nep-geo New Economics Papers
on Economic Geography
Issue of 2019‒07‒08
thirteen papers chosen by
Andreas Koch
Institut für Angewandte Wirtschaftsforschung

  1. Exploring the role of industrial structure for regional economic resilience By Luciana Lazzeretti; Stefania Oliva; Niccolò Innocenti
  2. Firm Organization with Multiple Establishments By Gumpert, Anna; Steimer, Henrike; Antoni, Manfred
  3. Retail and place attractiveness: The effects of big-box entry on property values By Daunfeldt, Sven-Olov; Mihaescu, Oana; Öner, Özge; Rudholm, Niklas
  4. Where have all the factories gone?: Growth and concentration of sub-national manufacturing activity in India By K.V. Ramaswamy
  5. Diversifying in green technologies in European regions: does political support matter? By Artur Santoalha; Ron Boschma
  6. Spatial Inefficiencies in Africa's Trade Network By Tilman Graff
  7. The Historical Roots of Ethnic Differences: The Role of Geography and Trade By Andrew Dickens
  8. Persistence of entrepreneurship in different historical contexts By Michael Fritsch; Korneliusz Pylak; Michael Wyrwich
  9. Economic Geography Aspects of the Panama Canal By Stephan Maurer; Ferdinand Rauch
  10. New(s) data for Entrepreneurship Research? An innovative approach to use Big Data on media coverage By Johannes von Bloh; Tom Broekel; Burcu Oezgun; Rolf Sternberg
  11. Did the Post-1986 Decline in the Homeownership Rate Benefit the New Zealand Labour Market? A Spatial-Econometric Exploration By Cochrane, William; Poot, Jacques
  12. Skill Mismatch and Skill Transferability: Review of Concepts and Measurements By Ljubica Nedelkoska; Frank Neffke
  13. The Industrial Revolution in Services By Chang-Tai Hsieh; Esteban Rossi-Hansberg

  1. By: Luciana Lazzeretti; Stefania Oliva; Niccolò Innocenti
    Abstract: The evolutionary approach of regional economic resilience suggests that an external shock can lead to a structural change and the development of new industrial specializations. Among its determinants, a role is played by the industrial structure where a certain degree of specialisation or diversification may influence the response of regions to shocks. The article aims at investigating the role of the relatedness of new specialisations to the existing industrial structure in favouring resilience of territories. Evaluating the resilience of Italian provinces in relation to the economic crisis of 2008, the analysis seeks to understand if provinces who resisted and recovered better, followed a ?related? or ?unrelated? diversification strategy. Conclusions discusses the implications for the policy debate on smart specialisation.
    Keywords: industrial structure, resilience, relatedness, smart specialisation
    JEL: O25 L16 R11
    Date: 2019–05
  2. By: Gumpert, Anna (LMU Munich); Steimer, Henrike (Stanford GSB); Antoni, Manfred (Institut für Arbeitsmarkt- und Berufsforschung)
    Abstract: How do geographic frictions affect firm organization? We show theoretically and empirically that geographic frictions increase the use of middle managers in multi-establishment firms. In our model, we assume that a CEO\'s time is a resource in limited supply, shared across headquarters and establishments. Geographic frictions increase the costs of accessing the CEO. Hiring middle managers at one establishment substitutes for CEO time, which is reallocated across all establishments. Consequently, geographic frictions between the headquarters and one establishment affect the organization of all establishments of a firm. Our model is consistent with novel facts about multi-establishment firm organization that we document using administrative data from Germany. We exploit the opening of high-speed train routes to show that not only the establishments directly affected by faster travel times but also the other establishments of the firm adjust their organization. Our findings imply that local conditions propagate across space through firm organization.
    Keywords: firm organization; multi-establishment firm; knowledge hierarchy; geography;
    JEL: D21 D22 D24
    Date: 2019–06–28
  3. By: Daunfeldt, Sven-Olov (Institute of Retail Economics (Handelns Forskningsinstitut)); Mihaescu, Oana (Institute of Retail Economics (Handelns Forskningsinstitut)); Öner, Özge (University of Cambridge); Rudholm, Niklas (Institute of Retail Economics (Handelns Forskningsinstitut))
    Abstract: Opponents of big-box entry argue that large retail establishments generate noise and other types of pollution and a variety of negative externalities associated with traffic. Big-box advocates, on the other hand, argue that access to a large retail market delivers not only direct economic benefits but also a variety of positive spillover effects and therefore can be considered a consumer amenity that increases the attractiveness of the entry location. To test the validity of these competing arguments, we use the entry of IKEA in Sweden as a quasi-experiment and empirically investigate whether increased access to retail affects place attractiveness, which is proxied by residential property values. We find that IKEA entry increases the prices of the properties sold in the entry cities by, on average, 4.4% or 60,425 SEK (approximately 6,400 USD), but this effect is statistically insignificant for the properties in the immediate vicinity of the new IKEA retail trade area. In addition, we observe an attenuation of the effect with distance from the new IKEA store and the associated retail trade area, where the properties located 10 km away experience a 2% price increase. Our results are in line with some previous findings regarding the effects of entry by Walmart or supermarket stores in the US and show that large retailers have the potential to increase place attractiveness, but perhaps not in the immediate vicinity of the new establishment.
    Keywords: retail trade; large retailers; property values; place attractiveness; difference-in-differences estimation
    JEL: D22 P25 R12 R32
    Date: 2019–06–24
  4. By: K.V. Ramaswamy (Indira Gandhi Institute of Development Research)
    Abstract: The spatial distribution of manufacturing across the states of India is analyzed covering the period 2004-05 to 2015-16. We found that the spatial concentration of manufacturing activity has increased since 2004-05. More industrialized states (example Maharashtra, Gujarat and Tamil Nadu) are found to have continued their dominance measured in terms of their share of output, factories and workers in manufacturing. They are observed to have captured a greater share of incremental growth of factories and workers. This outcome may be attributed to their comparative advantage due to agglomeration economies. Differences in the net entry of factories (and workers) in registered and unregistered segments of manufacturing are observed between different states of India. The estimates of net entry of factories in five selected industry groups in registered manufacturing are found to be consistent with agglomeration at the sectoral level.
    Keywords: Agglomeration, Concentration, Inequality, Spatial, Manufacturing, Net Entry
    JEL: O14 O17 O25 R12
    Date: 2019–05
  5. By: Artur Santoalha; Ron Boschma
    Abstract: Regional diversification is a process characterized by past and place dependence: new activities tend to emerge and develop in a region in technological or industrial fields closely related to existing local activities. Recently, the relatedness concept has also been applied successfully to studies on green diversification of regions, providing new insights to the transition literature that is primarily focused on disruptive change. What has received little attention is a systematic approach that assesses the role of political support for the ability of regions to diversify into new green activities. This paper makes a first attempt to test the impact of regional capabilities and political support for environmental policy at the national and regional scale on the ability of 95 regions in 7 European countries to diversify into new green technologies during the period 2000-2012. We find evidence that related capabilities rather than political support in a region is associated with green diversification of regions in Europe. However, political support tends to moderate the role of regional capabilities.
    Keywords: green technologies, regional diversification, sustainability transition, political support, relatedness
    JEL: O18 O44 Q55 R11
    Date: 2019–06
  6. By: Tilman Graff
    Abstract: I assess the efficiency of transport networks for every country in Africa. Using rich spatial data, I simulate trade flows over more than 70,000 links covering the entire continent. I maximise over the space of networks and find the optimal road system for every African state. My simulations predict that Africa would gain 1.1% of total welfare from better organising its national road systems. I then construct a novel dataset of local network inefficiency and I find that colonial infrastructure projects significantly skew trade networks towards a sub-optimal equilibrium. I also find evidence for regional favouritism and inefficient aid provision.
    JEL: F1 O18 R4
    Date: 2019–06
  7. By: Andrew Dickens (Department of Economics, Brock University)
    Abstract: The impact of ethnic divisions on economic growth and development are well understood, yet there is little known about the source of these divisions. This study takes the importance of ethnic group differences as given, and goes a step deeper to explore the geographic and economic foundation of group differences. I construct a novel georeferenced dataset to examine the border region of spatially adjacent ethnic groups, together with variation in the set of potentially cultivatable crops at the onset of the Columbian Exchange, to identify how variation in land productivity impacts linguistic differences between adjacent ethnic groups. I find that ethnic groups separated across geographic regions with high variation in land productivity are more similar in language than groups separated across more homogeneous regions. This finding is consistent with the proposed mechanism: historical trade was more frequent in these high variation regions and the frequency of trade served as a social tie between culturally distinct ethnic groups. To highlight this mechanism, I show that the productivity of a tract of land predicts a group’s historical mode of subsistence, where high productivity regions relied on agriculture and low productivity regions relied on pastoralism. Taken together, these findings suggest that geographic regions with high variation in land productivity relied on various modes of subsistence, thus creating an opportunity for trade. I then document the persistence of this fact with suggestive evidence that neighbouring ethnic groups in close proximity to Old World trade routes are more similar in language today.
    Date: 2019–06
  8. By: Michael Fritsch; Korneliusz Pylak; Michael Wyrwich
    Abstract: Persistence of entrepreneurship over longer periods of time could indicate a culture of entrepreneurship among the local population that may be an important factor for regional development, but does persistence of economic activity require cultural transmission? We exploit the diverse historical developments in the territory that is Poland today to analyze the level and the sources of persistence from the 1920s until today. Persistence is mainly found in those regions that were part of Germany before World War II. This persistence is noticeable despite the exchange of most of the pre- war population, ruling out that persistence is driven by transmission of culture. In most regions that were already part of Poland before World War II, the relationship between historical and current levels of entrepreneurship is not significant. Persistence of entrepreneurship is related to the historical success of regions, which we capture by the pre-war level of and self- employment in manufacturing industries, particularly in those that can be regarded as knowledge intensive. Our main conclusion is that persistence of entrepreneurship requires a certain level of successful economic development that we capture by the degree of industrialization in the early 20th century, but it does not necessarily require persistence of the local population.
    Keywords: Persistence, entrepreneurship, self-employment
    JEL: L26 M13 O1 O18 R11
    Date: 2019–06
  9. By: Stephan Maurer (University of Konstanz and CEP); Ferdinand Rauch (University of Oxford, CEP and CEPR)
    Abstract: This paper studies how the opening of the Panama Canal in 1914 changed market access and influenced the economic geography of the United States. We compute shipment distances with and without the canal from each US county to each other US county and to key international ports and compute the resulting change in market access. We relate this change to population changes in 20-year intervals from 1880 to 2000. We find that a 1 percent increase in market access led to a total increase of population by around 6 percent. We compute similar elasticities for wages, land values and immigration from out of state. When we decompose the e ect by industry, we find that tradable (manufacturing) industries react faster than non-tradable (services), with a fairly similar aggregate e ect.
    Keywords: Market access; Panama Canal; trade shock; gravity
    JEL: F1 R1 O1 N72
    Date: 2019–06–26
  10. By: Johannes von Bloh; Tom Broekel; Burcu Oezgun; Rolf Sternberg
    Abstract: Although conventional register and survey data on entrepreneurship have enabled remarkable insights into the phenomenon, the added value has slowed down noticeably over the last decade. There is a need for fresh approaches utilising modern data sources such as Big Data. Until now, it has been quite unknown whether Big Data actually embodies valuable contributions for entrepreneurship research and where it can perform better or worse than conventional approaches. To contribute towards the exploration of Big Data in entrepreneurship research, we use a newly developed dataset based on publications of the German Press Agency (dpa) to explore the relationship between news coverage of entrepreneurship and regional entrepreneurial activity. Furthermore, we apply sentiment analysis to investigate the impact on sentiment of entrepreneurial press releases. Our results show mixed outcomes regarding the relationship between reporting of entrepreneurial events, i.e., media coverage, and entrepreneurial activity in German planning regions. At this stage, our empirical results reject the idea of a strong relationship between actual entrepreneurial activities in regions and the intensity of it being reported. However, the results also imply much potential of Big Data approaches for further research with more sophisticated methodology approaches. Our paper provides an entry point into Big Data usage in entrepreneurship research and we suggest a number of relevant research opportunities based on our results.
    Keywords: entrepreneurship, media coverage, mass media, Big Data, sentiment analysis, GEM, entrepreneurial ecosystem, region, news data
    JEL: C8 L26 R12
    Date: 2019–06
  11. By: Cochrane, William (University of Waikato); Poot, Jacques (Vrije Universiteit Amsterdam)
    Abstract: The proportion of New Zealand households living in owner-occupied dwellings has declined steadily since the early 1990s. The unemployment rate declined steadily as well, except for upward shifts due to the late 1990s Asian Financial Crisis and the Global Financial Crisis a decade later. Research initiated by Andrew Oswald in the 1990s posits that declining homeownership and declining unemployment are linked and that the causality runs from high homeownership leading to high unemployment. The international empirical evidence for this hypothesis is rather mixed. In this paper we revisit the issue with New Zealand census data for commuting-defined labour market areas from 1986 until 2013. Allowing for spatial spillovers in our data, we apply a general nesting spatial econometric model. We also consider the potentially different impacts of freehold and mortgaged homeownership. Generally, the evidence that a declining homeownership rate contributes to a lower unemployment is statistically fragile, but a greater prevalence of freehold ownership and mortgaged ownership below the mean across labour market areas do have small upward effects on a labour market area’s unemployment rate.
    Keywords: Oswald hypothesis, unemployment, homeownership, labour market flexibility, spatial econometrics
    JEL: J61 J64 R23 R31
    Date: 2019–06
  12. By: Ljubica Nedelkoska; Frank Neffke
    Abstract: The notion of skills plays an increasingly important role in a variety of research fields. Since the foundational work on human capital theory, economists have approached skills through the lens of education, training and work experience, whereas early work in evolutionary economics and management stressed the analogy between skills of individuals and the organizational routines of firms. We survey how the concept of skills has evolved into notions such as skills mismatch, skill transferability and skill distance or skill relatedness in labor economics, management, and evolutionary approaches to economics and economic geography. We find that these disciplines converged in embracing increasingly sophisticated approaches to measuring skills. Economists have expanded their approach from quantifying skills in terms of years of education to measuring them more directly, using skill tests, self-reported skills and job tasks, or skills and job tasks reported by occupational experts. Others have turned to administrative and other large-scale data sets to infer skill similarities and complementarities from the careers of sometimes millions of workers. Finally, a growing literature on team human capital and skill complementarities has started thinking of skills as features of collectives, instead of only of individuals. At the same time, scholars in corporate strategy have studied the micro-determinants of team formation. Combined, the developments in both strands of research may pave the way to an understanding of how individual-level skills connect to firm-level routines.
    Keywords: Human capital, skills and tasks, skill relatedness, skill mismatch, skill transferability
    JEL: J24 J62 P25 L16
    Date: 2019–06
  13. By: Chang-Tai Hsieh; Esteban Rossi-Hansberg
    Abstract: The rise in national industry concentration in the US between 1977 and 2013 is driven by a new industrial revolution in three broad non-traded sectors: services, retail, and wholesale. Sectors where national concentration is rising have increased their share of employment, and the expansion is entirely driven by the number of local markets served by firms. Firm employment per market has either increased slightly at the MSA level, or decreased substantially at the county or establishment levels. In industries with increasing concentration, the expansion into more markets is more pronounced for the top 10% firms, but is present for the bottom 90% as well. These trends have not been accompanied by economy-wide concentration. Top U.S. firms are increasingly specialized in sectors with rising industry concentration, but their aggregate employment share has remained roughly stable. We argue that these facts are consistent with the availability of a new set of fixed-cost technologies that enable adopters to produce at lower marginal costs in all markets. We present a simple model of firm size and market entry to describe the menu of new technologies and trace its implications.
    JEL: E23 E24 L11 L22 L25 R11 R12
    Date: 2019–06

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