nep-geo New Economics Papers
on Economic Geography
Issue of 2020‒08‒17
fourteen papers chosen by
Andreas Koch
Institut für Angewandte Wirtschaftsforschung

  1. The Shrinking Advantage of Market Potential By Brülhart, Marius; Desmet, Klaus; Klinke, Gian-Paolo
  2. Income Sorting Across Space: The Role of Amenities and Commuting Costs By Carl Gaigne; Hans R.A. Koster; Fabien Moizeau; Jacques-François Thisse
  3. Spatial autocorrelation of exports and R&D expenditures in Portugal By António Carlos de Campos; Luís Lopes; Carlos Carreira
  4. Localised employment spillovers By Laws, A.
  5. Medieval Cities Through the Lens of Urban Economic Theories By Remi Jedwab; Noel D. Johnson; Mark Koyama
  6. Delineating urban areas using building density By Combes, Pierre-Philippe; De Bellefon, Marie-Pierre; Duranton, Gilles; Gobillon, Laurent; Gorin, Clément
  7. The Geography of Business Dynamism and Skill Biased Technical Change By Hannah Rubinton
  8. Tech Clusters By Kerr, William R.; Robert-Nicoud, Frédéric
  9. Spatial Production Economics By Orea, Luis; Álvarez, Inmaculada C.
  10. General Equilibrium Effects in Space: Theory and Measurement By Rodrigo Adao; Costas Arkolakis; Federico Esposito
  11. Regional Labour Market Spillovers By Cameron Haworth
  12. Measuring Inequality using Geospatial Data By Jaqueson Galimberti; Stefan Pichler; Regina Pleninger
  13. Building(s and) cities: delineating urban areas with a machine learning algorithm By Daniel Arribas-Bel; Miquel-Àngel Garcia-López; Elisabet Viladecans-Marsal
  14. Impacto de los efectos espaciales en la convergencia regional. Análisis departamental para la Argentina By Mauricio Rodrigo Talassino; Marcos Herrera

  1. By: Brülhart, Marius; Desmet, Klaus; Klinke, Gian-Paolo
    Abstract: How does a country's economic geography evolve along the development path? This paper documents recent employment growth in 18,961 regions in eight of the world's main economies. Overall, market potential is losing importance, and local density is gaining importance, as correlates of local growth. In mature economies, growth is strongest in low-market-potential areas. In emerging economies, the opposite is true, though the association with market potential is also weakening there. Structural transformation away from agriculture can account for some of the observed changes. The part left unexplained by structural transformation is consistent with a standard economic geography model that yields a bell-shaped relation between trade costs and the growth of centrally located regions.
    Keywords: economic development; market potential; regional growth; structural transformation
    JEL: O18 R11 R12
    Date: 2019–11
  2. By: Carl Gaigne; Hans R.A. Koster; Fabien Moizeau; Jacques-François Thisse
    Abstract: We study the sorting of skill/income-heterogeneous consumers within and between cities. We allow for non-homothetic preferences and locations that are differentiated by their accessibility to exogenous amenities and distance to employment centers, where production is subject to local externalities. The residential equilibrium is driven by the properties of an amenity-commuting aggregator obtained from the primitives of the model. Using the model’s structure and estimated parameters based on micro-data for the Netherlands, we predict that exogenous amenities are a key driver of spatial sorting. Our general equilibrium counterfactual analysis shows that in the absence of amenities, the GDP increases by 10% because commutes are shorter. However, income segregation rises and 95% of consumers are worse-off.
    Keywords: cities, social stratification, income, amenities, commuting
    JEL: R14 R23 R53 Z13
    Date: 2020
  3. By: António Carlos de Campos (State University of Maringá, Department of Economics); Luís Lopes (University of Coimbra, Centre for Business and Economics Research, CeBER and Faculty of Economics); Carlos Carreira (University of Coimbra, Centre for Business and Economics Research, CeBER and Faculty of Economics)
    Abstract: This article analyzes spatial autocorrelations and the formation of clusters of exports, based on Research and Development (R&D) intensity in Portugal. The central idea is that exports show relative interdependence and spillover effects among nearby regions and a direct relationship with R&D expenditures. It adopts the new taxonomy of the OECD, separating exports by manufacturing and non-manufacturing activities. Methodologically, is was used Exploratory Spatial Data Analysis (ESDA), utilizing Global Moran's Index and LISA. The results showed the presence of positive spatial autocorrelation of exports and the formation of a cluster of the High-High type for the Porto metropolitan region and Aveiro region. There was no confirmation of positive spatial autocorrelation for R&D expenditures among the regions of Portugal. However, there was both a positive spatial autocorrelation for exports associated with R&D expenditures as well as the formation of a regional cluster with high-high pattern for the Aveiro region. This outcome can be explained, in part, by nationally and internationally recognized universities and research centers surrounding the region, favoring knowledge spillovers across the regions.
    Keywords: Export; R&D expenditures; Spatial autocorrelation; Technological intensity; Clusters; Spillovers; Portugal.
    JEL: F10 F14 O32 R12
    Date: 2020
  4. By: Laws, A.
    Abstract: This paper is the first to provide firm level estimates of the propagation rates of localised employment shocks through space and time. A spatial network of the universe of UK firms with near pinpoint location accuracy is used to estimate the firm-level employment adjustment to mass layoffs. Results show that firm level employment adjustment is highly localised and decays rapidly through space - the negative spillover effects halve approximately every kilometre further away from the event. Firm level adjustment is also highly persistent, with further localised employment losses continuing for at least five years after the event. The spillover effects are experienced by a wide range of local firms, but are strongest in non-tradeable sector firms, consistent with the presence of local product demand transmission mechanisms. The paper provides new supporting evidence to theories that sluggish firm level adjustment interacting with local agglomeration forces generate persistence in local labour market outcomes. Furthermore, the micro-level effects uncovered are extremely localised, and thus more standard analysis methods discretising space into regions will incur significant measurement costs.
    Keywords: local employment dynamics, spillover decay rates, agglomeration
    JEL: J23 J63 R12
    Date: 2020–07–15
  5. By: Remi Jedwab (George Washington University); Noel D. Johnson (George Mason University); Mark Koyama (George Mason University)
    Abstract: We draw on theories and empirical findings from urban economics to explore and explain patterns of city growth in the Middle Ages (c. 800-1500 CE). We discuss how agricultural development and physical geography determined the location and size of cities during the medieval period. We also consider the relative importance of economies of scale, agglomeration, and human capital spillovers in medieval cities and discuss how their growth was limited by disamenities and constraints on mobility. We discuss how medieval cities responded to shocks such as the Black Death and describe how institutions became increasingly important in determining their trajectories. Avenues for future research are also laid out.
    Keywords: Medieval Era, City Growth, Urbanization, Food Surplus Hypothesis, Agglomeration Effects, Labor Mobility, Pandemics, Institutions, Europe, Asia
    JEL: R11 R12 R19 N9 N93 N95
    Date: 2020–09
  6. By: Combes, Pierre-Philippe; De Bellefon, Marie-Pierre; Duranton, Gilles; Gobillon, Laurent; Gorin, Clément
    Abstract: We develop a new dartboard methodology to delineate urban areas using detailed information about building location, which we implement using a map of all buildings in France. For each pixel, our approach compares actual building density after smoothing to counterfactual smoothed building density computed after randomly redistributing buildings. We define as urban any area with statistically significant excess building density. Within urban areas, extensions to our approach allow us to distinguish 'core' urban pixels and detect centres and subcentres. Finally, we develop novel one- and two-sided tests that provide a statistical basis to compare maps with different delineations, which we use to assess the robustness of our approach and to document large differences between our preferred delineation and the corresponding official one.
    Keywords: Dartboard approach; Jaccard indices; Urban area definition
    JEL: C14 R12 R14
    Date: 2019–11
  7. By: Hannah Rubinton
    Abstract: This paper seeks to explain three key components of the growing regional disparities in the U.S. since 1980, referred to as the Great Divergence by Moretti (2012). Namely, big cities saw a larger increase in the relative wages of skilled workers, a larger increase in the relative supply of skilled workers, and a smaller decline in business dynamism. These trends can be explained by differences across cities in the extent to which firms adopt new skill-biased technologies. In response to the introduction of a new skill-biased, high fixed cost but low marginal cost technology, firms endogenously adopt more in big cities, in cities that offer abundant amenities for high-skilled workers and in cities that are more productive in using high-skilled labor. The differences in adoption can account for the increasing relationship between skill intensity and city size, the divergence of the city size wage premium by skill group and the changing cross sectional patterns of business dynamism. I document a new fact that firms in big cities invest more in Information and Communication Technology per employee than firms in small cities,consistent with patterns of technology adoption in the model.
    Keywords: Skill Biased Technical Change; Technology Adoption; Economic Geography
    JEL: R12 O33
    Date: 2020–07–21
  8. By: Kerr, William R.; Robert-Nicoud, Frédéric
    Abstract: Tech clusters like Silicon Valley play a central role for modern innovation, business competitiveness, and economic performance. This paper reviews what constitutes a tech cluster, how they function internally, and the degree to which policy makers can purposefully foster them. We describe the growing influence of advanced technologies for businesses outside of traditional tech fields, the strains and backlash that tech clusters are experiencing, and emerging research questions for theory and empirical work.
    Keywords: agglomeration; Clusters; entrepreneurship; Innovation; patents
    Date: 2019–11
  9. By: Orea, Luis; Álvarez, Inmaculada C.
    Abstract: This chapter summarizes the empirical literature that uses a spatial analysis framework in production economics. This literature takes advantage of the spatial dimension of the data to capture the spillover effects of neighboring production units. In the first three sections, we outline standard spatial extensions of the neoclassical production models aiming to measure knowledge spillovers, the effect of network inputs and economies of agglomeration. The next three sections outline the literature that on one hand examines returns to scale and productivity growth from both internal and external inputs, and on the other hand summarize the spatial econometric techniques used in frontier analyses of firms’ production. The last section includes a set of final remarks regarding the application of spatial econometric techniques in production analyses.
    Date: 2019
  10. By: Rodrigo Adao; Costas Arkolakis; Federico Esposito
    Abstract: How do international trade shocks affect spatially connected regional markets? We answer this question by extending shift-share empirical specifications to incorporate general equilibrium effects that arise in spatial models. In partial equilibrium, regional shock exposure has a shift-share structure: it is the average shock weighted by regional exposure shares in revenue and consumption. General equilibrium responses of employment and wages in each market are the sum, across all regions, of these shift-share measures times bilateral reduced-form elasticities determined by the economy’s spatial links. We use this reduced-form representation of the model to efficiently estimate the bilateral elasticities exploiting exogenous variation in shock exposure across markets. Finally, we study the general equilibrium impact of the ‘‘China shock’’ on U.S. CZs using our model-consistent generalization of the specification in Autor et al. (2013). We find that indirect effects from the shock exposure of other markets reinforce the negative impact of the market’s own shock exposure, leading to employment and wage losses that are significantly larger than those reported in the existing literature.
    Date: 2020
  11. By: Cameron Haworth (Reserve Bank of New Zealand)
    Abstract: This analytical note examines how unemployment in one region could spill over and influence unemployment in other regions. The paper finds rising unemployment in Auckland and Waikato has the biggest impact on unemployment around New Zealand. In contrast, rising unemployment in the Upper South Island, Southland, and Taranaki generate few spillovers into other regions. The modelling indicates that regions with the largest spillovers can be used to improve the accuracy of national unemployment forecasts. This can help inform the Reserve Bank when it sets monetary policy to achieve its mandate in supporting employment in New Zealand. Watch Cameron Haworth from the Reserve Bank's Economics team explain how unemployment in one region can effect joblessness in another region.
    Date: 2020–07
  12. By: Jaqueson Galimberti (Faculty of Business, Economics and Law at AUT University); Stefan Pichler (KOF Swiss Economic Institute, ETH Zurich); Regina Pleninger (KOF Swiss Economic Institute, ETH Zurich)
    Abstract: The main challenge in studying economic inequality is limited data availability, which is particularly problematic in developing countries. We construct a measure of economic inequality for 234 countries and territories from 1992 to 2013 using satellite data on nighttime light emissions as well as gridded population data. Key methodological innovations include the use of varying levels of data aggregation, and a parsimonious calibration of the lights-prosperity relationship to match traditional inequality measures based on income data. Indeed, we obtain a measure that is significantly correlated with cross-country variation in income inequality. Subsequently, we provide three applications of the data in the fields of health economics and international finance. Our results show that light- and income-based inequality measures lead to similar results in terms of cross-country correlations, but not for the dynamics of inequality measure can capture more enduring features of economic activity that are not directly captured by income.
    Keywords: Nighttime lights, inequality, gridded population
    JEL: D63 E01 I14 O11 O47 O57
    Date: 2020–07
  13. By: Daniel Arribas-Bel (University of Liverpool); Miquel-Àngel Garcia-López (Universitat Autònoma de Barcelona & IEB); Elisabet Viladecans-Marsal (Universitat de Barcelona & IEB)
    Abstract: This paper proposes a novel methodology for delineating urban areas based on a machine learning algorithm that groups buildings within portions of space of sufficient density. To do so, we use the precise geolocation of all 12 million buildings in Spain. We exploit building heights to create a new dimension for urban areas, namely, the vertical land, which provides a more accurate measure of their size. To better understand their internal structure and to illustrate an additional use for our algorithm, we also identify employment centers within the delineated urban areas. We test the robustness of our method and compare our urban areas to other delineations obtained using administrative borders and commuting-based patterns. We show that: 1) our urban areas are more similar to the commuting-based delineations than the administrative boundaries but that they are more precisely measured; 2) when analyzing the urban areas’ size distribution, Zipf’s law appears to hold for their population, surface and vertical land; and 3) the impact of transportation improvements on the size of the urban areas is not underestimated.
    Keywords: Buildings, urban areas, city size, transportation, machine learning
    JEL: R12 R14 R2 R4
    Date: 2019
  14. By: Mauricio Rodrigo Talassino; Marcos Herrera
    Abstract: Este trabajo analiza diferentes modelos de convergencia para la Argentina usando herramientas de econometría espacial. El análisis espacial permite descomponer los resultados entre efectos directos, netos de dependencia espacial, y efectos indirectos, generados por el contagio entre regiones. Nuestra investigación detecta que la falta de convergencia en los resultados es producto del contagio espacial, anulando el efecto de convergencia neta. Este resultado brinda indicios sobre las causas de la no- convergencia detectada en investigaciones similares, destacando la importancia de las interacciones espaciales en los modelos de convergencia y en el diseño de políticas económicas regionales, más allá de las diseñadas a nivel local y/o provincial. La investigación incluye un análisis del proceso de difusión espacial ante shocks regionales mediante la descomposición del efecto emisión y recepción para todo el país.
    Keywords: Convergencia regional, Efectos espaciales, Argentina
    JEL: C21 R11
    Date: 2019–11

This nep-geo issue is ©2020 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.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.