nep-geo New Economics Papers
on Economic Geography
Issue of 2018‒10‒29
six papers chosen by
Andreas Koch
Institut für Angewandte Wirtschaftsforschung

  1. Absorptive capacity, economic freedom and the conditional effects of regional policy. By Jonathan Eberle; Thomas Brenner; Timo Mitze
  2. Optimal Public Investment in Economic Centers and the Periphery By Meurers, Martin; Moenius, Johannes
  3. Resource Dependence and the Causes of Local Economic Growth: An Empirical Investigation By Rian Hilmawan; Jeremy Clark
  4. Distance and Decline: The Case of Petersburg, Virginia By Owens, Raymond E.; Pinto, Santiago
  5. Fiscal Fragmentation and the Spatial Distribution of Crime in the United States By Jinghua Lei; Jenny Ligthart (deceased); Mark Rider; Ruixin Wang
  6. EU regions and the upgrading for the digital age By Antonio Vezzani; Emanuele Pugliese; Petros Gkotsis

  1. By: Jonathan Eberle (Department of Geography, Philipps University Marburg); Thomas Brenner (Department of Geography, Philipps University Marburg); Timo Mitze (Department of Business and Economics, University of Southern Denmark)
    Abstract: This paper analyzes the role played by regional conditioning factors, namely absorptive capacity and economic freedom, for the working of regional policy in Germany. We construct synthetic composite indicators to measure differences in these factors across German regions and stratify regions by their respective values. We then identify the subsample-specific transmission channels of regional policies in a spatial panel vector-autoregressive (VAR) framework and compare the direction and magnitude of effects by impulse-response function analysis and ex-post t-tests. The results point to two main channels of policy impact: While regions with low levels of absorptive capacity and economic freedom benefit from public funding only in terms of a traditional funding channel (i.e. higher investment rates and partly increased human capital levels), the link between regional policy, GDP and technology growth is very weak for these regions. In comparison, our findings hint at significant positive effects on regional GDP per workforce and patent activity for regions with a high absorptive capacity and economic freedom (i.e. a knowledge-based funding channel). This underlines the role of regional conditions for the direction and magnitude of funding effects and should be considered by policy makers as a means to trigger policy effectiveness in times of stagnating or decreasing funding volumes.
    Keywords: regional policy, production function, absorptive capacity, economic freedom, SpPVAR, impulse-response functions
    JEL: C33 R11 R58 O38 O47
    Date: 2018–10
  2. By: Meurers, Martin; Moenius, Johannes
    Abstract: We analyze productivity enhancing public expenditure in a spatial economic model with labor mobility, firm-specific increasing returns to scale, and transport costs. Building on Krugman (1991), Fujita, Krugman and Venables (1999) and Redding (2016), we compare optimal investment and tax policies of fiscally autonomous regions to those of a benevolent central planer. We find transport costs and the size of scale effects to influence optimal tax and spending rates under both regimes. For sufficiently low transport costs and low substitutability between manufactured goods, regional fiscal autonomy leads to underinvestment: The lower the transport costs, the lower the local investment, and the higher the potential welfare gain through centralized policies. Our results challenge the view that local public goods should be financed entirely by local governments. They also help explain the recent decline of public investment at the municipal level in fiscally decentralized countries like Germany.
    Keywords: quantitative spatial economics,public investment,fiscal federalism
    JEL: R12 R53 H72 H77
    Date: 2018
  3. By: Rian Hilmawan; Jeremy Clark (University of Canterbury)
    Abstract: Previous research has found that in Indonesia, a resource giant in South East Asia, resource dependence is positively associated with economic growth, contrary to a 'resource curse' hypothesis. We test four potential causal mechanisms for this positive effect: spill overs to manufacturing, higher education provision, improvements in institutional quality, and investment in public capital. We follow 390 districts within Indonesia from 2006 to 2015, using four alternative measures of resource dependence, and instrumenting for their potential endogeneity. We first confirm a positive overall effect of resource dependence on real per capita Gross Regional Domestic Product. We then test the extent to which resource dependence positively affects manufacturing, education, public investment, and district institutional quality. We finally test the extent to which these factors contribute to growth. We find that resource dependence aids growth in part by raising measures of district institutional quality. Resource dependence also raises net high school enrolment rates, though we do not find that this in turn raises growth. Conversely, while higher capital spending by districts raises growth, we find no evidence that this share is affected by resource dependence. In auxiliary analysis, we find little support for the hypothesis that resource dependence benefits growth more (or only) for districts that begin with higher institutional quality.
    Keywords: Resource dependence, causal channels, economic growth, institutional quality
    JEL: Q32 Q33 Q38 O13 O43 O47
    Date: 2018–10–01
  4. By: Owens, Raymond E. (Federal Reserve Bank of Richmond); Pinto, Santiago (Federal Reserve Bank of Richmond)
    Abstract: Petersburg, Virginia, prospered over two centuries as a center of production and trade. However, the city experienced economic difficulties beginning in the 1980s as a large number of layoffs at production plants in the area coincided with an erosion of retail trade in the city. Prolonged economic decline followed. In contrast, somewhat similar shocks in other moderate-sized cities in Virginia were followed by gradual economic recovery. We examine these differing outcomes and offer an explanation that hinges on the proximity of Petersburg to its larger neighbor, the greater Richmond area. We find evidence suggesting that after the job declines, higher-skilled residents in Petersburg initially commuted to jobs nearer to Richmond, later relocating from Petersburg toward Richmond--an option not readily available in the other Virginia cities considered. We suggest that, as a result, Petersburg suffered a sharp decline in tax revenues and that municipal costs could not be proportionately scaled down, leading to severe fiscal stress.
    Keywords: spatial equilibrium; urban decline
    JEL: R23 R40 R51
    Date: 2018–10–16
  5. By: Jinghua Lei (School of Finance,Renmin University of China); Jenny Ligthart (deceased); Mark Rider (Department of Economics, Andrew Young School of Policy Studies); Ruixin Wang (School of Economics and Management, Harbin Institute of Technology, Shenzhen)
    Abstract: We investigate the effect of fiscal fragmentation on crime and its spatial distribution among jurisdictions in metropolitan areas in the United States. We begin by developing a positive model of local government provision of public safety, in which fiscal fragmentation influences the provision of public safety through three channels: X-efficiency, interjurisdictional-spillover effects, and Tiebout-sorting effects. Our model predicts that fiscal fragmentation creates an efficiency-equity trade-off in the provision of public safety. To investigate this tradeoff, we estimate several a variety of models using U.S. county-level, panel data drawn from a sample of metropolitan areas for census years 1990, 2000, and 2010. Our findings suggest that fiscal fragmentation has a negative effect on the aggregated crime rate in a metropolitan area which we interpret as evidence of an increase in efficiency. We also find that fiscal fragmentation increases the disparities in crime rates among jurisdictions in a metropolitan area. To further explore the underlying mechanisms, we examine interjurisdictional-spillover and Tiebout-sorting effects of fiscal fragmentation in a Spatial-Autoregressive Durbin model with multiplicative spatial interaction terms. Since conventional estimation methods are not suitable for the task at hand, we derive an innovative Maximum Likelihood Estimator for our empirical model. As predicted by the theory, we find strong evidence that both interjurisdictional spillover and Tiebout-sorting effects have a positive effect on the spatial correlation in crime rates among jurisdictions in a metropolitan area.
    Date: 2018–10
  6. By: Antonio Vezzani (European Commission – JRC); Emanuele Pugliese (European Commission - JRC); Petros Gkotsis (European Commission - JRC)
    Abstract: In this work we use patent data from the European patent office (EPO) to assess the capabilities of EU regions in developing digital technologies especially focusing on those that are more closely related to the digital transformation. More specifically, we measure ICT patents by considering those containing digital codes, as defined by the OECD. The penetration of digital technologies in the development of innovative products is instead captured by the co-occurrence of digital and non-digital codes within patent documents; we call these patents ICT-combining patents.
    Keywords: Industrial transformation, Industry, Digital technologies, ICT, Regional specialisation
    JEL: O30 O14 R10 R58
    Date: 2018–10

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