nep-geo New Economics Papers
on Economic Geography
Issue of 2019‒02‒18
ten papers chosen by
Andreas Koch
Institut für Angewandte Wirtschaftsforschung

  1. “Technological cooperation and R&D outsourcing at the rm level: The role of the regional context” By Damián Tojeiro-Rivero; Rosina Moreno
  2. Spatial Linkages, Global Shocks, and Local Labor Markets: Theory and Evidence By Rodrigo Adão; Costas Arkolakis; Federico Espósito
  3. Cluster externalities, firm capabilities, and the recessionary shock: How the macro-to-micro-transition shapes firm performance during stable times and times of crisis By Christian Hundt; Linus Holtermann; Jonas Steeger; Johannes Bersch
  4. Unequal Migration and Urbanisation Gains in China By Pierre-Philippe Combes; Sylvie Démurger; Shi Li; Jianguo Wang
  6. “Green regions and local firms’ innovation” By Lorena M. D’Agostino; Rosina Moreno
  7. Global labor flow network reveals the hierarchical organization and dynamics of geo-industrial clusters in the world economy By Jaehyuk Park; Ian Wood; Elise Jing; Azadeh Nematzadeh; Souvik Ghosh; Michael Conover; Yong-Yeol Ahn
  8. Alignment of Multinational Firms along Global Value Chains: A Network-based Perspective By Charlie Joyez
  9. The economic effects of big events: evidence from the Great Jubilee 2000 in Rome By Raffaello Bronzini; Sauro Mocetti; Matteo Mongardini
  10. Robust Tests for Convergence Clubs By Luisa Corrado; Thanasis Stengos; Melvyn Weeks; M. Ege Yazgan

  1. By: Damián Tojeiro-Rivero (AQR-IREA, University of Barcelona); Rosina Moreno (AQR-IREA, University of Barcelona)
    Abstract: Much has been said about the role that technological networking activities play on the innovative performance of rms, but little is known about the relevance of the context where the rm is locate shaping the eciency of such networking activities. In this article we hypothesize that the transformation of rms' networking activities into innovation may vary depending on the regional environment in which the rm is located. For Spanish manufactures in the period 2000-12 and through the use of a multilevel framework, we obtain that after controlling for the rm's characteristics, the regional context has not only a direct eect on rms' innovation performance, but it also conditions the returns to rms' networking activities, although dierently in the case of cooperation and outsourcing. Cooperating in innovation activities is more benecial for those rms located in a knowledge intensive region, whereas R&D outsourcing seems to be more protable for rms in regions with a low knowledge pool.
    Keywords: Technological cooperation, R&D Outsourcing, Local Knowledge Spillovers; Multilevel; Panel data; Spanish Firms, Manufactures JEL classification: D21, D22, O31, R10, R15
    Date: 2019–01
  2. By: Rodrigo Adão (The University of Chicago Booth School of Business); Costas Arkolakis (Cowles Foundation, Yale University); Federico Espósito (Dept. of Economics, Tufts University)
    Abstract: How do shocks to economic fundamentals in the world economy affect local labor markets? In a framework with a flexible structure of spatial linkages, we characterize the model-consistent shock exposure of a local market as the exogenous shift in its production revenues and consumption costs. In general equilibrium, labor outcomes in any market respond directly to the market’s own shock exposure, and indirectly to other markets shocks exposures. We show how spatial linkages control the size and the heterogeneity of these indirect effects. We then develop a new estimation methodology - the Model-implied Optimal IV (MOIV) - that exploits quasi-experimental variation in economic shocks to estimate spatial linkages and evaluate their counterfactual implications. Applying our methodology to US Commuting Zones, we find that difference-in-difference designs based on model-consistent measures of local shock exposure approximate well the differential effect of international trade shocks across CZs, but miss around half of the aggregate effect, partly due to the offsetting action of indirect effects.
    Keywords: Economic Impacts of Globalization, Regional Economics Measurement, International Trade, Economic Geography, General Equilibrium, Structural Estimation
    Date: 2019–02
  3. By: Christian Hundt; Linus Holtermann; Jonas Steeger; Johannes Bersch
    Abstract: In this paper, we examine the macro-to-micro-transition of cluster externalities to firms and how it is affected by the macroeconomic instability caused by the recessionary shock of 2008/2009. Using data from 16,166 manufacturing and business services firms nested in 390 German regions, we employ within-firm regression techniques to estimate the impact of cross-level interactions between firm- and cluster-level determinants on phase-related differences in firm performance between a pre-crisis (2004-2007) and a crisis period (2009-2011). The empirical results validate the existence of a macro-to-micro-transition that evolves best in the case of broad firm-level capabilities and variety-driven externalities. Furthermore, the results indicate that the transition strongly depends on the macroeconomic cycle. While the transition particularly benefits from a stable macroeconomic environment (2004-2007), its mechanisms are interrupted when being exposed to economic turmoil (2009-2011). Yet, the crisis-induced interruption of the transition is mainly restricted to the national recession in 2009. As soon as the macroeconomic pressure diminishes (2010-2011), we observe a reversion of the transmission mechanisms to the pre-crisis level. Our study contributes to the existing literature by corroborating previous findings that the economic performance of firms depends on a working macro-to-micro transition of external re-sources, which presupposes sufficient cluster externalities and adequate firm-level combinative capabilities. In contrast to previous studies on this topic, the transition mechanism is not modeled as time-invariant. Instead, it is coupled to the prevailing macroeconomic regime.
    Keywords: Macro-to-micro-transition, combinative capabilities, agglomeration economies, cluster-level externalities, unrelated variety, related variety, macroeconomic regimes, Great Recession, economic resilience
    JEL: C33 R11 R58
    Date: 2019–02
  4. By: Pierre-Philippe Combes (Univ Lyon, CNRS, GATE UMR 5824, F-69130 Ecully, France; Sciences Po, Department of Economics, 28, Rue des Saints-Pères, 75007 Paris, France. Research fellow at CEPR); Sylvie Démurger (Univ Lyon, CNRS, GATE UMR 5824, F-69130 Ecully, France. Research fellow at IZA); Shi Li (Business School, Beijing Normal University, China. Research fellow at IZA); Jianguo Wang (Beijing Information Science and Technology University, China)
    Abstract: We assess the role of internal migration and urbanisation in China on the nominal earnings of three groups of workers (rural migrants, low-skilled natives, and high-skilled natives). We estimate the impact of many city and city-industry characteristics that shape agglomeration economies, as well as migrant and human capital externalities and substitution effects. We also account for spatial sorting and reverse causality. Location matters for individual earnings, but urban gains are unequally distributed. High-skilled natives enjoy large gains from agglomeration and migrants at the city level. Both conclusions also hold, to a lesser extent, for low-skilled natives, who are only marginally negatively affected by migrants within their industry. By contrast, rural migrants slightly lose from migrants within their industry while otherwise gaining from migration and agglomeration, although less than natives. The different returns from migration and urbanisation are responsible for a large share of wage disparities in China.
    Keywords: urban development, agglomeration economies, wage disparities, migrants, human capital externalities, China
    JEL: O18 R12 R23 J31 O53
    Date: 2019
  5. By: Laura Helena Kivi
    Abstract: This study investigates the spatial dependence of unemployment and employment rates in Europe relying on Eurostat NUTS2 level data for 306 European regions. Spatial dependence is explored using spatial error, spatial lag and a spatial autoregressive model with spatial autoregressive disturbances. The findings show that regional labour markets in Europe cluster in space – regions with high (low) (un)employment rate are surrounded by regions with high (low) (un)employment rate. The study provides evidence that significant spillovers across regional labour markets exist. The (un)employment rate in one region is directly affected by (un)employment rate changes in other regions, but also by unobserved shocks in other regions. It was found that the spatial effects are not determined by differences in the share of the population of youth, differences in industrial structure or difference in human capital. The results of the study confirm the importance of close coordination between regions while developing labour market and regional policy measures.
    Keywords: regional labour markets, spatial econometrics, spatial dependence, clustering, Europe
    Date: 2019
  6. By: Lorena M. D’Agostino (Department of Economics and Management. University of Trento); Rosina Moreno (AQR-IREA Research Group.)
    Abstract: Technological innovation is essential to achieve simultaneously economic, environmental and social goals (i.e. the green growth). Indeed, many studies found that environmental innovation spurs overall innovation. However, this topic has not been investigated by taking into account the geographical context. Therefore, our paper seeks to investigate whether ‘green regions’, with an increased public and private commitment in environmental issues, are related to innovation of local firms. Using data on Spanish manufacturing firms and regions, we find that environmental technologies (especially in green energy), environmental investments, and environmental management at the level of regions are positively associated to local firms’ innovation.
    Keywords: innovation; region; firm; green patents; environment JEL classification: R11; O31; O44
    Date: 2019–01
  7. By: Jaehyuk Park; Ian Wood; Elise Jing; Azadeh Nematzadeh; Souvik Ghosh; Michael Conover; Yong-Yeol Ahn
    Abstract: Groups of firms often achieve a competitive advantage through the formation of geo-industrial clusters. Although many exemplary clusters, such as Hollywood or Silicon Valley, have been frequently studied, systematic approaches to identify and analyze the hierarchical structure of the geo-industrial clusters at the global scale are rare. In this work, we use LinkedIn's employment histories of more than 500 million users over 25 years to construct a labor flow network of over 4 million firms across the world and apply a recursive network community detection algorithm to reveal the hierarchical structure of geo-industrial clusters. We show that the resulting geo-industrial clusters exhibit a stronger association between the influx of educated-workers and financial performance, compared to existing aggregation units. Furthermore, our additional analysis of the skill sets of educated-workers supplements the relationship between the labor flow of educated-workers and productivity growth. We argue that geo-industrial clusters defined by labor flow provide better insights into the growth and the decline of the economy than other common economic units.
    Date: 2019–02
  8. By: Charlie Joyez (Université Côte d'Azur, France; GREDEG CNRS)
    Abstract: The multiple location choices of firms respond to a complex design of simultaneous and related goals. This paper reveals how the geographic coverage of French multinational firms is increasingly determined by Global Value Chains (GVCs) since the mid-1990s. I study the network structure of French multinationals using firm-level data, and of the Global Value Chains using the bilateral value added (VA) content of exports (from international Input-Output tables). The comparison of the two networks reveals an alignment of firms' plants along global value chains, supported by several econometric estimations including a multiple regression Quadratic Assignment Procedure and a panel OLS defined at the country-pair level. Multinationals have modified their foreign affiliates' locations to settle in countries engaged in sequential production, and this result holds when controlling for gravity-like location's determinants and raw international trade flows. Specifically, I report how MNEs are moving up the value chain, as their new locations turned to be more driven by an upstream alignment on GVCs (toward the VA source) rather than a downstream one (toward VA destination). Eventually, the GVCs' attraction increased after the 2008 crisis, even though GVCs were experiencing a slowdown. Therefore, firm's vulnerability to the dismantling of GVCs similarly increased.
    Keywords: Global Value Chains, Multinational Firms, Location Choices, Weighted Directed Networks
    JEL: F02 F23 C45
    Date: 2019–02
  9. By: Raffaello Bronzini (Banca d'Italia); Sauro Mocetti (Banca d'Italia); Matteo Mongardini (Banca d'Italia)
    Abstract: This paper assesses the short- and long-term economic impact of the Great Jubilee 2000 on the city of Rome’s economy; this is an important Catholic event that occurs every 25 years. By applying the synthetic control approach, we find that the value added per capita increases slightly in the short term while in the long term it is not significantly different from what it would have been if Rome had not hosted the Jubilee. However, we do find a significant effect on the employment rate. Consistently with these findings, we document a shift of the local economy towards less productive sectors, such as construction and services requiring a lower skill content, and an overall productivity loss for/in Rome with respect to the counterfactual scenario. The investment in infrastructure, facilities and urban requalification did not significantly affect tourism or house prices in the long run, with exception of peripheral residential areas which experienced an appreciation.
    Keywords: mega events, synthetic control method, urban economic growth, house prices
    JEL: R00 R11 R12 R58
    Date: 2019–02
  10. By: Luisa Corrado (DEF & CEIS,University of Rome "Tor Vergata"); Thanasis Stengos (University of Guelph); Melvyn Weeks (University of Cambridge); M. Ege Yazgan (Istanbul Bilgi University)
    Abstract: In many applications common in testing for convergence the number of cross-sectional units is large and the number of time periods are few. In these situations asymptotic tests based on an omnibus null hypothesis are characterised by a number of problems. In this paper we propose a multiple pairwise comparisons method based on an a recursive bootstrap to test for convergence with no prior information on the composition of convergence clubs. Monte Carlo simulations suggest that our bootstrap-based test performs well to correctly identify convergence clubs when compared with other similar tests that rely on asymptotic arguments. Across a potentially large number of regions, using both cross-country and regional data for the European Union we find that the size distortion which afflicts standard tests and results in a bias towards finding less convergence, is ameliorated when we utilise our bootstrap test.
    Keywords: Multivariate stationarity, bootstrap tests, regional convergence.
    JEL: C51 R11 R15
    Date: 2019–02–14

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