nep-geo New Economics Papers
on Economic Geography
Issue of 2019‒11‒11
ten papers chosen by
Andreas Koch
Institut für Angewandte Wirtschaftsforschung

  1. From variety to economic complexity: empirical evidence from Italian regions By Roberto Antonietti; Chiara Burlina
  2. The Return to Big City Experience: Evidence from Danish Refugees By Eckert, Fabian; Hejlesen, Mads; Walsh, Conor
  3. A Retrospective Study on the Regional Benefits and Spillover Effects of High-Speed Broadband Networks: Evidence from German Counties By Briglauer, Wolfgang; Dürr, Niklas; Gugler, Klaus
  4. Skilled Tradable Services: The Transformation of U.S. High-Skill Labor Markets By Eckert, Fabian; Ganapati, Sharat; Walsh, Conor
  5. The Propagation of Regional Shocks in Housing Markets: Evidence from Oil Price Shocks in Canada By Kilian, Lutz; Zhou, Xiaoqing
  6. The emergence of relatedness between industries: The example of offshore oil and gas and offshore wind energy in Esbjerg, Denmark By Mads Bruun Ingstrup; Max-Peter Menzel
  7. What Explains Neighborhood Sorting by Income and Race? By Aliprantis, Dionissi; Carroll, Daniel R.; Young, Eric R.
  8. Monopsony in Spatial Equilibrium By Kahn, Matthew E.; Tracy, Joseph
  9. Do digital skills foster green diversification? A study of European regions By Artur Santoalha; Davide Consoli; Fulvio Castellacci
  10. Commute Mode and Residential Location Choice By Andrea Craig

  1. By: Roberto Antonietti; Chiara Burlina
    Abstract: Taking an evolutionary economic geography approach, we test whether the level of industry variety in a region affects its economic complexity. With reference to Italy, we measure variety using a Theil index of information entropy, and complexity with the Hidalgo and Hausmann index. Our results show that regions where variety grows faster also have a higher rate of growth in economic complexity. This relationship only holds in regions with low initial levels of variety and/or complexity, however, which are mainly located in the South of Italy. We suggest that product diversification, by increasing regional specialization in high-tech industries, can explain regional development and Italian North-South disparities.
    Keywords: economic complexity, entropy, industry variety, unit root
    JEL: O33 R11 R12
    Date: 2019–10
  2. By: Eckert, Fabian (Federal Reserve Bank of Minneapolis); Hejlesen, Mads (Aarhus University); Walsh, Conor (Yale University)
    Abstract: We offer causal evidence of higher returns to experience in big cities. Exploiting a natural experiment that settled political refugees across labor markets in Denmark between 1986 and 1998, we find that while refugees initially earn similar wages across locations, those placed in Copenhagen exhibit 35% faster wage growth with each additional year of experience. This gap is driven primarily by differential sorting towards high-wage establishments, occupations, and industries. An estimated spatial model of earnings dynamics attributes an important role to unobserved worker ability: more able refugees transition to more productive establishments faster in Copenhagen than in other cities.
    Keywords: Agglomeration economies; Urban; Regional labor markets; Resettlement; Wage differentials
    JEL: J31 J61 R11 R12 R23
    Date: 2019–08–13
  3. By: Briglauer, Wolfgang; Dürr, Niklas; Gugler, Klaus
    Abstract: There is still hardly any empirical evidence on how divergent broadband technologies, and, by extension, bandwidth levels, influence GDP growth, or on the extent of spatial externalities at a regional level. Our study aims to assess the economic benefits of high-speed broadband networks within and across neighbouring counties in Germany. Utilizing a balanced panel dataset of 401 German counties with data from 2010-2015 as well as different panel estimation techniques, we find that the availability of high-speed broadband (which enables transfer rates of 50 Mbit/sec and higher) has a small but significant positive effect on regional GDP growth in the average German county, when compared to normal broadband availability. Furthermore, we find that broadband deployment in German counties induces substantial economic benefits in terms of direct effects and regional externalities. According to our main estimation results, an increase in bandwidth coverage of 50 Mbit/sec and higher by one percentage point induces a rise in regional GDP of 0.05%. This effect is almost doubled if we also take regional externalities into account and is of particular relevance for urban counties. Furthermore, our cost-benefit analysis suggests substantial efficiency gains, as the total economic benefits of subsidy programs to encourage broadband expansion substantially exceeded their associated costs.
    Keywords: High-speed broadband infrastructure,economic growth,spatial externalities,German counties,panel data
    JEL: H23 H54 L96 L98 R11 R58
    Date: 2019
  4. By: Eckert, Fabian (Federal Reserve Bank of Minneapolis); Ganapati, Sharat (Georgetown University); Walsh, Conor (Yale University)
    Abstract: We study a group of service industries that are skill-intensive, widely traded, and have recently seen explosive wage growth. Between 1980 and 2015, these “Skilled Tradable Services” accounted for a sharply increasing share of employment among the highest earning Americans. Unlike any other sector, their wage growth was strongly biased toward the densest local labor markets and the highest paying firms. These services alone explain 30% of the increase in inequality between the 50th and 90th percentiles of the wage distribution. We offer an explanation for these patterns that highlights the complementarity between the non-rivalry of knowledge and changes in communication costs.
    Keywords: Wage inequality; Skill biased; Technological change; Urban growth; Trade and geography
    JEL: J31 O33 R11 R12
    Date: 2019–09–13
  5. By: Kilian, Lutz (Federal Reserve Bank of Dallas); Zhou, Xiaoqing (Federal Reserve Bank of Dallas)
    Abstract: Shocks to the demand for housing that originate in one region may seem important only for that regional housing market. We provide evidence that such shocks can also affect housing markets in other regions. Our analysis focuses on the response of Canadian housing markets to oil price shocks. Oil price shocks constitute an important source of exogenous regional variation in income in Canada because oil production is highly geographically concentrated. We document that, at the national level, real oil price shocks account for 11% of the variability in real house price growth over time. At the regional level, we find that unexpected increases in the real price of oil raise housing demand and real house prices not only in oil-producing regions, but also in other regions. We develop a theoretical model of the propagation of real oil price shocks across regions that helps understand this finding. The model differentiates between oil-producing and non-oil-producing regions and incorporates multiple sectors, trade between provinces, government redistribution, and consumer spending on fuel. We empirically confirm the model prediction that oil price shocks are propagated to housing markets in non-oil-producing regions by the government redistribution of oil revenue and by increased interprovincial trade.
    Keywords: House price; regional heterogeneity; oil price; redistribution; resource boom; regional propagation; Canada
    JEL: F43 Q33 Q43 R12 R31
    Date: 2019–09–04
  6. By: Mads Bruun Ingstrup; Max-Peter Menzel
    Abstract: When investigating the emergence of relatedness between two previously unrelated industries - the offshore oil and gas industry and the offshore wind energy industry in Esbjerg, Denmark, - we argue that relatedness is a system property, whose emergence should be visible via organizational search processes in the other industry. While network positions were important when companies began explorative searches in the other industry, regular search processes in the other industry coincided with the formation of new organizational arrangements. With these findings in mind, we propose that relatedness emerges when relationships between two industries are institutionalized.
    Keywords: relatedness, institutions, organizational search, emergence, offshore industries
    JEL: L14 L61 O33 R11
    Date: 2019–10
  7. By: Aliprantis, Dionissi (Federal Reserve Bank of Cleveland); Carroll, Daniel R. (Federal Reserve Bank of Cleveland); Young, Eric R. (Federal Reserve Bank of Cleveland)
    Abstract: Why do high-income black households live in neighborhoods with characteristics similar to those of low-income white households? We find that neighborhood sorting by income and race cannot be explained by financial constraints: High-income, high-wealth black households live in similar-quality neighborhoods as low-income, low-wealth white households. We provide evidence that black households sort across neighborhoods according to some non-pecuniary factor(s) correlated with the racial composition of neighborhoods. Black households sorting into black neighborhoods can explain the racial gap in neighborhood quality at all income levels. The supply of high-quality black neighborhoods drives the neighborhood quality of black households.
    Keywords: Neighborhood; Income; Wealth; Race;
    JEL: H72 J15 J18 R11 R21
    Date: 2019–10–08
  8. By: Kahn, Matthew E. (Johns Hopkins University); Tracy, Joseph (Federal Reserve Bank of Dallas)
    Abstract: An emerging labor economics literature studies the consequences of firms exercising market power in local labor markets. These monopsony models have implications for trends in earnings inequality. The extent of this market power is likely to vary across local labor markets. In choosing what market to live and work in, workers trade off wages, rents and local amenities. Building on the Rosen/Roback spatial equilibrium model, we investigate how the existence of local monopsony power affects the cross-sectional spatial distribution of wages and rents across cities. We find an employment-weighted elasticity of land prices to concentration of –0.034—similar to Rinz (2018)’s reported elasticity of compensation to concentration. This finding has implications for who bears the economic incidence of labor market power. We present two extensions of the model focusing on the role of migration costs and worker skill heterogeneity.
    Keywords: monopsony; wages; housing costs
    JEL: J3 R23
    Date: 2019–10–15
  9. By: Artur Santoalha (TIK Centre, University of Oslo, Norway); Davide Consoli (INGENIO (CSIC-Universitat Politècnica de València), Spain); Fulvio Castellacci (TIK Centre, University of Oslo, Norway)
    Abstract: Within the debate on smart specialisation, there is growing attention towards the features that favour or thwart regions’ ability to pursue sustainable development through eco-innovation. Against this backdrop, the present paper proposes an empirical analysis of the role of local capabilities, of related diversification and of their interaction in a panel of 225 European regions (NUTS 2) between 2002 and 2013. The main novelty is the explicit consideration of digital skills, workforce capabilities associated with the use and development of digital technologies. We find that the e-skills endowment is positively correlated with the probability that regions specialise in new green technological domains. Moreover, digital competences positively moderate the effect of technological relatedness on green diversification. Our results highlight the potential of complementarities between two emerging general-purpose technologies, ICTs and eco-innovations, in the transition towards a greener economy.
    Date: 2019–10
  10. By: Andrea Craig (Department of Economics, University of Windsor)
    Abstract: Public transportation infrastructure projects are major government investments that potentially affect not only travel mode choices, but residential location. To analyze the impacts of public transportation projects, accounting for households' residential location decisions, I develop a discrete choice model of commute mode and residential location. In this model, households have heterogeneous preferences for neighbourhood characteristics and commute costs. I estimate this model using microdata from Vancouver and commute times calculated with geographic information system (GIS) data. The mean-income household's willingness to pay to reduce commute time is fourteen dollars per hour and there is significant heterogeneity in this value across household income. Using the estimated model, I simulate households' residential and commute mode decisions under a proposed public transportation infrastructure project.
    Keywords: residential choice, commute mode choice, public transportation, counterfactual simulation
    JEL: R21 R41
    Date: 2019–10

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