nep-geo New Economics Papers
on Economic Geography
Issue of 2021‒02‒22
twelve papers chosen by
Andreas Koch
Institut für Angewandte Wirtschaftsforschung

  1. Attraction or Repulsion? Testing Coagglomeration of Innovation between Firm and University By Rudkin , Simon; He, Ming; Chen, Yang
  2. Quality of Life in Chinese Cities By Shi, Tie; Zhu, Wenzhang; Fu, Shihe
  3. Centrality Bias in Inter-city Trade By Tomoya Mori; Jens Wrona
  4. Distance (Still) Hampers Diffusion of Innovations By Georg von Graevenitz; Stuart J. H. Graham; Amanda Myers
  5. Regional Public Policy on the Use of ICT to Support Innovation and Growth: How Can Micro-Businesses and SMEs Be Supported Through Collaborative Initiatives in Clusters? By Martine Gadille; Karine Guiderdoni-Jourdain; Robert Tchobanian
  6. Do high-quality local institutions shape labour productivity in Western European manufacturing firms? By Ganau, Roberto; Rodríguez-Pose, Andrés
  7. Direct Forecasting for Applied Regional Analysis By Ryan R. Brady
  9. Factors Determining the Development of Minimum Comparable Areas and Spatial Interaction By , AISDL
  10. Uncertainty and Forecastability of Regional Output Growth in the United Kingdom: Evidence from Machine Learning By Mehmet Balcilar; David Gabauer; Rangan Gupta; Christian Pierdzioch
  11. Spatial Correlation Robust Inference By Ulrich K. M\"uller; Mark W. Watson
  12. The Economic Geography of Global Warming By Jose Luis Cruz Alvarez; Esteban Rossi-Hansberg

  1. By: Rudkin , Simon (Swansea University); He, Ming (Xi’an Jiaotong-Liverpool University); Chen, Yang (Xi’an Jiaotong-Liverpool University)
    Abstract: Agglomeration theory supports and existing findings confirm the geographical proximity of similar firms and spatial attraction of firms to universities. In addition to that, we are able to identify whether universities as one type of innovative units are attracted by firm-type innovators and the size of such attraction. Testing the bidirectional spatial innovation linkage contributes to the debate on firm- or university-led innovation. Using a large patent dataset from Shenzhen, the first innovation-led city in the People’s Republic of China, and employing a spatial point process analysis technique, underutilized in the literature that allows the bidirectional testing of coagglomeration, we find varying attraction distances between the same type of innovative units and across university–firm innovation pairs. Attractions are not only limited to identical technology fields but also generate coagglomerations across different technology fields of firms and universities. We find the attraction from firms to universities is more than that from universities to firms. Support is offered to the integration of firms into the university-led innovation clusters in science parks; firm innovation in patent fields like human necessities, physics, and electrical deserve more policy focus to benefit university research and innovation.
    Keywords: agglomeration; innovation; patents; spatial distribution; universities
    JEL: O31 R11 R12
    Date: 2020–02–25
  2. By: Shi, Tie; Zhu, Wenzhang; Fu, Shihe
    Abstract: The Rosen-Roback spatial equilibrium theory states that cross-city variations in wages and housing prices reflect urban residents’ willingness to pay for urban amenities or quality of life. This paper is the first to quantify and rank the quality of life in Chinese cities based on the Rosen-Roback model. Using the 2005 1% Population Intercensus Survey data, we estimate the wage and housing hedonic models. The coefficients of urban amenity variables in both hedonic models are considered the implicit prices of amenities and are used as the weights to compute the quality of life for each prefecture city in China. In general, provincial capital cities and cities with nice weather, convenient transportation, and better public services have a higher quality of life. We also find that urban quality of life is positively associated with the subjective well-being of urban residents.
    Keywords: Spatial equilibrium, hedonic model, urban amenity, quality of life, life satisfaction
    JEL: H44 J31 J61 R13 R23 R31
    Date: 2021–01–12
  3. By: Tomoya Mori (Institute of Economic Research, Kyoto University); Jens Wrona (University of Duisburg-Essen, Mercator School of Management)
    Abstract: Large cities with central location excessively export to smaller cities in close proximity. Using Japanese inter-city trade data, we identify a substantial centrality bias: Exports from central places to their hinterland are 40%-100% larger than predicted by gravity forces. This upward bias stems from aggregating industries, which are hierarchically distributed across large and small cities. Decomposing the centrality bias along the margins of our data, we identify the extensive industry margin as the main driver behind this aggregation bias. Relying on a theory-consistent decomposition of the aggregate gravity equation, we also sort out the underlying theoretical channels that are responsible for the manifestation of the centrality bias.
    Keywords: Inter-city trade, central place theory, gravity equation, aggregation bias
    JEL: C43 F10 F12 F14 R12
    Date: 2021–02
  4. By: Georg von Graevenitz (Queen Mary University London, School of Business and Management); Stuart J. H. Graham (Georgina Institute of Technology); Amanda Myers (United States Patent & Trademark Office)
    Abstract: This paper introduces a new innovation data source to re-examine how spatial distance affects the diffusion of ideas and innovations in an economy. We exploit the descriptions of products and services contained in U.S. trademark registrations during 1980-2012 to identify terms (tokens) not previously used by firms to describe products and services. From these we select tokens frequently re-used by follower firms. By linking the new tokens to the business addresses of innovator and follower firms, our data encompass all instances in which innovations captured by trademark tokens arise within and diffuse across the United States. We aggregate innovations at the year and ZIP code level and estimate Poisson models of the likelihood and intensity of diffusion between locations. After endogenising the creation of new diffusion links between ZIP codes, our results show that spatial distance no longer affects the creation of diffusion links within the US after 1996. However, contingent on previous diffusion from a sending to a receiving ZIP code, we find persistent, strong and negative effects of greater spatial distance on the intensity (extent) of diffusion for existing transfer links between locations within the US.
    Keywords: Innovation, Diffusion, Rate of Diffusion, Distance, Innovation Index, Trademarks, Patents
    JEL: O3 O51 R1 R32
    Date: 2019–08–01
  5. By: Martine Gadille (LEST - Laboratoire d'économie et de sociologie du travail - AMU - Aix Marseille Université - CNRS - Centre National de la Recherche Scientifique, CNRS - Centre National de la Recherche Scientifique, AMU - Aix Marseille Université); Karine Guiderdoni-Jourdain (AMU - Aix Marseille Université, LEST - Laboratoire d'économie et de sociologie du travail - AMU - Aix Marseille Université - CNRS - Centre National de la Recherche Scientifique); Robert Tchobanian (LEST - Laboratoire d'économie et de sociologie du travail - AMU - Aix Marseille Université - CNRS - Centre National de la Recherche Scientifique, CNRS - Centre National de la Recherche Scientifique)
    Abstract: We focus on meta-organisations at the subnational level, with regional governance and implementation at the heart of our analysis. There are parallels between that regional governance and the role of intermediaries in the economic development of regions (Cooke and Morgan 1998, Scott 1998). More recently, the new economic landscape has called for a review of the regional clusters policy and the adoption of a multilevel governance model that regulates commercial and non-commercial relations between the different regional and external stakeholders. This region-specific approach to innovation would be based on sectoral diversification, international openness and a high level of diversity among stakeholders to reduce the risks associated with lock-in effects and self-referential behaviours (Cappellin 2010, 2017). However, organisations of organisations are not designed to be tools for improving our understanding of the relationship between new types of region-specific government policies and the construction of collective identities through business associations. To answer our research question, we adopt a qualitative method that focuses on the analysis of three structurally different PRIDES: Culture Industries and Heritage, Business Tourism and Care Services.1 Despite the differences in their activities, the distinguishing feature of these types of cluster is that they have regional groups and administrative bodies as clients, suppliers, and trustees. After outlining our theoretical framework and methodology, we introduce the regional policy of the PRIDES as well as the geographical boundaries of each cluster. We then analyse how each meta-organisation has made use of the public incentives for innovation and development through the use of ICT. We conclude with a discussion on the relevance and limits of public policy with regard to the geographical boundaries of these very diverse business groupings, all of which include a significant number of SMEs.
    Abstract: Au début des années 2000, certains Conseils régionaux se sont lancés dans une politique de développement régional, inspirée du concept de "clusters" en faveur des micro-entreprises et des PME. L'objectif était d'élargir l'action collective au niveau régional menée par des groupements d'entreprises à travers des associations en faveur du développement économique et du soutien à l'innovation. Cette politique régionale de développement des clusters a été menée en Provence-Côte d'Azur (région PACA) à partir de 2006. Cette politique a consisté à labelliser des projets proposés par des groupements d'entreprises partageant des enjeux économiques, à partir d'un appel à projets pour la création de Pôles de Développement Economique Solidaire (SEDP - appelés PRIDES en France), qui sont des associations d'entreprises. Soutenus financièrement, ces associations d'entreprises ont alors pour mission d'activer cinq leviers dans leurs parcours stratégiques : l'innovation, l'international, la responsabilité sociale des entreprises, la formation des salariés et les TIC (technologies de l'information et de la communication). Le volet TIC attire notre attention car il s'agit d'un service transversal "innovation et économie numérique" du Conseil régional. Sa mission spécifique est de planifier et de stimuler l'action des autres services (économie, innovation et recherche) en termes de diffusion et d'appropriation des TIC. A travers ces actions TIC, la Région vise à avoir une position de leader, grâce à son aide autour de l'innovation numérique. Dans ce contexte, l'objectif de ce chapitre est d'étudier la manière dont ces associations d'entreprises agissent en relation avec l'action publique pour la mise en commun de services, de ressources et d'outils à partir d'une appropriation des TIC. D'un point de vue théorique, nous mobilisons la notion de méta-organisation comme analyseur des effets d'une politique publique-privée de développement économique et d'innovation sur les TPE-PME. La méta-organisation est définie ici comme une structure de gouvernance dont les membres sont des organisations et non des individus, elle est en cela un transformateur de contexte fragile dans la mesure où elle pratique la gouvernance et non le gouvernement (Arnhes et Brunson, 2004 ; Dumez, 2008 ; Gadille et al. 2013a ; Berkowitz et Dumez, 2015). Cette notion permet de réfléchir à la relation entre l'organisation localisée dans les réseaux d'entreprises et l'action publique dans la construction de nouvelles territorialités. C'est la méta-organisation infranationale qui nous intéresse ici. Ce niveau de gouvernance et d'opérationnalisation est au cœur de notre analyse et fait écho au rôle des intermédiaires dans le développement économique des régions (Cooke et Morgan, 1998 ; Scott, 1998). Plus récemment, la nouvelle géographie économique a insisté sur une réorientation de la politique régionale des clusters, par l'adoption du modèle de gouvernance multi-niveaux dans la régulation des relations marchandes et non marchandes entre les différents acteurs régionaux et externes. Cette approche de l'innovation sur le territoire, serait basée sur la diversification sectorielle, l'ouverture internationale, la forte diversité des acteurs pour réduire les risques liés aux effets de confinement (lock-in) et aux comportements d'auto-référencement (Cappellin, 2010, 2017). Après avoir expliqué notre cadre théorique et notre méthodologie, nous présentons la politique régionale des PRIDES ainsi que la territorialité dans laquelle s'inscrit chaque pôle. Nous analysons ensuite comment chaque méta-organisme s'est approprié les incitations publiques à l'innovation et au développement par les TIC. Nous terminons par une discussion sur la pertinence et les limites de l'action publique vis-à-vis de la territorialité de ces groupements d'entreprises très divers, avec une forte présence de PME.
    Date: 2020
  6. By: Ganau, Roberto; Rodríguez-Pose, Andrés
    Abstract: We investigate the extent to which regional institutional quality shapes firm labour productivity in Western Europe, using a sample of manufacturing firms from Austria, Belgium, France, Germany, Italy, Portugal and Spain, observed over the period 2009–2014. The results indicate that regional institutional quality positively affects firms' labour productivity and that government effectiveness is the most important institutional determinant of productivity levels. However, how institutions shape labour productivity depends on the type of firm considered. Smaller, less capital endowed and high-tech sectors are three of the types of firms whose productivity is most favourably affected by good and effective institutions at the regional level.
    Keywords: cross-country analysis; labour productivity; manufacturing firms; regional institutions; Western Europe
    JEL: C23 D24 H41 R12
    Date: 2019–08–01
  7. By: Ryan R. Brady (United States Naval Academy)
    Abstract: The regional-economic literature is vast, and attempts to estimate the time-series dimension of regional relationships therein are disparate. For applied researchers seeking a straightforward approach to time-series estimation within that literature, the scope may seem daunting. In this paper, I provide both an overview of that vast and disparate literature, and a simple path forward for applied work. For the latter, I first estimate spatial impulse response functions from a general time series-autoregressive model, emphasizing direct forecasting techniques. Second, I estimate impulse response functions from a spatial econometric model, the SLX model, showing how one can tease out spatial forecasts from a standard spatial framework. I demonstrate using state-level data on housing prices.
    Date: 2021–01
  8. By: Rosemary Mnongya (P.O. Box 307, Mwanza, St. Augustine University of Tanzania, Tanzania)
    Abstract: This study was conducted as a performance evaluation to examine the impact of clustering on the growth of individual firms in an agrarian economy with the case of Tanzania under study. Specifically, it focused on how the employment levels differ across individual firms that are located inside the industrial clusters and across those located outside existing industrial clusters; and how the age of firms influences their growth in clusters and in isolation. It is a critical study that brings answers to questions relating to the current state of Tanzania’s industries in terms of clustering of firms and growth of industrial clusters and contributes to policy geared towards growth of the industrial economy. Significant findings confirm that the employment level is high in firms operating in clusters than in the firms operating in isolation. It confirms that a manufacturing firm existing alone in an agrarian economy grows at a slower rate compared to the one operating in a cluster, which highlights the importance of clusters. The study revealed that a firm's age has a positive influence on its growth regardless of whether in a cluster or not in the short-run, but the long run, old firms in isolation can perform well or grow than the old firms in clusters. Key recommendations revolving around good cluster policies and initiatives that encourage clustering of firms to contribute to regional and national economic growth were outlined by the research.
    Keywords: Age of firms, employment, firm growth, industrial clusters, isolation
    JEL: L2 L6 D22 J3
    Date: 2020–12
  9. By: , AISDL
    Abstract: One popular strand of literature concerning economic growth and/or GDP focuses on the growth/GDP of minimum comparable areas (MCAs), but conducting research in this area is difficult due to data problems. To understand the nature of the microlevel structure, we estimate the determinants of the GDP of MCAs in Turkey since no single study covers all towns. We use spatial models and show that regional development policies should be based on the actual contiguity of MCAs, which is not currently considered in policies. We utilize Bayesian criteria to determine the best-fitting spatial weight matrix, whereas many previous studies have chosen such matrices subjectively.
    Date: 2021–01–18
  10. By: Mehmet Balcilar (Eastern Mediterranean University, Famagusta, via Mersin 10, Northern Cyprus, Turkey); David Gabauer (Data Analysis Systems, Software Competence Center Hagenberg, Austria); Rangan Gupta (Department of Economics, University of Pretoria, Private Bag X20, Hatfield, 0028, South Africa); Christian Pierdzioch (Department of Economics, Helmut Schmidt University, Holstenhofweg 85, P.O.B. 700822, 22008 Hamburg, Germany)
    Abstract: Utilizing a machine-learning technique known as random forests, we study whether regional output growth uncertainty helps to improve the accuracy of forecasts of regional output growth for twelve regions of the United Kingdom using monthly data for the period from 1970 to 2020. We use a stochastic-volatility model to measure regional output growth uncertainty. We document the importance of interregional stochastic volatility spillovers and the direction of the transmission mechanism. Given this, our empirical results shed light on the contribution to forecast performance of own uncertainty associated with a particular region, output growth uncertainty of other regions, and output growth uncertainty as measured for London as well. We find that output growth uncertainty significantly improves forecast performance in several cases, where we also document cross-regional heterogeneity in this regard.
    Keywords: Regional Output Growth, Uncertainty, United Kingdom, Forecasting, Machine Learning
    JEL: C22 C53 D8 E32 E37 R11
    Date: 2021–02
  11. By: Ulrich K. M\"uller; Mark W. Watson
    Abstract: We propose a method for constructing confidence intervals that account for many forms of spatial correlation. The interval has the familiar `estimator plus and minus a standard error times a critical value' form, but we propose new methods for constructing the standard error and the critical value. The standard error is constructed using population principal components from a given `worst-case' spatial covariance model. The critical value is chosen to ensure coverage in a benchmark parametric model for the spatial correlations. The method is shown to control coverage in large samples whenever the spatial correlation is weak, i.e., with average pairwise correlations that vanish as the sample size gets large. We also provide results on correct coverage in a restricted but nonparametric class of strong spatial correlations, as well as on the efficiency of the method. In a design calibrated to match economic activity in U.S. states the method outperforms previous suggestions for spatially robust inference about the population mean.
    Date: 2021–02
  12. By: Jose Luis Cruz Alvarez; Esteban Rossi-Hansberg
    Abstract: Global warming is a worldwide and protracted phenomenon with heterogeneous local economic effects. In order to evaluate the aggregate and local economic consequences of higher temperatures, we propose a dynamic economic assessment model of the world economy with high spatial resolution. Our model features a number of mechanisms through which individuals can adapt to global warming, including costly trade and migration, and local technological innovations and natality rates. We quantify the model at a 1° × 1° resolution and estimate damage functions that determine the impact of temperature changes on a region’s fundamental productivity and amenities depending on local temperatures. Our baseline results show welfare losses as large as 15% in parts of Africa and Latin America but also high heterogeneity across locations, with northern regions in Siberia, Canada, and Alaska experiencing gains. Our results indicate large uncertainty about average welfare effects and point to migration and, to a lesser extent, innovation as important adaptation mechanisms. We use the model to assess the impact of carbon taxes, abatement technologies, and clean energy subsidies. Carbon taxes delay consumption of fossil fuels and help flatten the temperature curve but are much more effective when an abatement technology is forthcoming.
    JEL: F63 F64 Q51 Q54 Q56
    Date: 2021–02

This nep-geo issue is ©2021 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.