nep-geo New Economics Papers
on Economic Geography
Issue of 2020‒11‒02
eight papers chosen by
Andreas Koch
Institut für Angewandte Wirtschaftsforschung

  1. The social profitability of rural roads in a small open economy: Do urban agglomeration economies matter? By Clive Bell
  2. Measuring the Regional Economic Cost of Brexit: Evidence up to 2019 By Fetzer, Thiemo; Wang, Shizhuo
  3. The misallocation in the Chinese land market By Fei, Xuan
  4. INDUSTRIAL CLUSTERS, NETWORKS AND RESILIENCE TO THE COVID-19 SHOCK IN CHINA By Ruochen Dai; Dilip Mookherjee; Yingyue Quan; Xiaobo Zhang
  5. Reassessing the Resource Curse using Causal Machine Learning By Roland Hodler; Michael Lechner; Paul A. Raschky
  6. Planes, Trains, and Automobiles: What Drives Human-Made Light? By Dickinson, Jeffrey
  7. Assessing the Impact of Social Network Structure on the Diffusion of Coronavirus Disease (COVID-19): A Generalized Spatial SEIRD Model By Giorgio Fagiolo
  8. Do Investment Incentives Promote Regional Growth and Income Convergence in Turkey? By Hulya Saygili

  1. By: Clive Bell
    Abstract: In the presence of agglomeration economies, the effects of a rural roads programme depend not only on the reduction in transportation costs, but also on the form of labour mobility. When financed by a poll tax on rural households, the wage will rise, accompanied by some return migration, provided both cross-price effects in production and consumption and agglomeration economies are sufficiently small. With empirically plausible elasticities of agglomeration economies, urban households may be worse off.
    Keywords: Rural roads, Profitability, Transportation, Agglomeration
    Date: 2020
  2. By: Fetzer, Thiemo (University of Warwick); Wang, Shizhuo (University of Warwick)
    Abstract: The United Kingdom (UK) reported record employment levels following its vote to Leave the European Union (EU), leading to many pundits discarding the dire pre-Brexit vote impact assessments as part of “project fear.” This paper studies the cost of the Brexit-vote to date across UK regions finding significant evidence suggesting that the economic costs of the Brexit-vote are both sizable and far from evenly distributed. Among 382 districts, at least 168 districts appear to be Brexit-vote losers, having lost, on average 8.54 percentage points of output in 2018 compared to their respective synthetic controls. The Brexit-vote costs are increasing in a districts: a) support for Leave in 2016; b) the size of its manufacturing sector; c) the share of low skilled. The Brexitvote induced economic divergence across regions is already exacerbating the regional economic inequalities that the 2016 EU referendum vote made apparent. Indirect evidence further suggests that firms may, amidst the significant (trade) policy uncertainty, have shifted away from capital to labor in the shortterm given that Brexit has, to date, not led to changes in market access. The resulting short-term employment- and payroll growth post-2016 is not supported by productivity increases in most parts of the UK. This sets up the possibility for significant labor market adjustments once Brexit becomes a defacto reality. Further, there is some evidence suggesting that COVID19 may exacerbate the regional economic impact of the Brexit-vote to date.
    Keywords: Brexit, economic impact, evaluation, trade barriers JEL Classification: F6, H2, H3, H5, P16, D7
    Date: 2020
  3. By: Fei, Xuan
    Abstract: This paper proposes a spatial equilibrium model to quantify welfare losses from land market distortions in China. In the model, heterogeneous firms in a variety of sectors choose their locations across regions with costly trade, frictional labor migration, and land market distortions. We match land transaction and firm-level survey data to estimate land market distortions for firms. Misallocation arises when similar firms are faced with land prices that effectively prevent productive firms from establishing in large cities where they can benefit from agglomeration forces and access to higher productivity. Our framework incorporating land market distortions also helps clarify the mystery of China’s undersized cities, a phenomenon noted by Au and Henderson (2006) and Chauvin et al. (2017). Our estimates suggest large negative effects of land policies on the economic welfare in China. We end with a counterfactual exercise that suggests that a coordinated land and labor migration reform would generate welfare gains and reduce regional inequality.
    JEL: F16 L22 L51 O47 R14 R30
    Date: 2020–10–21
  4. By: Ruochen Dai (Central University of Finance and Economics); Dilip Mookherjee (Boston University); Yingyue Quan (Peking University); Xiaobo Zhang (Peking University and IFPRI)
    Abstract: We examine how exposure of Chinese firms to the Covid-19 shock varied with a cluster index (measuring spatial agglomeration of firms in related industries) at the county level. Two data sources are used: entry flows of newly registered firms in the entire country, and an entrepreneur survey regarding operation of existing firms. Both show greater resilience in counties with a higher cluster index, after controlling for industry dummies and local infection rates, besides county and time dummies in the entry data. Reliance of clusters on informal entrepreneur hometown networks and closer proximity to suppliers and customers help explain these findings.
    Keywords: Clusters, Covid-19, China, Firms, Social Networks
    JEL: J12 J16 D31 I3
    Date: 2020–10
  5. By: Roland Hodler (SoDa Laboratories, Monash University); Michael Lechner (SoDa Laboratories, Monash University); Paul A. Raschky (SoDa Laboratories, Monash University)
    Abstract: We reassess the effects of natural resources on economic development and conflict, applying a causal forest estimator and data from 3,800 Sub-Saharan African districts. We find that, on average, mining activities and higher world market prices of locally mined minerals both increase economic development and conflict. Consistent with the previous literature, mining activities have more positive effects on economic development and weaker effects on conflict in places with low ethnic diversity and high institutional quality. In contrast, the effects of changes in mineral prices vary little in ethnic diversity and institutional quality, but are non-linear and largest at relatively high prices.
    Keywords: resource curse, economic development, conflict, causal machine learning, Africa
    JEL: C21 O13 O55 Q34 R12
    Date: 2020–09
  6. By: Dickinson, Jeffrey
    Abstract: This paper expands on our understanding of the lights-income relationship by linking the newest generation of nighttime satellite images derived from the Visible Infrared Imaging Radiometry Suite, VIIRS, to nationwide, panel data on population and income from 2012-2018 for both Brazil and the United States including 3,104 US counties, and 5,570 munic\'ipios. I leverage the quality and frequency of those data sources and the VIIRS lights images to decompose the links between population changes, GDP changes, and nighttime lights changes at the county and munic\'ipio level. I find decreasing marginal effects of GDP on nighttime light as well as decreasing marginal effects of population on nighttime light, a result which holds across many specifications and that is robust to sub-sample analysis and placebo tests. Interactions among controls also appear to be present. Using sub-sample analysis, I also find that nighttime light does a poor job of capturing less-wealthy areas. Finally, I use a between-county estimator to identify the effects of time-invariant infrastructure features on night-time light. Roads, rail, ports, airports, and border crossings I find to be strong contributors to increases in light.
    Keywords: night-time light, GDP, population, infrastructure, regional development
    JEL: C82 O51 R10 R11 R12
    Date: 2020
  7. By: Giorgio Fagiolo
    Abstract: In this paper, I study epidemic diffusion in a generalized spatial SEIRD model, where individuals are initially connected in a social or geographical network. As the virus spreads in the network, the structure of interactions between people may endogenously change over time, due to quarantining measures and/or spatial-distancing policies. I explore via simulations the dynamic properties of the co-evolutionary process dynamically linking disease diffusion and network properties. Results suggest that, in order to predict how epidemic phenomena evolve in networked populations, it is not enough to focus on the properties of initial interaction structures. Indeed, the co-evolution of network structures and compartment shares strongly shape the process of epidemic diffusion, especially in terms of its speed. Furthermore, I show that the timing and features of spatial-distancing policies may dramatically influence their effectiveness.
    Keywords: Corona Virus Disease; COVID-19; Diffusion Models on Networks; Spatial SEIRD Models.
    Date: 2020–10–22
  8. By: Hulya Saygili
    Abstract: This paper contributes to the literature on the growth and income convergence effects of investment incentives in Turkey in four ways: Firstly, it uses the most recent investment incentives data from 2004-2018 for 81 provinces grouped into 6 regions. Secondly, it investigates the significance of the lagged impact of investment incentives. Thirdly, it applies Prais-Winsten regressions with heteroskedastic panels-corrected standard errors (PCSE) to address autocorrelation, heterogeneity, and endogeneity problems in a panel context. Fourthly, in addition to neoclassical conditional Beta-convergence, it modifies the Sigma-convergence approach to investigate the direct impact of investment incentives directly on regional convergence. The estimation results indicate convergence, but investment incentives have significant time-lagged impacts in relatively high income regions only.
    Keywords: Regional income convergence, Regional investment incentives, Panel data analysis, Turkey
    JEL: R11 R50 O47 C23
    Date: 2020

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