nep-geo New Economics Papers
on Economic Geography
Issue of 2018‒07‒16
four papers chosen by
Andreas Koch
Institut für Angewandte Wirtschaftsforschung

  1. The regional effects of Germany's national minimum wage By Ahlfeldt, Gabriel; Roth, Duncan; Seidel, Tobias
  2. Effect of Climate and Geography on worldwide fine resolution economic activity By Alberto Troccoli
  3. Determinants of FDI for Spanish regions: Evidence using stock data By Miriam Camarero; Laura Montolio; Cecilio Tamarit
  4. Can Wealth Explain Neighborhood Sorting by Race and Income? By Aliprantis, Dionissi; Carroll, Daniel R.; Young, Eric R.

  1. By: Ahlfeldt, Gabriel; Roth, Duncan; Seidel, Tobias
    Abstract: We estimate the spatially differential effects of a nationally uniform minimum wage that was introduced in Germany in 2015. To this end, we use a micro data set covering the universe of employed and unemployed individ-uals in Germany from 2011 to 2016 and a difference-in-differences based identification strategy that controls for heterogeneity in pre-treatment outcome trends. We find that the policy led to spatial wage convergence, in par-ticular in the left tail of the distribution, without reducing relative employment in low-wage regions within the first two years.
    Keywords: Difference-in-Differences; employment; Germany; minimum wage; Wage inequality
    JEL: J31 J58 R12
    Date: 2018–06
  2. By: Alberto Troccoli
    Abstract: Geography, including climatic factors, have long been considered potentially important elements in shaping socio-economic activities. However, it has been argued that other possible drivers, particularly institutions, can be more important factors. Here we demonstrate that geography/climate variables satisfactorily explain the worldwide economic activity as measured by the per capita Gross Cell Product (GCP-PC) at a high geographical resolution, typically much higher than country average. A 1{\deg} by 1{\deg} GCP-PC dataset has been key for establishing and testing a direct relationship between 'local' geography/climate and GCP-PC. Not only have we tested the geography/climate hypothesis using many possible explanatory variables, importantly we have also predicted and reconstructed GCP-PC worldwide by retaining the most significant predictors. While this study confirms that latitude is the most important predictor for GCP-PC when taken in isolation, the accuracy of the GCP-PC prediction is greatly improved when other factors mainly related to variations in climatic variables, rather than average climatic conditions, are considered. However, latitude diminishes in importance when only the wealthier parts of the globe are considered. This work points to specific features of the climate system which appear key to driving economic activity, such as the variability in air pressure or the seasonal variations of dew point temperature. The implications of these findings range from a better understanding of why socio-economically better-off societies are geographically placed where they are, in the present, past and future, to informing where new economic activities could be established in order to yield favourable economic outcomes based on geography/climate conditions.
    Date: 2018–06
  3. By: Miriam Camarero (Jaume I University. Department of Economics, Av. de Vicent Sos Baynat s/n, E-12071 Castellón, Spain); Laura Montolio (University of Valencia, Department of Applied Economics II, Av. dels Tarongers, s/n Eastern Department Building E-46022 Valencia, Spain); Cecilio Tamarit (University of Valencia, INTECO Joint Research Unit. Department of Applied Economics II. PO Box 22.006 - E-46071 Valencia, Spain)
    Abstract: After two decades of academic debate on the factors that determine FDI, the discussion still remains open. This article empirically investigates the determinants of FDI activity from a macroeconomic point of view, using Spanish regional data (NUTS 2) for the period 2004-2013. We apply the Poisson Pseudo-Maximum-Likelihood estimator with country-origin fixed effects in a gravity framework. The empirical analysis revealed the following allocation patterns: FDI locational strategies in the Spanish regions are determined significantly by the economic potential and competitiveness of the regions and, in a lesser extent, by the productive capacity. We also confirm the adequacy of using the stock of FDI and obtain an improved specification of the model compared to previous empirical literature based on FDI flows. The results allow us to draw some policy implications about the prospective promotion of incoming FDI at the subnational level.
    Keywords: Foreign Direct Investment determinants; PPML; Gravity model; Spanish regions
    JEL: F21 R12 C23
    Date: 2018–09
  4. By: Aliprantis, Dionissi (Federal Reserve Bank of Cleveland); Carroll, Daniel R. (Federal Reserve Bank of Cleveland); Young, Eric R. (University of Virginia)
    Abstract: Why do high-income blacks live in neighborhoods with characteristics similar to those of low-income whites? One plausible explanation is wealth, since homeownership requires some wealth, and black households hold less wealth than white households at all levels of income. We present evidence against this hypothesis by showing that wealth does not predict sorting into neighborhood quality once race and income are taken into account. An alternative explanation is that the scarcity of high-quality black neighborhoods increases the cost of living in a high-quality neighborhood for black households with even weak race preferences. We present evidence in favor of this hypothesis by showing that sorting into neighborhood racial composition is similar across wealth levels conditional on race and income.
    Keywords: Neighborhood; Income; Wealth; Race Preference;
    JEL: H72 J15 J18 R11 R21
    Date: 2018–06–13

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