nep-geo New Economics Papers
on Economic Geography
Issue of 2018‒07‒30
seventeen papers chosen by
Andreas Koch
Institut für Angewandte Wirtschaftsforschung

  1. The Principle of Relatedness By César Hidalgo; Pierre-Alexandre Balland; Ron Boschma; Mercedes Delgado; Maryann Feldma; Koen Frenken; Edward Glaeser; Canfei He; Dieter F. Kogler; Andrea Morrison; Frank Neffke; David Rigby; Scott Stern; Siqi Zheng; Shengjun Zhu
  2. The role of industry, occupation, and location specific knowledge in the survival of new firms By Cristian Jara-Figueroa; Bogang Jun; Edward Glaeser; Cesar Hidalgo
  3. The billion pound drop: the blitz and agglomeration economics in London By Dericks, Gerard; Koster, Hans R. A.
  4. Innovating in less developed regions: what drives patenting in the lagging regions of Europe and North America By Andrés Rodríguez-Pose; Callum Wilkie
  5. Demand uncertainty, product differentiation, and entry timing under spatial competition By Takeshi Ebina; Noriaki Matsushima; Katsumasa Nishide
  6. The Economic Impacts of Constraining Home Investments By Christian A. L. Hilber; Olivier Schöni
  7. The geography of foreign investments in the EU neighbourhood By Ascani, Andrea; Crescenzi, Riccardo; Iammarino, Simona
  8. The diffusion of economic activity across space: a new approach By Carmen Camacho; Agustín Pérez-Barahona
  9. A Time-Space Dynamic Panel Data Model with Spatial Moving Average Errors By Baltagi, Badi H.; Fingleton, Bernard; Pirotte, Alain
  10. The Regional Innovation System in China: Regional comparison of technology, venture financing, and human capital focusing on Shenzhen By MOTOHASHI Kazuyuki
  11. Impacts of transport connections on port hinterlands By David Guerrero
  12. Europe's 2020 - innovation and creative capability of the Baltic Sea Region By Wedemeier, Jan; Kruse, Mirko
  13. The Local Impact of Containerization By Leah Brooks; Nicolas Gendron-Carrier; Gisela Rua
  14. Complex Economic Activities Concentrate in Large Cities By Pierre-Alexandre Balland; Cristian Jara-Figueroa; Sergio Petralia; Mathieu Steijn; David Rigby; César Hidalgo
  15. Heterogeneous Labor and Agglomeration over Generations By IHARA Ryusuke
  16. Market Potential and Global Growth over the Long Twentieth Century By David S. Jacks; Dennis Novy
  17. Understanding the effect of international remittances on undernourishment in Sub-Saharan Africa: A spatial model approach By Hamed Sambo

  1. By: César Hidalgo; Pierre-Alexandre Balland; Ron Boschma; Mercedes Delgado; Maryann Feldma; Koen Frenken; Edward Glaeser; Canfei He; Dieter F. Kogler; Andrea Morrison; Frank Neffke; David Rigby; Scott Stern; Siqi Zheng; Shengjun Zhu
    Abstract: The idea that skills, technology, and knowledge, are spatially concentrated, has a long academic tradition. Yet, only recently this hypothesis has been empirically formalized and corroborated at multiple spatial scales, for different economic activities, and for a diversity of institutional regimes. The new synthesis is an empirical principle describing the probability that a region enters - or exits - an economic activity as a function of the number of related activities pre- sent in that location. In this paper we summarize some of the recent empirical evidence that has generalized the principle of relatedness to a fact describing the entry and exit of products, industries, occupations, and technologies, at the national, regional, and metropolitan scales. We conclude by describing some of the policy implications and future avenues of research implied by this robust empirical principle.
    Keywords: economic complexity, relatedness, economic geography
    Date: 2018–07
  2. By: Cristian Jara-Figueroa; Bogang Jun; Edward Glaeser; Cesar Hidalgo
    Abstract: How do regions acquire the knowledge they need to diversify their economic activities? How does the migration of workers among firms and industries contribute to the diffusion of that knowledge? Here we measure the industry, occupation, and location specific knowledge carried by workers from one establishment to the next using a dataset summarizing the individual work history for an entire country. We study pioneer firms?firms operating in an industry that was not present in a region?because the success of pioneers is the basic unit of regional economic diversification. We find that the growth and survival of pioneers increase significantly when their first hires are workers with experience in a related industry, and with work experience in the same location, but not with past experience in a related occupation. We compare these results with new firms that are not pioneers and find that industry specific knowledge is significantly more important for pioneer than non-pioneer firms. To address endogeneity we use Bartik instruments, which leverage national fluctuations in the demand for an activity as shocks for local labor supply. The instrumental variable estimates support the finding that industry related knowledge is a predictor of the survival and growth of pioneer firms. These findings expand our understanding of the micro-mechanisms underlying regional economic diversification events.
    Keywords: industry, occupation, knowledge, firm, survival
    Date: 2018–07
  3. By: Dericks, Gerard; Koster, Hans R. A.
    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: 2018–04–01
  4. By: Andrés Rodríguez-Pose; Callum Wilkie
    Abstract: Not all economically-disadvantaged ? 'less developed' or 'lagging' ? regions are the same. They are, however, often bundled together for the purposes of innovation policy design and implementation. This paper attempts to determine whether such bundling is warranted by conducting a regional level investigation for Canada, the United States, on the one hand, and Europe, on the other, to (a) identify the structural and socioeconomic factors that drive patenting in the less developed regions of North America and Europe, respectively; and (b) explore how these factors differ between the two contexts. The empirical analysis, estimated using a mixed- model approach, reveals that, while there are similarities between the drivers of innovation in North America?s and Europe?s lagging regions, a number of important differences between the two continents prevail. The analysis also indicates that the territorial processes of innovation in North America?s and Europe?s less developed regions are more similar to those of their more developed counterparts than to one another.
    Keywords: Innovation, lagging regions, R&D, patenting, Canada, Europe, United States
    JEL: R11 R12 O32 O33
    Date: 2018–07
  5. By: Takeshi Ebina; Noriaki Matsushima; Katsumasa Nishide
    Abstract: We investigate the entry timing and location decisions under market size uncertainty with Brownian motions in a continuous-time spatial duopoly competition. We show the following results. The entry threshold of the follower non-monotonically increases in volatility, implying that the leader's monopoly periods get longer with volatility. However, the leader is more likely to increase the degree of product differentiation as the volatility rises. A larger entry cost asymmetry between the firms places the leader closer to the edge in a preemption equilibrium although such an asymmetry places the leader closer to the center in a sequential equilibrium.
    Date: 2017–07
  6. By: Christian A. L. Hilber; Olivier Schöni
    Abstract: We investigate how political backlash against wealthy investors in high-amenity places affects local residents. We exploit a quasi-natural experiment: the 'Swiss Second Home Initiative', which banned the construction of new second homes in desirable tourist locations. Consistent with our model, we find that the ban substantially lowered (increased) the price growth of primary (second) homes and increased the unemployment growth rate in the affected areas. Our findings suggest that the negative effect on local economies dominated the positive amenity-preservation effect. Constraining second home investments in locations where primary and second homes are not close substitutes may reinforce wealth inequality.
    Keywords: second homes, wealth inequality, land use regulation, housing policy, house prices, unemployment
    JEL: D63 G12 R11 R21 R31 R52
    Date: 2018–07
  7. By: Ascani, Andrea; Crescenzi, Riccardo; Iammarino, Simona
    Abstract: This paper aims at investigating the drivers of Multinational Enterprise (MNE) investment in countries linked to the 'core' of the European Union (EU-15) by different degrees of functional, economic and political integration: the EU 'New' Member states, Accession and Candidate countries, European Neighbourhood Policy countries, as well as Russia. Understanding the drivers of Foreign Investment (FDI) in these countries is highly relevant in consideration of their increasing integration into the global market and the strong influence exerted by the EU on this process. By employing data on individual greenfield investment projects for the period 2003 to 2008, this paper aims to disentangle the drivers of FDI in these countries for different industrial sectors, business functions and investment origins. The empirical results suggest that FDI in the area tends to follow market-seeking and efficiency-oriented strategies, and show path-dependency and concentration patterns that may reinforce core-periphery development trajectories in the EU neighbourhood.
    Keywords: multinational enterprises; FDI; location choices; European Union; European neighbourhood policy
    JEL: R14 J01
    Date: 2017–02–01
  8. By: Carmen Camacho (PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Panthéon-Sorbonne - ENS Paris - École normale supérieure - Paris - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique, PSE - Paris School of Economics); Agustín Pérez-Barahona (THEMA - Théorie économique, modélisation et applications - UCP - Université de Cergy Pontoise - Université Paris-Seine - CNRS - Centre National de la Recherche Scientifique)
    Abstract: Dynamic spatial theory has been a fruitful approach to understand economic phenomena involving time and space. However, this new field has opened a set of questions still unresolved in the literature. For instance, the identification of the social optimal allocation of economic activity across time and space has not been ensured yet in economic growth. By means of a monotone method, we study in this paper the optimal solution of spatial Ramsey-type models. We analytically prove, under fairly general assumptions, the existence of a unique social optimum. The iterative nature of this approach also allows us to present a new algorithm to simulate the optimal trajectories of the economy. We provide two economic illustrations of our method. Firstly, we apply our existence result to the spatial growth model and to a framework for optimal land-use planning, concluding that these problems are well-posed. We then consider the spatial growth model in order to investigate the importance of capital mobility in economic growth. We particularly underline the spatial dynamic implications of this feature on social welfare and income inequality.
    Keywords: Control,Spatial dynamics,Ramsey model,Partial differential equations
    Date: 2017–12
  9. By: Baltagi, Badi H. (Syracuse University); Fingleton, Bernard (University of Cambridge); Pirotte, Alain (University of Paris 2)
    Abstract: This paper focuses on the estimation and predictive performance of several estimators for the time-space dynamic panel data model with Spatial Moving Average Random Effects (SMA-RE) structure of the disturbances. A dynamic spatial Generalized Moments (GM) estimator is proposed which combines the approaches proposed by Baltagi, Fingleton and Pirotte (2014) and Fingleton (2008). The main idea is to mix non-spatial and spatial instruments to obtain consistent estimates of the parameters. Then, a forecasting approach is proposed and a linear predictor is derived. Using Monte Carlo simulations, we compare the short-run and long-run effects and evaluate the predictive efficiencies of optimal and various suboptimal predictors using the Root Mean Square Error (RMSE) criterion. Last, our approach is illustrated by an application in geographical economics which studies the employment levels across 255 NUTS regions of the EU over the period 2001–2012, with the last two years reserved for prediction.
    Keywords: panel data, spatial lag, error components, time-space, dynamic, OLS, within, GM, spatial autocorrelation, direct and indirect effects, moving average, prediction, simulations, rook contiguity, interregional trade
    JEL: C23
    Date: 2018–06
  10. By: MOTOHASHI Kazuyuki
    Abstract: Shenzhen has become a hot spot of innovation in China. In this paper, we characterize Shenzhen's innovation by comparing it with that of Beijing and Shanghai using patent and venture investment data. First, the role of universities and public research institutions is small in Shenzhen's innovation system as compared to Beijing and Shanghai. In contrast, private high-tech firms, such as Huawei, ZTE, and Tencent, are leading the innovation scene in Shenzhen. Second, we find that high-tech start-ups are geographically concentrated in the Nanshan district, particularly Yuehai Jiedao, where national-level high-tech zones are located. Recently, the number of start-ups has been increasing, and local, big firms, such as ZTE, are providing the human resources for such start-up firms. Third, inventor-disambiguated information based on patent data allows us to look at interorganizational talent movements. We find that such movements tend to occur within short distances, such as within the same district (e.g., Nanshan district). To sum up, Shenzhen has truly become a hot spot of high-tech entrepreneurship and innovation, but the dynamics are very much regionally bound. Therefore, it is important to become a local player in order to take advantage of innovation movements in Shenzhen by means of minority investment by corporate venture capital into local start-up firms.
    Date: 2018–07
  11. By: David Guerrero (IFSTTAR/AME/SPLOTT - Systèmes Productifs, Logistique, Organisation des Transports et Travail - IFSTTAR - Institut Français des Sciences et Technologies des Transports, de l'Aménagement et des Réseaux - Communauté Université Paris-Est)
    Abstract: This paper examines the spatial distribution of freight flows between the French NUTS-3 regions and West European ports. It focuses on the impacts of the quality of inland and maritime connections on the scope of hinterlands. The results of a spatial interaction analysis reveal that the inland distance constraint is significantly lower when intermodal connections such as regular barge or rail services are available. A case study focused on East Asian trade confirmed that factors related to maritime connectivity, such as the frequency of services at ports and their ability to accommodate large vessels, also contribute to limit the distance impedance. However, these effects vary considerably depending on the value density of the cargo.
    Date: 2018–01–01
  12. By: Wedemeier, Jan; Kruse, Mirko
    Abstract: The ongoing structural change towards the service and knowledge societies, innovations, and the increasing integration of markets will have considerable influence on the European Union, particularly on the Eastern members of EU. In March 2010, the European Commission released the Europe-2020 strategy, which shall push the EU to be the smartest and most competitive region in the world. Among the European Union members, the Baltic Sea countries are effective in bringing up innovative cluster solutions, cooperation between science and business. Innovations are crucial for further economic development and prosperity. However, the innovation headline indicators are ambitiously defined targets of the Europe-2020 strategy. The paper at hand analyses and highlights the innovation and creative capability within the Europe 2020 strategy framework.
    Keywords: innovation,Baltic Sea Region,Europe 2020,creative sector
    JEL: O3 R11 R12 Z1
    Date: 2018
  13. By: Leah Brooks; Nicolas Gendron-Carrier; Gisela Rua
    Abstract: We investigate how containerization impacts local economic activity. Containerization is premised on a simple insight: packaging goods for waterborne trade into a standardized container makes them dramatically cheaper to move. We use a novel cost-shifter instrument -- port depth pre-containerization -- to contend with the non-random adoption of containerization by ports. Container ships sit much deeper in the water than their predecessors, making initially deep ports cheaper to containerize. Consistent with New Economic Geography models, we find that counties near container ports grow an additional 70 percent from 1950 to 2010. Gains predominate in counties with initially low population density and manufacturing.
    Keywords: Containerization ; Globalization ; Local economic activity
    JEL: R11 F15
    Date: 2018–07–10
  14. By: Pierre-Alexandre Balland; Cristian Jara-Figueroa; Sergio Petralia; Mathieu Steijn; David Rigby; César Hidalgo
    Abstract: Why do some economic activities agglomerate more than others? And, why does the agglomeration of some economic activities continue to increase despite recent developments in communication and transportation technologies? In this paper, we present evidence that complex economic activities concentrate more in large cities. We find this to be true for technologies, scientific publications, industries, and occupations. Using historical patent data, we show that the urban concentration of complex economic activities has been continuously increasing since 1850. These findings suggest that the increasing urban concentration of jobs and innovation might be a consequence of the growing complexity of the economy.
    Keywords: economic complexity, complexity, scaling, occupations, cities, agglomeration
    Date: 2018–07
  15. By: IHARA Ryusuke
    Abstract: The productivity in cities is enhanced by the interaction between heterogeneous workers who are born and raised in various regions and countries. However, such benefit does not last forever because the composition of workers in cities becomes homogenized over generations. To evaluate the agglomeration economies and diseconomies of labor heterogeneity, this paper constructs a two-region non-overlapping generations model. Workers are assumed to be differentiated in terms of their birthplaces. Although they may migrate from their home regions to other regions to work as foreigners, they should incur an adjustment cost due to cultural differences. Assuming that the distribution of workers' births depends on their previous generation's residency choices, this study obtained the following results: (i) In the short run, residency choice leads workers to disperse across regions in each period. In the long run, however, the accumulation of residency choices over time makes birth distributions concentrated in a single region. Consequently, the composition of the workers becomes homogenized and they continue to reside in one region in a steady-state equilibrium. (ii) Social welfare is maximized by an even distribution of births involving a persistent circulation of heterogeneous labor. A comparison between the social optimum and the steady-state equilibrium indicates a dynamic inefficiency due to generational transition. (iii) When housing consumption is introduced as a dispersion force, social welfare can be maximized in a steady-state equilibrium with an equal distribution. (iv) Contrarily, even when another agglomeration economy is introduced on account of the quantity of labor, distribution of births in a steady-state equilibrium is still concentrated in comparison to the social optimum.
    Date: 2018–06
  16. By: David S. Jacks; Dennis Novy
    Abstract: We examine the evolution of market potential and its role in driving economic growth over the long twentieth century. Theoretically, we exploit a structural gravity model to derive a closed-form solution for a widely-used measure of market potential. We are thus able to express market potential as a function of directly observable and easily estimated variables. Empirically, we collect a large dataset on aggregate and bilateral trade flows as well as output for 51 countries. We find that market potential exhibits an upward trend across all regions of the world from the early 1930s and that this trend significantly deviates from the evolution of world GDP. Finally, using exogenous variation in trade-related distances to world markets, we demonstrate a significant causal role of market potential in driving global income growth over this period.
    Keywords: economic geography, market potential, structural gravity, trade costs
    JEL: F1 N7
    Date: 2018–07
  17. By: Hamed Sambo (CEPN - Centre d'Economie de l'Université Paris Nord - UP13 - Université Paris 13 - USPC - Université Sorbonne Paris Cité - CNRS - Centre National de la Recherche Scientifique)
    Abstract: This paper investigates the impact of remittances on undernourishment in Sub-Saharan Africa using panel data from 35 countries spanning the years 2001-2011. The panel Spatial Error Model (SEM) was used after taking into account the spatial interaction between countries. We find that remittances contribute to the reduction of undernourishment in Sub-Saharan African. However, the elasticity of calorie consumption to remittances is narrow. Moreover, the impact of remittances is more pronounced in intermediate income deciles countries than in the countries in lower income deciles and higher income deciles. Abstract This paper investigates the impact of remittances on undernourishment in Sub-Saharan Africa using panel data from 35 countries spanning the years 2001-2011. The panel Spatial Error Model (SEM) was used after taking into account the spatial interaction between countries. We find that remittances contribute to the reduction of undernourishment in Sub-Saharan African. However, the elasticity of calorie consumption to remittances is narrow. Moreover, the impact of remittances is more pronounced in intermediate income deciles countries than in the countries in lower income deciles and higher income deciles.
    Keywords: Remittances, Undernourishment, Spatial Error Model, Sub-Saharan Africa
    Date: 2018–01–24

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