nep-geo New Economics Papers
on Economic Geography
Issue of 2022‒01‒03
seven papers chosen by
Andreas Koch
Institut für Angewandte Wirtschaftsforschung

  1. The importance of global value chains and regional capabilities for the economic complexity of EU-regions By F. Colozza; R. Boschma; A. Morrison; C. Pietrobelli
  2. Forecasting Regional GDPs: a Comparison with Spatial Dynamic Panel Data Models By Anna Gloria Billé; Alessio Tomelleri; Francesco Ravazzolo
  3. Wage Rigidities in a Quantitative Spatial Economy: Commuting and Local Unemployment By Nathan Lachapelle; Francesco Pascucci
  4. The creation and diffusion of knowledge: Evidence from the Jet Age By Pauly, Stefan; Stipanicic, Fernando
  5. System-level agency and its many shades: How to shape the system for path development? By Maximilian Benner
  6. Revisiting path-as-process: A railroad track model of path development, transformation, and agency By Maximilian Benner
  7. A Dynamic Theory Of Spatial Externalities By Raouf Boucekkine; Giorgio Fabbri; Salvatore Federico; Fausto Gozzi

  1. By: F. Colozza; R. Boschma; A. Morrison; C. Pietrobelli
    Abstract: This paper combines various literatures on Global Value Chains (GVC), Economic Complexity and Evolutionary Economic Geography. The objective is to assess the role of regional capabilities and GVC participation in fostering economic complexity in 236 NUTS2-regions in Europe. Our results suggest there is no such thing as a common path of economic upgrading across EU regions. Regions with high economic complexity tend to keep their advantageous positions, as they are capable of benefitting from both regional capabilities (as proxied by a high relatedness between local activities) and external linkages in terms of GVC participation. Conversely, low-complex regions do not benefit from GVC participation, unless their regional capabilities (in terms of relatedness density) are also stronger.
    Keywords: Economic Complexity, Evolutionary Economic Geography, Global Value Chains, Relatedness, Economic Upgrading, EU regions
    JEL: B52 F23 O19 O33 R10
    Date: 2021–12
  2. By: Anna Gloria Billé; Alessio Tomelleri; Francesco Ravazzolo
    Abstract: The monitoring of the regional (provincial) economic situation is of particular importance due to the high level of heterogeneity and interdependences among different territories. Although econometric models allow for spatial and serial correlation of various kinds, the limited availability of territorial data restricts the set of relevant predictors at a more disaggregated level, especially for GDPs. This paper evaluates the predictive performance of a spatial dynamic panel data model with individual fixed effects and some relevant exogenous regressors by using data on total GVA for 103 Italian provinces (NUTS-3 level) over the period 2000-2016. A comparison with nested panel sub-specifications as well as pure temporal autoregressive specifications has also been included. The main finding is that the spatial dynamic specification increases forecast accuracy more than its competitors throughout the out-of-sample, recognizing an important role played by both space and time. However, when temporal cointegration is detected, the random walk specification is still to be preferred in some cases even in the presence of short panels.
    Keywords: Prediction,, Spatial Correlation, Panel Data, Regional GVA forecasting
    JEL: C33 C52 C53 E37 R11
    Date: 2021–12
  3. By: Nathan Lachapelle (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES)); Francesco Pascucci (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES))
    Abstract: In this paper we build a quantitative spatial general equilibrium model to study the geographical variation in unemployment rates in the presence of wage rigidities and when workers are allowed to commute from residence to workplace. Calibrating the model on Belgian district data, we find that, were workers' location choice driven only by preferences for amenities, workers would relocate away from the center of the country, generating a less concentrated spatial distribution of economic activity. We also explore the role of unemployment insurance in determining the location choices of workers. We find that when the risk of unemployment is fully insured, workers relocate to districts with initially high unemployment rates, therefore accentuating the spatial misallocation of labor. Removing unemployment insurance would instead not generate significant changes in the spatial distribution of workers. To gauge the magnitude of wage distortions, we compare the observed gross wage levels with the counterfactual market-clearing wages. Removing wage rigidities would generate significant gains in local and total GDP (+3%) and modest gains in the average real net labor income per resident (+1%). Lastly, we determine the level of the employers' social contribution rate that would allow to achieve full employment in all districts. We find that the optimal social contribution rate should be 24%, 12 percentage points lower than the observed rate, while at the same time it would increase fiscal revenue by 1.5%.
    Keywords: wage regulation, spatial equilibrium, labor mobility, commuting, local unemployment.
    JEL: J3 J5 J61 R12 R23
    Date: 2021–12–09
  4. By: Pauly, Stefan; Stipanicic, Fernando
    Abstract: This paper provides new causal evidence of the impact of improvements in air travel during the beginning of the Jet Age on the creation and diffusion of knowledge. We digitize airlines’ historical flight schedules and construct a novel data set of the flight network in the United States. Between 1951 and 1966, travel time between locations more than 2,000km apart decreased on average by 41%. The reduction in travel time explains 33% of the increase in knowledge diffusion as measured by patent citations. The increase in knowledge diffusion further caused an increase in the creation of new knowledge. The results provide evidence that jet airplanes led to innovation convergence across locations and contributed to the shift in innovation activity towards the South and the West of the United States.
    Keywords: O31, O33, R41, N72
    Date: 2021–11
  5. By: Maximilian Benner
    Abstract: Agency has become one of the critical themes in path development and several typologies of agency have been proposed. The notion of system-level agency has attracted particular attention. However, existing typologies of agency suffer from conceptual limitations and the many shades of system-level agency in the system of path development remain largely unclear. This article discusses the limitations of existing typologies of agency in path development, clarifies the notion of the system and its functions, and proposes a multidimensional framework that brings together the multiple shades of how agents shape paths along various angles, system functions, and a multiscalar perspective.
    Keywords: evolutionary economic geography, agency, institutions, path development, regional development
    Date: 2021
  6. By: Maximilian Benner
    Abstract: In the path development literature, the path-as-process perspective conceptualizes the emergence, evolution, transformation, and decline of regional industries in the long term. However, critical questions about the role of agency in and between episodes of path development and transformation remain open. This article argues that we should see path development as a long-term sequence that includes stretches of path development interrupted by occasional switches of transformation that are driven by changing patterns of agency. This railroad track model focuses attention on how and why the mix of agency changes at critical junctures between path development episodes.
    Keywords: evolutionary economic geography, path development, path transformation, agency, tourism, Israel
    Date: 2021
  7. By: Raouf Boucekkine (Rennes School of Business); Giorgio Fabbri (Univ. Grenoble Alpes, CNRS, INRA, Grenoble INP, GAEL, 38000 Grenoble, France.); Salvatore Federico (Università degli Studi di Genova, Dipartimento di Economia.); Fausto Gozzi (Dipartimento di Economia e Finanza, LUISS Guido Carli, Roma.)
    Abstract: This work targets the class of spatiotemporal problems with free riding under natural (pollution, epidemics...etc) diffusion and spatial externalities. Such a class brings to study a family of differential games in continuous time and space. In the fundamental pollution free riding problem we develop a strategy to solve completely the associated game contributing to the associated debate on environmental federalism. We depart from the preexisting literature in several respects. First, instead of assuming ad hoc pollution diffusion schemes across space, we consider a realistic spatiotemporal law of motion for pollution (diffusion and advection). Second, we tackle spatiotemporal non-cooperative (and cooperative) differential games instead of static games in the related literature. Precisely, we consider a circle partitioned into several states where a local authority decides autonomously about its investment, production and depollution strategies over time knowing that investment/production generates pollution, and pollution is transboundary. The time horizon is infinite. Third, we allow for a rich set of geographic heterogeneities across states while the literature assumes identical states. We solve analytically the induced non-cooperative differential game under decentralization and fully characterize the resulting long-term spatial distributions. In particular, we prove that there exist a Perfect Markov Equilibrium, unique among the class of the a‑ne feedbacks. We further provide with full exploration of the free riding problem, reflected in the so-called border effects. Finally, we explore how geographic discrepancies (the most elementary being the asymmetry of players) affect the shape of the border effects. We check in particular that our model is consistent with the set of stylized facts put forward by the related empirical literature.
    Keywords: Spatial externalities, spatial diffusion, differential games in continuous time and space, infinite dimensional optimal control problems, environmental federalism
    JEL: Q53 R12 O13 C72 C61 O44
    Date: 2021–11–18

This nep-geo issue is ©2022 by Andreas Koch. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.