nep-geo New Economics Papers
on Economic Geography
Issue of 2018‒11‒19
eight papers chosen by
Andreas Koch
Institut für Angewandte Wirtschaftsforschung

  1. Labor supply and the business cycle: The “Bandwagon Worker Effect” By Martín Román, Ángel L.; Cuéllar-Martín, Jaime; Moral de Blas, Alfonso
  2. Global Connectedness and Local Innovation in Industrial Clusters By Ekaterina Turkina; Ari Van Assche
  3. Matching in Cities By Wolfgang Dauth; Sebastian Findeisen; Enrico Moretti; Jens Suedekum
  4. Entrepreneurship and ageing: Exploring an economic geography perspective By Heike Mayer, Birgit Leick
  5. Structural Transformation and Spillovers from Industrial Areas By Blakeslee, David; Chaurey, Ritam; Fishman, Ram; Malik, Samreen
  6. Oligarchic place leadership and resistance to change in industrial districts By Marco Bellandi; Monica Plechero; Erica Santini
  7. Optimal Spatial Taxation: Are Big Cities too Small? By Jan Eeckhout; Nezih Guner
  8. Location Choices of Swedish Independent Schools: How Does Allowing for Private Provision Affect the Geography of the Education Market? By Edmark, Karin

  1. By: Martín Román, Ángel L.; Cuéllar-Martín, Jaime; Moral de Blas, Alfonso
    Abstract: The relationship between the labor force participation and the business cycle has become a topic in the economic literature. However, few studies have considered whether the cyclical sensitivity of the labor force participation is influenced by “social effects”. In this paper, we construct a theoretical model to develop the “Added Worker Effect” and the “Discouraged Worker Effect”, and we integrate the “social effects”, coining a new concept, the Bandwagon Worker Effect (BWE). To estimate the cyclical sensitivity of the labor force participation, we employ a panel dataset of fifty Spanish provinces for the period 1977–2015. Finally, we use spatial econometrics techniques to test the existence of the BWE in the local labor markets in Spain. Our results reveal that there exists a positive spatial dependence in the cyclical sensitivity of the labor force participation that decreases as we fix a laxer neighborhood criterion, which verifies the existence of the BWE. From the perspective of economic policy, our work confirms that “social effects” play a key role at the time of determining the economic dynamics of the territories.
    Keywords: Labor force participation,business cycle,regional labor markets,bandwagon effect,spatial dependence
    JEL: C23 D03 E32 J21 R23
    Date: 2018
  2. By: Ekaterina Turkina; Ari Van Assche
    Abstract: In today’s knowledge economy, clusters are a key driver of a country’s competitiveness. Yet a cluster’s technological base is now more than ever influenced by constituent firms’ actions to tap into distant knowledge sources. Drawing on a social network perspective, and distinguishing between horizontal versus vertical organization-based linkages, we explore the effects of a cluster’s connectedness to foreign locations on its innovation performance. We show that improvements in horizontal and vertical connectedness both stimulate a cluster’s innovation performance, but that their relative effects vary across cluster types. Innovation in knowledge-intensive clusters disproportionately benefits from enhancements in their constituent firms’ horizontal connectedness to foreign knowledge hotspots. Innovation in labor-intensive clusters mostly gains from stronger vertical connections by their firms to central value chain players abroad. We discuss the implications of our findings for research on global knowledge sourcing and cluster upgrading.
    Keywords: Cluster,Knowledge Sourcing,Connectedness,Network Analysis,Patent,
    Date: 2018–04–23
  3. By: Wolfgang Dauth; Sebastian Findeisen; Enrico Moretti; Jens Suedekum
    Abstract: In most countries, average wages tend to be higher in larger cities. In this paper, we focus on the role played by the matching of workers to firms in explaining geographical wage differences. Using rich administrative German data for 1985-2014, we show that wages in large cities are higher not only because large cities attract more high-quality workers, but also because high-quality workers are significantly more likely to be matched to high-quality plants. In particular, we find that assortative matching—measured by the correlation of worker fixed effects and plant fixed effects—is significantly stronger in large cities. The elasticity of assortative matching with respect to population has increased by around 75% in the last 30 years. We estimate that in a hypothetical scenario in which we keep the quality and location of German workers and plants unchanged, and equalize within-city assortative matching geographical wage inequality in Germany would decrease significantly. Overall, assortative matching magnifies wage differences caused by worker sorting and is a key factor in explaining the growth of wage disparities between communities over the last three decades. If high-quality workers and firms are complements in production, moreover, increased assortative matching will increase aggregate earnings. We estimate that the increase in within-city assortative matching observed between 1985 and 2014 increased aggregate labor earnings in Germany by 2.1%, or 31.32 billion euros. We conclude that assortative matching increases earnings inequality across communities, but it also generates important efficiency gains for the German economy as a whole.
    JEL: J0 R0
    Date: 2018–11
  4. By: Heike Mayer, Birgit Leick
    Abstract: The traditional understanding of entrepreneurship is biased towards certain population groups and specific locations. Yet the literature points to a much more diverse perspective on entrepreneurship and regional development. In this paper, we argue that regional characteristics such as the extent to which a region faces demographic change (population growth or decline, population ageing, emigration of youth, etc.) may exert a strong influence both on the individual propensity to start a business and the aggregate numbers of entrepreneurial activities. In addition, demographic change also influences the types of businesses or business models found in different regional contexts. With this idea in mind, we argue that the opportunities and challenges that are associated with old age entrepreneurship depend strongly on the regional context. We place old age entrepreneurship into a regional context and illustrate the ways in which opportunities and constraints arise from such a context and, in particular, from demographic change occurring in different regional types.
    Keywords: Entrepreneurship, Ageing, Silver Economy, Regional Development
    Date: 2018–11
  5. By: Blakeslee, David (New York University, Abu Dhabi); Chaurey, Ritam (The Johns Hopkins Carey Business School); Fishman, Ram (Tel Aviv University); Malik, Samreen (New York University, Abu Dhabi)
    Abstract: Like many developing countries, India features a variety of land-use restrictions that make it difficult to establish industrial firms on agricultural lands. Such policies have received some of the blame for the slow pace of industrialization, and there is widespread agreement on the need for reform. Traditional agrarian economies, however, have many features that may serve as barriers to industrialization, making it unclear that land-use reform would be sufficient for promoting manufacturing growth in rural areas. To better understand the role played by such regulations, we study the effects of the Industrial Areas (IAs) program in India, which facilitated the establishment of industrial firms in areas that had previously been restricted to agriculture. We find that IAs caused a large increase in the number of firms and employment, and that there were substantial spillovers to neighboring villages. Furthermore, IAs trigger a classic "structural transformation" of the economy, with a shift of workers from agricultural to non-agricultural employment, and the creation of numerous small manufacturing and agricultural firms.
    Keywords: industrial areas, spillovers, labor market
    JEL: O12 O25 R2
    Date: 2018–10
  6. By: Marco Bellandi; Monica Plechero; Erica Santini
    Abstract: The capability of local productive systems to react positively to disruptive challenges, entering new paths of development, depends on the presence of supportive local institutions, organizations and actors. A quite recent literature points out the key support given to path transformation by sets of local actors expressing a place leadership (PL). With a focus on industrial districts (IDs), characterized by a manufacturing specialization and a decentralized business organization based on SMEs, the paper aims at exploring conditions of a PL resisting change. We develop a conceptual frame that enables the identification of three different types of PL: open PL, corporate PL, and oligarchic PL. Specifically, oligarchic PL allows to reflect on models of developments and structural conditions where changes to meet disruptive challenges could be intentionally obstructed. In this regard, the paper provides some considerations and examples on how a model deviating from the canonical ID of local development and expressing an oligarchic PL could drive local productive systems through lock-in conditions.
    Keywords: Industrial District, Place Leadership, Lock-in Conditions, ID’ Life Cycle
    JEL: L60 O14 O30
    Date: 2018
  7. By: Jan Eeckhout (UCL and Barcelona GSE-UPF-ICREA); Nezih Guner (CEMFI, Centro de Estudios Monetarios y Financieros)
    Abstract: We analyze the role of optimal income taxation across different local labor markets. Should labor in large cities be taxed differently than in small cities? We find that a planner who needs to raise a given level of revenue and is constrained by free mobility of labor across cities does not choose equal taxes for cities of different sizes. The optimal tax schedule is location specific and tax differences between large and small cities depends on the level of government spending, the concentration of housing wealth and the strength of agglomeration economies. Our estimates for the US imply higher optimal marginal rates in big cities than in small cities. Under the current Federal Income tax code with progressive taxes, marginal rates are already higher in big cities which have higher wages, but the optimal difference we estimate is lower than what is currently observed. Simulating the US economy under the optimal tax schedule, there are large effects on population mobility: the fraction of population in the 5 largest cities grows by 7.6% with 3.4% of the country-wide population moving to bigger cities. The welfare gains however are smaller. This is due to the fact that much of the output gains are spent on the increased costs of housing construction in bigger cities. Aggregate goods consumption goes up by 1.51% while aggregate housing consumption goes down by 1.70%.
    Keywords: Misallocation, taxation, population mobility, city size, general equilibrium.
    JEL: H21 J61 R12 R13
    Date: 2017–01
  8. By: Edmark, Karin (Swedish Institute for Social Research)
    Abstract: This paper studies the location decisions of Swedish start-up independent schools. It makes use of the great expansion of independent schools following a reform implemented in 1992 to test what local market characteristics are correlated with independent school entry. The results suggest that independent schools are more likely to choose locations with a higher share of students with high-educated parents; a higher student population density; and a lower share of students with Swedish-born parents. There is also some evidence that independent schools are less likely to locate in municipalities with a left-wing political majority. These results are robust to various alternative and flexible definitions of local school markets, which were employed in order to alleviate the Modifiable Areal Unit Problem. For some of the included variables, the definition of the local market however had a large impact on the results, suggesting that the issue of how to define regions in spatial analyses can be important.
    Keywords: Private provision; Mixed markets; Education sector; Modifiable Areal Unit Problem
    JEL: H44 I28 L19 R32
    Date: 2018–11–05

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