nep-geo New Economics Papers
on Economic Geography
Issue of 2020‒10‒05
eight papers chosen by
Andreas Koch
Institut für Angewandte Wirtschaftsforschung

  1. Trade and Geography By Stephen J. Redding
  2. Agglomeration Economies and Race Specific Spillovers By Elizabeth Ananat; Shihe Fu; Stephen L. Ross
  3. More working from home will change the shape and size of cities By James Lennox
  4. Cities in a Post-COVID World By Richard Florida; Andres Rodriguez-Pose; Michael Storper
  5. Does cohesion policy reduce EU discontent and Euroscepticism? By Andres Rodriguez-Pose; Lewis Dijkstra;
  6. An ever-looser union? Juxtaposing accumulation and agglomeration in the context of surveillance capitalism By Kleinod, Sonja; Klüh, Ulrich
  7. Projecting Opportunities for INdustrial Transitions (POINT): Concepts, rationales and methodological guidelines for territorial reviews of industrial transition By PONTIKAKIS Dimitrios; FERNANDEZ SIRERA Tatiana; JANSSEN Matthijs; GUY Ken; MARQUES SANTOS Anabela; BODEN John Mark; MONCADA PATERNO' CASTELLO Pietro
  8. FRED-SD: A Real-Time Database for State-Level Data with Forecasting Applications By Kathryn Bokun; Laura E. Jackson; Kevin L. Kliesen; Michael T. Owyang

  1. By: Stephen J. Redding
    Abstract: This paper reviews recent research on geography and trade. One of the key empirical findings over the last decade has been the role of geography in shaping the distributional consequences of trade. One of the major theoretical advances has been the development of quantitative spatial models that incorporate both exogenous first-nature geography (natural endowments) and endogenous second-nature geography (the location choices of economic agents relative to one another) as determinants of the distribution of economic activity across space. These models are sufficiently rich to capture first-order features of the data, such as gravity equations for flows of goods and people. Yet they remain sufficiently tractable as to permit an analytical characterization of the properties of the general equilibrium and facilitate counterfactuals for realistic policy interventions. We distinguish between models of regions or systems of cities (where goods trade and migration take center stage) and models of the internal structure of cities (where commuting becomes relevant). We review some of key empirical predictions of both sets of theories and show that they have been remarkably successful in rationalizing the empirical findings from reduced-form research. Looking ahead, the combination of recent theoretical advances and novel geo-coded data on economic interactions at a fine spatial scale promises many interesting avenues for further research, including discriminating between alternative mechanisms for agglomeration, understanding the implications of new technologies for the organization of work, and assessing the causes, consequences and potential policy implications of spatial sorting.
    JEL: F1 J4 R1 R4
    Date: 2020–09
  2. By: Elizabeth Ananat (Barnard College, Columbia University); Shihe Fu (Southwest University of Finance and Economics); Stephen L. Ross (University of Connecticut)
    Abstract: Racial social isolation within workplaces may reduce firm productivity. We provide descriptive evidence that African-Americans feel socially isolated from whites. To test whether isolation affects productivity, we estimate models of Total Factor Productivity for manufacturing firms allowing the returns to concentrated economic activity and human capital to vary by the match between each establishment’s racial and ethnic composition and the composition of local area employment. Higher own-race representation increases the productivity return from employment density and concentrations of college educated workers. Looming demographic changes suggest that this drag on economic productivity may increase over time.
    Keywords: agglomeration economies, firm productivity, human capital externalities, information networks, racial and ethnic isolation
    JEL: J15 J24 L11 R32 R12 R23
    Date: 2020–09
  3. By: James Lennox
    Abstract: Experiences of and investments in working from home (WFH) during the COVID-19 pandemic may permanently alter commuting behaviour and employment practices, ultimately changing the shape and size of cities. Using a spatial computable general equilibrium (SCGE) model, we study the effects of a shift to working-from home on labour supply, housing demands and the sectoral and spatial structure of the Australian economy. The model accounts for households' choices of occupations, residence and work locations, and for trade and input-output linkages between firms in different locations and industries. Simulating increased WFH in selected occupations causes labour supply to shift towards these occupations at the expense of others. This is particularly favourable for many business services industries, which use the WFH occupations most intensively. Within cities, workers choosing WFH occupations opt for longer, but less frequent commutes from residential locations that are more attractive or have cheaper housing. Although this depresses house prices in inner areas, attracting workers choosing non-WFH occupations and non-working households, the net effects are flatter residential density gradients and increased urban sprawl. Jobs, become more centralised within cities and increase overall in the largest and most productive cities. Smaller cities and towns close to large employment centres attract more residents who commute out, but the majority of Australian cities and towns shrink, relative to the baseline.
    Keywords: commuting working from home telecommuting SCGE model COVID-19
    JEL: C68 R12 R13 R41
    Date: 2020–08
  4. By: Richard Florida; Andres Rodriguez-Pose; Michael Storper
    Abstract: This paper examines the effect of the COVID-19 pandemic and its related economic, fiscal, social and political fallout on cities and metropolitan regions. We assess the effect of the pandemic on urban economic geography at the intra- and inter-regional geographic scales in the context of four main forces: the social scarring instilled by the pandemic; the lockdown as a forced experiment; the need to secure the urban built environment against future risks; and changes in the urban form and system. At the macro-geographic scale, we argue the pandemic is unlikely to significantly alter the winner-take-all economic geography and spatial inequality of the global city system. At the micro-geographic scale, however, we suggest that it may bring about a series of short-term and some longer-running social changes in the structure and morphology of cities, suburbs, and metropolitan regions. The durability and extent of these changes will depend on the timeline and length of the pandemic.
    Keywords: Cities, COVID-19, Pandemic, Urban Structure, Remote Work.
    Date: 2020–09
  5. By: Andres Rodriguez-Pose; Lewis Dijkstra;
    Abstract: Some regions in Europe that have been heavily supported by the European Union’s cohesion policy have recently opted for parties with a strong Eurosceptic orientation. The results at the ballot box have been put forward as evidence that cohesion policy is ineffective for tackling the rising, European- wide wave of discontent. However, the evidence to support this view is scarce and, often, contradictory. This paper analyses the link between cohesion policy and the vote for Eurosceptic parties. It uses the share of votes cast for Eurosceptic parties in more than 63,000 electoral districts in national legislative elections in the EU28 to assess whether cohesion policy investment since 2000 has made a difference for the electoral support for parties opposed to European integration. The results indicate that cohesion policy investment is linked to a lower anti-EU vote. This result is robust to employing different econometric approaches, to considering the variety of European development funds, to different periods of investment, to different policy domains, to shifts in the unit of analysis, and to different levels of opposition by parties to the European project.
    Keywords: Euroscepticism, anti-system voting, populism, cohesion policy, elections, regions, Europe
    JEL: D72 R11 R58
    Date: 2020–09
  6. By: Kleinod, Sonja; Klüh, Ulrich
    Abstract: The article explores regional policy issues at the nexus of economic geography and the recent academic literature on the political economy of digitalization. The objective is to blend these two areas of research to derive a first set of preliminary policy implications for so called "Smart Region" strategies. First, we document and analyze the finding that digitalization and, more generally, technological progress based on information and communication technologies represents a risk rather than an opportunity for many regions. Against the backdrop of the role of human capital accumulation in this process, "Smart Region" strategies should re-focus their attention on the settlement and development of "digitally competent" human capital. Second, we summarize key findings from studies that deal with the capitalist accumulation regime emerging in the course of digital change. This regime, often referred to as "platform capitalism" or "surveillance capitalism", appears to be antagonistic what is considered an integral and functional regional economy. Against this background, regions should meet calls for a rapid integration into this regime with a good deal of skepticism. Similarly, they should be careful not to embrace "smart" initiatives overhasty. Instead, they should develop their own definition of digital literacy and consciously incorporate alternatives to platform capitalism in their digital strategies. Attracting digitally competent human capital can support such an approach, especially if the respective initiatives are directed towards the public, educational and non-profit sectors.
    Keywords: Digitalization,Surveillance Capitalism,Platform Economy,Labour Markets,Regional Development,Smart Cities,Smart Regions,Economic Geography,Agglomeration,Human Capital
    JEL: H4 J24 J45 J48 J61 L16 O3 P1 R1 R58
    Date: 2020
  7. By: PONTIKAKIS Dimitrios (European Commission - JRC); FERNANDEZ SIRERA Tatiana; JANSSEN Matthijs; GUY Ken; MARQUES SANTOS Anabela (European Commission - JRC); BODEN John Mark (European Commission - JRC); MONCADA PATERNO' CASTELLO Pietro (European Commission - JRC)
    Abstract: This report provides guidelines with respect to concepts, rationales and methodological considerations aimed at experts conducting territorial reviews of industrial transition and at policy makers and analysts with an interest in the operationalisation of transformative industrial innovation. It explains the concepts necessary to adopt a wider framing of the production and consumption system, the rationales for (and objectives of) reviews useful for transformative industrial innovation, and the POINT (Projecting Opportunities for INdustrial Transitions) methodology presented as a series of steps. The concepts section outlines a framework that allows Smart Specialisation Strategies (S3) to be mobilised in ways that are in keeping with vanguard thinking and international practice on system innovation and new industrial policies. Doing so requires reframing the domain of policy action, broadening it to cover the entire production and consumption system. When a wider view of the production and consumption system is taken, previously unidentified interconnections between its constituent parts can become obvious. Importantly, these interconnections represent points of powerful policy leverage, if their identification enables coordinated and timely action. Successful transition management requires strategic directions that draw upon territorial values (in addition to economic strengths); a concern with multiple-value creation (economic, social, environmental); the management of demand (public procurement, households); understanding and managing resistance to change; and ways of satisfying the very different needs and ambitions of a great number of actors with unequal power over the system. The rationales section argues that transitions require clarity of purpose and a new paradigm of thinking and acting in the face of transformative change. A confluence of maturing trends, including the availability of funding and an increasing readiness to deploy the full panoply of industrial policy instruments, can allow territories to benefit from new opportunities and manage the threats. As deep structural change is often accompanied by social transformation, these transitions represent a chance not just to cater for the economic growth imperative but also to respond to growing social demands to maintain dignified, fulfilling, and well-remunerated employment, empower traditionally disadvantaged groups and achieve sustainability. However, this is not a likely outcome in the absence of preparation and a preparedness to act. Obtaining legitimacy and resources for pursuing transformative change requires alternative framings as to why and how policy can yield desirable outcomes. The section also explains how the perspective taken has been motivated by the needs of lagging and other regions that suffer from long-term lock-in to economic activities with limited opportunities for branching within predictable timeframes. For these, as well as many other regions, new pathways for industrial development supported by multi-level coordination, planning and interventions are necessary. The territorial reviews can produce relevant evidence that is difficult to obtain otherwise. The section on the POINT methodology presents suggestions on the framing, procedure and conduct of the reviews. The reviews focus on an industrial theme of growing global importance suggested by the relevant territorial authorities (for instance, but not confined to: climate change/renewable energy; electrification of transport; circular economy; digitalisation; artificial intelligence). The purpose of the reviews is to collect evidence and examine the scope for developing adequate territorial responses that harness cross-portfolio complementarities (e.g. between ministries and between levels of governance) and cross-stakeholder coordination (e.g. between businesses and broad constituencies of consumers/users). In each territory under review and for an industrial theme suggested by the authorities the review findings are documented in a report that serves to: (a) Map the affected orientation, resource mobilisation, production and consumption systems in the territory; (b) Document existing planning arrangements and directions of deliberate change (e.g. as described in thematic policy and business strategies, or evident in momentum-gathering social concerns and movements, consumer trends, common territorial values etc.) of various stakeholders in the affected systems that could later form the basis for a broadly-supported transition vision; (c) Make concrete suggestions for the advancement of the transition and for managing its downsides. Given the nature and magnitude of the transition challenge, adequate territorial responses will include not just research and innovation policies that are already part of S3, but also industrial and employment policies more generally, including provisions for education and skills, for complementary large public infrastructures (e.g. in energy, transport, waste), urban planning, fiscal policy and social security reform, among others. The recommendations of the review therefore place a particular emphasis on fostering alignment and coordination within government. The reviews aim to build the evidence base for appropriate "Actions to Manage Industrial Transitions", as stipulated in fulfilment criterion No.6 of the enabling condition of good governance foreseen in the next multi-annual financing period of the EU Structural Funds (without prejudice to the final decision of the European Commission). The reviews can further inform the design and implementation of S3 [e.g. refining or extending priorities, broadening the Entrepreneurial Discovery Process (EDP), fostering synergies with other funding streams] as well as informing, and been informed by, industrial policies and other territorial strategies for economic, social and sustainable development. More broadly, the reviews can be an input to a participatory process of stakeholder engagement leading to the development of credible positive visions for the future that can be the source of pride and inspiration for the region (or country) and a rallying point for the mobilisation of actors and resources from all levels.
    Keywords: industrial transition, territorial strategies, industrial innovation
    Date: 2020–09
  8. By: Kathryn Bokun; Laura E. Jackson; Kevin L. Kliesen; Michael T. Owyang
    Abstract: We construct a real-time dataset (FRED-SD) with vintage data for the U.S. states that can be used to forecast both state-level and national-level variables. Our dataset includes approximately 28 variables per state, including labor market, production, and housing variables. We conduct two sets of real-time forecasting exercises. The first forecasts state-level labor-market variables using five different models and different levels of industrially-disaggregated data. The second forecasts a national-level variable exploiting the cross-section of state data. The state-forecasting experiments suggest that large models with industrially-disaggregated data tend to have higher predictive ability for industrially-diversified states. For national-level data, we find that forecasting and aggregating state-level data can outperform a random walk but not an autoregression.
    Keywords: space-time autogregression; factor model; VAR; industrial diversity
    JEL: C33 R11
    Date: 2020–08–14

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.
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