nep-geo New Economics Papers
on Economic Geography
Issue of 2021‒11‒01
eight papers chosen by
Andreas Koch
Institut für Angewandte Wirtschaftsforschung

  1. Agglomeration and the Italian North-South divide By Luigi Buzzacchi; Antonio De Marco; Marcello Pagnini
  2. On the Persistence of the China Shock By David Autor; David Dorn; Gordon H. Hanson
  3. Local Public Goods and the Spatial Distribution of Economic Activity By Arthur Guillouzouic--Le Corff; Emeric Henry; Joan Monras
  4. The Geography of Job Creation and Job Destruction By Moritz Kuhn; Iourii Manovskii; Xincheng Qiu
  5. Innovation in Malmö after the Öresund Bridge By Olof Ejermo; Katrin Hussinger; Basheer Kalash; Torben Schubert
  6. Who Lives Where in the City? Amenities, Commuting and Income Sorting By Fabien Moizeau; Carl Gaigné; Hans Koster; Jacques-François Thisse
  7. Control theory in infinite dimension for the optimal location of economic activity: The role of social welfare function By Raouf Boucekkine; Giorgio Fabbri; Salvatore Federico; Fausto Gozzi
  8. Persistence, Randomization, and Spatial Noise By Morgan Kelly

  1. By: Luigi Buzzacchi (Politecnico di Torino); Antonio De Marco (Politecnico di Torino); Marcello Pagnini (Bank of Italy)
    Abstract: This paper offers novel evidence on agglomeration economies by examining the link between total factor productivity (TFP) and employment density in Italy. TFP is estimated for a large sample of manufacturing firms and then aggregated at the level of Local Labor Market Areas (LLMAs). We tackle the endogeneity issues stemming from the presence of omitted covariates and reverse causation with an instrumental variable (IV) approach that relies on his-torical and geological data. Our estimate of the TFP elasticity with respect to the spatial con-centration of economic activities is about 6%, a magnitude comparable to that measured for other developed countries. We find that the TFP-density nexus contributes to explaining a large share of the substantial productivity gap between the northern and southern regions of Italy. We also show that no significant heterogeneity emerges in the intensity of agglomera-tion economies across the country and that the positive TFP difference in favor of the firms located in the North is not due to the tougher competition taking place in those areas.
    Keywords: agglomeration economies, density, total factor productivity, regional disparities, selection effects
    JEL: R12 R23
    Date: 2021–10
  2. By: David Autor; David Dorn; Gordon H. Hanson
    Abstract: Abstract We evaluate the duration of the China trade shock and its impact on a wide range of outcomes over the period 2000 to 2019. The shock plateaued in 2010, enabling analysis of its effects for nearly a decade past its culmination. Adverse impacts of import competition on manufacturing employment, overall employment-population ratios, and income per capita in more trade-exposed U.S. commuting zones are present out to 2019. Over the full study period, greater import competition implies a reduction in the manufacturing employment-population ratio of 1.54 percentage points, which is 55% of the observed change in the value, and the absorption of 86% of this net job loss via a corresponding decrease in the overall employment rate. Reductions in population headcounts, which indicate net out-migration, register only for foreign-born workers and the native-born 25-39 years old, implying that exit from work is a primary means of adjustment to trade-induced contractions in labor demand. More negatively affected regions see modest increases in the uptake of government transfers, but these transfers primarily take the form of Social Security and Medicare benefits. Adverse outcomes are more acute in regions that initially had fewer college-educated workers and were more industrially specialized. Impacts are qualitatively—but not quantitatively—similar to those caused by the decline of employment in coal production since the 1980s, indicating that the China trade shock holds lessons for other episodes of localized job loss. Import competition from China induced changes in income per capita across local labor markets that are much larger than the spatial heterogeneity of income effects predicted by standard quantitative trade models. Even using higher-end estimates of the consumer benefits of rising trade with China, a substantial fraction of commuting zones appears to have suffered absolute declines in average real incomes.
    JEL: E24 F16 J23 J31 R12 R23
    Date: 2021–10
  3. By: Arthur Guillouzouic--Le Corff; Emeric Henry (ECON - Département d'économie (Sciences Po) - Sciences Po - Sciences Po - CNRS - Centre National de la Recherche Scientifique, CEPR - Center for Economic Policy Research - CEPR); Joan Monras (ECON - Département d'économie (Sciences Po) - Sciences Po - Sciences Po - CNRS - Centre National de la Recherche Scientifique, UPF - Universitat Pompeu Fabra [Barcelona])
    Abstract: Using French data, we provide: a) causal evidence that a drop in local public goods provision decreases private sector activity, and b) evidence consistent with monopsony power of the public sector in local labor markets. We introduce a public sector with these two key characteristics in an otherwise standard spatial equilibrium model, and show that it delivers the main stylized facts established in our data, in particular, that the share of the public sector relative to the private is independent of the productivity of the city. We emphasize the tradeoffs between allowing governments to freely choose local public employment and wages (as in most of the US public sector), versus imposing rules that constrain public sector pay with some indexation to the local cost of living (as in many European countries). We show that wage indexation limits monopsony power – leading to a larger public sector – and is optimal if the indexation is sufficiently strong.
    Keywords: Local public goods,Public service,Market power,Spatial economics
    Date: 2021–06–01
  4. By: Moritz Kuhn; Iourii Manovskii; Xincheng Qiu
    Abstract: Spatial differences in labor market performance are large and highly persistent. Using data from the United States, Germany, and the United Kingdom, we document striking similarities in spatial differences in unemployment, vacancies, job finding, and job filling within each country. This robust set of facts guides and disciplines the development of a theory of local labor market performance. We find that a spatial version of a Diamond-Mortensen-Pissarides model with endogenous separations and on-the-job search quantitatively accounts for all the documented empirical regularities. The model also quantitatively rationalizes why differences in job-separation rates have primary importance in inducing differences in unemployment across space while changes in the job-finding rate are the main driver in unemployment fluctuations over the business cycle.
    JEL: E24 E32 J63 J64 R13
    Date: 2021–10
  5. By: Olof Ejermo; Katrin Hussinger (Dep. of Economics and Business Administration - Maastricht University [Maastricht]); Basheer Kalash; Torben Schubert (Fraunhofer ISI - Fraunhofer Institute for Systems and Innovation Research - Fraunhofer-Gesellschaft - Fraunhofer)
    Abstract: We analyze the effect of the Öresund Bridge, a combined railway and motorway bridge between Swedish Malmö and the Danish capital Copenhagen, on inventive activity in the region of Malmö. Applying difference-in-difference estimation on individual-level data, our findings suggest that the Öresund Bridge led to a significant increase in the number of patents per individual in the Malmö region as compared to the two other major regions in Sweden, Gothenburg and Stockholm. We show that a key mechanism is the attraction of highly qualified workers to the Malmö region following the construction of the bridge.
    Keywords: Transportation infrastructure,innovation,Öresund Bridge,cross-border regions,patents,inventors,agglomeration effects
    Date: 2021–01–01
  6. By: Fabien Moizeau (CREM - Centre de recherche en économie et management - UNICAEN - Université de Caen Normandie - NU - Normandie Université - UR1 - Université de Rennes 1 - UNIV-RENNES - Université de Rennes - CNRS - Centre National de la Recherche Scientifique, TEPP - Travail, Emploi et Politiques Publiques - UPEM - Université Paris-Est Marne-la-Vallée - CNRS - Centre National de la Recherche Scientifique); Carl Gaigné (CREATE - ULaval - Université Laval [Québec]); Hans Koster (HSE - Higher School of Economics [Perm] - MAI - National research university, CEPR - Center for Economic Policy Research - CEPR); Jacques-François Thisse (HSE - Higher School of Economics [Perm] - MAI - National research university, CEPR - Center for Economic Policy Research - CEPR)
    Abstract: We develop a new model of a "featureful" city in which locations are di¤erentiated by two attributes, that is, the distance to employment centers and the accessibility to given amenities. The residential equilibrium involves the spatial separation of households sharing similar incomes. Under Stone-Geary preferences, amenities and commuting are subsumed into a location-quality index. Hence, the assignment of households to locations becomes one-dimensional. Since residential choices are driven by the location-quality index, the income mapping may be fully characterized. Using a rich micro-dataset on the Netherlands, we show that household income sorting is indeed driven by amenities and commuting times.
    Keywords: cities,Social stratification and inequality,income,amenities,Commuting costs
    Date: 2021
  7. By: Raouf Boucekkine (AMSE - Aix-Marseille Sciences Economiques - EHESS - École des hautes études en sciences sociales - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique - AMU - Aix Marseille Université, IMéRA - Institute for Advanced Studies - Aix-Marseille University); Giorgio Fabbri (GAEL - Laboratoire d'Economie Appliquée de Grenoble - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement - Grenoble INP - Institut polytechnique de Grenoble - Grenoble Institute of Technology - UGA - Université Grenoble Alpes - CNRS - Centre National de la Recherche Scientifique - UGA - Université Grenoble Alpes); Salvatore Federico (DEPS - Dipartimento di Economia Politica e Statistica - UNISI - Università degli Studi di Siena = University of Siena); Fausto Gozzi (LUISS - Libera Università Internazionale degli Studi Sociali Guido Carli [Roma])
    Abstract: In this paper, we consider an abstract optimal control problem with state constraint. The methodology relies on the employment of the classical dynamic programming tool considered in the infinite dimensional context. We are able to identify a closed-form solution to the induced Hamilton-Jacobi-Bellman (HJB) equation in infinite dimension and to prove a verification theorem, also providing the optimal control in closed loop form. The abstract problem can be seen an abstract formulation of a PDE optimal control problem and is motivated by an economic application in the context of continuous spatiotemporal growth models with capital di usion, where a social planner chooses the optimal location of economic activity across space by maximization of an utilitarian social welfare function. From the economic point of view, we generalize previous works by considering a continuum of social welfare functions ranging from Benthamite to Millian functions. We prove that the Benthamite case is the unique case for which the optimal stationary detrended consumption spatial distribution is uniform. Interestingly enough, we also find that as the social welfare function gets closer to the Millian case, the optimal spatiotemporal dynamics amplify the typical neoclassical dilution population size effect, even in the long-run.
    Date: 2021
  8. By: Morgan Kelly
    Abstract: Historical persistence studies and other regressions using spatial data commonly have severely inflated t statistics, and different standard error adjustments to correct for this return markedly different estimates. This paper proposes a simple randomization inference procedure where the significance level of an explanatory variable is measured by its ability to outperform synthetic noise with the same estimated spatial structure. Spatial noise, in other words, acts as a treatment randomization in an artificial experiment based on correlated observational data. Combined with Müller and Watson (2021), randomization gives a way to estimate credible confidence intervals for spatial regressions. The performance of twenty persistence studies relative to spatial noise is examined.
    Keywords: Historical persistence; Spatial data; Randomization inference; Spatial noise
    JEL: N0
    Date: 2021–10

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