nep-geo New Economics Papers
on Economic Geography
Issue of 2018‒12‒10
seven papers chosen by
Andreas Koch
Institut für Angewandte Wirtschaftsforschung

  1. The cost of agglomeration: Land prices in cities By Pierre-Philippe Combes; Gilles Duranton; Laurent Gobillon
  2. Agglomeration and Industry Spillover Effects in the Aftermath of a Credit Shock By José Jorge; Joana Rocha
  3. Shocking Germany – A spatial analysis of German regional labor markets By Oliver Krebs
  4. The Economic Geography of Innovation By Egger, Peter; Loumeau, Nicole
  5. Varying Youth Cohort Effects on Regional Labour Market Outcomes in Germany By de Graaff, Thomas; Ozgen, Ceren; Roth, Duncan
  6. Ethnic Enclaves and Labor Market Outcomes – What Matters Most: Neighborhood, City or Region? By Öner, Özge; Klaesson, Johan

  1. By: Pierre-Philippe Combes (Département d'économie); Gilles Duranton (Pennsylvania State University); Laurent Gobillon (Institut National d'Etudes Démographiques)
    Abstract: We develop a new methodology to estimate the elasticity of urban costs with respect to city population using French house and land price data. After handling a number of estimation concerns, we find that the elasticity of urban costs increases with city population with an estimate of about 0.03 for an urban area with 100,000 inhabitants to 0.08 for an urban area of the size of Paris. Our approach also yields a number of intermediate outputs of independent interest such as the share of housing in expenditure, the elasticity of unit house and land prices with respect to city population, and within-city distance gradients for house and land prices.
    Keywords: Urban costs; House prices; Land prices; Land use; Agglomeration
    JEL: R31 R21 R14
    Date: 2018–10
  2. By: José Jorge (Faculdade de Economia, Universidade do Porto); Joana Rocha (Faculdade de Economia, Universidade do Porto)
    Abstract: This paper provides empirical evidence showing that industries with intense strategic complementarities exhibit stronger sensitivity to economic shocks. The Portuguese credit crunch of 2009 represents a negative shock for nonfinancial firms, which has created negative spillover effects among firms. Corporate investment declines significantly in industries with strong strategic complementarities following the onset of the crisis, controlling for firm fixed effects, time varying measures of financial constraints and investment opportunities. Consistent with a causal effect, the decline is greatest for firms in industries with strong strategic complementarities. To address sample selection concerns we consider several sample splits and apply a matching approach to find the best counterfactual, and confirm similar results.
    Keywords: Banking; Financial Crises; Industry Spillovers; Production Externalities; Agglomeration
    JEL: G21 D22 G01 D62 C23
    Date: 2018–11
  3. By: Oliver Krebs
    Abstract: This paper quantifies the surprisingly large heterogeneity of real income and employment effects across German counties in response to local productivity shocks. Using a quantitative model with imperfect mobility and sector-specific labor market frictions together with an outstanding data set of county level goods shipments, I identify the sources of the heterogeneity in Germany’s complex interregional linkages. I find that population mobility reduces the magnitude of local employment rate responses by a striking 70 percent on average. In all but a few counties, changes in the sectoral composition of production have a much milder effect on employment elasticities. National employment rates are less dependent on mobility with worker in- and outflows in individual counties partially cancelling out effects. For productivity shocks affecting individual sectors across all regions the composition effect is substantially magnified, the mobility effect reduced. In line with recent real world observations I find that real income and employment effects, while correlated, do not need to be of the same sign. Finally, the spatial propagation of real income effects closely follows trade linkages whereas employment effects are more complex to predict.
    Keywords: Quantitative spatial analysis, unemployment, migration, search and matching, labor market frictions
    JEL: F16 F17 R13 R23
    Date: 2018–11
  4. By: Egger, Peter; Loumeau, Nicole
    Abstract: This paper outlines a quantitative global multi-region model to assess the importance of country-level investment incentives towards innovation at the level of 5,633 regions of heterogeneous size. While incentives vary across countries (and time), the responses are largely heterogeneous across regions within as well as across countries. The reason for this heterogeneity roots in average technology differences -- in terms of the production of both output and innovation -- as well as in the geography (location) and amenities across regions. The model and quantitative analysis take the tradability of output as well as the mobility of people across regions into account. In the counterfactual equilibrium analysis we focus on the effects of R&D-investment incentives on three key variables -- place-specific employment, productivity, and welfare -- in a scenario where investment incentives towards innovation are abandoned. We find that the use of policy instruments which are designed to stimulate private R&D are globally beneficial in terms of productivity and welfare. In particular, low-amenity, peripheral places, and ones where patenting is relatively less common than elsewhere benefit more strongly than others, which implies that the studied nation-wide investment incentives also work as place-based policies. According to the quantification, about one-tenth of the long-run growth rate of real GDP on the globe can be attributed to the use of R&D investment incentives as used in the year 2005 alone.
    Keywords: Economic Geography; Innovation; labor mobility; Quantitative general equilibrium; structural estimation; Trade
    JEL: C68 F13 F14 O31 R11
    Date: 2018–11
  5. By: de Graaff, Thomas (Vrije Universiteit Amsterdam); Ozgen, Ceren (University of Birmingham); Roth, Duncan (Institute for Employment Research (IAB), Nuremberg)
    Abstract: We assess how changes in youth cohort sizes effect employment rates in German labour market regions. Replicating the conventional approach, we estimate that a percentage increase in the youth share reduces regional employment rates by −0.2%. We challenge the assumption that cohort size effects are homogenous across space and find robust evidence that the negative effect of youth cohort size is more pronounced in the labour markets of metropolitan regions. These results suggest an upward pressure on urban regional employment rates as a result of the projected decrease in the size of the German youth share.
    Keywords: employment rate, youth share, Germany, regional heterogeneity
    JEL: J1 J2 R1 R2
    Date: 2018–10
  6. By: Öner, Özge (Department of Land Economy); Klaesson, Johan (Centre for Entrepreneurship and Spatial Science, Jönköping International Business School, Jönköping)
    Abstract: The relevance of residential segregation and ethnic enclaves for labor market sorting of immigrants has been investigated by a large body of literature. Previous literature presents competing arguments and mixed results for the effects of segregation and ethnic concentration on various labor market outcomes. The geographical size of the area at which segregation and/or ethnic concentration is measured, however, is left to empirical work to determine. We argue that ethnic concentration and segregation should not be used interchangeably, and more importantly, the geographical area at which they are measured relates directly to different mechanisms. We use a probabilistic approach to identify the likelihood that an immigrant is employed or a self-employed entrepreneur in the year 2005 with respect to residential segregation and ethnic concentration at the level of the neighborhood, municipality and local labor market level jointly. We study three groups of immigrants that accentuate the differences between forced and pulled migrants: (i) the first 15 member states of European Union (referred to as EU 15) and the Nordic countries, (ii) the Balkan countries, and (iii) countries in the Middle East. We find that ethnic enclaves, proxied by ethnic concentration at varying levels indicate mixed results for the different immigrant groups we study, both for their employment and entrepreneurship probability. Whereas residential segregation has a more uniformly distributed result where its relationship to any of the two labor market outcomes is almost always negative or insignificant.
    Keywords: Immigrant entrepreneurship; Ethnic enclaves; Segregation; Push entrepreneurship; Local labor market
    JEL: F22 L26 O18 R23
    Date: 2018–11–22
  7. By: Tommaso Agasisti (Politecnico di Milano School of Management); Aleksei Egorov (National Research University Higher School of Economics); Daria Zinchenko (National Research University Higher School of Economics); Oleg Leshukov (National Research University Higher School of Economics)
    Abstract: This paper analyses the link between the efficiency of regional higher education systems and the rates of regional economic development between 2012 and 2015 in Russia. The efficiency scores are calculated at the institutional level using a double-bootstrap data envelopment analysis (DEA) procedure, taking into account the different internal characteristics of universities which may affect their production process, and the scores are then aggregated at the regional level. We formulate a regional economic growth model that considers the efficiency of regional higher education systems as one of the explanatory variables. As an econometric method, we employ a robust GMM estimator. The model also includes spatial interactions between regional economies and between regional higher education systems in neighboring regions. The findings highlight a positive, substantial and statistically significant effect of HEI efficiency on the regional economic growth rate. We also found negative spillover effects indicating that efficient regional higher education systems may extract resources from neighboring regions
    Keywords: Regional economic development; efficiency in higher education; knowledge spillovers; economic growth; Russia.
    JEL: I25 I21 E02
    Date: 2018

This nep-geo issue is ©2018 by Andreas Koch. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.