nep-geo New Economics Papers
on Economic Geography
Issue of 2018‒10‒01
six papers chosen by
Andreas Koch
Institut für Angewandte Wirtschaftsforschung

  1. Does Foreign Direct Investment Lead to Industrial Agglomeration By Hsu, Wen-Tai; Lu, Yi; Luo, Xuan; Zhu, Lianming
  2. Subways and Urban Growth: Evidence from Earth By Marco Gonzalez-Navarro; Matthew A. Turner
  3. The Making of the Modern Metropolis: Evidence from London By Stephan Heblich; Stephen J. Redding; Daniel M. Sturm
  4. Long-run spatial inequality in South Africa: early settlement patterns and separate development By Dieter von Fintel
  5. Collaborative knowledge creation: Evidence from Japanese patent data By Mori, Tomoya; Sakaguchi, Shosei
  6. Infrastructure Grants and the Performance of Microenterprises By Chaurey, Ritam; Le, Duong Trung

  1. By: Hsu, Wen-Tai (School of Economics, Singapore Management University); Lu, Yi (Tsinghua University); Luo, Xuan (INSEAD); Zhu, Lianming (Osaka University)
    Abstract: This paper studies the effect of foreign direct investment (FDI) on industrial agglomeration. Using the differential effects of FDI deregulation in 2002 in China on different industries, we find that FDI actually affects industrial agglomeration negatively. This result is somewhat counter-intuitive, as the conventional wisdom tends to suggest that FDI attracts domestic firms to cluster for various agglomeration benefits, in particular technology spillovers. To reconcile our empirical findings and the conventional wisdom, we develop a theory of FDI and agglomeration based on two counter-veiling forces. Technology diffusion from FDI attracts domestic firms to cluster, but fiercer competition drives firms away. Which force dominates depends on the scale of the economy. When the economy is sufficiently large, FDI discourages agglomeration. We find various evidence on this competition mechanism.
    Keywords: Industrial agglomeration; Ellison-Glaeser index; Competition; Foreign direct investment; Special economic zones; WTO; China
    Date: 2018–09–02
  2. By: Marco Gonzalez-Navarro; Matthew A. Turner
    Abstract: We investigate the relationship between the extent of a city’s subway network, its population and its spatial configuration. For the 632 largest cities in the world we construct panel data describing population, measures of centralization calculated from lights at night data, and the extent of each of the 138 subway systems in these cities. These data indicate that large cities are more likely to have subways but that subways have an economically insignificant effect on urban population growth. Our data also indicate that subways cause cities to decentralize, although the effect is smaller than previously documented effects of highways on decentralization. For a subset of subway cities we observe panel data describing subway and bus ridership. For those cities we find that a 10% increase in subway extent causes about a 6% increase in subway ridership and has no effect on bus ridership.
    JEL: L91 R11 R14 R4
    Date: 2018–09
  3. By: Stephan Heblich; Stephen J. Redding; Daniel M. Sturm
    Abstract: Modern metropolitan areas involve large concentrations of economic activity and the transport of millions of people each day between their residence and workplace. We use the revolution in transport technology from the invention of steam railways, newly-constructed spatially-disaggregated data for London from 1801-1921, and a quantitative urban model to provide evidence on the role of these commuting flows in supporting such concentrations of economic activity. Steamrailwaysdramaticallyreducedtraveltimesandpermittedthefirstlarge-scaleseparationof workplace and residence. We show that our model is able to account for the observed changes in the organization of economic activity, both qualitatively and quantitatively. In counterfactuals, we find that removing the entire railway network reduces the population and the value of land and buildings in Greater London by 20 percent or more, and brings down commuting into the City of London from more than 370,000 to less than 60,000 workers.
    Keywords: agglomeration, urbanization, transportation
    JEL: O18 R12 R40
    Date: 2018–09
  4. By: Dieter von Fintel (Department of Economics, Stellenbosch University)
    Abstract: New economic geography theories predict that historically densely settled areas also become more industrialised. Industrial agglomeration has therefore cultivated spatial inequalities in all parts of the world. South Africa presents an interesting case study, where institutional failures interrupted the ‘usual’ agglomeration process. On the one hand, current day metropolitan regions are located in historically densely populated areas. On the other hand, apartheid-era homelands also had highly concentrated populations, but did not industrialise to the same extent as other parts of South Africa. Much earlier in history, following the mfecane, these locations attracted migrants in search of favourable agricultural conditions and physical security in the face of conflict (they were high rainfall, rugged areas). The benefit of settling in these areas, however, only remained prior to imposed restrictions on land ownership (1913 Land Act) and movement of people (during apartheid). This paper decomposes modern spatial inequality, and establishes that agglomerations and historical institutional failures explain large proportions of spatial inequality. Furthermore, the homelands wage penalty reverses once these controls are introduced into various models: had agglomeration taken its course without institutional constraints, the homelands would likely have developed into high paying local economies. While new economic geography theories hold in the urban core, the densely populated former homelands did not follow this trajectory. Spatial inequality is therefore more severe than it would have been had institutional failures not prevented the former homelands from industrialising at the same pace as other historically densely populated areas.
    Keywords: Spatial inequality, economic geography, apartheid homelands, African economic history
    JEL: N97 R11 D31
    Date: 2018
  5. By: Mori, Tomoya; Sakaguchi, Shosei
    Abstract: In this paper, we quantitatively characterize the mechanism of collaborative knowledge creation at the individual researcher level a la Berliant and Fujita(2008) by using Japanese patent data. The key driver for developing new ideas is found to be the exchange of differentiated knowledge among collaborators. To stay creative, inventors seek opportunities to shift their technological expertise to unexplored niches by utilizing the differentiated knowledge of new collaborators in addition to their own stock of knowledge. In particular, while collaborators' differentiated knowledge raises all the average cited count, average (technological) novelty and the quantity of patents for which an inventor contributes to the development, it has the largest impact on the average novelty among the three.
    Keywords: Knowledge creation, Collaboration, Differentiated knowledge, Technological novelty, Technological shift, Recombination, Patents, Network, Strategic interactions
    JEL: C33 C36 D83 D85 O31 R11
    Date: 2018–08–29
  6. By: Chaurey, Ritam (The Johns Hopkins Carey Business School); Le, Duong Trung (Binghamton University, New York)
    Abstract: We evaluate the impact of a place-based infrastructure development scheme directed towards India's most "backward" districts, on the performance of microenterprises. "Backward" districts were selected based on a transparent score-based assignment mechanism. Using a Fuzzy Regression Discontinuity Design, we find that firms in treated districts had higher profits, revenues, and employment. Improvements in electrification was an important channel driving these results, as firms used more electricity and had a lower likelihood of facing a power cut. We also find increases in migrants, and proportion of new firms in treated districts, along with negative spillovers in areas closer to the treated districts.
    Keywords: infrastructure, microenterprises, place-based policy, regression discontinuity
    JEL: O12 O18 O25 R11
    Date: 2018–08

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