nep-geo New Economics Papers
on Economic Geography
Issue of 2021‒01‒25
seventeen papers chosen by
Andreas Koch
Institut für Angewandte Wirtschaftsforschung

  1. Prime Locations By Gabriel Ahlfeldt; Thilo N. H. Albers; Kristian Behrens
  2. The City Paradox: Skilled Services and Remote Work By Fabian Eckert; Sharat Ganapati; Conor Walsh
  3. Quality of Life in a Dynamic Spatial Model By Gabriel Ahlfeldt; Fabian Bald; Duncan Roth; Tobias Seidel
  4. What makes an artist? The evolution and clustering of creative activity in the US since 1850 By Borowiecki, Karol Jan; Dahl, Christian Møller
  5. The Revealed Comparative Advantages of Dutch Cities By Tijl Hendrich; Jennifer Olsen
  6. Plants in Space By Ezra Oberfield; Esteban Rossi-Hansberg; Pierre-Daniel G. Sarte; Nicholas Trachter
  7. How and where satellite cities form around a large city: Bifurcation mechanism of a long narrow economy By Ikeda, Kiyohiro; Aizawa, Hiroki; Gaspar, Jose M.
  8. Exposure to OFDI and regional labour markets: Evidence for routine and non-routine jobs in Great Britain By Luisa Gagliardi; Simona Iammarino; Andres Rodriguez-Pose
  9. Quality of government and regional trade: Evidence from European Union regions By Javier Barbero; Giovanni Mandras; Giovanni Mandras; Ernesto Rodriguez-Crespo; Andres Rodriguez-Pose
  10. Structural Change and Regional Economic Growth in Indonesia By Andriansyah, Andriansyah; Nurwanda, Asep; Rifai, Bakhtiar
  11. Churning in Rural and Urban Retail Markets By Artz, Georgeanne M.; Eathington, Liesl; Francois, Jasmine; Masinde, Melvin; Orazem, Peter F.
  12. Can Placement of Governmental Sector Jobs Spur Private Sector Employment and Performance? By Dale-Olsen, Harald; Schone, Pal
  13. Regional and State Heterogeneity of Monetary Shocks in Argentina By Emilio Blanco; Pedro Elosegui; Alejandro Izaguirre; Gabriel Montes Rojas
  14. What Future for History Dependence in Spatial Economics? By Jeffrey Lin; Ferdinand Rauch
  15. Quality of sub-national government and regional development in Africa By Yohan Iddawela; Neil Lee; Andres Rodriguez-Pose
  16. The Subnational Effect of Temperature on Economic Production: A Disaggregated Analysis in European Regions By Holtermann, Linus; Rische, Marie-Christin
  17. Interregional Cooperation and Smart Specialisation: a Lagging Regions Perspective By Jayne Woolford; Effie Amanatidou; Elisa Gerussi; Mark Boden

  1. By: Gabriel Ahlfeldt; Thilo N. H. Albers; Kristian Behrens
    Abstract: We harness big data to detect prime locations—large clusters of knowledge-based tradable services—in 125 global cities and track changes in the within-city geography of prime service jobs over a century. Historically smaller cities that did not develop early public transit networks are less concentrated today and have prime locations farther away from their historic cores. We rationalize these findings in an agent-based model that features extreme agglomeration, multiple equilibria, and path dependence. Both city size and public transit networks anchor city structure. Exploiting major disasters and using a novel instrument—subway potential—we provide causal evidence for these mechanisms and disentangle size- from transport network effects.
    Keywords: prime services, internal city structure, agent-based model, multiple equilibria and path dependence, transport networks
    JEL: R38 R52 R58
    Date: 2020
  2. By: Fabian Eckert; Sharat Ganapati; Conor Walsh
    Abstract: Large cities in the US are the most expensive places to live. Paradoxically, this cost is paid disproportionately by workers who could work remotely, and live anywhere. The greater potential for remote work in large cities is mostly accounted for by their specialization in skill- and information-intensive service industries. We highlight that this specialization makes these cities vulnerable to remote work shocks. When high-skill workers begin to work from home or leave the city altogether, they withdraw spending from local consumer service industries that rely heavily on their demand. As a result, low-skill service workers in big cities bore most of the recent pandemic’s economic impact.
    Keywords: Remote work; High-skill services; Technological change
    JEL: O33 R11 R12
    Date: 2020–12–03
  3. By: Gabriel Ahlfeldt; Fabian Bald; Duncan Roth; Tobias Seidel
    Abstract: We develop a dynamic spatial model in which heterogeneous workers are imperfectly mobile and forward-looking and yet all structural fundamentals can be inverted without assuming that the economy is in a stationary spatial equilibrium. Exploiting this novel feature of the model, we show that the canonical spatial equilibrium framework understates spatial quality-of-life differentials, the urban quality-of-life premium and the value of local non-marketed goods. Unlike the canonical spatial equilibrium framework, the model quantitatively accounts for local welfare effects that motivate many place-based policies seeking to improve quality of life.
    Keywords: Covid, dynamic, housing, migration, rents, pollution, productivity, spatial equilibrium, quality of life, wages, welfare
    JEL: J20 J30 R20 R30 R50
    Date: 2020
  4. By: Borowiecki, Karol Jan (Historical Economics and Development Group (HEDG)); Dahl, Christian Møller (Department of Business and Economics)
    Abstract: This research illuminates the historical development and clustering of creative activity in the United States. Census data is used to identify creative occupations (i.e., artists, musicians, authors, actors) and data on prominent creatives, as listed in a comprehensive biographical compendium. The analysis first sheds light on the socio-economic background of creative people and how it has changed since 1850. The results indicate that the proportion of female creatives is relatively high, time constraints can be a hindrance for taking up a creative occupation, racial inequality is present and tends to change only slowly, and access to financial resources within a family facilitates the uptake of an artistic occupation. Second, the study systematically documents and quantifies the geography of creative clusters in the United States and explains how these have evolved over time and across creative domains.
    Keywords: Creativity; artists; geographic clustering; agglomeration economies; urban history
    JEL: N33 R10 Z11
    Date: 2021–01–22
  5. By: Tijl Hendrich (CPB Netherlands Bureau for Economic Policy Analysis); Jennifer Olsen (CPB Netherlands Bureau for Economic Policy Analysis)
    Abstract: The trade literature often treats countries as dimensionless points, which is a strong assumption. Agglomeration or lumpiness of production factors within countries can affect the national pattern of trade. In this paper we analyze comparative advantage patterns for 22 cities and 4 regions for (a selection of) 83 sectors within The Netherlands.
    JEL: F11 F15 R12
    Date: 2021–01
  6. By: Ezra Oberfield; Esteban Rossi-Hansberg; Pierre-Daniel G. Sarte; Nicholas Trachter
    Abstract: We study the number, size, and location of a firm's plants. The firm's decision balances the benefit of delivering goods and services to customers using multiple plants with the cost of setting up and managing these plants and the potential for cannibalization that arises as their number increases. Modeling the decisions of heterogeneous firms in an economy with a vast number of widely distinct locations is complex because it involves a large combinatorial problem. Using insights from discrete geometry, we study a tractable limit case of this problem in which these forces operate at a local level. Our analysis delivers clear predictions on sorting across space. Productive firms place more plants in dense locations that exhibit high rents compared with less productive firms and place fewer plants in markets with low density and low rents. Controlling for the number of plants, productive firms also operate larger plants than those operated by less productive firms in locations where both are present. We present evidence consistent with these and several other predictions using U.S. establishment-level panel data.
    Keywords: plants; economics; rents
    Date: 2020–05–26
  7. By: Ikeda, Kiyohiro; Aizawa, Hiroki; Gaspar, Jose M.
    Abstract: We investigate economic agglomerations in a long narrow economy, in which discrete locations are evenly spread over a line segment. The bifurcation mechanism of a monocentric city at the center is analyzed analytically to show how and where satellite cities form. This is an important step to elucidate the mechanism of the competition between a large central city and satellite cities, which is taking place worldwide. By the analysis of the Forslid & Ottaviano (J Econ Geo, 2003) model, we show that the larger the agglomeration forces, the farther from the monocentric city satellite cities emerge. As the trade freeness increases from a low value, there occurs a spatial period doubling in which every other city grows. Thereafter a central city with two satellite cities appears, en route to a complete agglomeration to the central city.
    Keywords: Bifurcation; economic geography; replicator dynamics; satellite cities; spatial period doubling.
    JEL: R13
    Date: 2020–06–25
  8. By: Luisa Gagliardi; Simona Iammarino; Andres Rodriguez-Pose
    Abstract: This paper explores the role of subnational geography in the analysis of the consequences of outward foreign direct investment (OFDI) for workers performing different typologies of jobs. We qualify jobs according to their knowledge content, degree of tradability and response to agglomeration economies. While the former two dimensions are key to signal the intensity to OFDI exposure of different typologies of jobs, the latter contributes to explain the unequal spatial distribution of benefits and losses from OFDI in terms of job creation/destruction. We theorise that areas that are more severely exposed to OFDI experience job losses in routine occupations, whereas they do not necessarily benefit from job creation in non-routine jobs. To test our hypothesis, we make use of a balanced panel dataset at the local labour market level, exploiting variations in OFDI exposure and in the job composition of local areas. Our findings – robust to numerous checks, including unobserved global and local trends – indicate that job losses concentrate in regions that were more exposed to OFDI based on their initial industry mix, and affect individuals performing mainly routine tasks. In these same areas, however, no significant effects are found when looking at job creation in non-routine occupations.
    Keywords: OFDI, Local Labour Markets, Routine and Non-routine Occupations, Home impact of MNEs
    Date: 2021–01
  9. By: Javier Barbero; Giovanni Mandras; Giovanni Mandras; Ernesto Rodriguez-Crespo; Andres Rodriguez-Pose
    Abstract: This paper examines – using a novel database of regional trade flows between 267 European regions for 2013 – how government quality affects trade between European Union (EU) regions. The results of a structural gravity cross-sectional analysis of trade show that trade across EU regions is highly influenced by differences in regional government quality. This influence varies by sector of economic activity and by the level of economic development of the region. The results indicate that, if the less developed regions of the EU want to engage in greater interregional trade, improving their institutional quality is a must.
    Keywords: Quality of government; institutions; regional policy; gravity model of trade; structural estimation
    JEL: F15 R10 E02
    Date: 2021–01
  10. By: Andriansyah, Andriansyah; Nurwanda, Asep; Rifai, Bakhtiar
    Abstract: This paper investigates the relationship between structural change and regional economic growth in Indonesia. We utilize several measures of structural change, i.e. structural change index, norm absolute value index, shift-share method, and effective structural change index, for 30 provinces over the period 2005-2018. We show that the structural change has occurred across provinces, even though it is slowing, towards an agricultural-services transition. By employing dynamic panel data models, this study shows that structural change is a significant determinant of growth. However, structural change matters for growth only if there is an increase in productivity, not only a movement of labor across sectors. An improvement in productivity within sectors and a movement of labors to other sectors with better productivity lead to a better economic development.
    Keywords: Structural Change; Regional Growth; Indonesia; Productivity
    JEL: L16 O40 R11
    Date: 2020–08–07
  11. By: Artz, Georgeanne M.; Eathington, Liesl; Francois, Jasmine; Masinde, Melvin; Orazem, Peter F.
    Abstract: Using data on the universe of taxable retail sales, retail firm start-ups, and retail firm exits in Iowa from 1992 through 2011, we test whether patterns of retail firm entry and exit are consistent with churning. Consistent with churning, the same factors that increase retail sales in a local market also increase new retail firm entry and either increase or do not affect retail firm exit. Evidence suggests that there is more churning in urban than in rural markets. Similar evidence is found using a sample of national firm entry and exit into local markets. If churning increases productivity growth, then the greater churning rate in urban markets is another source of agglomeration advantages in thick markets.
    Date: 2020–01–01
  12. By: Dale-Olsen, Harald (Institute for Social Research, Oslo); Schone, Pal (Institute for Social Research, Oslo)
    Abstract: We analyse the impact of establishment of governmental sector jobs on private sector employment based on Norwegian population-wide administrative-register data. Based on precise geographical information on the location of jobs, differential treatment intensities yield identification of causal effects. The results suggest that governmental employment has positive effects on private sector employment in the close proximity of the stimulus area. In the same area, we also observe positive short-term effects on wage growth and on firms' sales. Over time, only employment effects prevail. Two different types of placebo tests give support to the causal interpretation of the main results.
    Keywords: regional labour markets, central government jobs, job creation
    JEL: J61 R23
    Date: 2020–12
  13. By: Emilio Blanco (Banco Central de la República Argentina); Pedro Elosegui (Banco Central de la República Argentina); Alejandro Izaguirre (Universidad de San Andrés); Gabriel Montes Rojas (Instituto Interdisciplinario de Economía Política de Buenos Aires - UBA - CONICET)
    Abstract: This paper empirically investigates how economic activity in Argentina at regional and provincial (i.e., state) levels respond to central national monetary policy shocks, as given by a change in the interest rate. The rst result is that regional heterogeneity of monetary shocks exists in Argentina. At the regional level the long-term eects of increasing the interest rate are negative and statistically signicant. At the provincial level, 11 provinces show a negative and signicant impact of a shock on the interest rate over employment. However, there are 13 provinces in which the eect is not statistically signicant, including the City of Buenos Aires and Buenos Aires Province. Bayesian methods are implemented to study the discrepancies in the impact on dierent provinces.
    Keywords: Monetary Policy, Monetary Transmission, Regional Effects
    JEL: E52 G21 R11 R12
  14. By: Jeffrey Lin; Ferdinand Rauch
    Abstract: History (sometimes) matters for the location and sizes of cities and neighborhood segregation patterns within cities. Together with evidence on rapid neighborhood change and self-fulfilling expectations, this implies that nature might not completely determine the spatial structure of the economy. Instead, the spatial economy might be characterized by multiple equilibria or multiple steady-state equilibrium paths, where history and expectations can play decisive roles. Better evidence on the conditions under which history matters can help improve theory and policy analysis.
    JEL: N9 R1
    Date: 2020–12–16
  15. By: Yohan Iddawela; Neil Lee; Andres Rodriguez-Pose
    Abstract: Despite widespread interest in government quality and economic development, the role of sub-national government has been largely overlooked. This represents an omission in Africa, given ongoing processes of devolution in much of the continent. In this article, we consider the impact of sub-national government institutions on economic development in 356 regions across 22 African countries. We create a novel index of sub-national government quality based on large-scale survey data and assess its impact on regional economies using satellite data on night light luminosity. To address causality concerns, we instrument sub-national government quality with data from pre-colonial societies. Our results show a positive and significant relationship between sub-national government quality and regional economic development, even when controlling for the quality of national level institutions. Better sub-national governments are a powerful but often overlooked determinant of development in Africa.
    Keywords: Institutions, quality of government, regions, Africa, decentralisation
    Date: 2021–01
  16. By: Holtermann, Linus; Rische, Marie-Christin
    Abstract: In order to develop efficient strategies to counter the adverse economic consequences of climate change, accurate and spatially detailed assessments of economic damage are required. Estimates to assess the impact of temperature variations on macroeconomic output are usually based on country-level weather aggregates, neglecting that weather realizations tend to vary significantly within countries. Using data from multiple decades for spatially small-scaled European regions, we conduct a disaggregated analysis to mitigate the potential bias arising from spatial aggregation. We examine the economic impacts of temperature by analysing annual variations in two different weather indicators, namely yearly averages representing rise in temperature levels and standardized deviations from the region-specific climate norm representing unusual warm and cold periods. Our spatially explicit approach considers spatial dynamics and the spatial distribution of temperature effects as it captures spatial dependence via spillovers and allows for potential heterogeneous effects sizes for distinct spatial regimes. We find that regional-level growth reacts non-linearly to a rise in temperature levels, with a concave response curve similar to those estimated in earlier country-level studies. Interestingly, baseline temperature levels also moderate the effects of temperature deviations as unusually hot years adversely affect warm regions, whereas overly cold years foster growth. In contrast to most of the literature, we disclose that the relationship between economic growth and temperature variations is not generalizable. The uniform temperature-growth relationship found in the literature for countries at a global scale does not hold at the subnational level. The “world city” regions at the top of the urban hierarchy are not prone to any form of tested temperature variation. The resilience of these city regions can be explained, inter alia, by the prevalence of invulnerable sectors. The uneven effect sizes suggest that spatially differentiated policy measures are needed that should be coordinated between regional and national levels of government to counter the adverse consequences of temperature variations and climate change more efficiently.
    Keywords: temperature, climate change, regional economic growth, heterogenous vulnerability, Europe, spatial spillovers
    JEL: C31 C33 O44 Q51 Q54 R1
    Date: 2020
  17. By: Jayne Woolford (European Commission - JRC); Effie Amanatidou; Elisa Gerussi (European Commission - JRC); Mark Boden (European Commission - JRC)
    Abstract: This report has been prepared as part of the Lagging Regions project of the JRC. In the 2021-2027 programming period, smart specialisation strategies will be required to meet a series of fulfilment criteria around the relevant "enabling condition" of good governance. One such criterion relates to international collaboration, or measures for enhancing cooperation with partners in different countries in areas designated as priority areas for smart specialisation. The potential for Lagging Regions to participate in interregional and international cooperation remains under-exploited, and this report determines specific challenges as well as potential benefits and opportunities that are relevant for low-growth and low-income regions. An exploration of interregional and international cooperation aims to contribute to a better understanding of its role in strengthening innovation ecosystems and its interaction with Smart Specialisation in the context of Lagging Regions.
    Keywords: Lagging Regions
    Date: 2020–12

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