nep-geo New Economics Papers
on Economic Geography
Issue of 2018‒05‒07
eight papers chosen by
Andreas Koch
Institut für Angewandte Wirtschaftsforschung

  1. Firm Sorting and Agglomeration By Cecile Gaubert
  2. How Do Trade and Communication Costs Shape the Spatial Organization Of Firms? By Toshitaka Gokan; Sergey Kichko; Jacques-François Thisse
  3. The impact of the French policy mix on business R&D : how geography matters By Benjamin Montmartin; Marcos Herrera; Nadine Massard
  4. The Billion Pound Drop: The Blitz and Agglomeration Economies in London By Gerard H. Dericks; Hans R. A. Koster
  5. Spatial Inequalities in Indonesia, 1996-2010: A Hierarchical Decomposition Analysis By Takahiro Akita; Sachiko Miyata
  6. Effects of Distance and Borders on International and Interregional Tourist Flows: A micro-gravity analysis By MORIKAWA Masayuki
  7. Fiscal Transfers in the Spatial Economy By Henkel, Marcel; Seidel, Tobias; Südekum, Jens
  8. Globalization, economic growth, and spillovers: A spatial analysis By Ahmad, Mahyudin

  1. By: Cecile Gaubert
    Abstract: The distribution of firms in space is far from uniform. Some locations host the most productive large firms, while others barely attract any. In this paper, I study the sorting of heterogeneous firms across locations and analyze policies designed to attract firms to particular regions (place-based policies). I first propose a theory of the distribution of heterogeneous firms in a variety of sectors across cities. Aggregate TFP and welfare depend on the extent of agglomeration externalities produced in cities and on how heterogeneous firms sort across them. The distribution of city sizes and the sorting patterns of firms are uniquely determined in equilibrium. This allows me to structurally estimate the model, using French firm-level data. I find that nearly half of the observed productivity advantage of large cities is due to firm sorting. I use the estimated model to quantify the general equilibrium effects of place-based policies. I find that policies that decrease local congestion lead to a new spatial equilibrium with higher aggregate TFP and welfare. In contrast, policies that subsidize under-developed areas have negative aggregate effects.
    JEL: F11 R10 R30
    Date: 2018–04
  2. By: Toshitaka Gokan (National Research University Higher School of Economics); Sergey Kichko (National Research University Higher School of Economics); Jacques-François Thisse (National Research University Higher School of Economics)
    Abstract: We show how trade and communication costs interact to shape the way firms organize their activities across space. We consider the following three organizational types: (i) integrated firms in which all activities are conducted at the same location, (ii) horizontal firms, which operate several plants producing the same good at different locations, and (iii) vertical firms, which perform distinct activities at separated locations. We find necessary and sufficient conditions for the three types of organization to coexist within the same country, whereas firms located in the other country are all spatially integrated. We then study how trade and communication costs affect firms’ organizational choices. First, lower trade costs lead to fewer firms going multinational. By contrast, less expensive communication flows leads to more investment abroad. The reason for this difference in results is that the two types of spatial frictions differ in nature: in the proximity-concentration trade-off, lower trade costs weaken the need for proximity, while lower communication costs foster deconcentration.
    Keywords: trade costs, communication costs, spatial fragmentation of firms
    JEL: F12 F21 R12
    Date: 2018
  3. By: Benjamin Montmartin (Observatoire français des conjonctures économiques); Marcos Herrera (National University of Salta (Argentine) (CONICET)); Nadine Massard (Université Grenoble Alpes (UGA))
    Abstract: Based on a spatial extension of an R&D investment model, this paper measures the macroeconomic impact of the French R&D policy mix on business R&D using regional data. Our measure takes into account not only the direct effect of policies but also indirect effects generated by the existence of spatial interaction between regions. Using a unique database containing information on the levels of various R&D policy instruments received by firms in French NUTS3 regions over the period 2001-2011, our estimates of a spatial Durbin model with structural breaks and fixed effects reveal the existence of a negative spatial dependence among R&D investments in regions. In this context, while a-spatial estimates would conclude that all instruments have a crowding-in effect, we show that national subsidies are the only instrument that is able to generate significant crowding-in effects. On the contrary, it seems that the design, size and spatial allocation of funds from the other instruments (tax credits, local subsidies, European subsidies) lead them to act (in the French context) as beggar-thy-neighbor policies.
    Keywords: Policy mix evaluation; R&D investment; Spatial panel; French Nuts3 regions
    JEL: H25 O31 O38
    Date: 2018–03
  4. By: Gerard H. Dericks; Hans R. A. Koster
    Abstract: This paper exploits locally exogenous variation in the location of bombs dropped during the Blitz to quantify the effect of density restrictions on agglomeration economies in London: an elite global city. Employing microgeographic data on office rents and employment, this analysis points to effects for London several multiples larger than the existing literature which primarily derives its results from secondary cities. In particular, doubling employment density raises rents by 25%. Consequently if the Blitz had not taken place, the resulting loss in agglomeration economies to present day London would cause total annual office rent revenues to fall by $4:5 billion { equivalent to 1:2% of London's annual GDP. These results illuminate the substantial impact of land-use regulations in one of the world's largest and most productive cities.
    Keywords: regulatory costs, office rents, agglomeration economies, London Blitz bombings
    JEL: R14 R33 R38
    Date: 2018–04
  5. By: Takahiro Akita (Rikkyo University, International University of University); Sachiko Miyata (Ritsumeikan University)
    Abstract: This study analyzes spatial inequalities in Indonesia from 1996-2010 using the hierarchical decomposition method. It uses household expenditures rather than regional accounts and tries to investigate the contributions of spatial inequalities to overall expenditure inequality. We find that urban-rural disparity constitutes 15-25% of overall expenditure inequality. A large difference exists between urban and rural areas in the magnitude of inequality among districts. After controlling for the urban and rural difference, inequality among districts accounts for 15-25% of overall inequality. While disparity between five major island regions is negligible, inequalities between districts within provinces appear to have played an increasingly important role in both urban and rural areas. Given unequal geographic distributions of resource endowments, public infrastructure and economic activities, some spatial inequalities are inevitable. Nevertheless, sustained efforts are necessary to reduce spatial inequalities to facilitate national unity, cohesion and stability.
    Keywords: spatial inequality, expenditure inequality, hierarchical decomposition of inequality, Theil index, Indonesia
    JEL: O15 O18 R12
    Date: 2017–02
  6. By: MORIKAWA Masayuki
    Abstract: Although there have been a number of studies that have applied the gravity model to migration and tourist flows, analyses covering both international and intranational movements have been scarce. This study, using unique official statistics for accommodation facilities in Japan, empirically analyzes the determinants of both international and intranational tourist flows. According to gravity model estimations, physical distance has a large, negative effect on tourist flows, but the quantitative magnitude of these effects differs little between foreign and domestic (interregional) tourists. The border effect on tourist flows is quantitatively large, and the number of tourists from foreign countries is more than 60% smaller than that from domestic ones. These results suggest that policies mitigating border barriers may contribute to a higher number of foreign tourists.
    Date: 2018–04
  7. By: Henkel, Marcel; Seidel, Tobias; Südekum, Jens
    Abstract: Many countries operate pronounced fiscal equalization schemes that shift tax revenue across jurisdictions. We use a general equilibrium model with multiple asymmetric regions, costly trade and labor mobility to carve out the aggregate implications of this policy. Calibrating the model for Germany, we find that it indeed delivers smaller spatial economic disparities across regions. This comes at the cost of lower national output, however, because activity is diverted away from core cities and towards remote areas with low productivity. But despite this output loss, fiscal transfers may still raise national welfare, because they effectively countervail over-congestion in large cities.
    Keywords: Fiscal equalization; migration; regional transfers; spatial economics
    JEL: F15 R11
    Date: 2018–04
  8. By: Ahmad, Mahyudin
    Abstract: This paper seeks to deepen our understanding of the globalization-growth nexus as it extends the investigation to using a spatial econometric approach, hitherto has been rarely used in the globalization literature. The objective of the paper is to uncover not only the significant growth-effects of globalization, but also the possible spillover effects of globalization onto neighbouring countries. Using a panel dataset of 83 countries and 30-year period and via a spatial autoregressive panel data method, this paper estimates a standard growth model augmented with a parameter to capture the countries’ spatial dependence, whilst controlling for globalization indices. The findings indicate a positive effect of economic globalization and the effect is dependent upon the political settings in the countries under study. The spillover effects of globalization across neighbouring countries are shown, both in geographical and institutional spheres. The paper concludes with some policy recommendations.
    Keywords: globalization, economic growth, institutional quality, spatial autooregressive model
    JEL: C31 O43
    Date: 2018–03

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