nep-geo New Economics Papers
on Economic Geography
Issue of 2019‒09‒23
thirteen papers chosen by
Andreas Koch
Institut für Angewandte Wirtschaftsforschung

  1. The global distribution of economic activity: nature, history, and the role of trade By Henderson, Vernon; Squires, Tim; Storeygard, Adam; Weil, David
  2. The Globe as a Network: Geography and the Origins of the World Income Distribution By Matthew Delventhal
  3. Regional and Aggregate Implications of Transportation Costs and Tradability of Services By A. Kerem Cosar; Latchezar Popov; Sophie Osotimehin
  4. Regional Efficiency Dispersion, Convergence, and Efficiency Clusters: Evidence from the Provinces of Indonesia 1990-2010 By Mendez, Carlos
  5. Geographic Clustering of Firms in China By Douglas Hanley; Chengying Luo; Mingqin Wu
  6. Infrastructure and income inequality: an application to the brazilian case using hierarchical spatial autoregressive models By Victor Medeiros; Rafael Saulo Marques Ribeiro; Pedro Vasconcelos Maia do Amaral
  7. Productivity effects of an exogenous improvement in transport infrastructure: accessibility and the Great Belt Bridge By Bruno de Borger; Ismir Mulalic; Jan Rouwendal
  8. Working from Home and Commuting: Heterogeneity over Time, Space, and Occupations By de Vos, Duco; van Ham, Maarten; Meijers, Evert J.
  9. The Spatial Dimension of Import Competition By Gullstrand, Joakim; Knutsson, Polina
  10. Hidden Networks within the European Parliament: a Spatial Econometrics Approach. By Giovanna Iannantuoni; Elena Manzoni; Francesca Rossi
  11. Geography, Competition, and Optimal Multilateral Trade Policy By Antonella Nocco; Gianmarco Ottaviano; Matteo Salto
  12. Modern industrial policy in Latin America: Lessons from cluster development policies By Pietrobelli, Carlo
  13. A threshold extension of spatial dynamic panel model By Junyue Wua; Yasumasa Matsuda

  1. By: Henderson, Vernon; Squires, Tim; Storeygard, Adam; Weil, David
    Abstract: We explore the role of natural characteristics in determining the worldwide spatial distribution of economic activity, as proxied by lights at night, observed across 240,000 grid cells. A parsimonious set of 24 physical geography attributes explains 47% of worldwide variation and 35% of within-country variation in lights. We divide geographic characteristics into two groups, those primarily important for agriculture and those primarily important for trade, and confront a puzzle. In examining within-country variation in lights, among countries that developed early, agricultural variables incrementally explain over 6 times as much variation in lights as do trade variables, while among late developing countries the ratio is only about 1.5, even though the latter group is far more dependent on agriculture. Correspondingly, the marginal effects of agricultural variables as a group on lights are larger in absolute value, and those for trade smaller, for early developers than for late developers. We show that this apparent puzzle is explained by persistence and the differential timing of technological shocks in the two sets of countries. For early developers, structural transformation due to rising agricultural productivity began when transport costs were still high, so cities were localized in agricultural regions. When transport costs fell, these agglomerations persisted. In late-developing countries, transport costs fell before structural transformation. To exploit urban scale economies, manufacturing agglomerated in relatively few, often coastal, locations. Consistent with this explanation, countries that developed earlier are more spatially equal in their distribution of education and economic activity than late developers.
    Keywords: agriculture; physical geography; development
    JEL: O13 O18 R12
    Date: 2018–02–01
  2. By: Matthew Delventhal (Claremont McKenna College)
    Abstract: In this paper I develop a quantitative dynamic spatial model of global economic development over the long run. There is an agricultural (ancient) sector and a non-agricultural (modern) sector. Innovation, technology diffusion, and population growth are endogenous. A set of plausible parameter restrictions makes this model susceptible to analysis using classic network theory concepts. Aggregate connectivity is summarized by the largest eigenvalue of the matrix of inverse iceberg transport costs, and the long-run path of the world economy displays threshold behavior. If transport costs are high enough, the world remains in a stagnant, Malthusian steady state; if they are low enough enough, this sets off an endogenous process of sustained growth in population and income. Taking the model to the data, I divide the world into 16,000 1 degree by 1 degree quadrangles. I infer bilateral transport costs by calculating the cheapest route between each pair of locations given the placement of rivers, oceans and mountains. I infer a series of global transport networks using historical estimates of the costs of transport over land and water and their evolution over time. I then simulate the evolution of population and income from the year 1000 until the year 2000 CE. I use the model to calculate two sets of location-specific efficiency parameters, one for the ancient sector and one for the modern sector, that rationalize both the year 1000 population distribution and the year 2000 distribution of income per capita. I then calculate the relative contributions of each set of efficiency wedges, and key historical shifts in transport costs, to the year 2000 variance of per-capita real income.
    Date: 2019
  3. By: A. Kerem Cosar (University of Virginia); Latchezar Popov (Texas Tech University); Sophie Osotimehin (UQAM)
    Abstract: What are the aggregate, sectoral, and regional effects of major technological advances and productivity improvements in shipping goods and transmitting data? This paper aims to provide theoretical and quantitative answers to this question. The theory features a realistic and novel treatment of freight and tradability of services in a multi-sector, multi-region model: each intermediate input, be it a good or a tradable service, requires the complementary supply of hauling and communication, respectively. Their low substitutability bestows transport and communication a critical role in establishing the spatial links between other sectors in the input-output structure. Existing work on modeling and quantifying trade costs, and the input-output structure of the economy typically follow separate tracks, without a unifying framework that treats freight and communication costs as determined by productivities of the sectors supplying these services. Workhorse models of economic geography investigating the effect of transportation technology and infrastructure feature a single-sector model of trade with iceberg trade costs but abstract from realistic input-output linkages in a multi-sector setting. General equilibrium models of the macroeconomy, on the other hand, typically feature a single region and thus abstract from spatial interactions across regions. None of these models distinguish transportation and communication in terms of their substitutability. We bring these two separate approaches together in order to analyze the aggregate, sectoral and regional effects of reductions in the cost of overcoming distance.
    Date: 2019
  4. By: Mendez, Carlos
    Abstract: This paper studies efficiency convergence across provinces in Indonesia over the 1990-2010 period. Through the lens of both classical and distributional convergence frameworks, the dispersion dynamics of pure technical efficiency and scale efficiency are contrasted. The results suggest that—on average—there is regional convergence in both measures of efficiency. However, results from the distributional framework indicate the existence of two separate convergence clusters within the pure technical efficiency distribution. Moreover, since scale efficiency is characterized by only one convergence cluster, the two clusters of pure technical efficiency appear to be driving the overall efficiency dynamics of Indonesia.
    Keywords: Efficiency, Convergence, Distribution-based clustering, Nonparametric distribution, Indonesia
    JEL: R11 R12 R58
    Date: 2019–09–11
  5. By: Douglas Hanley (University of Pittsburgh); Chengying Luo (University of Pittsburgh); Mingqin Wu (South China Normal University)
    Abstract: The spatial arrangement of firms is known to be a critical factor influencing a variety of firm level outcomes. Numerous existing studies have investigated the importance of firm density and localization at various spatial scales, as well as agglomeration by industry. In this paper, we bring relatively new data and techniques to bear on the issue. Regarding the data, we use a comprehensive census of firms conducted by the National Bureau of Statistics of China (NBS). This covers firms in all industries and localities, and we have waves from both 2004 and 2008 available. Past studies have largely relied on manufacturing firms. This additional data allows us to look more closely at clustering within services, as well as potential spillovers between services and manufacturing. Further, by looking at the case of China, we get a snapshot of a country (especially in the early 2000s) in a period of rapid transition, but one that has already industrialized to a considerable degree. Additionally, this is an environment shaped by far more aggressive industrial policies than those seen in much of Western Europe and North America. In terms of techniques, we take a machine learning approach to understanding firm clustering and agglomeration. Specifically, we use images generated by density maps of firm location data (from the NBS data) as well as linked satellite imagery from the Landsat 7 spacecraft. This allows us to frame the issue as one of prediction. By predicting firm outcomes such as profitability, productivity, and growth using these images, we can understand their relationship to firm clustering. By turning this into a prediction problem using images as inputs, we can tap into the rich and rapidly evolving literature in computer science and machine learning on deep convolutional neural networks (CNNs). Additionally, we can utilize software and hardware tools developed for these purposes.
    Date: 2019
  6. By: Victor Medeiros (UFMG); Rafael Saulo Marques Ribeiro (UFMG); Pedro Vasconcelos Maia do Amaral (UFMG)
    Abstract: Many scholars have highlighted the role of infrastructure in reducing income inequality. Developing economies present immense regional and income discrepancies, which are correlated with unequally distributed infrastructure in territorial and population terms. In this paper, we assess the effects of infrastructure supply on income inequality and verify whether these effects vary according to the infrastructure sector and its degree of quality and access in Brazil. The analysis is based on spatial hierarchical models. Results allow us to say that infrastructure correlates negatively with income inequality. Hence, policies aimed at improving infrastructure quality and expanding access are crucial for reducing income concentration.
    Keywords: infrastructure; income inequality; Brazil; spatial econometrics; multilevel approach.
    Date: 2019–09
  7. By: Bruno de Borger (University of Antwerp); Ismir Mulalic (Technical University of Denmark); Jan Rouwendal (Vrije Universiteit Amsterdam)
    Abstract: Most studies of the effects of transport infrastructure on the performance of individual firms have focused on marginal expansions of the rail or highway network over time. In this paper, we study the short-run effects of a large discrete shock in the quality of transport infrastructure, viz. the opening of the Great Belt bridge connecting the Copenhagen area with a neighboring island and the mainland of Denmark. We analyse the effect of the opening of the bridge on the productivity of firms throughout the country using a two-step approach: we estimate firm- and year-specific productivity for a large panel of individual firms, using the approaches developed by Levinsohn and Petrin (2003) and De Loecker (2011). Then, controlling for firm-fixed effects, we relate productivity to a calculated measure of accessibility that captures the effect of the opening of the bridge. We find large productivity effects for firms located in the regions near the bridge, especially for relatively small firms in the construction and retail industry. Estimation results further suggest statistically significant but small positive wage effects throughout the country, even in regions far from the bridge. Finally, there is some evidence that the bridge has stimulated new activities in the Copenhagen region at the expense of firms disappearing on the neighboring island Funen.
    Keywords: production functions, productivity, accessibility, agglomeration, transport infrastructure
    JEL: R12 H54 O18
    Date: 2019–09–13
  8. By: de Vos, Duco (Delft University of Technology); van Ham, Maarten (Delft University of Technology); Meijers, Evert J. (Delft University of Technology)
    Abstract: Teleworking may increase the willingness to accept a longer commute. This paper presents new evidence of the effect of teleworking on the length of commutes. We use novel panel data from the Netherlands, for the years 2008-2018, and find stronger effects compared to studies that use older data. Between 2008 and 2018 however, the effect was remarkably stable: workers that started teleworking increased their commutes by 12 percent on average. We analyse heterogeneity in the effect of teleworking on commuting across different levels of urbanization and across occupations. This study stresses the effects of teleworking on the geographical scale of labour markets, and provides important inputs for policymakers that aim to promote teleworking.
    Keywords: telecommuting, commuting time, information technology, fixed effects
    JEL: R11 R41 O18
    Date: 2019–08
  9. By: Gullstrand, Joakim (Department of Economics, Lund University); Knutsson, Polina (Department of Economics, Lund University)
    Abstract: Exposure to international competition on a country level has been shown to improve the efficiency of domestic producers. We contribute to this literature by assessing whether the distance between producers and importers, within a country, matters for import competition effects at product level. Using detailed geographical information about the location of all manufacturing firms in Sweden during the period 2005–2014, we find strong evidence of an increased efficiency in the domestic production when imports surge, but that the effect diminishes with the distance between the producer and the importer. In addition to the importance of the geographical pattern within a country, we find that the average effect of import competition conceals large variations across firms and products. Highly productive firms respond to import competition by further improving efficiency, which, in turn, is transmitted to both a lower price and a higher markup. Firms are also more likely to drop fringe products while keeping core ones. Products undercut by low import prices in their proximity respond by lowering prices only, although highly efficient products resist this by a more pronounced improvement in the marginal cost, which, in turn, is transmitted to both a lower price and a higher markup.
    Keywords: Import competition; distance; firm-product performance
    JEL: F14
    Date: 2019–09–10
  10. By: Giovanna Iannantuoni (University of Milano-Bicocca); Elena Manzoni (Department of Economics (University of Verona)); Francesca Rossi (Department of Economics (University of Verona))
    Abstract: The European political spectrum can be modelled as a two-dimensional space, whose interpretation has been investigated in the spatial voting literature by regression analysis. However, data on legislators' positions display spatial clustering that is not explained by the standard models. We account for correlation among legislators by modelling spatial dependence across countries, using a new sets of geopolitical and cultural metrics. We confirm the well known result that the first dimension of the European political space is mainly explained by the Members of European Parliament's ideological position on a left-right scale, although correlation across legislators cannot be neglected. We show that spatial correlation plays instead a central role when interpreting the more controversial second dimension of the political spectrum. The most relevant proximity measures are based on geographical proximity, institutional similarities and on three cultural metrics related to which issues play a central role in the political debate.
    Keywords: European political space, spatial autoregressions, NOMINATE, proximity matrices, economic distances.
    JEL: D72 C21
    Date: 2019–09
  11. By: Antonella Nocco; Gianmarco Ottaviano; Matteo Salto
    Abstract: How should multilateral trade policy be designed in a world in which countries differ in terms of market access and technology, and ?firms with market power differ in terms of productivity? We answer this question in a model of monopolistic competition in which variable markups increasing in firm size are a key source of misallocation across ?firms and countries. We use ?disadvantaged?to refer to countries with smaller market size, worse state of technology (in terms of higher innovation and production costs), and worse geography (in terms of more remoteness from other countries). We show that, in a global welfare perspective, optimal multilateral trade policy should: promote the sales of low cost ?firms to all countries, but especially to disadvantaged ones; trim the sales of high cost ?firms to all countries, but especially to disadvantaged ones; reduce firm entry in all countries, but especially in disadvantaged ones. This would not only restore efficiency but also reduce welfare inequality between advantaged and disadvantaged countries if their differences in market size, state of technology and geography are large enough.
    Keywords: International trade policy, monopolistic competition, ?rm heterogeneity, pricing to market, multilateralism.
    JEL: D4 D6 F1 L0 L1
    Date: 2019
  12. By: Pietrobelli, Carlo (UNU-MERIT, and University of Roma Tre)
    Abstract: Industrial clusters have developed in many regions and countries of Latin America. Active public policies have often supported them at the national (federal) and local levels, sometimes with the financial and technical assistance of international organizations. These experiences have been most remarkable, and share several elements of the 'modern' industrial policies that enjoy an increasing consensus in the literature. The vast experience of locally based forms of active policies that have proliferated in Latin America reflects a modern approach to industrial policies, and an example for other developing countries. Such approach has typically included clever interactions of private and government sectors, a process of search and discovery of the necessary public policy inputs, and an interactive design and implementation of these policies.
    Keywords: Industrial policy, innovation policy, innovation and learning, cluster development, industrial clusters
    JEL: O25 O43 L14
    Date: 2019–09–11
  13. By: Junyue Wua; Yasumasa Matsuda
    Abstract: This paper proposes a threshold extension of Spatial Dynamic Panel Data (SDPD) model with fixed two-way effect to analyze data sets with spatial-temporal heterogeneity. We classify multiple regimes by a threshold variable to examine the regional dependency of parameters in SDPD models. A Bayesian estimation method along with a maximum likelihood one is put forward and compared by their Monte Carlo performance results. We find out that our Bayesian method yields more preferable estimation results, though at the expense of computation time. We also illustrate empirical applications of the threshold SDPD model to two spatial panel data set, US cigar demand data from 1963 to 1992 and Japan foreign labour data from 2008 to 2014, showing that meaningful regional dependencies of SDPD model parameters were detected.
    Date: 2019–07

This nep-geo issue is ©2019 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.
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