nep-geo New Economics Papers
on Economic Geography
Issue of 2021‒03‒29
sixteen papers chosen by
Andreas Koch
Institut für Angewandte Wirtschaftsforschung

  1. Does a local knowledge base in Industry 3.0 foster diversification in Industry 4.0 technologies? Evidence from European regions By Matteo Laffi; Ron Boschma;
  2. Industrial Relatedness in MNE Spillovers over Geographical Space By Nicola Cortinovis; Zhiling Wang; Hengky Kurniawan
  3. The Economics of Urban Density By Gilles Duranton; Diego Puga
  4. Urban Growth and its Aggreate Implications By Gilles Duranton; Diego Puga
  5. Complex economic activities concentrate in large cities By Pierre-Alexandre Balland; Cristian Jara-Figueroa; Sergio Petralia; Mathieu Steijn; David Rigby; César A. Hidalgo
  6. Local and global agglomeration patterns in the banking sector: the calm in the mid of a storm By Valter Di Giacinto; Marcello Pagnini
  7. Inequality in Productivity: Geography and Finance of Leaders and Laggards in Italy By Giorgio Barba Navaretti; Anna Rosso
  8. The geography of EU discontent By Dijkstra, Lewis; Poelman, Hugo; Rodríguez-Pose, Andrés
  9. The missing link: international migration in global clusters of innovation By Massimiliano Coda Zabetta; Christian Mauricio Chacua Delgado; Francesco Lissoni; Ernest Miguelez; J. Raffo; Deyun Yin
  10. Saving the American Dream? Education Policies in Spatial General Equilibrium By ; Fabian Eckert
  11. Optimal Regional Labor Market Policies By Jung, Philip; Korfmann, Philipp; Preugschat, Edgar
  12. Migration, Specialization, and Trade: Evidence from Brazil's March to the West By Heitor S. Pellegrina; Sebastian Sotelo
  13. Urbanisation and the onset of modern economic growth By Liam Brunt; Cecilia García-Peñalosa
  14. Regional differences in the generation of green technologies: the role of local recombinant capabilities and academic inventors By Gianluca Orsatti; Francesco Quatraro; Alessandra Scandura
  15. Smart Specialisation Strategies and Regional Productivity: A preliminary assessment in Portugal By Anabela Santos; John Edwards; Paulo Neto
  16. Measuring Inequality using Geospatial Data By Jaqueson K. Galimberti; Stefan Pichler; Regina Pleninger

  1. By: Matteo Laffi; Ron Boschma;
    Abstract: The aim of the paper is to shed light on the role played by regional knowledge bases in Industry 3.0 in fostering new technologies in Industry 4.0 in European regions (NUTS3) over the period 1991-2015. We find that 4.0 technologies appear to be quite related to 3.0 technologies, with some heterogeneity among different technology fields. The paper investigates the geographical implications. We find that the probability of developing Industry 4.0 technologies is higher in regions that are specialised in Industry 3.0 technologies. However, other types of knowledge bases also sustain regional diversification in Industry 4.0 technologies.
    Keywords: Fourth Industrial Revolution, Industry 4.0, regional innovation, patents, knowledge space, relatedness, EU regions
    JEL: B52 O33 R11
    Date: 2021–03
  2. By: Nicola Cortinovis; Zhiling Wang; Hengky Kurniawan
    Abstract: In this paper, we explore how spillovers from multinational enterprises (MNEs) spread and impact domestic firms through different channels and at various spatial scales. Taking a firm-level approach, we test whether industrial relatedness mediates spillover effects from MNEs over and above horizontal and vertical linkages traditionally identified by the literature. Thanks to fine- grained geographical information, we further investigate the spatial reach of the spillovers and how they are associated with domestic firms’ characteristics such as absorptive capacity and technological sophistication. Our hypotheses are tested on a panel data set of Indonesian manufacturing firms census between 2002 to 2009. We find that domestic firms have higher total factor productivity when being exposed to a higher share of output from multinational firms in related industries, on top of the widely acknowledged horizontal and vertical MNE spillovers. We also show that MNE spillovers are sensitive to distance, with relatedness-mediated ones being detected between 30 and 60 km from the municipality of the MNE. Regarding heterogeneity, large firms benefit from productivity-enhancing relatedness spillovers at a wider spatial distance (up to 90km), and firms in less-advanced industries benefit from relatedness mediated effects as much as those in more advanced industries.
    Keywords: Multinational enterprises, spillovers, industrial relatedness, spatial effects.
    JEL: D24 F23 O33 R10
    Date: 2021–03
  3. By: Gilles Duranton (University of Pennsylvania); Diego Puga (CEMFI, Centro de Estudios Monetarios y Financieros)
    Abstract: Urban density boosts productivity and innovation, improves access to goods and services, reduces typical travel distances, encourages energy-efficient construction and transport, and facilitates sharing scarce amenities. However, density is also synonymous with crowding, makes living and moving in cities more costly, and concentrates exposure to pollution and disease. We explore the appropriate measurement of density and describe how it is both a cause and a consequence of the evolution of cities. We then discuss whether and how policy should target density and why the trade-off between its pros and cons is unhappily resolved by market and political forces.
    Keywords: Density, agglomeration, urban costs.
    JEL: R12 R31 R32
    Date: 2020–06
  4. By: Gilles Duranton (University of Pennsylvania); Diego Puga (CEMFI, Centro de Estudios Monetarios y Financieros)
    Abstract: We develop an urban growth model where human capital spillovers foster entrepreneurship and learning in heterogenous cities. Incumbent residents limit city expansion through planning regulations so that commuting and housing costs do not outweigh productivity gains. The model builds on strong microfoundations, matches key regularities at the city and economywide levels, and generates novel predictions for which we provide evidence. It can be quantified relying on few parameters, provides a basis to estimate the main ones, and remains transparent regarding its mechanisms. We examine various counterfactuals to assess quantitatively the effect of cities on economic growth and aggregate income.
    Keywords: Urban growth, agglomeration economies, urban costs, planning regulations, city size distributions.
    JEL: C52 R12 D24
    Date: 2020–06
  5. By: Pierre-Alexandre Balland; Cristian Jara-Figueroa; Sergio Petralia; Mathieu Steijn; David Rigby; César A. Hidalgo (University of Toulouse, France)
    Date: 2020–01–13
  6. By: Valter Di Giacinto (Bank of Italy); Marcello Pagnini (Bank of Italy)
    Abstract: We compare the spatial agglomeration of banks’ branches in Italy across local areas (as identified by local labor market areas) to that of other services. Banks branches appear to be only weakly spatially agglomerated, their spatial distribution being similar to that of other services and to that of the firms from whom the demand for banking services is most likely to stem from. These findings have been stable throughout the period 1991-2015, despite the dramatic changes occurring in that time span (liberalization, ICT and the great recession). On the other hand, local areas with a higher (lower) presence of banking branches tend to be geographically clustered, displaying also a moderately decreasing pattern in this polarization. IC technologies partially contributed to this trend.
    Keywords: spatial concentration, bank branching, ICT
    JEL: R12 G21 C19
    Date: 2021–03
  7. By: Giorgio Barba Navaretti (University of Milan); Anna Rosso (University of Milan)
    Abstract: We examine the geography of productivity leaders and laggards in the population of Italian joint stock manufacturing companies between 2007 and 2017 and analyse how far such patterns can be related to their financial structure and the provision of financial services in the Italian provinces. To do so we exploit the reform of the Italian banking system in the mid-Nineties as an exogenous shock on the structure of local banking markets and examine whether this shock affects productivity patterns at the firm level. We find a robust descriptive evidence of a widening of the leader-laggard gaps, with a very sizeable productivity divide between the North and the South of the country. Leaders are concentrated in the North. Leaders, especially in the North are also more likely to have access to capital markets. Firms in the South, instead, also those at the frontier, are more reliant on bank lending. The liberalization of the banking market in the mid 90s and the growth of joint stock banks at the provincial level positively affected firms’ productivity outcomes, possibly through an improvement of firms’ financial structure. We also use a firm specific measure of core-periphery based on distance from airport hubs and find that the likelihood of activating a virtuous capital market productivity link declines with distance from core areas.
    Keywords: Productivity, Bank Liberalization, Core-periphery Dynamics
    JEL: R1 O4 G21
    Date: 2021–03–19
  8. By: Dijkstra, Lewis; Poelman, Hugo; Rodríguez-Pose, Andrés
    Abstract: Support for parties opposed to European Union (EU) integration has risen rapidly, and a wave of discontent has taken over the EU. This discontent is purportedly driven by the very factors behind the surge of populism: differences in age, wealth, education, or economic and demographic trajectories. This paper maps the geography of EU discontent across more than 63,000 electoral districts in the EU-28 and assesses which factors push anti-EU voting. The results show that the anti-EU vote is mainly a consequence of local economic and industrial decline in combination with lower employment and a less educated workforce. Many of the other suggested causes of discontent, by contrast, matter less than expected, or their impact varies depending on levels of opposition to European integration.
    Keywords: anti-Europeanism; anti-system voting; populism; economic decline; industrial decline; education; migration; European Union
    JEL: D72 R11
    Date: 2020–06–02
  9. By: Massimiliano Coda Zabetta (GREThA - Groupe de Recherche en Economie Théorique et Appliquée - UB - Université de Bordeaux - CNRS - Centre National de la Recherche Scientifique); Christian Mauricio Chacua Delgado (GREThA - Groupe de Recherche en Economie Théorique et Appliquée - UB - Université de Bordeaux - CNRS - Centre National de la Recherche Scientifique); Francesco Lissoni (GREThA - Groupe de Recherche en Economie Théorique et Appliquée - UB - Université de Bordeaux - CNRS - Centre National de la Recherche Scientifique); Ernest Miguelez (GREThA - Groupe de Recherche en Economie Théorique et Appliquée - UB - Université de Bordeaux - CNRS - Centre National de la Recherche Scientifique); J. Raffo (WIPO - World Intellectual Property Organization); Deyun Yin (HIT - Harbin Institute of Technology, WIPO - World Intellectual Property Organization)
    Abstract: In this chapter we look at the global network of innovative agglomerations, with a focus on their degree of internationalization and on the actors behind it – particularly high-skilled migrants. Using worldwide patent and publication geo-localized data, we identify all Global Hotspots of Innovation (GIHs) and Niche Clusters (NCs) worldwide, and study their success as a function of their international connections. In particular, we compare organizational ones, such as international collaborations orchestrated by multinational firms' collaborations, to personal ones, which may derive from migration to/from the GIHs and NCs. We find a strong role of the latter, always comparable and sometimes larger than the former.
    Keywords: patents,publications,agglomeration,internationalization,migration
    Date: 2021–03–08
  10. By: ; Fabian Eckert
    Abstract: Children's education and economic opportunities differ substantially across US neighborhoods. This paper develops and estimates a spatial equilibrium model that links children's education outcomes to their childhood location. Two endogenous factors determine education choices in each location: local education quality and local labor market access. We estimate the model with US county-level data and study the effects of a school funding equalization on education outcomes and social mobility. The reform's direct effects improve education outcomes among children from low-skill families. However, the effects are weaker in spatial general equilibrium because average returns to education decline and residential and educational choices of low-skill families shift them toward locations with lower education quality.
    Keywords: Intergenerational mobility; Equality of opportunity; School access; Education reform; Regional labor markets; Economic geography; Spatial economics
    JEL: E24 E62 R12 R23 I24 I28
    Date: 2021–03–22
  11. By: Jung, Philip (TU Dortmund); Korfmann, Philipp (TU Dortmund); Preugschat, Edgar
    Abstract: We document large and persistent spatial dispersion in unemployment rates, vacancies, labor market tightness, labor market flows, and wages for Germany on a granular regional level. We show that in the 1990s differences in inflows from employment to unemployment were the key driver of regional dispersion in unemployment rates while in the 2000s outflows became more important. To account for the documented regional dispersion we develop a spatial search and matching model with risk-averse agents, endogenous separations and unobservable search effort that leads to moral hazard and quantify the relative importance of 4 potential structural driving forces: dispersion in productivity, in the bargaining strength of workers, in idiosyncratic risk components and in regional matching efficiency. Based on region-specific estimates of these factors we then study the resulting policy trade-off between insurance, regional redistribution and efficiency. We design (optimal) region-specific labor market policies that can be implemented using hiring subsidies, layoff taxes, unemployment insurance benefits and transfers financed by social insurance contributions. We find that a move towards an optimal tax system that explicitly conditions on regional characteristics could lead to sizable welfare and employment gains.
    Keywords: optimal labor market policies, regional unemployment
    JEL: J50
    Date: 2021–03
  12. By: Heitor S. Pellegrina; Sebastian Sotelo
    Abstract: Exploiting a large migration of farmers to the West of Brazil between 1950 and 2010, we study how migration shapes aggregate and regional comparative advantage. We document that farmers emigrating from regions with high employment in an activity are more likely to work in that activity and have higher income than other migrants doing so. We incorporate this heterogeneity into a quantitative model and find that, by reshaping comparative advantage, declines in migration costs contributed substantially to Brazil's rise as a leading commodity exporter. Opportunities to migrate, moreover, account for a substantial share of the gains from trade.
    JEL: F10 F16 Q17 R23
    Date: 2021–01
  13. By: Liam Brunt (Norwegian School of Economics and Business Administration - Norwegian School of Economics and Business Administration, CEPR - Center for Economic Policy Research - CEPR); Cecilia García-Peñalosa (AMSE - Aix-Marseille Sciences Economiques - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique, CEPR - Center for Economic Policy Research - CEPR)
    Abstract: A large literature characterizes urbanisation as the result of productivity growth attracting rural workers to cities. We incorporate economic geography elements into a growth model and suggest that causation runs the other way: when rural workers move to cities, the resulting urbanisation produces technological change and productivity growth. Urban density leads to knowledge exchange and innovation, thus creating a positive feedback loop between city size and productivity that sets off sustained economic growth. The model is consistent with the fact that urbanisation rates in Western Europe, and notably in England, reached unprecedented levels by the mid-18 th century, the eve of the Industrial Revolution.
    Keywords: industrialization,urbanisation,innovation,long-run growth
    Date: 2021–01
  14. By: Gianluca Orsatti; Francesco Quatraro; Alessandra Scandura
    Abstract: This paper investigates the association between region-level recombinant capabilities and the generation of green technologies (GTs), together with their interplay with the intensity of academic involvement in innovation dynamics. The analysis focuses on Italian NUTS 3 regions, over the period 1998-2009. We show that the local capacity to introduce novel combinations is positively and strongly associated to the generation of GTs, while the involvement of academic inventors in local innovation dynamics shows an interesting compensatory role when local contexts lack such capacity.
    Keywords: green technologies, academic inventors, recombinant novelty.
    JEL: O33 R11
    Date: 2020
  15. By: Anabela Santos (European Commission - JRC); John Edwards (Policy Experimentation and Evaluation Platform); Paulo Neto
    Abstract: Smart Specialisation is a place-based approach to innovation policy that underpins a significant amount of EU funding. The origins of the concept lie in the transatlantic productivity gap and a concern that previous investments in Research and Innovation (R&I) had failed to deliver commercial benefits. Following more than five years of implementation, this report contributes to the evaluation of the smart specialisation approach through quantitative analysis. As part of the Stairway to Excellence project, it is one of the first to assess its impact on regional productivity, based on the case of Portugal. This is done using the country’s main instrument to support corporate Research and Development (R&D) that was launched in 2007 and adapted to accommodate smart specialisation in 2014. An analysis of project characteristics reveals that during the programming period 2014-2020, financial support to corporate R&D investment aligned with S3 priorities has been more concentrated on cooperation between regions and sectors. A higher diversification of R&D and Innovation funds across sectors, regions and beneficiaries, in comparison with 2007-2013, is also observed. As more cooperation and diversification are two important features of smart specialisation, these findings suggest improved investment choices in the programming period 2014-2020. Furthermore, after controlling for the existence of potential geographical spillover effects by applying a spatial econometric analysis, the results display a positive effect on regional productivity from the R&D and Innovation subsidies over the last two programming periods. Furthermore, a higher rate of return of RDI subsidy in the second period is also observed, which suggests that smart specialisation was able to generate an additional effect in comparison with a situation without this place-based policy. Nevertheless, we also found that – in the case of Portugal - smart specialisation has only been able to generate this additional effect in regional productivity when the R&D funding instrument is combined with other types of innovation subsidies. This finding provides additional weight to the argument for broader and more integrated smart specialization policy mixes in the new programming period.
    Keywords: Productivity, Innovation, Smart Specialisation Strategies, Portugal
    JEL: O31 R11 H71
    Date: 2021–03
  16. By: Jaqueson K. Galimberti (Auckland University of Technology); Stefan Pichler (ETH Zurich, Switzerland); Regina Pleninger (ETH Zurich, Switzerland)
    Abstract: The main challenge in studying economic inequality is limited data availability, which is particularly problematic in developing countries. We construct a measure of economic inequality for 234 countries/territories from 1992 to 2013 using satellite data on night lights and gridded population data. Key methodological innovations include the use of varying levels of data aggregation, and a calibration of the lights-prosperity relationship to match traditional inequality measures based on income data. We obtain a measure that is significantly correlated with cross-country variation in income inequality. We provide three applications of the data in the fields of health economics and international finance. Our results show that light- and income-based inequality measures lead to similar results in terms of cross-country correlations, but not for the dynamics of inequality within countries. Namely, we find that the light-based inequality measure can capture more enduring features of economic activity that are not directly captured by income.
    Keywords: : Nighttime lights, inequality, gridded population
    JEL: D63 E01 I14 O11 O47 O57
    Date: 2021–03

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