nep-geo New Economics Papers
on Economic Geography
Issue of 2021‒11‒29
seven papers chosen by
Andreas Koch
Institut für Angewandte Wirtschaftsforschung

  1. On the Persistence of the China Shock By Autor, David; Dorn, David; Hanson, Gordon H.
  2. The Geography of Job Creation and Job Destruction By Kuhn, Moritz; Manovskii, Iourii; Qiu, Xincheng
  3. Can labor market institutions mitigate the China syndrome? Evidence from regional labor markets in Europe By Jan-Luca Hennig
  4. Manhattan Transfer: Productivity effects of agglomeration in American authorship By Lukas Kuld; Sara Mitchell; Christiane Hellmanzik
  5. Winner Takes All? Tech Clusters, Population Centers, and the Spatial Transformation of U.S. Invention By Brad Chattergoon; William R. Kerr
  6. Keeping regional inequality in check in Sweden By Christophe André; Jinwoan Beom; Mathilde Pak; Axel Purwin
  7. Agglomerationsvorteile und kommunales Steueraufkommen By Bergholz, Christian; Hundt, Christian; Osigus, Torsten

  1. By: Autor, David (MIT); Dorn, David (University of Zurich); Hanson, Gordon H. (University of California, San Diego)
    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.
    Keywords: import competition, China trade, local labor markets, manufacturing decline, job loss
    JEL: E24 F14 F16 J23 J31 L60 O47 R12 R23
    Date: 2021–10
  2. By: Kuhn, Moritz (University of Bonn); Manovskii, Iourii (University of Pennsylvania); Qiu, Xincheng (University of Pennsylvania)
    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.
    Keywords: local labor markets, unemployment, vacancies, search and matching
    JEL: J63 J64 E24 E32 R13
    Date: 2021–10
  3. By: Jan-Luca Hennig (Trinity College Dublin)
    Abstract: A large literature has shown that trade shocks, such as the rise of China in the global markets, have had negative effects on employment in manufacturing both in the United States and in Europe. This paper analyzes how trade shocks interact with labor market regulations. More specifically, it investigates whether differences in labor market frictions mitigate or amplify the labor market effects of Chinese imports on European regions between 1997 and 2006. To do so, the paper constructs measures of regional exposure to China based on previous literature and on regional labor market frictions exploiting involuntary labor reallocations. The paper finds that regions more exposed to the rise of China have suffered from a reduction in manufacturing employment shares. This shock grows larger with regional labor market friction, hence it exacerbates the impact of trade shock on employment. Moreover, the paper finds that employment in public services, and not in construction or private services sector, absorbed the negative shock to the manufacturing sector. The unemployment rate, the labor force participation rate, and wages in all sectors are unresponsive to import competition from China.
    Keywords: Empirical Trade, Regional Labor Markets, Employment Structure, Labor Reallocation
    JEL: F14 F16 J21 R23
    Date: 2020–08
  4. By: Lukas Kuld (Department of Business and Economics, TU Dortmund); Sara Mitchell (Department of Business and Economics, TU Dortmund); Christiane Hellmanzik (Department of Business and Economics, TU Dortmund)
    Abstract: We investigate quantity and quality effects of agglomeration in the careers of American authors. We combine novel yearly data on publications and work location of 471 eminent authors with US Census data to provide a complete picture of industry concentration and agglomeration economies from 1850-2000. We find that, on aggregate, an author has 40\% higher odds of publishing while living in New York City. The effect size increases with industry concentration but declines with industry maturity and technological progress after WWII. Taking relocation of working-age authors to New York City as an event study, we see a significant immediate increase in publications after arriving. In comparison, the penalty of moving away from the city is mild. Works published while an author lived in New York City were more likely to achieve critical acclaim and are more likely to have lasting influence in terms of present-day popularity.
    Keywords: Agglomeration economies, urban history, geographic clustering, productivity, literature, creativity
    JEL: N30 N90 R11 Z11
    Date: 2021–07
  5. By: Brad Chattergoon; William R. Kerr
    Abstract: U.S. invention has become increasingly concentrated around major tech centers since the 1970s, with implications for how much cities across the country share in concomitant local benefits. Is invention becoming a winner-takes-all race? We explore the rising spatial concentration of patents and identify an underlying stability in their distribution. Software patents have exploded to account for about half of patents today, and these patents are highly concentrated in tech centers. Tech centers also account for a growing share of non-software patents, but the reallocation, by contrast, is entirely from the five largest population centers in 1980. Non-software patenting is stable for most cities, with anchor tenants like universities playing important roles, suggesting the growing concentration of invention may be nearing its end. Immigrant inventors and new businesses aided in the spatial transformation.
    JEL: L86 O30 O31 O32 O33 O34 R11 R12
    Date: 2021–11
  6. By: Christophe André; Jinwoan Beom; Mathilde Pak; Axel Purwin
    Abstract: Regional inequality is low in Sweden compared to most other OECD countries, but has been rising over the past decades, fuelling discontent in parts of the country, whose inhabitants feel left behind. The younger population is increasingly concentrated in the largest cities, which also enjoy the highest productivity growth. Demographic trends exacerbate the difficulty in providing equal public services across the country. Healthy public finances are allowing the government to increase its support to municipalities and regions to adjust to demographic developments and local operating conditions. Beyond this effort, keeping regional inequality in check will require upgrading the sub-national government fiscal framework, enhancing public service efficiency, especially through digitalisation, and promoting regional convergence further, especially by strengthening the role of universities in regional knowledge and innovation networks.
    Keywords: Regional economic activity, Regional government analysis, Regional inequality, Regional Studies, State and local budget and expenditures, State and local taxation, subsidies, and revenue, Sweden
    JEL: H71 H72 P48 R11 R50
    Date: 2021–11–19
  7. By: Bergholz, Christian; Hundt, Christian; Osigus, Torsten
    Abstract: Using the example of German districts and independent cities (kreisfreie Städte), we find that latter generate higher gross domestic product (GDP) per inhabitant as well as larger tax revenues per inhabitant. Accordingly, independent cities generate a GDP of €50,854 per inhabitant and record tax revenues of €1,739 per inhabitant, while in municipalities belonging to districts the GDP is €32,029 per inhabitant and tax revenues per inhabitant are €1,283. In order to analyze the positive correlation between GDP and tax revenues, we look in particular at the role of (net) agglomeration economies. Furthermore, we argue that agglomeration economies increase local governments´ tax revenues per inhabitant through two distinct channels. First, agglomeration economies lead to rising local value added that again ends up in a greater local tax base and in greater local tax revenues (indirect channel). Second, local governments can directly tax local agglomeration economies by increasing their tax multipliers (direct channel). Looking at total tax revenues, our empirical results suggest that the indirect channel is quantitatively more important than the direct channel. However, the extent to which both channels come into play varies considerably across the examined types of tax revenues. While the direct channel is most important for non-agricultural/non-forestry land property tax, the indirect channel plays a more important role for the three business-related taxes. Property tax for agricultural and forestry land shows a high negative effect, especially in the case of the direct channel. The reason for this is that there are no agglomeration-related rents for agricultural and forestry land that can be taxed. Finally, we can show that the business-related tax revenues (business tax, income tax, value added tax) per inhabitant are systematically lower in Eastern Germany than in Western Germany, which is mainly due to the lower average GDP per inhabitant of Eastern German districts and independent cities.
    Keywords: Public Economics
    Date: 2021–11–19

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