nep-geo New Economics Papers
on Economic Geography
Issue of 2020‒02‒03
ten papers chosen by
Andreas Koch
Institut für Angewandte Wirtschaftsforschung

  1. How social interactions matter when distance dies? By Minoru Osawa; Jos\'e M. Gaspar
  2. The role of R&D-intensive clusters for regional competitiveness By Reinhold Kosfeld; Timo Mitze
  3. Quantifying Quality Specialization Across Space: Skills, Sorting, and Agglomeration By Chang, Pao-Li; Lu, Angdi; Yi, Xin
  4. Railroads, Reallocation, and the Rise of American Manufacturing By Richard Hornbeck; Martin Rotemberg
  5. Spatial trends of manufacturing a Von Thünen Mills approach By José Pedro Pontes; Armando J. Garcia Pires
  6. Cooperative approach to a location problem with agglomeration economies By Bergantiños, Gustavo; Navarro-Ramos, Adriana
  7. Beyond Brexit: reshaping policies for regional development in Europe By Bachtler, John; Begg, Iain
  8. Exploring the Determinants of Productivity Growth in Italian Regions: a Kaldorian Perspective By Matteo Deleidi; Walter Paternesi Meloni; Luigi Salvati; Francesca Tosi
  9. A theory of heterogeneous city growth By Christian Ghiglino; Kazuo Nishimura; Alain Venditti
  10. Urban Growth and its Aggregate Implications By Gilles Duranton; Diego Puga

  1. By: Minoru Osawa; Jos\'e M. Gaspar
    Abstract: We consider an economic geography model with two inter-regional proximity structures, one due to trade linkages and the other due to social interactions. We investigate how the network structure of social interactions, or the social proximity structure, affects the timing of endogenous agglomeration and the spatial distribution of workers across regions. Endogenous agglomeration emerges when inter-regional trade and/or social interactions incur high transportation costs, and the uniform dispersion occurs when these costs become negligibly small (i.e., when distance dies). In many-region geography, the network structure of social proximity emerges as the determinant of the geographical distribution of workers when trade becomes freer. If social proximity is governed by geographical distance (as in ground transportation), a mono-centric concentration emerges. If geographically distant pairs of regions are ``socially close'' (due to, e.g., passenger transportation modes with strong distance economy such as regional airlines), then geographically multi-centric spatial distribution can be sustainable.
    Date: 2020–01
  2. By: Reinhold Kosfeld (University of Kassel); Timo Mitze (Southern University of Denmark)
    Abstract: Modern cluster theory provides reasons for positive external effects that accrue from the interaction of spatially proximate firms operating in common and related fields of economic activity. In this paper, we examine the impact of R&D-intensive clusters as a key factor of regional competitiveness on productivity and innovation growth. In analogy to the industry-oriented concepts of related and unrelated variety (Frenken, Van Oort, Verburg 2007), we differentiate between effects of cluster specialisation and diversity. The identification of R&D-intensive clusters is based on a hybrid approach of qualitative input-output analysis and spatial scanning (Kosfeld and Titze 2017). Our empirical study is conducted for a panel of German NUTS-3 regions in 2001-2011. To comprehensive account for specialisation and diversity effects of clustering we adopt a spatial econometric approach, which allows us to identify these effects beyond the geographical boundaries of a single region. After controlling for regional characteristics and unobserved heterogeneity, a robust ‘cluster strength’ effect (i.e. specialization) on productivity growth is found within the context of conditional convergence across German regions. With regard to the underlying mechanisms, we find that the presence of a limited number of R&D-intensive clusters in specific technological fields is most strongly linked to higher levels of regional productivity growth. While we also observe a positive effect of cluster strength on innovation growth once we account for spatial spillovers, no significant effects of ‘cluster diversity’ can be identified. This indicates that some but not all cluster-based regional development strategies are promising policy tools to foster regional growth processes.
    Keywords: Industry clusters, regional competitiveness, cluster specialisation, cluster diversity, correlated random effects model
    JEL: L16 R11 R15
    Date: 2020
  3. By: Chang, Pao-Li (School of Economics, Singapore Management University); Lu, Angdi (School of Economics, Singapore Management University); Yi, Xin (School of Economics, Singapore Management University)
    Abstract: We quantify the supply-side determinants of quality specialization across space. Specifically, we complement the quality specialization literature in international trade and study how larger cities specialize in higher-quality goods within a country. In our general equilibrium model, firms in larger cities produce goods with higher quality, because agglomeration benefits accrue more to skilled workers who are also more efficient in upgrading quality. Two channels are at work in our model. The first channel is through the treatment effect of agglomeration, such that firms become more productive if they locate in a larger city. The second channel works through sorting, in that more pro-ductive firms receive higher agglomeration benefits and endogenously sort into larger cities. These two effects are further mitigated by the increasing skill premium with respect to city size, though the latter is dominated in the spatial equilibrium. Using firm-level data from China, we structurally estimate the model and find that product quality is on average 23% higher in big cities than that of small cities. We further find that agglomeration forces account for half of the quality difference in big cities while sorting of firms accounts for another half. A counterfactual policy to relax land use regulation in housing production raises the quality of goods produced in big cities by 5.5% and (in-direct) welfare of all residents by 6.2% through reallocation of economic activities across space.
    Keywords: Agglomeration; Quality Upgrading; Firm Heterogeneity; Sorting
    JEL: D22 F12 R12 R32
    Date: 2019–11–28
  4. By: Richard Hornbeck; Martin Rotemberg
    Abstract: We examine impacts of market integration on the development of American manufacturing, as railroads expanded through the latter half of the 19th century. Using new county-by-industry data from the Census of Manufactures, we estimate substantial impacts on manufacturing productivity from relative increases in county market access as railroads expanded. In particular, the railroads increased economic activity in marginally productive counties. Allowing for the presence of factor misallocation generates much larger aggregate economic gains from the railroads than previous estimates. Our estimates highlight how broadly-used infrastructure or technologies can have much larger economic impacts when there are inefficiencies in the economy.
    JEL: D24 N61 N71 R1
    Date: 2019–12
  5. By: José Pedro Pontes; Armando J. Garcia Pires
    Abstract: We use a location model due to VON THUNEN (1826)and MILLS (1970; 1972, chapter 5) to determine the patterns of the spatial distribution of manufacturing. In a homogeneous space organized around an activity center (a “Town”), a set of competitive firms produce two complementary commodities: product 1 is a consumer good and product 2, an intermediate good.Firms in both vertically related stages use land and downstream producers of commodity 1 use also product 2 as an input. The productive activity takes place under fixed proportions and the economy is competitive.We further introduce increasing returns, which are external to the firmand derive from a fixed input (a “machine”)that is shared by all manufacturers. We presuppose that such a “machine”is supplied by the set of landowners if the fixed cost is covered by the increase in total land rent (or capitalized value of land) related with its installation. This model can be interpreted in two different ways. Either the intermediate good is viewed as a raw material that is produced by farmers and successively “refined” by a manufacturer,who uses a “mill” or “distillery” for that purpose, or it can stand for “labor” supplied by households with residential land. The economic results are the same in both cases.The model shows that the decentralization of manufacturing and its spatial integration with primary production orworkers’ residences takes place more likely in industries that are labor-intensive (or show high “refining rates” of raw materials) and relatively small fixed costs requirements. The factories that relocate away from the activity center will likely stay in areas at an intermediate distance rather than in remote territories since they would then face too high transport costs in exporting back their output.
    Keywords: Manufacturing Location; Industrialization; External Economies of Scale
    JEL: O12 O14 R12
    Date: 2020–01
  6. By: Bergantiños, Gustavo; Navarro-Ramos, Adriana
    Abstract: This paper considers agglomeration economies. A new firm is planning to open a plant in a country divided into several regions. Each firm receives a positive externality if the new plant is located in its region. In a decentralized mechanism, the plant would be opened in the region where the new firm maximizes its individual benefit. Due to the externalities, it could be the case that the aggregated utility of all firms is maximized in a different region. Thus, the firms in the optimal region could transfer something to the new firm in order to incentivize it to open the plant in that region. We propose two rules that provide two different schemes for transfers between firms already located in the country and the newcomer. The first is based on cooperative game theory. This rule coincides with the nucleolus and the t-value of the associated cooperative game. The second is defined directly. We provide axiomatic characterizations for both rules. We characterize the core of the cooperative game. We prove that both rules belong to the core.
    Keywords: game theory, core, axiomatic characterization, agglomeration economies.
    JEL: C71
    Date: 2020–01–13
  7. By: Bachtler, John; Begg, Iain
    Abstract: Regional development is one of the main EU spending priorities through its Cohesion Policy. Brexit is among several influences on the future of the policy, whose evolution is part of a wider reshaping of the principles and practice of regional policy in Europe. In the context of emerging policy challenges and recent contributions to the regional policy literature, the article highlights innovation, human capital and effective institutions as three crucial dimensions of future policy. It argues that a shift in regional policy priorities, governance and territorial focus is underway – partly influenced by place-based policy thinking - at EU level under Cohesion Policy as well as under national regional policies in the EU27 and the UK.
    Keywords: Brexit; EU Cohesion Policy; place‐based policy; regional development; regional policy
    JEL: F15 H77 L52 R11 R58
    Date: 2018–03–01
  8. By: Matteo Deleidi; Walter Paternesi Meloni; Luigi Salvati; Francesca Tosi
    Abstract: The promotion of regional convergence is at the heart of the European cohesion policy,although how to stimulate it still is a debated question in the economic theory. Endorsing a Kaldorian perspective, we investigate the determinants of labour productivity in Italian regions by applying Panel Structural VAR modelling to 1981-2013 data. By esplicitly considering the endogeneity among the studied variables, we find that labour productivity is stimulated by output growth and capital accumulation. Our findings bear important implications in terms of policy advice, leading to the conclusion that considerable public investment is necessary to stimulate economic growth and productivity especially in economically depressed areas, like the Italian Mezzogiorno.
    Keywords: Labour productivity; Technical progress; Investment; Regional differentials; Panel SVAR
    JEL: C33 O18 O47 R11
    Date: 2020–01
  9. By: Christian Ghiglino (Department of Economics, University of Essex, UK); Kazuo Nishimura (RIEB, Kobe University, Japan); Alain Venditti (Aix-Marseille Univ, CNRS, EHESS, Ecole Centrale, AMSE, Marseille, France.)
    Abstract: We consider an economy with three cities producing different outputs. Two cities produce intermediate goods, a type 1 producing an intermediate "agricultural" good with capital and labor only, and a type 2 producing an intermediate "industrial" good with capital, labor and human capital, and the last type 3 city produces the final good which is obtained from the two intermediate goods and labor. The asymmetric introduction of human capital allows us to prove that the three cities experience at the equilibrium heterogeneous endogenous growth rates which are proportional to the growth rate of human capital. We show that the "industrial" type 2 city is characterized by the larger growth rate while the "agricultural" type 1 city experiences the lower growth rate, and thus the type 3 city is characterized by a growth rate which is a convex combination of the two formers. This implies that the relative size in terms of output of the "agricultural" city decreases over time. This property allows to recover the empirical fact that most nonagricultural production occurs in growing metropolitan areas. But, simultaneously, as we prove that total labor employed in each city is proportional to the total population, the relative population size distribution of cities is constant over time as shown in empirical studies.
    Keywords: urban dynamics, human capital, endogenous growth, heterogeneous growth rates, city inequalities
    JEL: C61 C62 O41 R11 R12
    Date: 2020–01
  10. By: Gilles Duranton; Diego Puga
    Abstract: We develop an urban growth model where human capital spillovers foster entrepreneurship and learning in heterogenous cities. Incumbent residents limit city expansion through planning regulations so that commuting and housing costs do not outweigh productivity gains. The model builds on strong microfoundations, matches key regularities at the city and economy-wide levels, and generates novel predictions for which we provide evidence. It can be quantified relying on few parameters, provides a basis to estimate the main ones, and remains transparent regarding its mechanisms. We examine various counterfactuals to assess quantitatively the effect of cities on economic growth and aggregate income.
    JEL: C52 D24 R12
    Date: 2019–12

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