nep-geo New Economics Papers
on Economic Geography
Issue of 2021‒05‒03
ten papers chosen by
Andreas Koch
Institut für Angewandte Wirtschaftsforschung

  1. Import competition, regional divergence, and the rise of the skilled city By Javier Quintana
  2. Borders within Europe By Santamaría, Marta; Ventura, Jaume; YeÅŸilbayraktar, UÄŸur
  3. New directions for RIS studies and policies in the face of grand societal challenges By Franz Tödtling; Michaela Trippl; Veronika Desch
  4. The Day After Covid-19: Implications for Growth, Specialization, and Inequality By Stefano Magrini; Alessandro Spiganti
  5. Railways and cities in India By Fenske, James; Kala, Namrata; Wei, Jinlin
  6. The Long Shadow of Infrastructure Development: Long Run Effects of Railway Construction in Colonial India By Pushkar Maitra; William Yu
  7. Spatial internet spillovers in manufacturing By Joël Cariolle; Maëlan Le Goff
  8. Closing Time : The Local Equilibrium Effects of Prohibition By Howard, Greg; Ornaghi, Arianna
  9. Human capital spillovers from Special Economic Zones: evidence from Yangtze Delta in China By Template-Type: ReDIF-Paper 1.0; Zhaoying Lu
  10. Does Size Matter? Evidence from Municipality Break-Ups By Gissur Ó Erlingsson; Jonas Klarin; Eva Maria Mörk

  1. By: Javier Quintana (Banco de España)
    Abstract: This paper analyzes the contribution of import competition to the regional divergence among US metropolitan areas over recent decades. I document that the sharp rise in imports of Chinese manufacturing goods had a significant effect on the spatial skill polarization and the divergence of college wage premium among local labor markets. The effects of the China trade shock were systematically different depending on the skill intensity of local services. Among regions with skill-intensive services, a higher exposure to import competition in manufacturing increased the number and wages of college-educated workers. The negative effects of the China shock concentrated in exposed regions with a low density of college-educated workers. The heterogeneous effects of import competition explain one third of the spatial skill polarization and one fourth of the divergence in college wage premium. I show that the contribution of the trade shock operates through the reallocation of workers across sectors and regions. Using a novel measure of “labor market exposure to the China shock”, I document that service industries expand when local manufacturers face import competition. High human capital regions exposed to the China shock undergo a faster transition from manufacturing to skill-intensive service industries and attract college-educated workers from other locations.
    Keywords: international trade, import competition, regional inequality, skill sorting, factor mobility
    JEL: F14 F16 F66 I24 J24 J61 R12
    Date: 2021–04
  2. By: Santamaría, Marta (University of Warwick and CAGE); Ventura, Jaume (CREI, Universitat Pompeu Fabra and Barcelona GSE); YeÅŸilbayraktar, UÄŸur (Universitat Pompeu Fabra and Barcelona GSE)
    Abstract: Are country borders still an impediment to trade flows within Europe? Using a microlevel survey with 3 million annual shipments of goods, we construct a matrix of bilateral trade for 269 European regions. Take two similar region pairs, one containing regions in different countries and the other containing regions in the same country. The market share of the origin region in the destination region for the international pair is 17.5 percent that of the intranational pair. Across industries, this estimate ranges from 12.3 to 38.9 percent. For post-1910 borders, this estimate is 28.8 percent. The implication is clear: Europe is far from having a single market.
    Keywords: Border effect, European integration, regional trade. JEL Classification: D71, F15, F55, H77, O57
    Date: 2021
  3. By: Franz Tödtling (Vienna University of Economics and Business); Michaela Trippl (University of Vienna); Veronika Desch (University of Vienna)
    Abstract: The regional innovation system (RIS) approach has become a widely used framework for examining the dynamics of innovation across space as well as for crafting policies aimed at promoting the innovation capacity of regions. The dominant focus of RIS studies and regional innovation policies has been on technological innovation that drives competitiveness and economic growth. In light of persistent environmental and social challenges such as climate change, health problems, and growing inequalities, this narrow understanding of innovation appears to be obsolete. This article claims that the RIS approach requires critical rethinking and reassessment to provide a solid basis for informing the next generation of regional innovation policies. We explore how RIS scholarship and policies could benefit from engaging more deeply with an alternative understanding of innovation. Inspired by recent work on responsible innovation, mission-oriented and transformative innovation policies, we develop the notion of ‘challenge-oriented RIS’ (CORIS). In contrast to conventional understandings of RIS, this approach embraces a broader and more critical understanding of innovation, captures the directionality of change, opens up to new innovation actors and novel coordination mechanisms between various stakeholders and territorial scales, and pays more attention to the application side and upscaling of innovation within the region and beyond. Acknowledging that regions vary in their capacity to fashion transformative change and challenge-oriented innovation, the paper outlines new directions for place-based innovation policies.
    Keywords: regional innovation systems, grand societal challenges, sustainability transitions, challenge-oriented regional innovation policy
    Date: 2021
  4. By: Stefano Magrini (Department of Economics, University Of Venice Cà Foscari); Alessandro Spiganti (Department of Economics, University Of Venice Cà Foscari)
    Abstract: In the post-pandemic world, digital communication will be integral part of daily working to a higher extent than before, with a disproportionally strong impact on knowledge-based activities, like innovation and research. We present a multi-area endogenous growth model where abstract knowledge flows at no cost across space but tacit knowledge arises from the interaction between researchers and hence is hampered by distance. Digital communication reduces this “cost of distance” for flows of tacit knowledge and reinforces productive specialization. This increases the system-wide growth rate, but at the cost of an increase in inequality within and across areas.
    Keywords: Agglomeration, videoconferencing, innovation, disparities
    JEL: J24 O31 O41 R12
    Date: 2021
  5. By: Fenske, James (University of Warwick and CAGE); Kala, Namrata (SLOAN SCHOOL OF MANAGEMENT, MASSACHUSETTS INSTITUTE OF TECHNOLOGY); Wei, Jinlin (University of Warwick)
    Abstract: Using a new dataset on city populations in colonial India, we show that the railroad network increased city size in the period 1881 to 1931. Our baseline estimation approach includes fixed effects for city and year, and we construct instrumental variables for railroad proximity based on distance from a least cost path spanning cities that existed prior to the start of railroad construction. Cities that increased market access due to the railroad grew, particularly those cities that were initially small and isolated.
    Keywords: JEL Classification:
    Date: 2021
  6. By: Pushkar Maitra (Monash University, Department of Economics); William Yu (Monash University)
    Abstract: This paper examines the long-term impacts of infrastructural investment. It considers the case of British investment in railway infrastructure in colonial India. Railways had an immediate impact on trade and development in the predominantly agricultural India. In this paper, we show that the positive effects of railways have persisted over more than a century. Districts of the Indian sub-continent that were connected to railways earlier continue to have higher levels of economic prosperity and lower rural poverty rates a century later. Men and women residing districts connected earlier are less likely to be uneducated or malnourished. Districts further away from connected districts are worse o in terms of levels of economic development in 2013. The corresponding IV estimates are larger in magnitude than the OLS estimates indicating that the OLS estimates provide a lower bound to the effect of exposure to railways on long run prosperity. The persistent effects appear to be driven by agglomeration due to early exposure to trade and globalization as a result of connectedness.
    Keywords: Infrastructure, Railways, Long Run Prosperity, Colonial India
    JEL: O11 N75 O18
    Date: 2021–04
  7. By: Joël Cariolle (FERDI - Fondation pour les Etudes et Recherches sur le Développement International); Maëlan Le Goff (Banque de France - Banque de France - Banque de France)
    Abstract: In this paper, we study the spatial spillover effects of internet usage on manufacturing output. Using repeated cross-section datasets of 40,154 manufacturing firms located in 91 developing and transition economies, we adopt an original shift-share instrumental variable setup , and find that a greater diffusion of email technology in locations increases manufacturing firm's sales and productivity. This result is driven by local email dissemination within industries, supporting the existence of network or knowledge spillover effects among proximate firms, engaged in similar or interlinked activities. By contrast, the dissemination of email technology across other industries located in the same place reduces manufacturing firms' performance. However, these inter-industry spillovers are U-shaped, indicating that they remain negative below a local email incidence threshold established at approximately 50% of the local universe of firms, and turn positive only once this threshold is reached. Last, we find that positive Internet spillovers are mediated by firm's own use of the internet technology, and by its absorptive capacity, reflected by its share of skilled production workers, its multi-plant status, and its maturity.
    Keywords: Connectivity,internet,spillovers,manufactures,industrialisation
    Date: 2021–04–14
  8. By: Howard, Greg (University of Illinois); Ornaghi, Arianna (University of Warwick)
    Abstract: How do different local policies in a federal system affect local land values, production, and sorting? We study the question exploiting a large historical policy change : U.S. Alcohol Prohibition in the early twentieth century. Comparing same-state early and late adopters of county dry laws in a difference-in-differences design, we find that early Prohibition adoption increased population and farm real estate values. Moreover, we find strong effects on farm productivity consistent with increased investment due to a land price channel. In equilibrium, the policy change disproportionately attracted immigrants and African-Americans.
    Keywords: Tiebout sorting ; migration ; land values ; productivity ; amenities ; credit JEL Classification: N91 ; R13 ; E22
    Date: 2021
  9. By: Template-Type: ReDIF-Paper 1.0; Zhaoying Lu (Graduate School of Economics, Osaka University)
    Abstract: This paper evaluates the effects of a place-based program in the Yangtze Delta of China?Special Economic Zones (SEZs). It takes into account spatial dependence to examine whether the human capital of SEZs exerts positive influences on the productivity of the local industry. The empirical results find that the local industry benefits from the human capital of SEZs. The spillover effects are not only confined to own counties but also neighboring counties. Indeed, SEZs contribute more to the productivity of neighboring counties than the one in the hosting county itself. Moreover, positive spillover effects of the human capital of SEZs still hold for the growth of productivity. Furthermore, the productivity of a region is similar to the one of the same industry in proximity.
    Keywords: Special Economic Zone, Spatial Analysis, Human Capital, Spillovers,Yangtze Delta.
    JEL: C21 C23 R10 O21
  10. By: Gissur Ó Erlingsson; Jonas Klarin; Eva Maria Mörk
    Abstract: Municipal break-ups are an understudied phenomenon despite the fact that such territorial reforms regularly take place across the globe. This paper estimates how seven voluntary splits of Swedish municipalities affected municipal current costs. To predict what would have happened had the break-ups not taken place, we apply the matrix completion method with nuclear norm minimization. Our results do not support the standard view, that smaller municipalities imply higher per capita costs. Instead, we find an intriguing heterogeneity: costs increase in some municipalities, are unaffected in others and decrease elsewhere. The findings point to the complex nature of territorial reforms, the difficulty in drawing general conclusions of such, and hence, the perils of expecting them to have uniform outcomes.
    Keywords: territorial reforms, municipalities, matrix completion
    JEL: H72 R12 R50
    Date: 2021

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