nep-geo New Economics Papers
on Economic Geography
Issue of 2018‒04‒23
eight papers chosen by
Andreas Koch
Institut für Angewandte Wirtschaftsforschung

  1. Regional inequality in Europe: evidence, theory and policy implications By Simona Iammarino; Andrés Rodríguez-Pose; Michael Storper
  2. Complexities in the spatial scope of agglomeration economies By Paul Verstraten; Gerard Verweij; Peter Zwaneveld
  3. Why do wages grow faster in urban areas? Sorting of high potentials matters By Paul Verstraten; Gerard Verweij; Peter Zwaneveld
  4. GVCs and the Endogenous Geography of RTAs By Lionel Fontagné; Gianluca Santoni
  5. Disentangling the effects of a banking crisis: evidence from German firms and counties By Huber, Kilian
  6. Local multipliers at work By Cerqua, Augusto; Pellegrini, Guido
  7. The urban economics of retail By Ioulia Ossokina; Coen Teulings; Jan Svitak
  8. The effect of geographical distance on online transactions: Evidence from the Netherlands By Ali Palali; Bas Straathof; Rinske Windig

  1. By: Simona Iammarino; Andrés Rodríguez-Pose; Michael Storper
    Abstract: Regional economic divergence has become a threat to economic progress, social cohesion and political stability in Europe. Market processes and policies that are supposed to spread prosperity and opportunity are no longer sufficiently effective. The evidence points to the existence of several different modes of regional economic performance in Europe, responding to different development challenges and opportunities. Both mainstream and heterodox theories have gaps in their ability to explain the existence of these different regional trajectories and the weakness of the convergence processes among them. Therefore, a different approach is required, one that strengthens Europe?s strongest regions but develops new approaches to promote opportunity in industrial declining and less-developed regions. There is ample new theory and evidence to support such an approach, which we have labelled 'place-sensitive distributed development policy'.
    Keywords: Regions, inequality, economic divergence, place-sensitive development, European Union
    JEL: R11 R12 R58
    Date: 2018–04
  2. By: Paul Verstraten (CPB Netherlands Bureau for Economic Policy Analysis); Gerard Verweij (CPB Netherlands Bureau for Economic Policy Analysis); Peter Zwaneveld (CPB Netherlands Bureau for Economic Policy Analysis)
    Abstract: This article argues that the spatial scope of agglomeration economies is much more complex than is often assumed in the agglomeration literature. We provide insight into this issue by analyzing panel data on individual wages with a high level of spatial detail. The results show that agglomeration on short distances (<5 km) does not significantly affect wages, whereas it has a significant and positive effect on medium distances (5-10 km). This effect attenuates rapidly across geographic space, becoming insignificant after 40-80 km. These results, however, do not imply that nearby agglomeration is irrelevant for productivity. Regions must meet a critical threshold of nearby agglomeration in order to benefit from agglomeration on further distances. Furthermore, this article finds no evidence that foreign economic mass affects wages in the Netherlands, which suggests that national borders are still a substantial barrier for economic interaction. This article is a revised version of a paper published in February 2017. The original version of the article can be found here .
    JEL: R12 J24 J31
    Date: 2018–02
  3. By: Paul Verstraten (CPB Netherlands Bureau for Economic Policy Analysis); Gerard Verweij (CPB Netherlands Bureau for Economic Policy Analysis); Peter Zwaneveld (CPB Netherlands Bureau for Economic Policy Analysis)
    Abstract: The existence of an urban wage growth premium is a well-established empirical fact. This article challenges the conventional view that faster wage growth for urban workers is caused by human capital spillovers. Instead, we find that the positive association between city size and individual wage growth is to a large extent driven by sorting of workers and firms, with inherently higher wage growth, into bigger cities. Having controlled for spatial sorting, we conclude that only young workers experience significant urban wage growth benefits. Wage level benefits of urban areas are important to all types of workers, especially the highly educated.
    JEL: R23 J31
    Date: 2018–02
  4. By: Lionel Fontagné (CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique); Gianluca Santoni (CEPII - Centre d'études prospectives et d'informations internationales)
    Abstract: There has been considerable attention paid to the endogenous nature of regional trade agreements Geography, economic size, or common history help predicting signed agreements. However, not all signed RTAs are “natural" according to economic determinants, as trade negotiations can be used as a tool of external policy. Recent developments in terms of structural gravity help clarifying this debate by taking account of all theoretically relevant determinants of bilateral trade, as well as general equilibrium effects of signing an agreement. Indeed, the endogeneity of trade arrangements has a time dimension and is related to firm strategies. These are the two mechanisms addressed in this paper. We estimate the time-varying probability for a country pair to sign a trade agreement and build upon structural gravity in general equilibrium to determine how the patterns of Global Value Chains shape the evolving geography of optimal trade agreements. Our results confirm that the endogenous geography of RTAs is shaped by the development of GVCs.
    Abstract: Une grande attention a été accordée à la nature endogène des accords commerciaux régionaux. La géographie, la taille économique ou l'histoire commune aident à prévoir les accords régionaux (ACR) signés. Cependant, tous les ACR signés ne sont pas "naturels" du point de vue des seuls déterminants économiques, dans la mesure où les négociations commerciales peuvent être utilisées comme un outil de politique extérieure.Les développements récents en termes de modèles structurels de gravité des échanges aident à clarifier ce débat en prenant en compte l'ensemble des déterminants théoriques du commerce bilatéral. En effet, l'endogénéité des accords commerciaux a une dimension temporelle et est liée aux stratégies des firmes. Ces deux mécanismes sont abordés ici : nous estimons a probabilité pour chaque paire de pays de signer un accord commercial et utilisons la gravité structurelle en équilibre général pour déterminer comment les chaînes de valeur mondiales façonnent la géographie optimale des accords commerciaux. Nos résultats confirment que la géographie endogène des ACR est façonnée par le développement des chaînes de valeurs mondiales.
    Date: 2018–04–11
  5. By: Huber, Kilian
    Abstract: Lending cuts by banks directly affect the firms borrowing from them, but also indirectly depress economic activity in the regions in which they operate. This paper moves beyond firm-level studies by estimating the effects of an exogenous lending cut by a large German bank on firms and counties. I construct an instrument for regional exposure to the lending cut based on a historic, postwar breakup of the bank. I present evidence that the lending cut affected firms independently of their banking relationships, through lower aggregate demand and agglomeration spillovers in counties exposed to the lending cut. Output and employment remained persistently low even after bank lending had normalized. Innovation and productivity fell, consistent with the persistent effects.
    JEL: E32 E44 G21 G32 R11 R23
    Date: 2018–03–01
  6. By: Cerqua, Augusto; Pellegrini, Guido
    Abstract: We measure the effects of a substantial place-based policy shock on the local labor market systems exploiting as an instrumental variable the peculiar information necessary to apply for capital subsidies in Italy during the period 1996-2006. The results show the presence of positive multipliers in the South of Italy, slightly lower than what was previously found for the US but much higher than those identified for European and Asian countries. The reasons for this finding lie in the greater accuracy of the data, in the relevance of the instrument used, and in the widespread underutilization of production factors.
    Keywords: Local multiplier, place-based policy, local labor market.
    JEL: F16 H25 J23 R23
    Date: 2018
  7. By: Ioulia Ossokina (CPB Netherlands Bureau for Economic Policy Analysis); Coen Teulings; Jan Svitak
    Abstract: This paper is the first to document empirically that urban shopping areas have a pronounced centre where the rents are the highest, and a negative rent gradient. We use this insight to build and test empirically a simple theoretical model of the competition between the residential and the retail land in a city. The model predicts that rents and occupancy rates on the edges of shopping areas are most sensitive to changes in economic conditions. Demand shocks may lead to transformations between retail and residential land use, mostly at the edge, and to a contraction or expansion of shopping areas. The model predictions are tested on unique data on the location and characteristics of all retail and non-retail properties within 300 largest shopping areas in the Netherlands in 2004-2014, a period including the Great Recession. With every 100 metre distance from the centre of a shopping area rents fall, on average, by 15 percent. Shopping streets, areas located on attractive sites and areas offering free parking have a flatter distance decay. The vacancy rate on the edge of a shopping area is almost twice as high as in the centre. During the Great Recession some 2% of the retail properties were transformed into other use, mostly on the edges of the shopping areas.
    JEL: L81 R13 R3 R4
    Date: 2017–06
  8. By: Ali Palali (CPB Netherlands Bureau for Economic Policy Analysis); Bas Straathof (CPB Netherlands Bureau for Economic Policy Analysis); Rinske Windig (CPB Netherlands Bureau for Economic Policy Analysis)
    Abstract: The rise of online trade alters the role of distance between (potential) buyers and sellers. We use data from eBay subsidiary, one of the largest online trading platforms in the Netherlands, to estimate how distance affects the probability of a transaction between small geographical regions. We find that distance negatively and modestly affects the probability of having a transaction between two regions, and that the distribution of this probability is highly skewed: ranging from a change of 0.000 to -0.008 percentage points per marginal kilometer. The unconditional probability of a transaction is 27 percent. Distance is less influential for: advertisements with more photos advertisements placed by high-frequency advertisers for new goods in comparison to second hand goods. This suggests that information frictions might be the driving force behind the distance effect on online trade in the Netherlands.
    JEL: D44 R12
    Date: 2017–10

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