nep-geo New Economics Papers
on Economic Geography
Issue of 2021‒03‒08
twelve papers chosen by
Andreas Koch
Institut für Angewandte Wirtschaftsforschung

  1. The impact of public employment: evidence from Bonn By Becker, Sascha O.; Heblich, Stephan; Sturm, Daniel M.
  2. Urban Growth Shadows By David Cuberes; Klaus Desmet; Jordan Rappaport
  3. Social capital and economic growth in the regions of Europe By Jonathan Muringani; Rune Dahl Fitjar; Andres Rodriguez-Pose
  4. What kind of region reaps the benefits of a currency union? By Augusto Cerqua; Roberta Di Stefano; Guido Pellegrini
  5. Institutions and the Productivity Challenge for European Regions By Andres Rodriguez-Pose; Roberto Ganau;
  6. The local economic impacts of regeneration projects: evidence from UK’s single regeneration budget By Gibbons, Stephen; Overman, Henry G.; Sarvimäki, Matti
  7. Will urban air mobility fly? The efficiency and distributional impacts of UAM in different urban spatial structures By Anna Straubinger; Erik T. Verhoef; Henri L.F. de Groot
  8. Administrative reforms, urban hierarchy, and local population growth. Lessons from Italian unification By Giulio Cainelli; Carlo Ciccarelli; Roberto Ganau
  9. Housing Consumption and the Cost of Remote Work By Christopher T. Stanton; Pratyush Tiwari
  10. Revisiting Estimation Methods for Spatial Econometric Interaction Models By Dargel, Lukas
  11. Location, location, location! - A quality-adjusted rent index for the Oslo office market By Anundsen, André K.; Hagen, Marius
  12. Does urban concentration matter for changes in country economic performance? By Roberto Ganau; Andres Rodriguez-Pose;

  1. By: Becker, Sascha O.; Heblich, Stephan; Sturm, Daniel M.
    Abstract: This paper evaluates the impact of changes in public employment on private sector activity using the creation of the new West German government in Bonn in the wake of the Second World War as a source of exogenous variation. To guide our empirical analysis, we develop a simple economic geography model in which public sector employment affects private sector employment through its impact on wages and house prices and also through potential productivity and amenity spillovers to the private sector. We find that relative to a control group of cities, Bonn experiences a substantial increase in public employment. However, this results in only modest increases in private sector employment with each additional public sector job destroying around 0.2 jobs in industry and creating just over one additional job in other parts of the private sector. We show how our model can explain this finding and provide several pieces of evidence for the mechanisms emphasized by the model.
    Keywords: Economic geography; German division; Place-Based policies; Public employment
    JEL: F15 J45 N44 R12
    Date: 2021–03–01
  2. By: David Cuberes; Klaus Desmet; Jordan Rappaport
    Abstract: Does a location's growth benefit or suffer from being geographically close to large economic centers? Spatial proximity may lead to competition and hurt growth, but it may also improve market access and enhance growth. Using data on U.S. counties and metro areas for the period 1840-2017, we document this tradeoff between urban shadows and urban access. Proximity to large urban centers was negatively associated with growth between 1840 and 1920, and positively associated with growth after 1920. Using a two-city spatial model, we show that the secular evolution of inter-city and intra-city commuting costs can account for this. Alternatively, the long-run decline in inter-city shipping costs relative to intra-city commuting costs is also consistent with these observed patterns.
    JEL: N91 N92 R11 R12
    Date: 2021–02
  3. By: Jonathan Muringani; Rune Dahl Fitjar; Andres Rodriguez-Pose
    Abstract: Social capital is an important factor explaining differences in economic growth among regions. However, the key distinction between bonding social capital, which can lead to lock-in and myopia, and bridging social capital, which promotes knowledge flows across diverse groups, has been overlooked in growth research. In this paper, we address this shortcoming by examining how bonding and bridging social capital affect regional economic growth, using data for 190 regions in 21 EU countries, covering eight waves of the European Social Survey between 2002 and 2016. The findings confirm that bridging social capital is linked to higher levels of regional economic growth. Bonding social capital is highly correlated with bridging social capital and associated with lower growth when this is controlled for. We do not find significantly different effects of bonding social capital in regions with more or less bridging social capital, or vice versa. We examine the interaction between social and human capital, finding that bridging social capital is fundamental for stimulating economic growth, especially in low-skilled regions. Human capital also moderates the relationship between bonding social capital and growth, reducing the negative externalities imposed by excessive bonding.
    Keywords: social capital, bonding, bridging, regions, economic growth, EU
    Date: 2021–02
  4. By: Augusto Cerqua (Department of Social Sciences and Economics, Sapienza University of Rome); Roberta Di Stefano (Department of Methods and Models for Economics, Territory and Finance, Sapienza University of Rome); Guido Pellegrini (Department of Social Sciences and Economics, Sapienza University of Rome)
    Abstract: What is the economic impact of joining a currency union? Is this impact heterogeneous across regions? And how does it change in case of a recession? We answer these questions by investigating the economic impact of joining the euro area for the latecomers, i.e., the countries that adopted the euro after 2002. Di erently from previous literature, we use NUTS-2 regions as units of analysis. This novelty allows us to investigate the theoretical predictions of a currency union impact at a more appropriate geographi- cal level. Using a counterfactual approach based on the recently developed kernel balancing estimator, we estimate the overall as well as the disaggre- gated impact of joining the euro area. We find that the adoption of the euro brought about a small positive e ect, which was, however, dampened by the Great Recession. Individual regional estimates suggest heterogeneous returns with benefits accruing mostly to core regions.
    Keywords: euro area, accession countries, regional data, kernel balancing estimator
    JEL: C23 F33 R11
    Date: 2021–02
  5. By: Andres Rodriguez-Pose; Roberto Ganau;
    Abstract: Europe has witnessed a considerable labour productivity slowdown in recent decades. Many potential explanations have been proposed to address this productivity ‘puzzle’. However, how the quality of local institutions influences labour productivity has been overlooked by the literature. This paper addresses this gap by evaluating how institutional quality affects labour productivity growth and, particularly, its determinants at the regional level during the period 2003-2015. The results indicate that institutional quality influences regions’ labour productivity growth both directly —as improvements in institutional quality drive productivity growth— and indirectly —as the short- and long-run returns of human capital and innovation on labour productivity growth are affected by regional variations in institutional quality.
    Keywords: Labour productivity; institutional quality; physical capital; human capital; innovation; regions; Europe
    JEL: E24 J24 O47 R11
    Date: 2021–02
  6. By: Gibbons, Stephen; Overman, Henry G.; Sarvimäki, Matti
    Abstract: Many governments aim to improve the labour market outcomes of people living in deprived areas through "place-making" initiatives. Economists are often sceptical about the effectiveness of such policies, but empirical evidence on their impacts remains limited. We examine the impact of building subsidised business floor space in deprived neighbourhoods in the UK. Our estimates suggest that while the £8.2bn investment into these projects increased the number of jobs located in the targeted neighbourhoods, it did little to improve the employment of local residents.
    Keywords: single regeneration budget; regeneration; employment; neighbourhoods; urban policy; ES/J021342/1; ES/G005966/1; APC paid from UKRI fund
    JEL: R11 J08 H50
    Date: 2021–03–01
  7. By: Anna Straubinger (Vrije Universiteit Amsterdam); Erik T. Verhoef (Vrije Universiteit Amsterdam); Henri L.F. de Groot (Vrije Universiteit Amsterdam)
    Abstract: Recent technological developments open up possibilities for introducing a vast number of novel mobility concepts in urban environments. One of these new concepts is urban air mobility (UAM). It makes use of passenger drones for on-demand transport in urban settings, promising high travel speeds for those willing and able to pay. This research aims to answer the question how benefits from UAM will be distributed, taking into account the spatial dimension and the differential impacts on low- and high-skilled households. We develop a framework that can more generally be used to assess the welfare impacts resulting from the introduction of novel transport modes. The development of an urban spatial computable general equilibrium model building on the polycentric modelling tradition developed by Anas and co-authors allows for an analysis of mutually dependent effects on the land, labour and product markets, triggered by changes on the transport market. Allowing for an endogenous spatial structure through the introduction of agglomeration effects and an amenity-based approach, the framework investigates the relevance of the initial spatial structure for the impact of the introduction of UAM. Incorporating different skill levels of households allows to assess location choice and travel behaviour for households with different characteristics. A numerical simulation of the model shows that the different initial spatial structures impose comparable welfare changes. Variations in UAM features like marginal cost, prices, land demand for infrastructure, vertical travel speed and access and egress times have a (much) more decisive impact on modal choice and welfare effects than the initial urban structure. Simulations show that considering households of different skill levels brings additional insights, as welfare effects of UAM introduction strongly differ between groups and sometimes even go in opposing directions.
    Keywords: Urban air mobility, spatial equilibrium, welfare effects, agglomeration effects
    JEL: R13 R41 C68
    Date: 2021–02–24
  8. By: Giulio Cainelli; Carlo Ciccarelli; Roberto Ganau
    Abstract: We analyze the local-level demographic effects of the 1865 Italian “Lanza administrative reform†. This reform established the skeleton and functioning of the entire public administration in the Kingdom of Italy, unified in 1861, by re-assigning administrative functions to municipalities throughout the country. We focus on municipality-level population dynamics over the period 1861-2011, while also providing evidence of more recent local-level economic performance. We rely on ‘generalized’ difference-in-differences and matching techniques, and find that municipalities that emerged from the reform with new or increased administrative functions at supra-municipal level gained a population growth premium, persistent over time. Moreover, local labor market productivity increased during the early 2000s.
    Keywords: Administrative reforms; local population growth; nation-building process; Italy
    JEL: C31 N13 R11
    Date: 2021–02
  9. By: Christopher T. Stanton; Pratyush Tiwari
    Abstract: This paper estimates housing choice differences between households with and without remote workers. Prior to the pandemic, the expenditure share on housing was more than seven percent higher for remote households compared to similar non-remote households in the same commuting zone. Remote households’ higher housing expenditures arise from larger dwellings (more rooms) and a higher price per room. Pre-COVID, households with remote workers were actually located in areas with above-average housing costs, and sorting within-commuting zone to suburban or rural areas was not economically meaningful. Using the pre-COVID distribution of locations, we estimate how much additional pre-tax income would be necessary to compensate non-remote households for extra housing expenses arising from remote work in the absence of geographic mobility, and we compare this compensation to commercial office rents in major metro areas.
    JEL: J32 J81 J82 R21 R3 R40
    Date: 2021–02
  10. By: Dargel, Lukas
    Abstract: Taking advantage of a generalization of the matrix formulation introduced by LeSage and Pace (2008), this article presents improvements in the computational performance and flexibility of three estimators of spatial econometric interaction models. By generalizing computational techniques for the evaluation of the likelihood function and also for the Hessian matrix the maximum likelihood estimator (MLE) achieves computation times that are not much longer than those of an ordinary least-squares (OLS) regression. The restructured likelihood also improves the performance of the Bayesian Markov chain Monte Carlo (MCMC) estimator considerably. Finally, the spatial two-stage least-squares (S2SLS) estimator presented in this article is the first one that exploits the efficiency gains of the matrix formulation. In addition to the computational improvements of the three estimation methods this article presents a new solution to the issue of defining the feasible parameter space that allows to verify the consistency of the spatial econometric interaction model with a minimal computational burden. All of these developments indicate that the spatial econometric alternative to the traditional gravity model has become an increasingly mature option and should eventually be considered a standard modeling approach for origin-destination flow problems.
    Keywords: Origin-destination flows; Cross-sectional dependence; Maximum likelihood;; Two-stage least-squares; Bayesian Markov chain Monte Carlo
    JEL: C01 C21 C63
    Date: 2021–02–24
  11. By: Anundsen, André K.; Hagen, Marius
    Abstract: In this paper, we construct a quality-adjusted rent index for the office market in Oslo. Commonly used rent indices are based on average developments or expert opinions. Such indices often suffer from compositional biases or low data coverage. Using detailed data from more than 16,000 rental contracts, we show that compositional biases can have a large impact on rental price developments. By adding building fixed effects to a standard hedonic regression model, we show that the explanatory power increases considerably. Furthermore, indices controlling for micro-location portray a different picture of rent developments than indices that do not take this into account. We also document a considerable rent premium for proximity to a metro station. Finally, we exploit information on contract signature date and find that a more timely detection of turning-points can be achieved by using the signature date instead of the more typically used start date of the lease. The financial system is heavily exposed towards the commercial real estate market and timely detection of turning-points is of major importance to policymakers.
    Keywords: Hedonic index, commercial real estate, financial stability
    JEL: C20 E30 G01 R30 R33
    Date: 2020–02–12
  12. By: Roberto Ganau; Andres Rodriguez-Pose;
    Abstract: This paper uses a novel, globally-harmonised city-level dataset —with cities defined at the Functional Urban Area (FUA) level— to revisit the link between urban concentration and country-level economic dynamics. The empirical analysis, involving 108 low- and high-income countries, examines how differences in urban concentration impinge on changes in employment, Gross Domestic Product (GDP) per capita, and labour productivity at country level over the period 2000-2016. The results indicate that urban concentration reduces employment growth but increases GDP per capita and labour productivity growth. The returns of urban concentration are higher for high- than for low-income countries and are mainly driven by the ‘core’ of FUAs, rather than by sub-urban areas.
    Keywords: Urban concentration; Long-run economic dynamics; Employment growth; GDP per capita growth; Labour productivity growth; Cross-country analysis
    JEL: E24 O47 O57 R12
    Date: 2021–02

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