nep-geo New Economics Papers
on Economic Geography
Issue of 2020‒06‒22
fourteen papers chosen by
Andreas Koch
Institut für Angewandte Wirtschaftsforschung

  1. On the productivity advantage of cities By Jacob, Nicholas; Mion, Giordano
  2. Stability and sustainability of urban systems under commuting and transportation costs By Ikeda, Kiyohiro; Takayama, Yuki; Thisse, Jacques-François
  3. Matching and Agglomeration: Theory and Evidence from Japanese Firm-to-Firm Trade By Yuhei Miyauchi
  4. The Economics of Urban Density By Duranton, Gilles; Puga, Diego
  5. Planes, Trains, and Automobiles: Night-time Lights of the USA By Dickinson, Jeffrey
  6. Spatial divisions of poverty and wealth: How much does segregation matter for educational achievement? By Rafael Carranza; Gabriel Otero; Dante Contreras
  7. Intergenerational Income Mobility in Sweden: A look at the spatial disparities across cities By Alessandra Michelangeli; John Östh; Umut Türk
  8. Measuring and Visualizing Place-Based Space-Time Job Accessibility By Yujie Hu; Joni Downs
  9. Measuring Commuting and Economic Activity inside Cities with Cell Phone Records By Gabriel E. Kreindler; Yuhei Miyauchi
  10. Spatial Analysis of Poverty: The case of Peru By Delgado Narro, Augusto Ricardo
  11. A dynamic theory of spatial externalities By Raouf Boucekkine; Giorgio Fabbri; Salvatore Federico; Fausto Gozzi
  12. The Prices of Residential Land in German Counties By Stefanie Braun; Gabriel S. Lee
  13. Employment effects of investment subsidies by German Regional Policy By Bade, Franz-Josef; Alm, Bastian; Weins, Sebastian
  14. The heterogenous regional effects of minimum wages in Poland By Maciej Albinowski; Piotr Lewandowski

  1. By: Jacob, Nicholas; Mion, Giordano
    Abstract: Ever since Marshall (1890) agglomeration externalities have been viewed as the key factor explaining the existence of cities and their size. However, while the various micro foundations of agglomeration externalities stress the importance of Total Factor Productivity (TFP), the empirical evidence on agglomeration externalities rests on measures obtained using firm revenue or value-added as a measure of firm output: revenue-based TFP (TFP-R). This paper uses data on French manufacturing firms' revenue, quantity and prices to estimate TFP and TFP-R and decompose the latter into various elements. Our analysis suggests that the revenue productivity advantage of denser areas is mainly driven by higher prices charged rather than differences in TFP. At the same time, firms in denser areas are able to sell higher quantities, and generate higher revenues, despite higher prices. These and other results we document suggest that firms in denser areas are able to charge higher prices because they sell higher demand/quality products. Finally, while the correlation between firm revenue TFP and firm size is positive in each location, it is also systematically related to density: firms with higher (lower) TFP-R account for a larger (smaller) share of total revenue in denser areas. These patterns thus amplify in aggregate regional-level figures any firm-level differences in productivity across space.
    Keywords: Agglomeration externalities; demand; density; prices; Quality; Revenue-based TFP; Total factor productivity (TFP)
    JEL: D24 L11 R12 R15
    Date: 2020–04
  2. By: Ikeda, Kiyohiro; Takayama, Yuki; Thisse, Jacques-François
    Abstract: This paper explores the conditions for the emergence of a system of cities in a general equilibrium setting that accounts for the mobility of labor, transportation costs between cities and commuting costs within cities. Locations are equally distributed over a circular space. We find that the multiplicity of stable spatial equilibria is the rule and not the exception. Using the concept of stability areas to study the transition from one stable equilibrium to the next, we show that decreasing commuting or transportation costs generate equilibrium paths that may feature a megalopolis or hierarchical system of cities having different sizes. We confirm that transportation and commuting costs have opposite impacts on the space-economy.
    Keywords: Cities; Commuting costs; Economic Geography; Multiplicity of stable equilibria; Racetrack economy; Transportation Costs
    JEL: F12 R12
    Date: 2020–05
  3. By: Yuhei Miyauchi (Boston University)
    Abstract: Why are economic activities geographically concentrated? I argue that matching frictions and increasing returns to scale in firm-to-firm matching for input trade is an important source of agglomeration. Using a yearly panel of firm-to-firm trade in Japan and unanticipated supplier bankruptcies as a natural experiment, I first document that firms rematch with new suppliers at a faster rate in locations and industries with a higher density of alternative suppliers. At the same time, the new supplier matching rate does not decrease with the geographic density of other buyers, hence the matching rate exhibits increasing returns to scale. Motivated by these findings, I develop a structural general equilibrium model of firm-to-firm trade with matching frictions. I structurally estimate the key parameters of the model to precisely replicate the reduced-form estimates, and I show that this agglomeration mechanism explains about a third of the population-density premium in nominal wages in Japan.
    Date: 2019–12
  4. By: Duranton, Gilles; Puga, Diego
    Abstract: Urban density boosts productivity and innovation, improves access to goods and services, reduces typical travel distances, encourages energy-efficient construction and transport, and facilitates sharing scarce amenities. However, density is also synonymous with crowding, makes living and moving in cities more costly, and concentrates exposure to pollution and disease. We explore the appropriate measurement of density and describe how it is both a cause and a consequence of the evolution of cities. We then discuss whether and how policy should target density and why the trade-off between its pros and cons is unhappily resolved by market and political forces.
    Keywords: agglomeration; density; Urban costs
    JEL: R12 R31 R32
    Date: 2020–05
  5. By: Dickinson, Jeffrey
    Abstract: This paper seeks to advance understanding of the lights-income relationship by linking the newest generation of night-time satellite images, the VIIRS images, to nationwide, panel data on 3,101 US counties, including data on both population and income. I leverage the quality and frequency of those data sources and the VIIRS lights images to decompose the links between population growth, official GDP growth, and nighttime lights growth at the county level. I use a between-county estimator to identify the effects of time-invariant infrastructure features on night-time light. Roads, rail, ports, and airports I find to be strong contributors to increases in light. I find GDP growth is weakly linked with night-time lights though light growth is strongly linked with population growth even when controlling for substantial non-linearities which appear to be present.
    Keywords: night-time light, GDP, population, infrastructure, regional development
    JEL: C82 O51 R10 R11 R12
    Date: 2020
  6. By: Rafael Carranza (London School of Economics); Gabriel Otero (Utrecht University); Dante Contreras (Universidad de Chile)
    Abstract: We explore how different spatial compositions affect the educational achievement in mathematics of 16 year-old students in Chile, a Latin American country with high income inequality and school segregation. We develop a critical review on the literature on negative "neighbourhood effects" associated with concentrated poverty, complementing it with studies concerning self-segregation preferences by members of the upper-middle class. We combine administrative data about student performance with survey data for the 52 municipalities of the Metropolitan Region of Santiago de Chile. We cluster the districts based on factors such as unemployment, economic inequality, access to services, experiences of violence and stigmatization. Using longitudinal data, we look at the effect of each of the six spatial clusters on academic performance. Spatial clusters report a significant effect, above and beyond that of individual, household, and school-level characteristics. We conclude that space complements and reinforces the processes of accumulation of socioeconomic (dis)advantages.
    Keywords: Class; Education; Inequality; Socio-economic environment; Urban studies.
    JEL: D63 I24 R23
    Date: 2020–06
  7. By: Alessandra Michelangeli; John Östh; Umut Türk
    Abstract: This paper provides a comprehensive overview of intergenerational income mobility in Sweden. Intergenerational income mobility is considered in both relative and absolute terms, and the analysis is carried out at the individual and municipality-level. We use multilevel models to explore the correlation between upward mobility and social, economic and demographic characteristics of cities. The analyses is carried out on three subpopulations: offspring who live in a different municipality than their parents (mobile population); offspring who live in the municipality where they grew up (immobile population); offspring belonging to visible minority groups. Our results confirm those of previous studies showing a relatively high intergenerational mobility in Sweden compared to other European and North American countries. Substantial differences are observed across municipalities meaning that the particular combination of municipality attributes contributes to shaping the chance of status attainment among young generations. Highly mobile municipalities have more significant human capital, more residential segregation by income, more income inequality, and greater accessibility to jobs.
    Keywords: Intergenerational social mobility; multilevel models; cities.
    JEL: J62 R11 R12
    Date: 2020–05
  8. By: Yujie Hu; Joni Downs
    Abstract: Place-based accessibility measures, such as the gravity-based model, are widely applied to study the spatial accessibility of workers to job opportunities in cities. However, gravity-based measures often suffer from three main limitations: (1) they are sensitive to the spatial configuration and scale of the units of analysis, which are not specifically designed for capturing job accessibility patterns and are often too coarse; (2) they omit the temporal dynamics of job opportunities and workers in the calculation, instead assuming that they remain stable over time; and (3) they do not lend themselves to dynamic geovisualization techniques. In this paper, a new methodological framework for measuring and visualizing place-based job accessibility in space and time is presented that overcomes these three limitations. First, discretization and dasymetric mapping approaches are used to disaggregate counts of jobs and workers over specific time intervals to a fine-scale grid. Second, Shen (1998) gravity-based accessibility measure is modified to account for temporal fluctuations in the spatial distributions of the supply of jobs and the demand of workers and is used to estimate hourly job accessibility at each cell. Third, a four-dimensional volumetric rendering approach is employed to integrate the hourly job access estimates into a space-time cube environment, which enables the users to interactively visualize the space-time job accessibility patterns. The integrated framework is demonstrated in the context of a case study of the Tampa Bay region of Florida. The findings demonstrate the value of the proposed methodology in job accessibility analysis and the policy-making process.
    Date: 2020–05
  9. By: Gabriel E. Kreindler (Harvard University); Yuhei Miyauchi (Boston University)
    Abstract: We show how commuting flows can be used to infer the spatial distribution of income within a city. We use a simple workplace choice model, which predicts a gravity equation for commuting flows whose destination fixed effects correspond to wages. We implement this method with cell phone transaction data from Dhaka and Colombo. Model-predicted income predicts separate income data, at the workplace and residential level. Unlike machine learning approaches, our method does not require training data, yet achieves comparable predictive power. In an application, we show that hartals (transportation strikes) in Dhaka lower commuting, leading to 5-8% lower predicted income.
    JEL: C55 E24 R14
    Date: 2019–02
  10. By: Delgado Narro, Augusto Ricardo
    Abstract: The concept of Multidimensional Poverty traditionally was used for comparative analysis across regions or countries. Nevertheless, in this paper, we use the concept of Multidimensional Poverty calculated for each Peruvian region and analyze the spatial patterns and spatial autocorrelation observed across the country, and, later, identify the spatial spillovers in poverty across the country. We find evidence of spatial autocorrelation across the regions which are statistically significant across models; in other words, it means poverty has spatial effects. Additionally, we find strong and significant evidence of spatial spillovers originated in the error terms rather than the endogenous variable, which has an unstable effect. Finally, the set of covariates we use in our regressions are statistically significant and stable across the models.
    Keywords: Poverty, Spatial econometrics, Peru
    JEL: C21 O10
    Date: 2020–05–23
  11. By: Raouf Boucekkine (AMSE - Aix-Marseille Sciences Economiques - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique, UCL IRES - Institut de recherches économiques et sociales - UCL - Université Catholique de Louvain); Giorgio Fabbri (GAEL - Laboratoire d'Economie Appliquée de Grenoble - Grenoble INP - Institut polytechnique de Grenoble - Grenoble Institute of Technology - CNRS - Centre National de la Recherche Scientifique - UGA - Université Grenoble Alpes - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement); Salvatore Federico (DEPS - Dipartimento di Economia Politica e Statistica - UNISI - Università degli Studi di Siena); Fausto Gozzi (Dipartimento di Economia e Finanza [Roma] - LUISS - Libera Università Internazionale degli Studi Sociali Guido Carli [Roma])
    Abstract: In this paper, we revisit the theory of spatial externalities. In particular, we depart in several respects from the important literature studying the fundamental pollution free riding problem uncovered in the associated empirical works. First, instead of assuming ad hoc pollution diffusion schemes across space, we consider a realistic spatiotemporal law of motion for air and water pollution (diffusion and advection). Second, we tackle spatiotemporal non-cooperative (and cooperative) differential games. Precisely, we consider a circle partitioned into several states where a local authority decides autonomously about its investment, production and depollution strategies over time knowing that investment/production generates pollution, and pollution is transboundary. The time horizon is infinite. Third, we allow for a rich set of geographic heterogeneities across states while the literature assumes identical states. We solve analytically the induced non-cooperative differential game under decentralization and fully characterize the resulting long-term spatial distributions. We further provide with full exploration of the free riding problem, reflected in the so-called border effects. In particular, net pollution flows diffuse at an increasing rate as we approach the borders, with strong asymmetries under advection, and structural breaks show up at the borders. We also build a formal case in which a larger number of states goes with the exacerbation of pollution externalities. Finally, we explore how geographic discrepancies affect the shape of the border effects.
    Keywords: spatial externalities,environmental federalism,transboundary pollution,differential games in continuous time and space,infinite dimensional optimal control problems
    Date: 2020–05
  12. By: Stefanie Braun; Gabriel S. Lee
    Abstract: We estimate changes in the value and price of residential land for 379 German counties (”Landkreise”) from 2014 to 2017 using a total of 42,685 observations. We use the two-step residual method that decomposes the value of a home into the value of the structure and land value. Despite the short time series, we show that the price of residential land has become relatively more expensive in the majority of German counties. More speci?cally, we show that the cumulative change in land values varies between 9% and 171% (excluding Berlin with exorbitant high increases of 668% and Saarland with a decrease of 18%) from 2014 to 2017. On average, the home values increased by 30% and 15% for West and East Germany respectively, whereas the land values increased by 108% and 91% for West and East Germany. Our ?ndings imply that cycles in the German land values are more likely to a?ect the evolution of house prices more in the future than they did in the past. Moreover, our estimated land prices vary signi?cantly to the current land price valuation by one of the German state governments (Hessen).
    Keywords: German Land prices; Land values; German Housing prices; Housing values; Construction costs; Replacement costs
    JEL: R0 R11 R14 R21 R31
    Date: 2020–04
  13. By: Bade, Franz-Josef; Alm, Bastian; Weins, Sebastian
    Abstract: This study investigates the employment impact of investment subsidies in Germany. With 45 billion Euro for about 100,000 firms since the German reunification, these capital grants are the central element of regional policy for strengthening employment in economically weaker regions. The effects of investment grants are analysed by comparing the employment growth of assisted firms with their counterfactual outcome. The hypothetical growth without grant is estimated with panel data from 1999 to 2009 for each German firm in the social security records which are linked with the official records of investment grants. The control group are selected out of total non-assisted firms by combining covariate and propensity score matching methods. The employment effect is determined by cross-section estimators. The assisted firms show a significantly stronger employment growth than their control group. This result is quite robust. Even if the control group is restricted to those non-assisted firms which have had a similar employment growth before the year of allowance, the differences in the growth after the allowance persist. Further heterogeneity tests do not reveal significant hidden influences. All subgroups analysed show nearly the same growth difference between assisted and non-assisted firms.
    JEL: B41 C14 C21 C81 H71 R00 R11 R28 R58
    Date: 2020
  14. By: Maciej Albinowski; Piotr Lewandowski
    Abstract: Since 2008, Poland has been among the EU countries that have increased their minimum wage levels the most, following period in the mid-2000s during which the country’s minimum wage was barely raised. We evaluate the impact of these minimum wage hikes on employment and wage growth in Poland between 2004 and 2018. We estimate panel data models utilising the considerable variation in wage levels, and in minimum wage bites, across 73 Polish NUTS 3 regions. We find that minimum wage hikes had a significant positive effect on wage growth and a significant negative effect on employment growth only in regions of Poland that were in the first tercile of the regional wage distribution in 2007. These effects were moderate in size, and appear to be more relevant for wages. Specifically, we show that if the ratio of minimum wage to average wage had remained constant after 2007, by 2018, the average wages in these regions would have been 3.4% lower, while employment would have been 1.2% higher. On the other hand, in the remaining two-thirds of Polish regions, we find no significant effects of minimum wage hikes on average wages or on employment. We also find indicative evidence that the effects on employment growth differ between groups of workers: i.e., that they are negative for men and for workers in industry, but they are positive for women and for workers in services.
    Keywords: minimum wage, spatial heterogeneity, panel data
    JEL: J21 J23 J38
    Date: 2020–06

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