nep-geo New Economics Papers
on Economic Geography
Issue of 2019‒03‒18
eight papers chosen by
Andreas Koch
Institut für Angewandte Wirtschaftsforschung

  1. Do Institutions Determine Economic Geography? Evidence from the Concentration of Foreign Suppliers By Fariha Kamal; Asha Sundaram
  2. Spatial inequality, geography and economic activity By Sandra Achten; Christian Leßmann
  3. The Geographic Dispersion of Economic Shocks: Evidence from the Fracking Revolution: Comment By Alexander James; Brock Smith
  5. Estimation and inference for spatial models with heterogeneous coefficients: an application to U.S. house prices By Michele Aquaro; Natalia Bailey; M. Hashem Pesaran
  6. Sorting in an urban housing market - is there a response to demographic change? By Neumann, Uwe; Taruttis, Lisa
  7. Regional health care decentralization in unitary states: equal spending, equal satisfaction? By Costa-Font, Joan; Turati, Gilberto
  8. A provincial view of consumption risk sharing: Asset classes as shock absorbers By Victor Pontines

  1. By: Fariha Kamal; Asha Sundaram
    Abstract: Do institutions shape the geographic concentration of industrial activity? We explore this question in an international trade setting by examining the relationship between country-level institutions and patterns of spatial concentration of global sourcing. A priori, weak institutions could be associated with either dispersed or concentrated sourcing. We exploit location and transaction data on imports by U.S. firms and adapt the Ellison and Glaeser (1997) index to construct a product-country-specific measure of supplier concentration for U.S. importers. Results show that U.S. importers source in a more spatially concentrated manner from countries with weaker contract enforcement. We find support for the idea that, where formal contract enforcement is weak, local supplier networks compensate by sharing information to facilitate matching and transactions.
    Keywords: buyer-seller match, global sourcing, contract enforcement, institutions, spillovers, trade
    JEL: F1 F14 R12
    Date: 2019–02
  2. By: Sandra Achten; Christian Leßmann
    Abstract: We study the effect of spatial inequality on economic activity. Given that the relationship is highly simultaneous in nature, we use exogenous variation in geographic features to construct an instrument for spatial inequality, which is independent from any man-made factors. Inequality measures and instruments are calculated based on grid-level data for existing countries as well as for artificial countries. In the construction of the instrumental variable, we use both a parametric regression analysis as well as a random forest classification algorithm. Our IV regressions show a significant negative relationship between spatial inequality and economic activity. This result holds if we control for country-level averages of different geographic variables. Therefore, we conclude that geographic heterogeneity is an important determinant of economic activity.
    Keywords: regional inequality, spatial inequality, economic activity, development, geography, machine learning
    JEL: R12 O15
    Date: 2019
  3. By: Alexander James (Department of Economics and Public Policy, University of Alaska Anchorage); Brock Smith (Department of Agricultural Economics and Economics, Montana State University)
    Abstract: In the mid 2000s, shale-energy-rich U.S. counties experienced a sudden and significant economic shock resulting from energy extraction. While the resulting localized economic effects are relatively well understood, less is known about the geographic dispersion of the effects. We build upon an existing literature, most notably Feyrer, Mansur, and Sacerdote (2017), by examining the conditional economic effects of nearby energy production. Because energy-producing counties tend to be located near each other, producing counties experience inward economic spillovers from other nearby producing counties and this inflates the estimated effect of own-county production. Accounting for this, we identify smaller income effects of hydrocarbon production than Feyrer, Mansur, and Sacerdote (2017), limited to counties within 60-80 miles of the source of production. The proposed estimation strategy can be applied more generally to estimate the dispersion of multiple, simultaneously occurring economic shocks.
    Keywords: Economic Shocks; Regional Development; Economic Propagation
    JEL: L14 L81 Q33
    Date: 2018–02
  4. By: Nicolas De Vijlder; Koen Schoors (-)
    Abstract: In this paper we investigate the hypothesis that the economic divergence across Flemish localities between 1830 and 1910 is explained by the theory of Hernando de Soto. We hypothesize that the uniform land rights installed after the French revolution provided borrowers with an attractive form of collateral. Conditional on the presence of local financial development provided by a new government-owned bank this eased access to external finance and fostered industrial and commercial economic activity. Using primary historical data of about 1179 localities in Flanders we find that the variation in the local value of land (collateral) and the variation in local financial development jointly explain a substantial amount of the variation in non-agricultural employment accumulated between 1830 and 1910. By 1910 industrial and commercial economic activity was more developed in localities where both early (1846) rural land prices were high and early (1880) local financial development was more pronounced, which is in line with the “de Soto” hypothesis.
    Keywords: de Soto, financial institutions, industrial development, land prices, Flanders, 19th - 20th centuries
    JEL: N93 O43 R11 R12
    Date: 2019–02
  5. By: Michele Aquaro; Natalia Bailey; M. Hashem Pesaran
    Abstract: This paper considers the problem of identification, estimation and inference in the case of spatial panel data models with heterogeneous spatial lag coefficients, with and without (weakly) exogenous regressors, and subject to heteroskedastic errors. A quasi maximum likelihood (QML) estimation procedure is developed and the conditions for identification of spatial coefficients are derived. Regularity conditions are established for the QML estimators of individual spatial coefficients, as well as their means (the mean group estimators), to be consistent and asymptotically normal. Small sample properties of the proposed estimators are investigated by Monte Carlo simulations for Gaussian and non-Gaussian errors, and with spatial weight matrices of differing degrees of sparsity. The simulation results are in line with the paper's key theoretical findings even for panels with moderate time dimensions, irrespective of the number of cross section units. An empirical application to U.S. house price changes during the 1975-2014 period shows a significant degree of heterogeneity in spill-over effects over the 338 Metropolitan Statistical Areas considered.
    Keywords: spatial panel data models, heterogeneous spatial lag coefficients, identification, quasi maximum likelihood (QML) estimators, non-Gaussian errors, house price changes, Metropolitan Statistical Areas
    JEL: C21 C23
    Date: 2019
  6. By: Neumann, Uwe; Taruttis, Lisa
    Abstract: In urban areas, there is considerable neighbourhood-level variation in population characteristics. Using Dortmund as a case study we analyse whether and to what extent rents, housing prices and segregation dynamics corresponded with demographic ageing in urban neighbourhoods between 2007 and 2016. We find that in Dortmund so far there has been no slump of the housing market in neighbourhoods where the population ages more rapidly. Nevertheless, over the study period demographic segregation was on the rise and, according to a hedonic analysis, prices for apartments were higher in districts with a comparatively "younger" population. In the course of further demographic change in Germany, which has come to a contemporary halt due to immigration, the response to ageing on urban housing markets in terms of location choice and prices may therefore become more evident. A large-scale urban regeneration project has revitalised the housing market of a declining Dortmund community during this decade. Since local ageing has not affected housing markets severely so far, it appears to be within the scope of urban policy to upgrade the attractiveness of ageing neighbourhoods as perceived by younger generations.
    Keywords: neighbourhood sorting,demographic segregation,hedonic analysis,urban policy
    JEL: R21 R23 R31 R58 J61
    Date: 2018
  7. By: Costa-Font, Joan; Turati, Gilberto
    Abstract: Does regional decentralization threaten the commitment to regional equality in government outcomes? We attempt to shed light on this question by drawing on unique evidence from the largest European unitary states to have engaged in countrywide health system decentralization: Italy and Spain. We estimate, decompose, and run counterfactual analysis of regional inequality in government output (health expenditure per capita) and outcome (health system satisfaction) during the expansion of health care decentralization in both countries. We find no evidence of an increase in regional inequalities in outcomes and outputs in the examined period. Inequalities are accounted for by differences in health system design and management by regional governments.
    Keywords: health care decentralization; regional inequality; health care; Oaxaca decomposition
    JEL: N0
    Date: 2018–01–01
  8. By: Victor Pontines
    Abstract: Using a unique data set on provincial net factor income flows disaggregated across the three asset classes of debt, equity and FDI reinvested earnings in Korea, we investigated how these asset channels impacted consumption risk sharing during the Global Financial Crisis and the European sovereign debt crisis. Adopting spatial panel methods, this study found that net receipts of debt, equity and FDI retained earnings have all contributed favorably to consumption risk sharing during these crises episodes, with FDI retained earnings robustly positive in its contribution in buffering shocks to consumption. We also found suggestive evidence that net equity receipts rather than net debt receipts contributed more to risk sharing during these episodes. Overall, our results indicate that different asset channels can provide the insurance needed to cushion the economy against adverse shocks.
    Keywords: Consumption risk sharing, Consumption smoothing, Factor income flows, Spatial panel
    JEL: E25 F36 G11 R12
    Date: 2019–03

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