nep-geo New Economics Papers
on Economic Geography
Issue of 2021‒06‒21
thirteen papers chosen by
Andreas Koch
Institut für Angewandte Wirtschaftsforschung

  1. Gathering round Big Tech: how the market for acquisitions reinforces regional inequalities in the US By Feldman, Maryann; Guy, Frederick; Iammarino, Simona; Ioramashvili, Carolin
  2. Capabilities, diversification & economic dynamics in European Regions By Jan Fagerberg; Martin Srholec
  3. Subnational Income Growth and International Border Effects By Hanna L. Adam; Mario Larch; David Stadelmann
  4. The Size of U.S. Metropolitan Areas By McKenzie Humann; Jordan Rappaport
  5. Regional Convergence in the European Union: What are the Factors of Growth? By Jan Pintera
  6. US banking deregulation and local economic growth: A spatial analysis By Laura Spierdijk; Pieter IJtsma; Sherrill Shaffer
  7. Organisation Capital, Knowledge Spillover and Firm Performance: Evidence from Chinese Manufacturing Sector By Qing Li; Yanrui Wu
  8. A map of the fractal structure of high-tech dynamics across EU regions By Wirkierman, Ariel L.; Ciarli, Tommaso; Savonna, Maria
  9. Centrality Bias in Inter-city Trade By MORI Tomoya; Jens WRONA
  10. Spoils of War: Trade Shocks and Segmented Labor Markets in Spain during WWI By Simon Fuchs
  11. Understanding Spatial Variation in COVID-19 across the United States By Desmet, Klaus; Wacziarg, Romain
  12. The Causal Effect of Transport Infrastructure: Evidence from a New Historical Database By Lindgren Erik; Per Pettersson-Lidbom; Bjorn Tyrefors
  13. The legacy of conflict: aggregate evidence from Sierra Leone By Tillman Hönig

  1. By: Feldman, Maryann; Guy, Frederick; Iammarino, Simona; Ioramashvili, Carolin
    Abstract: Are the agglomeration economies of technology hubs augmented by a localized market for start-ups – acquisitions, and IPOs? How does this affect the ability of places outside of those hubs to foster digital startups as a tool of local economic development? We study this with a particular focus on acquisitions by the seven largest American digital platforms – Amazon, Alphabet [Google], Apple, Microsoft, Facebook, Oracle and Adobe, which we call, collectively, Big Tech. We cover the years 2001-2020. We show that firms acquired by Big Tech are, disproportionately to the sectors in which they operate, concentrated in major tech clusters, and particularly in the Silicon Valley (San Francisco/San Jose). Foreign acquisitions by Big Tech also show a marked concentration in a few countries, and particular places in those countries. NASDAQ IPOs of firms in relevant sectors are similarly concentrated. Acquisition, or the less common alternative, IPO, is the second major phase of financing for a digital start up. The first phase is commonly associated with venture capital (VC), and location proximate to venture capital companies has often been seen as a motivation for locating in a tech cluster. We find, however, that neither VC funding, nor funding an investor located in the Silicon Valley, predicts either acquisition by Big Tech, or IPO. Funding by any of the VCs that helped launch the Big Tech firms, however, is strongly associated with Big Tech acquisition. This suggests an important role for social networks in both the first and second phases of financing, but not necessarily a geographical role in the first phase. We argue that the acquisition market – and its effects on both the major tech hubs and the left behind rest – depends crucially on the proprietary control of access to various digital network products. Regulation of these markets, particularly in the form of common carrier status and open standards, could achieve a considerable re-balancing.
    Keywords: tech giats; market power; start-ups; acquisitions; regional inequality
    JEL: R12
    Date: 2021–05–01
  2. By: Jan Fagerberg (TIK, University of Oslo); Martin Srholec (CERGE-EI, a joint workplace of Charles University and the Economics Institute of the Czech Academy of Sciences)
    Abstract: What determines the differences in economic performance across European regions? In addressing this question, this paper takes inspiration from two different approaches. One approach highlights the role of capability-building, of a technological or social nature, while another perspective emphasizes the potential advantages of proximity and, hence, a relatively diversified economic structure, for regional economic performance. The paper argues that the impacts of capability-building and diversification on regional economic development need to be assessed jointly. Using information for 261 regions at NUTS2 level in 27 European countries in the 2000s, novel data sources are exploited to construct measures of technological and social capabilities, which are combined with indicators of related and unrelated variety in the analysis of regional economic dynamics. The results suggest that capability-building play a key role in regional economic development while the results for diversification are more mixed.
    Date: 2021–06
  3. By: Hanna L. Adam; Mario Larch; David Stadelmann
    Abstract: This paper analyses the effect of international borders and of trade agreements at international borders on subnational (i.e. regional) growth. We construct an extensive panel dataset covering 1,350 regions in 86 countries worldwide between 1950 and 2017. Our results show that international borders decrease regional income per capita, while trade agreements at international borders increase regional income per capita by about the same magnitude. The positive marginal effect of trade agreements on regional income corresponds to at least three fifths of the negative marginal effect of international borders. Thus, trade agreements can compensate negative border effects and explain regional inequalities within countries. An array of robustness tests supports our interpretations.
    Keywords: border effects, trade, trade agreements, GDP per capita, regional analysis
    JEL: F14 F15 F43 O18 R12
    Date: 2021
  4. By: McKenzie Humann; Jordan Rappaport
    Abstract: Metropolitan areas—unions of nearby built-up locations within which people travel on a day-to-day basis among places of residence, employment, and consumption—serve as a fundamental unit of economic analysis. But existing delineations of U.S. metro areas—including metropolitan Core-Based Statistical Areas (CBSAs), Urbanized Areas, and Commuting Zones—stray far from this conception. We develop a flexible algorithm that uses commuting flows among U.S. census tracts in 2000 to match varied interpretations of our metropolitan conception. Under a baseline parameterization that balances encompassing commuting flows and excluding sparsely settled land, our Kernel-Based Metropolitan Areas (KBMAs) capture almost all of the population and employment of metropolitan CBSAs but only a small portion of their land area. The population of the baseline KBMAs is distributed more diffusely than the population of existing delineations, suggesting KBMAs better match the geographic scope of agglomeration. But as with existing delineations, population becomes more bunched across the largest KBMAs. Settled land area expands proportionately with population across small KBMAs but increasingly less than proportionately as population becomes larger, suggesting the existence of centripetal forces that temper the geographic expansion of metropolitan areas.
    Keywords: Metropolitan Areas; Metro Areas
    JEL: R12 R14 R2 R4
    Date: 2021–05–25
  5. By: Jan Pintera (Institute of Economic Studies, Faculty of Social Sciences, Charles University, Opletalova 26, 110 00, Prague, Czech Republic)
    Abstract: Despite years of deepening economic integration among the states and regions of the European Union, empirical research remains inconclusive about speed of convergence across regions, if not its existence. This paper provides a new look on convergence in the EU while focusing on development at regional level after the Great Recession. It uses the log t convergence test by Phillips and Sul (2007) to analyze the convergence in level of income among the European regions. Rather than supporting the convergence hypothesis, we identify five convergence clubs in which the regions converge in income growth rates. Investigating further the geographical distribution of the convergence clubs, we confirm high inequality within the member states and find large continuous area of high convergence clubs in the urbanized part of Western Europe. Furthermore, we investigated the determinants of convergence club membership using Logistic Regression. We found a low impact of any of the estimated variables on membership in the highest club but confirmed positive association of membership in the higher clubs with research and patent activities.
    Keywords: Club Convergence, European Regions, log t test, Logistic regression
    JEL: C23 C40 R11
    Date: 2021–06
  6. By: Laura Spierdijk; Pieter IJtsma; Sherrill Shaffer
    Abstract: The economic literature has largely ignored the existence of global common factors and local spatial dependence in the assessment of the real effects of U.S. banking deregulation. Motivated by consistency concerns, this study uses spatial econometric models with common factors to analyze the impact of U.S. banking deregulation on county-level economic growth during the 1970–2000 period. We estimate the direct effects of banking deregulation, as well as the size, geographic scope and source of any spatial spillovers. Statistically and economically significant growth effects were experienced by counties in states that deregulated intrastate branching, but only after an initial period without any growth effects. We find no significant growth effects of interstate banking deregulation. During the later half of the sample, intrastate branching deregulation increased the average expected annual growth rates of counties in the deregulated state by about 0.5 p.p. in the long run. Local spatial dependence turns out to be a crucial feature of county-level economic growth, even after common factors are accounted for. As a result, significant spatial spillovers of intrastate branching deregulation were experienced by counties in states surrounding the deregulated state during the later half of the sample. Intrastate branching deregulation increased the average expected annual growth rates of counties adjacent to the deregulated state by about 0.2 p.p. in the long run, while the spillovers to hinterland counties in adjacent states were still about 0.05–0.1 p.p. A comparison to models that ignore common factors or local spatial dependence substantiates our consistency concerns.
    Keywords: U.S. banking deregulation, common factors, spatial autocorrelation, spatial spillovers, local economic growth
    Date: 2021–03
  7. By: Qing Li (Qing Li, SHU-UTS SILC Business School, Shanghai University); Yanrui Wu (Business School, The University of Western Australia)
    Abstract: This study explores organisation capital and its spillover effects among Chinese manufacturing firms. By linking patent data with China’s annual survey of industrial enterprises database, we examine technological proximity as one potential channel for organisational spillover but find weak evidence. This result is consistent with previous findings from developed countries. In contrast, organisation capital is found to generate positive spillover in China when geographical proximity is considered. In other words, it is found that spillover from organisation capital is likely among Chinese firms due to geographical proximity rather than technological proximity.
    Keywords: Organisation capital; knowledge spillover; intangible capital; patent portfolio; Chinese firms
    JEL: D21 D24 L22
    Date: 2021
  8. By: Wirkierman, Ariel L. (Institute of Management Studies(IMS), Goldsmiths, University of London); Ciarli, Tommaso (UNU-MERIT, and Science Policy Research Unit (SPRU), University of Sussex); Savonna, Maria (Science Policy Research Unit (SPRU), University of Sussex, and Department of Economics and Finance, Luiss University)
    Abstract: The paper provides a novel, theoretically driven map of EU regional asymmetries, based on the shares and dynamics of high-tech employment and wages, as well as the structure of inter-regional Input-Output relations at the EU NUTS-1 regional level. We use data from EUROSTAT and the EU-REGIO database to perform a trade-aware shift-share analysis coupled with a hierarchical clustering. We show that EU regions present a fractal structure of asymmetries, i.e. the emergence of core-periphery relations at progressively smaller scales, in relation to both spatial and trade dimensions. We identify regional clusters labelled 'consolidated core', 'declining core', 'emerging cities', 'declining peripheries' and 'CEE factories', and we show that there is a polarising dynamics between driving and follower clusters, drawing implications for EU cohesion policy.
    Keywords: Regional high-tech employment, Regional wage rate differentials, Cluster Analysis, European cohesion policy
    JEL: R11 O30 C38
    Date: 2021–05–17
  9. By: MORI Tomoya; Jens WRONA
    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.
    Date: 2021–04
  10. By: Simon Fuchs
    Abstract: How does intranational factor mobility shape the welfare effects of a trade shock? I provide evidence that during WWI, a demand shock emanated from belligerent countries and affected neutral Spain. Within Spain, labor predominantly reallocated locally, while the most affected provinces experienced drastic increases in wages and consumer prices. Embedding imperfect labor mobility in an economic geography model, I show that external demand shocks can improve allocative efficiency, but asymmetric shocks cause localized increases in wages and consumer prices instead of reallocation. Adjusting an aggregate gains of trade formula to take domestic reallocation into account more than triples the estimated welfare effects.
    Keywords: gains from trade; labor mobility; economic geography
    JEL: D5 F11 F12 F15 F16 N14 N9 R12 R13
    Date: 2021–05–28
  11. By: Desmet, Klaus; Wacziarg, Romain
    Abstract: We analyze the correlates of COVID-19 cases and deaths across US counties. We consider a wide range of correlates - population density, public transportation, age structure, nursing home residents, connectedness to source countries, etc. - finding that these variables are important predictors of variation in disease severity. Many of the effects are persistent - even increasing - through time. We also show that there are fewer deaths and cases in counties where Donald Trump received a high share of the vote in 2016, partly explaining the emerging political divide over lockdown and reopening policies, but that this correlation is reversed when controlling for shares of minority groups. The patterns we identify are meant to improve our understanding of the drivers of the spread of COVID-19, with an eye toward helping policymakers design responses that are sensitive to the specificities of different locations.
    Keywords: COVID-19; Determinants; spatial variation; US counties
    JEL: I18 R1
    Date: 2020–06
  12. By: Lindgren Erik; Per Pettersson-Lidbom; Bjorn Tyrefors
    Abstract: In this paper, we analyze the effect of transport infrastructure investments in railways on three measures of local economic activity: real nonagricultural income, agricultural land values and population size. As a testing ground, we use data from a new historical database that includes annual panel data on approximately 2,400 Swedish geographical units, i.e., local governments, during the period 1860-1917. We use a staggered event study design that is robust to treatment effect heterogeneity. Importantly, we find extremely large reduced-form effects of having access to railways. For real nonagricultural income, the cumulative treatment effect is approximately 120% after 30 years. Therefore, this effect is 20 times larger than most reduced-form effects found in previous works on the effect of transport infrastructure on economic activity. Equally important, we also show that our reduced-form effect reflects growth rather than a reorganization of existing economic activity.
    Date: 2021–06
  13. By: Tillman Hönig
    Abstract: This paper studies the general equilibrium impact of civil war in Sierra Leone. I first use an instrumental variable (IV) strategy and geographic conflict variation to estimate reduced-form effects. I show that civil war leads to affected areas having a higher share of workers in agriculture, fewer educated workers, and lower worker income. In order to explicitly take into account general equilibrium effects such as selective migration in response to the war, I then develop an economic geography model.
    Keywords: Conflict, Livelihoods, Structural transformation, Migration, Computable general equilibrium, Firm productivity, Human capital
    Date: 2021

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