nep-geo New Economics Papers
on Economic Geography
Issue of 2019‒05‒06
ten papers chosen by
Andreas Koch
Institut für Angewandte Wirtschaftsforschung

  1. From periphery to core: measuring agglomeration effects using high-speed rail By Ahlfeldt, Gabriel M.; Feddersen, Arne
  2. Understanding Migration Aversion Using Elicited Counterfactual Choice Probabilities By Koşar, Gizem; Ransom, Tyler; van der Klaauw, Wilbert
  3. Rush hours and urbanization By Tobias Seidel; Jan Wickerath
  4. Spatio-temporal diffusion of solar thermal systems in Germany: A spatial panel data analysis By Jan Paul Baginski
  5. Illuminating Economic Growth By Yingyao Hu; Jiaxiong Yao
  6. Matching in Cities By Dauth, Wolfgang; Findeisen, Sebastian; Moretti, Enrico; Suedekum, Jens
  7. Spatial variations and clustering in the rates of youth unemployment and NEET By Steve Bradley; Giuseppe Migali; Maria Navarro Paniagua
  8. Wage Equalization and Regional Misallocation: Evidence from Italian and German Provinces By Boeri, Tito; Ichino, Andrea; Moretti, Enrico; Posch, Johanna
  9. Global Value Chains and Vertical Specialization: The case of Portuguese Textiles and Shoes exports By Tiago Domingues
  10. Estimating Who Benefits from Productivity Growth: Direct and Indirect Effects of City Manufacturing TFP Growth on Wages, Rents, and Inequality By Hornbeck, Richard; Moretti, Enrico

  1. By: Ahlfeldt, Gabriel M.; Feddersen, Arne
    Abstract: We analyze the economic impact of the German high-speed rail (HSR) connecting Cologne and Frankfurt, which provides plausibly exogenous variation in access to surrounding economic mass. We find a causal effect of about 8.5% on average of the HSR on the GDP of three counties with intermediate stops. We make further use of the variation in bilateral transport costs between all counties in our study area induced by the HSR to identify the strength and spatial scope of agglomeration forces. Our most careful estimate points to an elasticity of output with respect to market potential of 12.5%. The strength of the spillover declines by 50% every 30 minutes of travel time, diminishing to 1% after about 200 minutes. Our results further imply an elasticity of per-worker output with respect to economic density of 3.8%, although the effects seem driven by worker and firm selection.
    Keywords: accessibility; agglomeration; density; high-speed rail; market potential; transport policy; productivity
    JEL: R12 R38 R48
    Date: 2018–03–01
  2. By: Koşar, Gizem (Federal Reserve Bank of New York); Ransom, Tyler (University of Oklahoma); van der Klaauw, Wilbert (Federal Reserve Bank of New York)
    Abstract: Residential mobility rates in the U.S. have fallen considerably over the past three decades. The cause of the long-term decline remains largely unexplained. In this paper we investigate the relative importance of alternative drivers of residential mobility, including job opportunities, neighborhood and housing amenities, social networks and housing and moving costs, using data from two waves of the NY Fed's Survey of Consumer Expectations. Our hypothetical choice methodology elicits choice probabilities from which we recover the distribution of preferences for location and mobility attributes without concerns about omitted variables and selection biases that hamper analyses based on observed mobility choices alone. We estimate substantial heterogeneity in the willingness-to-pay (WTP) for location and housing amenities across different demographic groups, with income considerations, proximity to friends and family, neighbors' shared norms and social values, and monetary and psychological costs of moving being key drivers of migration and residential location choices. The estimates point to potentially important amplifying roles played by family, friends, and shared norms and values in the decline of residential mobility rates.
    Keywords: migration, geographic labor mobility, neighborhood characteristics
    JEL: J61 R23 D84
    Date: 2019–04
  3. By: Tobias Seidel; Jan Wickerath
    Abstract: We use a spatial general equilibrium model with potential commuting of workers between their place of work and their place of residence to analyze the effects of rush hours on the spatial allocation of employment and population, average labor productivity and the housing market. Abolishing traffic congestion during rush hours leads to a more urbanized economy as households move from the low-density countryside to the commuter belts of cities rather than from the city centers to the periphery. Employment, however, becomes more agglomerated in high-density large cities. This adjustment implies an increase of average labor productivity of 7.2 percent and higher inequality of housing costs.
    Keywords: urbanization, commuting, traffic, congestion, spatial general equilibrium
    JEL: R12 R13 R41
    Date: 2019
  4. By: Jan Paul Baginski (Chair for Management Sciences and Energy Economics, University of Duisburg-Essen (Campus Essen))
    Abstract: Solar thermal roof-top installations offer the potential to meet an important share of residential water and space heating demand in Germany. These systems are subsidised with grants under the so-called market incentive program. The political goal is to encourage the adoption of renewable energy and to reduce CO2-emissions in the heating market in view of a low-carbon building stock. Solar thermal adoption levels are currently rather low after a high period in 2008 and 2009. Also, solar thermal adoption rates distinctly vary between regions. This paper tries to disentangle influences governing regional and temporal differences in residential solar thermal uptake. Spatial panel regression models are estimated to capture spatial interactions, while controlling for potential adoption determinants, including economic considerations, household characteristics and climatic suitability. The panel data contain observations for over 1 million solar thermal installations across 402 German regions covering the period from 2001 to 2015. Results indicate that differences in profitability influence the spatial and temporal patterns of solar thermal uptake. Regional diffusion is mainly driven by solar radiation. The development of fossil fuel prices is accountable for different adoption rates over time. New constructions do not seem to foster solar thermal use, indicating that solar heating is easily applied to existing houses. Larger households are more inclined to use solar heating, given that they use more efficiently solar generated heat. Results also show that spatial dependence drives the diffusion of solar thermal systems. These findings imply that there is potential for new policies and business models to increase the geographic and social diversification of solar thermal adoption.
    Keywords: solar energy, domestic solar thermal heating, spatial econometrics, panel data
    JEL: C23 D12 Q28 Q42
  5. By: Yingyao Hu; Jiaxiong Yao
    Abstract: This paper seeks to illuminate the uncertainty in official GDP per capita measures using auxiliary data. Using satellite-recorded nighttime lights as an additional measurement of true GDP per capita, we provide a statistical framework, in which the error in official GDP per capita may depend on the country’s statistical capacity and the relationship between nighttime lights and true GDP per capita can be nonlinear and vary with geographic location. This paper uses recently developed results for measurement error models to identify and estimate the nonlinear relationship between nighttime lights and true GDP per capita and the nonparametric distribution of errors in official GDP per capita data. We then construct more precise and robust measures of GDP per capita using nighttime lights, official national accounts data, statistical capacity, and geographic locations. We find that GDP per capita measures are less precise for middle and low income countries and nighttime lights can play a bigger role in improving such measures.
    Date: 2019–04–09
  6. By: Dauth, Wolfgang (University of Würzburg); Findeisen, Sebastian (University of Mannheim); Moretti, Enrico (University of California, Berkeley); Suedekum, Jens (Heinrich Heine University Düsseldorf)
    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.
    Keywords: local labor markets, agglomeration
    JEL: J20
    Date: 2019–04
  7. By: Steve Bradley; Giuseppe Migali; Maria Navarro Paniagua
    Abstract: We investigate the ‘determinants’ of spatial variations in youth unemployment and NEET rates, and the presence of spatial clusters, for Italy, Spain and the UK. Using Labour Force Survey data for the period 1993-2011 at a ‘regional’ level we obtain broadly consistent measures of quarterly youth unemployment and NEET rates. Our findings suggest that youths are sensitive to aggregate labour market conditions with older youths being more cyclically sensitive than are teenagers. We find a discouraged worker effect, again larger for older youths than for teenagers. In the UK and Spain, temporary jobs are preferred to part-time jobs, perhaps as a way of avoiding unemployment, whereas in Italy the opposite occurs. There is evidence of spatial clustering of youth unemployment and NEET rates. Our paper concludes with a discussion of the implications for regional and labour market policies.
    Keywords: Youth unemployment, Regions, NEET, Clusters
    JEL: R11 R23 J40 J60
    Date: 2019
  8. By: Boeri, Tito (Bocconi University); Ichino, Andrea (European University Institute); Moretti, Enrico (University of California, Berkeley); Posch, Johanna (European University Institute)
    Abstract: In many European countries, wages are determined by collective bargaining agreements intended to improve wages and reduce inequality. We study the local and aggregate effects of collective bargaining in Italy and Germany. The two countries have similar geographical differences in firm productivity – with the North more productive than the South in Italy and the West more productive than the East in Germany – but have adopted different models of wage bargaining. Italy sets wages based on nationwide contracts that allow for limited local wage adjustments, while Germany has moved toward a more flexible system that allows for local bargaining. We find that, as a consequence, Italy exhibits limited geographical wage differences in nominal terms and almost no relationship between local productivity and local nominal wages, while Germany has larger geographic wage differences and a tighter link between local wages and local productivity. While the Italian system is successful at reducing nominal wage inequality, it also creates costly geographic imbalances. In Italy, low productivity provinces have significantly higher non-employment rates than high productivity provinces, because employers cannot lower wages, while in Germany the relationship between non-employment and productivity is significantly weaker. In Italy, the relationship between real wages and productivity is negative, with lower real wages in the North compared to the South, since the latter has low housing costs but similar nominal wages. Thus, conditional on having a job, Italian workers have higher purchasing power in the South, but the probability of having a job is higher in the North. We conclude that the Italian system has significant costs in terms of forgone aggregate earnings and employment because it generates a spatial equilibrium where workers queue for jobs in the South and remain unemployed while waiting. If Italy adopted the German system, aggregate employment and earnings would increase by 11.04% and 7.45%, respectively. Our findings are relevant for several other European countries with systems similar to Italy's.
    Keywords: local labor markets
    JEL: J20
    Date: 2019–04
  9. By: Tiago Domingues (GEE)
    Abstract: This paper evaluates the growing participation of the Portuguese economy, and especially of the textiles, leather, and shoes industry, in the so-called Global Value Chains (GVCs).We use the 2016 edition of the World Input-Output Database (WIOD) to empirical assess the changes in the geography of imports and exports of the Portuguese textiles, leather and shoes industry as well as quantify the growing vertical specialization in this sector. We also measure value added, import and employment coefficients for the Portuguese economy and the Portuguese textiles, leather, and shoes sector. The results show that Portuguese textiles, leather, and shoes trade have been more concentrated in Spain, Italy, India and China and less concentrated in Germany, France, and the United Kingdom. This sector is more relevant in the Portuguese economy than in any other Eurozone economy in terms of output, employment and value-added, and it has been recovering its relevance in the Portuguese economy since 2009.Textiles, leather, and shoes is the manufacturing industry with the higher potential to generate new jobs in Portugal. Despite the negative contribution of the financial crisis, vertical specialization of Portuguese textiles, leather, and shoes exports have been increasing ever since.
    Keywords: Global value chains; Textiles, leather, and shoes; Input-Output models
    JEL: C67 D57 E01 F14 L67
    Date: 2018–12
  10. By: Hornbeck, Richard (Harris School, University of Chicago); Moretti, Enrico (University of California, Berkeley)
    Abstract: We estimate direct and indirect effects of total factor productivity growth in manufacturing on US workers' earnings, housing costs, and purchasing power. Drawing on four alternative instrumental variables, we consistently find that when a city experiences productivity gains in manufacturing, there are substantial local increases in employment and average earnings. For renters, increased earnings are largely offset by increased cost of living; for homeowners, the benefits are substantial. Strikingly, local productivity growth in manufacturing reduces local inequality, as it raises earnings of local less-skilled workers more than the earnings of local more-skilled workers. This is due, in part, to lower geographic mobility of less-skilled workers. However, local productivity growth also has important indirect effects through worker mobility. We estimate that 38% of the overall increase in workers' purchasing power occurs outside cities directly affected by local TFP growth. The indirect effects on worker earnings are substantially greater for more-skilled workers, due to greater geographic mobility of more-skilled workers, which increases inequality in other cities. Neglecting these indirect effects would both understate the overall magnitude of benefits from productivity growth and misstate their distributional consequences. Overall, US workers benefit substantially from manufacturing productivity growth. Summing direct and indirect effects, we find that manufacturing TFP growth from 1980 to 1990 increased purchasing power for the average US worker by 0.5-0.6% per year from 1980 to 2000. These gains do not depend on a worker's education; rather, the benefits from productivity growth mainly depend on where workers live.
    Keywords: local labor markets
    JEL: J20
    Date: 2019–04

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