nep-geo New Economics Papers
on Economic Geography
Issue of 2018‒06‒25
ten papers chosen by
Andreas Koch
Institut für Angewandte Wirtschaftsforschung

  1. Does Proximity to Foreign Invested Firms Stimulate Productivity Growth of Domestic Firms? Firmlevel Evidence from Vietnam By Stephan Kyburz, Huong Quynh Nguyen
  2. On the optimal design of place-based policies: A structural evaluation of EU regional transfers By Yashar Blouri, Maximilian von Ehrlich
  3. Optimal Spatial Policies, Geography and Sorting By Pablo Fajgelbaum; Cecile Gaubert
  4. Structural change and convergence across European regions By Tullio Buccellato; Giancarlo Corò
  5. A Note on Local Public Good Induced Spillovers between a Leading and a Lagging Region By Batabyal, Amitrajeet
  6. Bifurcation theory of a racetrack economy in a spatial economy model By Ikeda, Kiyohiro; Onda, Mikihisa; Takayama, Yuki
  7. Post-industrial globalization and local milieus: A typology By Delphine Guex, Olivier Crevoisier
  8. Expenditure interactions between municipalities and the role of agglomeration forces: A spatial analysis for North Rhine-Westphalia By Langer, Sebastian
  9. Italian industrial districts: theories, profiles and competitiveness By Schilirò, Daniele
  10. Implicit Regional Economic Goals and Objectives: A Study of U.S. Development Programs By Peter Schaeffer; Randall Jackson; Eric Bowen

  1. By: Stephan Kyburz, Huong Quynh Nguyen
    Abstract: Inward foreign direct investment (FDI) is regarded as a key engine of industrial growth and technological progress, especially in emerging markets. Regarding the relevance of geographic proximity between foreign and domestic firms for FDI spillover effects, there is yet little clear evidence, owing to a lack of precise location specific firm-level data. This paper presents the so far spatially most detailed analysis of FDI spillover effects by geo-referencing the census of Vietnamese enterprises for the period 2005 to 2010, allowing us to measure the changing presence of foreign invested firms around each domestic firm. We apply a first-differenced two-stageleast- squares estimator to identify spillover effects from proximate FDI exposure on TFP growth of domestic manufacturing firms. We find positive and significant within-industry (horizontal) spillover effects within radii of 2 to 10 km, that decay beyond. Importantly, in particular small and medium enterprises (SMEs) gain from foreign firms in their vicinity. Furthermore, vertical spillovers through forward and backward linkages to other manufacturing firms are localized, while vertical spillovers from foreign firms in the service sector are less geographically restricted.
    Keywords: foreign direct investment, spillover effects, geographic proximity, horizontal and vertical linkages
    JEL: D22 D24 F23 O12 O14 O33 R11 R32
    Date: 2017–10
  2. By: Yashar Blouri, Maximilian von Ehrlich
    Abstract: We quantify general equilibrium effects of place-based policies in a multi-region framework with population mobility, trade and agglomeration economies. Using detailed data on EU transfers, we infer the local effects of different transfer types on productivity, income and transportation cost. Based on these estimates and the general equilibrium model we derive the spatial distribution of economic activity and the resulting aggregate welfare effects if (i) no transfers were paid and taxes set to zero, (ii) transfers were distributed uniformly, (iii) transfers were welfare-optimally distributed. Characterizing the optimal distributions, we reveal complementarities between transfer types and between transfers and local endowments.
    Keywords: economic geography; place-based policies; structural estimation; subsidies; public investments; European structural funds
    JEL: R10 R50 F10 F20 H20
    Date: 2017–10
  3. By: Pablo Fajgelbaum; Cecile Gaubert
    Abstract: We study optimal spatial policies in quantitative trade and geography frameworks with spillovers and sorting of heterogeneous workers. We characterize the spatial transfers that must hold in efficient allocations, as well as labor subsidies that would implement them. Assuming homogeneous workers and constant-elasticity spillovers, a constant labor tax over space restores efficiency regardless of micro heterogeneity in fundamentals. Place-specific subsidies are needed to attain optimal sorting if there are spillovers across different types of workers. We show how to quantify optimal spatial transfers, and apply the framework to data across U.S. cities using existing estimates of the spillover elasticities. The results suggest that the U.S. economy features too much spatial sorting by skill and wage inequality in larger cities relative to efficient allocations.
    JEL: F12 H21 H71 R13
    Date: 2018–05
  4. By: Tullio Buccellato (Economic Research Department, Confindustria); Giancarlo Corò (Department of Economics, University Of Venice Cà Foscari)
    Abstract: The aim of our paper is to analyze the structural diversity of the European regions assuming the complexity of production spaces approach (Hidalgo C.A., B. Klinger, A.L. Barabási, R. Hausmann 2007). This stream of economic literature is the natural companion of the evolutionary theory of economics, where development is seen as the endogenous learning process led by the initial knowledge basis, which tends to expand in its proximity (Boschma 2005). The first step of our analysis is to map the EU regions according to their economic structure. We exploit information conveyed by Eurostat data, which are available for a balanced panel of 241 regions and 86 economic branches in 2010 and 2015. In this way we are able to construct a space characterized by technological proximity of regions. The underlying assumption is that territories with similar production structures display similar production knowledge. The second step is the construction of the network space based on the correlation matrix. In order to obtain the clusters of regions based on the similarity of their economic structure, we apply a modularity algorithm to the network. Such measures define groups based on the degree of connectedness of the observations between them and allows to measure how such groups explain the network connections using as benchmark a case in which edges where assigned randomly. Our findings suggest that regions, which are more dynamic in terms of structural change, are those with manufacturing capabilities located in Eastern European countries. Such regions were able to upgrade their competences towards more complex productions and this resulted also in a fast catch-up of their GDP per capita level with respect to other mid income regions in Western Europe. Most prosperous regions are found to be urban areas with developed creative service activities and in regions with advanced manufactures (machinery, automotive, electronics, etc.); whereas backwardness is detected in regions with a cumbersome weight of tourism related activities.
    Keywords: Regional Disparities, Growth, Structural Changes, relatedness
    JEL: O10 O25 P25 R10 L16
    Date: 2018
  5. By: Batabyal, Amitrajeet
    Abstract: We analyze spatial spillovers in an aggregate economy consisting of a leading and a lagging region where the spillovers stem from the provision of a local public good. Specifically, if the leading region provides the public good then the lagging region obtains some spillover benefits and vice versa. We first solve for the Nash equilibrium levels of the local public goods in the two regions when public investment decisions are simultaneous; next, we determine the equilibrium welfare levels in each region. Second, on the assumption that the public investment decisions are centralized, we compute the levels of the local public goods that maximize aggregate welfare. Finally, we describe an interregional transfer scheme that leads each region to choose non-cooperatively in a Nash equilibrium the same public investment levels as those that arise when aggregate welfare is maximized.
    Keywords: Lagging Region, Leading Region, Local Public Good, Spatial Spillover
    JEL: O18 R11
    Date: 2018–05–31
  6. By: Ikeda, Kiyohiro; Onda, Mikihisa; Takayama, Yuki
    Abstract: Racetrack economy is a conventional spatial platform for economic agglomeration in spatial economy models. Studies of this economy up to now have been conducted mostly on $2^k$ cities, for which agglomerations proceed via so-called spatial period doubling bifurcation cascade. This paper aims at the elucidation of agglomeration mechanisms of the racetrack economy in a general setting of an arbitrary number of cities. First, an attention was paid to the existence of invariant solutions that retain their spatial distributions when the transport cost parameter is changed. A complete list of possible invariant solutions, which are inherent for replicator dynamics and are dependent on the number of cities, is presented. Next, group-theoretic bifurcation theory is used to describe bifurcation from the uniform state, thereby presenting an insightful information on spatial agglomerations. Among a plethora of theoretically possible invariant solutions, those which actually become stable for spatial economy models are obtained numerically. Asymptotic agglomeration behavior when the number of cities become very large is studied.
    Keywords: Bifurcation; Economic agglomeration; Racetrack economy; Replicator dynamics; Spatial economy model
    JEL: R12
    Date: 2018–05–22
  7. By: Delphine Guex, Olivier Crevoisier
    Abstract: In terms of regional development, let’s call the period up to 2008 the industrial age. Until then, the development of regions depended on their integration into globalization through production, and their positioning in the spatial division of labor: this illustrates the concept of competitiveness. Now, globalization also plays a role in terms of consumption. This dimension is discussed in the literature, for example by Markusen (Markusen, 2007, Markusen & Schrock, 2009) and the proponents of the so-called residential and presential economic trends in France (Davezies, 2009, Davezies & Talandier, 2016): this illustrates the concept of attractiveness. This research greatly improves the understanding of the current development processes of the regions insofar as it considers both consumption and productive flows. Nevertheless, the question of understanding the dynamics of development based on competitiveness and attractiveness still arises. This article proposes an analytical framework based on the idea put forward in Camagni’s (2005) conceptualization of the region as a meeting place for different supplies and demands. We propose a typology of income flows and regional and urban activities that considers local and extra-local demands, as well as local supply, firstly as a productive agglomeration and secondly as both a place of consumption and a living environment. The concept of an "innovative milieu" (e.g. clusters, industrial districts, etc.) allowed the industrial context to take into consideration local capacity for renewing competitiveness; we suggest that the "local postindustrial milieu" development model should encompass the capacity of a city or a region to manage tensions and to exploit the synergies between the various types of activities and people in the region which result from the integration of the region into various forms of globalization.
    Keywords: territorial development, export base theory, residential economy, milieu, demand-based development
    Date: 2017–06
  8. By: Langer, Sebastian
    Abstract: This paper analyzes municipal expenditures in the light of horizontal fiscal interactions. I investigate total expenditures and a set of non-earmarked expenditure subcategories in the largest German federal state, North Rhine-Westphalia (NRW). The empirical analysis is based on a Spatial Durbin Model in a panel for the years 2009-2015. Using a two-regime spatial matrix, I also examine the impact of agglomeration on the intensity of public expenditure interactions, thus testing the hypothesis that an agglomerated region can decrease the amount of public goods without losing mobile factors to the periphery. The findings indicate that significant municipal expenditure interaction effects do exist. The reaction functions also vary for different expenditure subcategories. Unlike spillover effects and fiscal competition, yardstick competition is an insignificant source of potential interactions. Expenditure interaction is fiercer if there is less agglomeration in a municipality. Urbanized and populous municipalities appear to benefit from agglomeration economies, a fact that enables them to spend less. Robustness checks confirm the findings.
    Keywords: Local Government Expenditure,Spatial Regression Analysis,Expenditure Interaction
    JEL: C31 F12 F15 J31
    Date: 2018
  9. By: Schilirò, Daniele
    Abstract: The paper is a contribution to the debate about the theoretical aspects, the structure, and the competitiveness of Italian industrial districts. The work first examines the theoretical strand on industrial districts ranging from Marshall to Becattini, and focusing on the contemporary distrettualism of Giacomo Becattini, where the district is essentially a socio-economic construct and an important localized productive system. Furthermore, the paper offers an updated picture of the Italian industrial districts as they are represented in the 2011 Census by the National Statistics Institute. Finally, this study underlines the resilient competitive capacity of this typical form of industrial organization. Then, through empirical literature, it analyzes the Italian district companies, and their performance and success in foreign markets, especially with regard to “Made in Italy” products.
    Keywords: Industrial districts; Italian SME; exports; competitiveness
    JEL: D0 M0 M1 M20
    Date: 2017–11
  10. By: Peter Schaeffer (Resource Economics and Management, West Virginia University); Randall Jackson (Regional Research Institute, West Virginia University); Eric Bowen (Bureau of Business and Economic Research, West Virgina University)
    Abstract: At the present time, U.S. regional economic development policies tend to be focused on sectors, infrastructure, human capital, innovation capability, or to be problem oriented, and only a few programs can be described as being place-based. In this paper, we are looking at major federal regional development programs to deduce their combined implicit place-based goals and objectives. Because the U.S. seems to be relatively unique among OECD countries in its scant use of place-based policies, we compare the United States to, in particular, Canada to gain further insights into the reasons for and potential effects of such policy differences.
    Keywords: regional development, national policy, implicit goals
    JEL: O2 R0 L52
    Date: 2018–06–07

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