past development strategies if they are to be successful and focus on tapping into untapped potential and on providing opportunities to those people living in the places that 'don't matter'.
    Keywords: Economic development, territorial inequality, regions, cities, populism, place-sensitive policies
    JEL: R11 O3 O43 D02
    Date: 2018–01
  7. By: Michael Fritsch (FSU Jena); Mirko Titze (Halle Institute for Economic Research (IWH), Germany); Matthias Piontek (Friedrich Schiller University Jena, Germany)
    Abstract: The value of social network analysis is critically dependent on the comprehensive and reliable identification of actors and their relationships. We compare regional knowledge networks based on different types of data sources, namely, co-patents, co-publications, and publicly subsidized collaborative R&D projects. Moreover, by combining these three data sources, we construct a multilayer network that provides a comprehensive picture of intraregional interactions. By comparing the networks based on the data sources, we address the problems of coverage and selection bias. We observe that using only one data source leads to a severe underestimation of regional knowledge interactions, especially those of private sector firms and independent researchers. The key role of universities that connect many regional actors is identified in all three types of data.
    Keywords: Knowledge interactions, social network analysis, regional innovation systems, data sources
    JEL: O30 R12 R30
    Date: 2018–01–08
  8. By: Michael Wyrwich (FSU Jena)
    Abstract: Migration restrictions are a hotly debated topic in the current refugee crisis in Europe. This paper investigates the long-term effect of a restrictive migration policy on regional development. The analysis is based on the large-scale expulsion of Germans from Central and Eastern Europe after World War II (WWII). Expellees were not allowed to resettle in the French occupation zone in the first years after the War while there was no such legislation in the other occupation zones (U.S.; U.K; Soviet Union). The temporary migration barrier had long-lasting consequences. In a nutshell, results of a Difference-in-Difference (DiD) analysis show that growth of population has been significantly lower in the long run, if a region was part of the French occupation zone. Even 60 years after the removal of the barrier the degree of agglomeration is still significantly lower in these areas. The paper discusses implications for the current refugee crisis.
    Keywords: Migration barrier, population shock, refugee migration, long-term regional development
    JEL: J11 J61 N34 R11 R23
    Date: 2018–01–08
  9. By: Michael Fritsch (FSU Jena); Michael Wyrwich (FSU Jena)
    Abstract: We investigate the role of entrepreneurship culture and the historical knowledge base of a region on current levels of new business formation in innovative industries. The analysis is for German regions and covers the time period 1907-2014. We find a pronounced positive relationship between high levels of historical self-employment in science-based industries and new business formation in innovative industries today. This long-term legacy effect of entrepreneurial tradition indicates the prevalence of a regional culture of entrepreneurship. Moreover, local presence and geographic proximity to a technical university founded before the year 1900 is positively related to the level of innovative start-ups more than a century later. The results show that a considerable part of the knowledge that constitutes an important source of entrepreneurial opportunities is deeply rooted in history. We draw conclusions for policy and for further research.
    Keywords: Innovative start-ups, universities, regional knowledge, regional cultures of entrepreneurship
    JEL: L26 L60 L80 O18 R12 R30
    Date: 2018–01–08
  10. By: Waights, Sevrin
    Abstract: Hedonic prices of locational attributes in urban land markets are determined by a process of spatial arbitrage that is similar to that which underpins the law of one price. If hedonic prices deviate from their spatial equilibrium values then individuals can benefit from changing locations. I examine whether the law holds for the hedonic price of rail access using a unique historical dataset for Berlin over the period 1890-1914, characterised by massive investment in the transport infrastructure. I estimate the hedonic price of rail access across multiple urban neighbourhoods and time periods to generate a panel dataset of hedonic price differences that I test for stationarity using a panel unit root test. Across multiple specifications I consistently fail to reject the null hypothesis of no unit root and accept the alternative hypothesis that the law holds. My estimates indicate a half-life for convergence to the law of one price that lies between 0.28 and 1.14 years. This result is consistent with spatial equilibrium.
    Keywords: Spatial equilibrium; law of one price; hedonic prices; transport; unit root tests; panel data
    JEL: N93 R00 R12 R13 R31
    Date: 2018
  11. By: Stefan Leknes (Statistics Norway)
    Abstract: Using a very large comprehensive matched employer-employee panel of the Norwegian workforce (19 million observations), I find a higher likelihood of job change across sectors and occupations, namely labor churning, in populous areas. Further investigation shows that this result is driven by high skilled groups, assumed to have more transferable skills. Moreover, educated urban workers are more likely to switch to sectors and occupations that they have prior experience with and that are similar in the use of human capital. Together, these novel results complement previous research by illuminating how the tradeoff between better labor matching and accumulating specific skills affect churning decisions for heterogeneous workers.
    Keywords: turnover; urban scale; human capital; sector; occupation
    JEL: J24 J63 R12 R23
    Date: 2017–10
  12. By: Fiore, Annamaria
    Abstract: The aim of this paper is to describe an analytical tool able to support policy makers in defining regional policy for entrepreneurship. Given the growing interest about the themes of smart specialization assigned as policy objectives to the Regions, focus of the paper is at the regional level. The three-dimensional strategic analysis considers simultaneously three kinds of data for each industrial sector: spatial concentration, cost competitiveness and export weight. Each of the three dimensions considered can be seen in turn as a specialization index since the data are related to the performance recorded at national level (benchmark). Depending on position (quarter) occupied by a specific sector in a graph, policy makers can have at one sight the relative weight of that sector in the regional economy and could have support in defining policies accordingly. As an application, the paper presents last official available data for Puglia manufacturing sectors (2013). Moreover, the analysis could be also simply utilised to realize temporal comparisons. As an example, comparison between data for 2008 and 2013 have highlighted how Puglia has lost competitive advantages over time due to the economic crisis. However, analysis also shows how, in the same years, careful sectorial policies implemented (aerospace) has enabled the Region to emerge in this medium-high technology market also at an international level. Once reached the full availability of homogeneous and internationally comparable data, the same analytical framework could be easily extended to assess the status of different national economies for drawing policy recommendations also at higher territorial levels.
    Keywords: Regional policy; Smart Specialization Strategy; Industrial specialization; Policy tool; Three-dimensional strategic analysis.
    JEL: O2 R1
    Date: 2016–09
  13. By: Modai-Snir, Tal (Delft University of Technology); van Ham, Maarten (Delft University of Technology)
    Abstract: Many studies of urban and neighbourhood change investigate changes in the relative positions of neighbourhoods within an urban region, without looking at the underlying processes. Often, changes in socio-spatial structures reflect intensifying socio-spatial divisions caused by both increasing inequality and urban development processes. This paper will examine the roles of increasing inequality and urban-development processes in reshaping the socio-spatial structure of the Tel-Aviv metropolitan area in Israel. Tel-Aviv is an interesting case study because of the persistent north-south socioeconomic divide. During the research period (1995–2008) inequality in Israel has risen substantially following the integration in the global economy; at the same time, the metropolitan area went through extensive urban development and expansion to the rural fringe. To examine the contributions associated with increasing inequality and urban-development processes to income changes among metropolitan neighbourhoods, we use a method that was originally presented in the context of individual income mobility and recently applied in the context of neighbourhood change. The results show that urban processes and inequality intensified the historical divide in different ways, and each factor can be associated with a typical spatial pattern. The interaction between the factors is diverse; in some places they reinforced each other, whereas in some they operated at opposite directions and offset each other.
    Keywords: neighbourhood change, socioeconomic change, spatial polarization, socio-spatial structure, inequality, socio-spatial divide
    JEL: O18 P25 R23
    Date: 2017–12
  14. By: Laszlo Goerke; Olga Lorenz
    Abstract: We investigate the causal effect of commuting on sickness absence from work using German panel data. To address reverse causation, we use changes in commuting distance for employees who stay with the same employer and who have the same residence during the period of observation. In contrast to previous papers, we do not observe that commuting distances are associated with higher sickness absence, in general. Only employees who commute long distances are absent about 20% more than employees with no commutes. We explore various explanations for the effect of long distance commutes to work and can find no evidence that it is due to working hours mismatch, lower work effort, reduced leisure time or differences in health status.
    Keywords: sickness absence, absenteeism, commuting, health, labour supply
    JEL: I10 J22 R2 R40
    Date: 2017
  15. By: Becker, Sascha O.; Heblich, Stephan; Sturm, Daniel M
    Abstract: This paper evaluates the impact of public employment on private sector activity using the relocation of the German federal government from Berlin to Bonn in the wake of the Second World War as a source of exogenous variation. To guide our empirical analysis, we develop a simple economic geography model in which public sector employment in a city can crowd out private employment through higher wages and house prices, but also generates potential productivity and amenity spillovers. We find that relative to a control group of cities, Bonn experiences a substantial increase in public employment. However, this results in only modest increases in private sector employment with each additional public sector job destroying around 0.2 jobs in industries and creating just over one additional job in other parts of the private sector. We show how this finding can be explained by our model and provide several pieces of evidence for the mechanisms emphasised by the model.
    Keywords: Economic Geography; German Division; Place-Based Policies; Public Employment
    JEL: F15 J45 N44 R12
    Date: 2018–01
  16. By: Anda David (Agence Française de Développement); Nathalie Guilbert; Nobuaki Hamaguchi (Research Institute for Economics and Business Administration, Kobe University); Yudai Higashi (Research Institute for Economics and Business Administration, Kobe University); Hiroyuki Hino (Southern Africa Labour and Development Research Unit, School of Economics, University of Cape Town); Murray Leibbrandt (Pro-Vice Chancellor, Poverty and Inequality of the University of Cape Town, the Director of SALDRU and the DST/NRF Research Chair on Poverty and Inequality.); Muna Shifa (Southern Africa Labour and Development Research Unit, School of Economics, University of Cape Town)
    Abstract: Using the 2011 South African population census, we provide income and multidimensional poverty and inequality estimates at the municipal level. We go on to estimate a spatial econometric model to identify the correlates of poverty across municipalities in South Africa. Our results show that both income and multidimensional poverty and inequality vary significantly across municipalities in South Africa. In general, areas that are historically characterized by low economic and welfare outcomes still experience significantly higher poverty and deprivation levels. Using both global and local spatial autocorrelation measures we find significant and positive spatial dependence and clustering of regional development indicators. The situation of poverty is both spatially unequal and autocorrelated. Results from our spatial econometric analysis indicate negative and significant relations between the municipal poverty levels and local levels of education and economic activity (GDP per capita). Significant and positive relations are found between municipal poverty levels and local inequality levels, suggesting that municipalities with higher levels of inequality also have higher incidences of poverty. In contrast, natural geographic factors such as rainfall and temperature are not significantly related to municipal poverty. Accounting for both direct, intra-municipality effects as well as spillover effects of neighbouring municipalities is important. These spillover effects notably reduce the coefficient sizes suggested by non-spatial, OLS regressions. Most striking, the large negative coefficient that OLS attributes to residing within a historical homeland area is greatly reduced and even loses statistical significance in some spatial models. Clearly municipalities in homeland areas are particularly likely to be surrounded by very poor municipal neighbours and therefore subject to strong negative spillovers. That said, when interactions between this historical geographical variable and contemporary socio-economic deprivations are included, then homeland becomes statistically significant once more. This makes the important point that while, it is these socio-economic deprivations that are particularly important in explaining contemporary income poverty across the county, those who reside in these homeland areas remain especially badly off in terms of these deprivations.
    Keywords: spatial poverty and inequality, South Africa
    Date: 2018
  17. By: Hedman, Lina (Uppsala University); van Ham, Maarten (Delft University of Technology); Tammaru, Tiit (University of Tartu)
    Abstract: The literature on intergenerational contextual mobility has shown that neighbourhood status is partly "inherited" from parents to children where children who spend their childhood in deprived neighbourhoods are more likely to live in such neighbourhoods also as adults. It has been suggested that such transmission of neighbourhood status also is relevant from multiple generation approach. To our knowledge, however, this has only been confirmed by simulations and not empirical research. This study uses actual empirical data covering 25 years and the full Swedish population to investigate intergenerational similarities in neighbourhood status of three generations of Swedish women. Findings suggest that the neighbourhood environments of Swedish women are correlated with the neighbourhood statuses of their mothers and, to some extent, grandmothers. We also find an effect of distance where intergenerational transmission is stronger for those remaining close. Whereas women whose mothers and grandmothers live in high-income areas benefit from staying close, women whose mothers and grandmothers live in low-income areas do better if they live further away. These results are robust over two different analytical strategies – comparing neighbourhood status of the three generations at similar ages and at the same point in time – and two different spatial scales. We argue that the finding of such effects in (relatively egalitarian) Sweden implies that similar, and possibly stronger, patterns are likely to exist in other countries as well.
    Keywords: intergenerational transmission, neighbourhood, low-income neighbours, register data, Sweden
    JEL: I30 J60 R23
    Date: 2017–12
  18. By: Arikan, Cengiz; Yalcin, Yeliz
    Abstract: Nowadays, not land border but economic cooperation and borders determine the neighborhood and closeness by globalization. No doubt, any economic event happens in any country affects other partners more and less according to economic relationship in globalization process. The desire of measuring of this interaction make occur spatial econometrics. Initially, in spatial models take into account land borders. Subsequently, studies about spatial econometric models allow economic interactions and relationships. After the global economic crises in 2008 Central Banks have started to vary monetary policy tool to ensure economic and financial stability. It is estimated that which tool will be implemented by following the policies of the central banks in which they are closely related. The spatial effect of monetary policy can be not only geographical but also economic or social. Different spatial models have set up to examine whether any spatial effect on monetary policy. Unlike other studies in this study not only geographic weight matrix but also economic weight matrix have been used in the spatial models. Different weight matrix models results have been compared and construed. Our preliminary findings reveal that there is a spatial effect on monetary policy between OECD, EU and G-20 countries. And also, economic weight matrix effect is more than geographic weight matrix.
    Keywords: Monetary Policy, Spatial Model, Spatial Impact, Econometrics
    JEL: C01 C51 E52
    Date: 2017–12–21
  19. By: M. D. Gadea-Rivas (UNIVERSITY OF ZARAGOZA); Ana Gómez-Loscos (Banco de España); Eduardo Bandrés (UNIVERSITY OF ZARAGOZA)
    Abstract: The aim of this paper is to show the usefulness of Finite Mixture Markov Models (FMMMs) for regional analysis. FMMMs combine clustering techniques and Markov Switching models, providing a powerful methodological framework to jointly obtain business cycle datings and clusters of regions that share similar business cycle characteristics. An illustration with European regional data shows the sound performance of the proposed method.
    Keywords: business cycles, clusters, regions, finite mixture Markov models
    JEL: C22 C32 E32 R11
    Date: 2017–12
  20. By: Van Egeraat, Chris; Morgenroth, Edgar; Kroes, Rutger; Curran, Declan; Gleeson, Justin
    Date: 2017
  21. By: Michael P. Cameron (University of Waikato); Jacques Poot (University of Waikato)
    Abstract: We demonstrate that the conventional OLS and fixed effects estimators of gravity models of migration are biased, and that the interpretation of coefficients in the fixed effects model is typically incorrect. We present a new best linear unbiased estimator for gravity models of migration.
    Keywords: gross migration flows; gravity model; New Zealand
    JEL: O15 R23
    Date: 2018–01–15

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