nep-geo New Economics Papers
on Economic Geography
Issue of 2019‒10‒14
eight papers chosen by
Andreas Koch
Institut für Angewandte Wirtschaftsforschung

  1. Effects of R&D subsidies on regional economic dynamics: Evidence from Chinese provinces By Eberle, Jonathan; Böing, Philipp
  2. Market Potential, Agglomeration Effects and the Location of French Firms in Africa By Alain Pholo Bala; Michel Tenikue; Baraka Nafari
  3. Skill, Agglomeration, and Inequality in the Spatial Economy By Farid Farrokhi
  4. The Origins of Creativity: The Case of the Arts in the United States since 1850 By Borowiecki, Karol Jan
  5. Decentralisation, quality of government and economic growth in the regions of the EU By Muringani, Jonathan; Dahl Fitjar, Rune; Rodríguez-Pose, Andrés
  6. The urban wage premium in imperfect labour markets By Hirsch, Boris; Jahn, Elke; Manning, Alan; Oberfichtner, Michael
  7. Spatial dependence of per capita property tax income in South Africa By Kabeya Clement Mulamba; Fiona Tergenna
  8. What Explains U.S. House Prices? Regional Income Divergence By Greg Howard; Carl Liebersohn

  1. By: Eberle, Jonathan; Böing, Philipp
    Abstract: We investigate the impact of research and development (R&D) subsidies on R&D inputs of large- and medium-sized firms and on additional innovation and economic activities in Chinese provinces. A panel vector autoregressive (VAR) model and corresponding impulse response function (IRF) analysis allow us to differentiate between direct and indirect effects, which add up to total effects. We find that an increase of R&D subsidies significantly decreases private R&D investments, although there is a significant positive effect on the R&D personnel employed in firms. We interpret these findings as a partial crowding-out effect because public funds substitute some private funds while total R&D inputs still increase. Complementarily, we find a positive secondary effect on the provincial patent activity, our measure of technological progress. Interestingly, we also find potentially unintended effects of R&D subsidies on increases in the investment rate in physical capital and residential buildings. Although R&D subsidies fail to incentivise private R&D expenditures, firms increase total R&D inputs, and provincial economies benefit from secondary effects on technological progress and capital deepening.
    Keywords: China,R&D subsidies,regional economic development,panel VAR,impulse response function
    JEL: C33 R11 R58 O38 O47
    Date: 2019
  2. By: Alain Pholo Bala; Michel Tenikue; Baraka Nafari
    Abstract: This paper informs the debate on the existence of agglomeration effects in Africa. It uses a structural estimation approach to investigate the impact of agglomeration economies and forward linkages on the localization of French affiliates in Africa. Using a sample of French subsidiaries in Africa, we compate the theoretically derived measure of market potential with the standard form used by geographers and with a measure of local demand. Our results show that maket potential matters for location choice. However, the semi-elasticity estimates suggest that the intensity of demand linkages in Africa is lower than what has been observed in the European Union. Moreover, their effects seem to be insignificant when we consider the spillover variables. These spillover effects have a positive and significant impact on location which suggests that agglomerations effects are at play throughout Africa.
    Keywords: Aggloreration Economics, Local of Firms, Market Potential, Africa
    JEL: F12 F15 R30 R32 R34
    Date: 2019–03
  3. By: Farid Farrokhi (Purdue University)
    Abstract: This paper develops a spatial equilibrium model with skill heterogeneity and endogenous agglomeration to study distributional welfare consequences of spatial policies. I show empirically that the relationship between log worker productivity and log city population is nonlinear in city size and in worker's skill. The model predicts these nonlinearities through local idea exchange between workers. I structurally estimate the model to match US Census employment and wage data, and use the estimates for decomposition and counterfactual exercises. A policy, with zero aggregate welfare effect, that favors smaller cities at the expense of larger cities, would notably reduce welfare inequality.
    Date: 2019
  4. By: Borowiecki, Karol Jan (Department of Business and Economics)
    Abstract: This research illuminates the historical development of creative activity in the United States. Census data is used to identify creative occupations (i.e., artists, musicians, authors, actors) and data on prominent creatives, as listed in a comprehensive biographical compendium. The analysis first sheds light on the socio-economic background of creative people and how it has changed since 1850. The results indicate that the proportion of female creatives is relatively high, time constraints can be a hindrance for taking up a creative occupation, racial inequality is present and tends to change only slowly, and access to financial resources within a family facilitates the uptake of an artistic occupation. Second, the study systematically documents and quantifies the geography of creative clusters in the United States and explains how these have evolved over time and across creative domains. Third, it investigates the importance of outstanding talent in a discipline for the local growth of an artistic cluster.
    Keywords: Creativity; artists; geographic clustering; agglomeration economies; urban history
    JEL: N33 R10 Z11
    Date: 2019–10–07
  5. By: Muringani, Jonathan; Dahl Fitjar, Rune; Rodríguez-Pose, Andrés
    Abstract: The effect of decentralisation on regional economic growth is a hotly debated topic. In theory, decentralisation should entail welfare benefits by bringing government closer to the people. In practice, the benefits of decentralisation have been hard to prove. A problem is that the quality of regional governments is often lacking, or at least varies widely across different regions. Hence, regional governments may not be capable of delivering public goods in an efficient and accountable manner. Previous analyses have, however, neglected how the benefits of decentralisation may depend on the quality of the regional government whose authority is strengthened by such reforms. This paper considers these two dimensions in conjunction, highlighting that the effect of decentralisation on economic performance is highly mediated by the quality of the devolved government. Using panel data for 223 regions in the EU, the results show that the quality of regional government is a better predictor of economic development than decentralisation. Regional government quality also conditions the economic returns to decentralisation, meaning decentralisation works best in regions with a higher quality of government. Accordingly, decentralisation reforms must consider the quality of the regional government to which they would devolve authority.
    Keywords: political institutions; regions; quality of government; regional authority; economic growth; Europe
    JEL: O1 O4
    Date: 2019–01–01
  6. By: Hirsch, Boris; Jahn, Elke (Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany]); Manning, Alan; Oberfichtner, Michael (Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany])
    Abstract: "Using administrative data for West Germany, this paper investigates whether part of the urban wage premium stems from fierce competition in thick labour markets. We first establish that employers possess less wage-setting power in denser markets. Local differences in wage-setting power predict 1.8 - 2.1% higher wages from a 100 log points increase in population density. We further document that the observed urban wage premium from such an increase drops by 1.5 - 1.9pp once conditioning on local search frictions. Our results therefore suggest that a substantial part of the urban wage premium roots in differential imperfections across local labour markets." (Author's abstract, IAB-Doku) ((en))
    Keywords: Marktunvollkommenheit, Stadt, Lohnunterschied, Monopson, friktionelle Arbeitslosigkeit, Bevölkerungsdichte, Einkommenseffekte, regionaler Arbeitsmarkt, Lohnelastizität, Integrierte Erwerbsbiografien, IAB-Betriebs-Historik-Panel, erwerbstätige Männer, Lohnhöhe, Westdeutschland, Bundesrepublik Deutschland
    JEL: R23 J42 J31
  7. By: Kabeya Clement Mulamba; Fiona Tergenna
    Abstract: We investigate spatial dependence of per capita property tax income among South African municipalities. One original contribution of our study is the use of per capita property tax income, rather than the property tax rate, as the outcome variable. Per capita property tax income is indicative of tax burden on residents. In addition, whilst most studies focus on advanced countries that have had institutionalised fiscal decentralisation for many decades, this paper focuses on South Africa, which is a developing country and implemented fiscal decentralisation only 18 years ago. Using Bayesian spatial econometric approach, we establish the presence of spatial dependence.
    Keywords: Municipalities, per capita property tax income, spatial, Spatial dependence, South Africa
    JEL: H70 H77 C31
    Date: 2019–10
  8. By: Greg Howard (University of Illinois); Carl Liebersohn (Ohio State University)
    Abstract: A simple measure of regional income divergence explains much of the variation in U.S. house prices since 1939. We develop an asset-pricing theory to explain why. House prices reflect the discounted value of expected rents, which reflect expected incomes. Higher expected regional income divergence increases the house price premium in rich areas. This raises average prices because house prices in poor areas are largely determined by construction costs. In addition to explaining average prices, our model explains several facts about the housing market, including regional variation in prices, the relationship between rents and prices, and patterns of net inter-state migration.
    Date: 2019

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