nep-geo New Economics Papers
on Economic Geography
Issue of 2020‒11‒16
nine papers chosen by
Andreas Koch
Institut für Angewandte Wirtschaftsforschung

  1. Connective Financing: Chinese Infrastructure Projects and the Diffusion of Economic Activity in Developing Countries By Richard Bluhm; Axel Dreher; Andreas Fuchs; Bradley C. Parks; Austin M. Strange; Michael J. Tierney
  2. Industrial Clusters, Networks and Resilience to the Covid-19 Shock in China By Ruochen Dai; Dilip Mookherjee; Yingyue Quan; Xiaobo Zhang
  4. UK Interregional Trade Estimation: Estimates of trade between Northern Ireland, Scotland, Wales and England By Alastair Greig; Mairi Spowage; Graeme Roy
  5. Top Lights: Bright cities and their contribution to economic development By Richard Bluhm; Melanie Krause
  6. Modeling European regional FDI flows using a Bayesian spatial Poisson interaction model By Tam\'as Krisztin; Philipp Piribauer
  7. Spatial Growth Theory: Optimality and Spatial Heterogeneity By Anastasios Xepapadeas; Athanasios Yannacopoulos
  8. Regional Divergence and House Prices By Howard, Greg; Liebersohn, Jack
  9. Regional Housing Market Conditions in Spain By Galesi, Alessandro; Mata, Nuria; Rey, David; Schmitz, Sebastian; Schuffels, Johannes

  1. By: Richard Bluhm (SoDa Laboratories, Monash University); Axel Dreher (SoDa Laboratories, Monash University); Andreas Fuchs (SoDa Laboratories, Monash University); Bradley C. Parks (SoDa Laboratories, Monash University); Austin M. Strange (SoDa Laboratories, Monash University); Michael J. Tierney (SoDa Laboratories, Monash University)
    Abstract: This paper studies the causal effect of transport infrastructure on the spatial concentration of economic activity. Leveraging a new global dataset of geo-located Chinese government-financed projects over the period from 2000 to 2014 together with measures of spatial inequality based on remotely-sensed data, we analyze the effects of transport projects on the spatial distribution of economic activity within and between regions in a large number of developing countries. We find that Chinese-financed transportation projects reduce spatial concentration within but not between regions. In line with land use theory, we document a range of results which are consistent with a relocation of activity from city centers to their immediate periphery. Transport projects decentralize economic activity particularly strongly in regions that are more urbanized, located closer to the coast, and less developed.
    Keywords: transport costs, infrastructure, development finance, spatial concentration, China
    JEL: F15 F35 R11 R12 P33 O18 O19
    Date: 2020–11
  2. By: Ruochen Dai; Dilip Mookherjee; Yingyue Quan; Xiaobo Zhang
    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.
    JEL: L25 O14
    Date: 2020–10
  3. By: Hartmut Lehmann (National Research University Higher School of Economics); Aleksey Oshchepkov (National Research University Higher School of Economics); Maria Giulia Silvagni (University of Bologna)
    Abstract: This paper studies the convergence in per capita gross regional products (GRPs) across Russian regions in the period from 1996 to 2017. We estimate growth equations, which are directly derived from a neoclassical growth model, augmented with human capital and migration. To our knowledge, this is the first paper that explicitly applies a neoclassical model to analyze regional convergence in Russia. We also take into account possible spatial effects and do a series of other robustness checks. Our main estimates establish a convergence rate of around 2% per year. While we fail to find any role of human capital for regional economic growth, we find that interregional migration and the interdependencies of the growth of Russian regions contribute to the economic convergence between them.
    Keywords: convergence, economic growth, regional economics, migration, Russia
    JEL: O47 R11 P2
    Date: 2020
  4. By: Alastair Greig; Mairi Spowage; Graeme Roy
    Abstract: In the UK, there is major economic change such as Brexit on the horizon. The impact of such change is likely to vary across UK regions. There is also a growing demand for improved regional economic analysis to help inform devolution and City Deal-type policymaking. Despite these concerns, there are no comprehensive national statistics on interregional trade in the UK. This paper fills this gap, proposing a framework for estimating interregional trade between the devolved nations of the UK: England, Scotland, Wales, and Northern Ireland. We explain where gaps exist in the current UK data landscape and suggests various ways in which these could be addressed. We then apply our framework using currently available data, presenting initial results for trade between the 4 nations of the UK in 2015. Recommendations for future work are also presented, including the need to evaluate current methods for collecting trade information within the UK.
    Keywords: Interregional Trade Flows, Regional Supply Use Tables, Trade Surveys, Origin Destination Data
    JEL: F15 F17 R12
    Date: 2020–06
  5. By: Richard Bluhm (SoDa Laboratories, Monash University); Melanie Krause (SoDa Laboratories, Monash University)
    Abstract: Tracking the development of cities in emerging economies is difficult with conventional data. Even the commonly-used satellite images of nighttime light intensity fail to capture the true brightness of larger cities. This paper shows that nighttime lights can be used as a reliable proxy for economic activity at the city level, provided they are first corrected for top-coding. We present a stylized model of urban luminosity and empirical evidence which both suggest that these ‘top lights’ can be characterized by a Pareto distribution. We then propose a correction procedure which recovers the full distribution of city lights. Our results show that the brightest cities account for nearly a third of global economic activity. Applying this approach to cities in Sub-Saharan Africa, we find that primate cities are outgrowing secondary cities but are changing from within. Poorer neighborhoods are developing and sub-centers are emerging, with the side effect that Africa’s cities are also becoming increasingly fragmented.
    Keywords: Development, urban growth, night lights, top-coding, inequality
    JEL: O10 O18 R11 R12
    Date: 2020–11
  6. By: Tam\'as Krisztin; Philipp Piribauer
    Abstract: This paper presents an empirical study of spatial origin and destination effects of European regional FDI dyads. Recent regional studies primarily focus on locational determinants, but ignore bilateral origin- and intervening factors, as well as associated spatial dependence. This paper fills this gap by using observations on interregional FDI flows within a spatially augmented Poisson interaction model. We explicitly distinguish FDI activities between three different stages of the value chain. Our results provide important insights on drivers of regional FDI activities, both from origin and destination perspectives. We moreover show that spatial dependence plays a key role in both dimensions.
    Date: 2020–10
  7. By: Anastasios Xepapadeas; Athanasios Yannacopoulos
    Abstract: Spatiotemporal dynamics are introduced in a standard Ramsey model of optimal growth in which capital moves towards locations where the marginal productivity of capita is relatively higher. We extend Pontryagin's maximum principle to account for transition dynamics governed by a nonlinear partial differential equation emerging for spatial capital flows. The potential spatial heterogeneity of optimal growth as seen from the point of view of an optimizing social planner is examined. Our results suggest that for high utility discount rate the spatial capital flows induce the emergence of optimal spatial patterns while hor low utility discount a flat-earth steady state is socially optimal. Furthermore, when spatial heterogeneities exist due to total factor productivity differences across locations, we identify conditions under which the spatial capital flows could intensify or weaken spatial inequalities.
    Keywords: Ramsey model, spatiotemporal dynamics, flat earth, pattern formation.
    JEL: O41 R11 C61 C62
    Date: 2020–10–30
  8. By: Howard, Greg (U of Illinois at Urbana-Champaign); Liebersohn, Jack (Ohio State U)
    Abstract: This paper develops a model of the U.S. housing market that explains much of the time series of rents and house prices since World War II. House prices depend on expec- tations of future rents. We show that rents are tied to regional income inequality, and therefore, house prices are determined by how much faster incomes are growing in richer regions. This theory also matches many cross-sectional facts, including regional varia- tion in rents and prices, differing house price sensitivities to national trends, patterns of inter-state migration, and surveys of income expectations. An industry shift-share instrument provides causal evidence for our channel. The model implies that while interest rates have an ambiguous effect on house price levels, low rates increase house price volatility.
    JEL: E22 G12 R31
    Date: 2020–05
  9. By: Galesi, Alessandro; Mata, Nuria; Rey, David; Schmitz, Sebastian; Schuffels, Johannes (RS: GSBE Theme Data-Driven Decision-Making, Macro, International & Labour Economics)
    Abstract: Selling homes is not easy. Home sellers usually need to apply a price discount to swiftly close a deal, and more so when housing market activity is low. Using detailed data on home listings and transactions in Spain, we provide unique estimates of the price discount across regional submarkets and time. We document that the price discount is strongly countercylical, as it increases with declining market conditions, and viceversa during upturns. Despite substantial heterogeneity, regional price discounts are synchronized and a single common factor can account for about sixty percent of their variation, thus suggesting the existence of a national housing cycle. Finally, we document that the main factors linked to changes in the price discount are developments in income, population, and interest rates, which are jointly able to explain the bulk of variation in housing market liquidity across regions and time. Besides providing a formal test of the performance of the price spread in gauging housing market liquidity, this study conveys practical information to real estate market participants, policymakers, and financial institutions for which assessing conditions in Spanish housing markets is a central task.
    JEL: R20 R30 R32
    Date: 2020–10–29

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.