nep-geo New Economics Papers
on Economic Geography
Issue of 2021‒09‒27
seven papers chosen by
Andreas Koch
Institut für Angewandte Wirtschaftsforschung

  1. The Pitfalls of Using Location Quotients to Identify Clusters and Represent Industry Specialization in Small Regions By Andrew Crawley; Todd M. Gabe; Mariya Pominova
  2. The Geography of Unemployment By Adrien Bilal
  3. Road Capacity, Domestic Trade and Regional Outcomes By A. Kerem Cosar; Banu Demir Pakel; Devaki Ghose; Nathaniel Young
  4. Urban Resilience By Edward L. Glaeser
  5. The Home Market Effects in a Home-Biased Geography By Jordan J. Norris
  6. Zoom in, zoom out: A shift-share analysis of productivity in Switzerland based on micro data By Jean-Marie Grether; Benjamin Tissot-Daguette
  7. Multiple imputation techniques: An application to Swiss value-added data By Jean-Marie Grether; Benjamin Tissot-Daguette

  1. By: Andrew Crawley; Todd M. Gabe; Mariya Pominova
    Abstract: This paper examines the use of location quotients, a measure of regional business activity relative to the national benchmark, as an indicator of sectoral agglomeration in small cities and towns, and as a measure of industry specialization that might impact the number of new business startups in these places. Using establishment-level data on businesses located in Maine, our findings suggest that the addition of one "hypothetical" establishment in very small towns leads to a dramatic change in the magnitude of the region-industry location quotient. At population sizes of about 4,100 or more people, however, location quotients are reasonably stable. Regression results from an analysis of the relationship between new business activity and regional industry specialization show that the effect of location quotients on business startups switches from "inelastic" to "elastic" at a population size cutoff of about 2,600 residents. Overall, our findings suggest that researchers and practitioners should exercise caution when using location quotients to study small regions.
    Keywords: Agglomeration; Industrial Cluster; Location Quotient; Regional Economics; Rural
    JEL: R10 R11 R12
    Date: 2021–09–10
  2. By: Adrien Bilal
    Abstract: Unemployment rates differ widely across local labor markets. I offer new empirical evidence that high local unemployment emerges because of elevated local job losing rates. Local employers, rather than local workers, account for most of spatial gaps in job stability. I then propose a theory in which spatial differences in job loss arise endogenously, due to the spatial sorting of heterogeneous employers across local labor markets. Labor market frictions induce productive employers to over-value locating close to each other. The optimal policy incentivizes them to relocate to areas with high job losing rates, providing a rationale for commonly used place-based policies. I estimate the model using French administrative data. The estimated model accounts for over three fourths of the cross-sectional dispersion in unemployment rates, as well as for the respective contributions of job losing and job finding rates. Employers' inefficient location choices amplify spatial unemployment differentials five-fold. Both real-world and optimal place-based policies can yield sizable local and aggregate welfare gains.
    JEL: E20 E24 E60 F16 H21 J42 J61 J63 J64 R13 R23
    Date: 2021–09
  3. By: A. Kerem Cosar; Banu Demir Pakel; Devaki Ghose; Nathaniel Young
    Abstract: What is the impact on intra-national trade and regional economic outcomes when the quality and lane-capacity of an existing paved road network is expanded significantly? We investigate this question for the case of Turkey, which undertook a large-scale public investment in roads during the 2000s. Using spatially disaggregated data on road upgrades and domestic transactions, we estimate a large positive impact of reduced travel times on trade as well as local manufacturing employment and wages. A quantitative exercise using a workhorse model of spatial equilibrium implies heterogeneous effects across locations, with aggregate real income gains reaching 2-3 percent in the long-run. Reductions in travel times increased local employment-to-population ratio but had no effect on local population. We extend the model by endogenizing the labor supply decision to capture this finding. The model-implied elasticity of employment rates to travel time reductions captures about one-third of the empirical elasticity.
    Keywords: trade, market access, transportation infrastructure
    JEL: F14 R11 R41
    Date: 2021
  4. By: Edward L. Glaeser
    Abstract: Will COVID-19 end the urban renaissance that many cities have experienced since the 1980s? This essay selectively reviews the copious literature that now exists on the long-term impact of natural disasters. At this point, the long-run resilience of cities to many forms of physical destruction, including bombing, earthquakes and fires, has been well-documented. The destruction of human capital may leave a longer imprint, but cities have persisted through many plagues over the past millennia. By contrast, economic and political shocks, including deindustrialization or the loss of capital city status, can enormously harm an urban area. These facts suggest that the COVID-19 pandemic will only significantly alter urban fortunes, if it is accompanied by a major economic shift, such as widespread adoption of remote work, or political shifts that could lead businesses and the wealthy to leave urban areas. The combination of an increased ability to relocate with increased local redistribution or deterioration of local amenity levels or both could recreate some of the key attributes of the urban crisis of the 1970s.
    JEL: R11 R23 R28 R5 R53 R58
    Date: 2021–09
  5. By: Jordan J. Norris (Division of Social Science)
    Abstract: A demand-side mechanism for international trade, the Home Market Effect (HME), predicts a more-than-proportional relationship between domestic expenditure and domestic production. Yet, since its inception in the 1980s by Paul Krugman, this theoretical result has only been shown to be generally valid in two-location models. I prove that the HME is maintained in an arbitrary number of locations provided the geography of trade is home-biased: the majority of domestic sales go to domestic consumers. Intuitively, without home bias, increasing domestic expenditure can actually benefit foreign production more, thus causing domestic production to rise by less, violating the more-than-proportional relationship. This result has been overlooked until now because in standard two location models all geographies are necessarily home-biased.
    Date: 2021–09
  6. By: Jean-Marie Grether; Benjamin Tissot-Daguette
    Abstract: Using novel data on value added in Switzerland we propose to use a growth rate decomposition technique, in the spirit of shift-share analysis, to analyze the patterns of regional competitiveness over the 2011-2015 period. The growth differential of a region (or canton) depends on four terms, three structural effects and one competitive effect. The competitive effect turns out to be the dominant force at a high level of aggregation. An interesting pattern of structural effects unveils when working at a lower level of aggregation, allowing for identification of the leaders and laggers across regions and sectors.
    Keywords: firm-level, productivity, shift-share, structural and competitive effects, Switzerland.
    JEL: R11 R32
    Date: 2021–09
  7. By: Jean-Marie Grether; Benjamin Tissot-Daguette
    Abstract: We use imputation techniques and combine official data sources to address the various shortcomings affecting the analysis of value-added data at the level of production units in Switzerland. The new ad hoc databases that emerge include consistent information on value added and employment at the level of geographically localized pseudo-firms over the 2011-2015 period. Our preferred sample is obtained through multiple imputation techniques, includes 18'000 pseudo-firms per year, covers two-third of Swiss municipalities and is suitable to address productivity issues at the microeconomic level.
    Keywords: Swiss firms, value-added, multiple imputation, spatial distribution.
    JEL: R11 R32
    Date: 2021–09

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