nep-geo New Economics Papers
on Economic Geography
Issue of 2022‒01‒31
nine papers chosen by
Andreas Koch
Institut für Angewandte Wirtschaftsforschung

  1. Spatial Equilibria: The Case of Two Regions By Konstantin Kucheryavyy; Gary Lyn; Andrés Rodríguez-Clare
  2. Checkmate! Losing with Borders, Winning with Centers. The Case of European Integration By Ketevani Kapanadze
  3. Destabilization of homogeneous stationary solution of a mathematical model in new economic geography with a quadratic subutility: The effect of the number of regions By Kensuke Ohtake
  4. Latin American Integration Route and the State of Mato Grosso do Sul: productive characterization, threats, and possibilities of promotion By Boldrine Abrita, Mateus; Centuriao, Daniel; Rondina Neto, Angelo; Stradiotto, Rafaella
  5. The network effect of deglobalisation on European regions By Giammetti, Raffaele; Papi, Luca; Teobaldelli, Desiree; Ticchi, Davide
  6. Bayesian Spatial Econometrics and the Need for Software By Nikolas Kuschnig
  7. Who stays and who leaves? Immigration and the selection of natives across locations By Javier Ortega; Gregory Verdugo
  8. The effects of regional banks on economic resilience during the COVID-19 pandemic and the global financial crisis a cross-country comparison of the European countries By Flögel, Franz; Hejnová, Tereza
  9. A Golden Opportunity: The Gold Rush, Entrepreneurship and Culture By Stuetzer, Michael; Brodeur, Abel; Obschonka, Martin; Audretsch, David; Rentfrow, Peter J.; Potter, Jeff; Gosling, Samuel D.

  1. By: Konstantin Kucheryavyy; Gary Lyn; Andrés Rodríguez-Clare
    Abstract: In this paper we characterize the set of equilibria in a generalized version of the canonical two-region economic geography model that nests the class of models in Allen and Arkolakis (2014) as well as Krugman (1991). We show that the set of (regular) equilibria corresponds to the set of zeros of a function V(x), where x is the relative price of manufacturing goods produced in the two regions (adjusted by the trade elasticity). Using this approach, we provide sufficient conditions for uniqueness of equilibria that — in contrast to the well-know result in Allen and Arkolakis (2014) — allow for positive agglomeration externalities even in the absence of congestion effects, and highlight the key role played by three additional parameters: the trade elasticity, which regulates the strength of the dispersion force associated with the decline in the terms of trade caused by migration into a region; trade costs, which weaken this dispersion force by limiting trade across regions; and the importance of the agricultural sector, which pushes against agglomeration forces in manufacturing. We also discuss how asymmetries between the two regions tend to push against multiplicity.
    JEL: F10 F20 R0 R13
    Date: 2021–12
  2. By: Ketevani Kapanadze
    Abstract: This paper studies two major stages of European integration, the expansion of the European Union (EU) in 2004 and the Schengen Area in 2008, and their impacts on economic performance in subregions of Central and Eastern European (CEE) countries. Using European regional data at the NUTS3 level and disaggregated synthetic control method, I construct counterfactuals for sub-regions of CEE countries. This approach allows me to assess regional treatment effects (RTEs) and to study the heterogeneous effects of European integration. I find that the benefits of EU and Schengen memberships to annual GDP per capita are approximately 10% less in border regions, relative to interior areas. The results expose regional economic disparities, as border regions lose relative to interior regions since European integration. Furthermore, integration facilitators in border regions such as fewer geographical barriers, more service employment, and positive attitudes toward the EU did not reduce economic disparities. The results show that the gap persists, regardless of some complementarities. Thus, the main implication of this paper is that sub-regions of CEE countries are far from being fully converged, and that European integration instead seems to have spurred sub-regional divergence.
    Keywords: CEE countries; European integration; RTEs; borders; dissagregated synthetic controls;
    JEL: F15 F16 F20 R12
    Date: 2021–12
  3. By: Kensuke Ohtake
    Abstract: We extend the mathematical model proposed by Ottaviano-Tabuchi-Thisse (2002) to a multi-regional case and investigate the stability of the homogeneous stationary solution of the model in a one-dimensional periodic space. When the number of regions is two and three, the homogeneous stationary solution is stable under sufficiently high transport costs. On the other hand, when the number of regions is four, the homogeneous stationary solution is unstable under any values of the transport cost.
    Date: 2021–12
  4. By: Boldrine Abrita, Mateus; Centuriao, Daniel; Rondina Neto, Angelo; Stradiotto, Rafaella
    Abstract: The Latin American Integration Route (RILA) corresponds to the materialization of an old desire to integrate the peoples of South America. This route will connect important municipalities in Brazil, Paraguay, Argentina, and Chile. In the state of Mato Grosso do Sul (MS), it will connect important municipalities, and bring opportunities and threats. The objective of the study was to analyze the productive structure of the municipalities in Mato Grosso do Sul that will be directly affected by the RILA to better understand this process. For this purpose, we used an Exploratory Spatial Data Analysis (Spatial EDA) and the spatial Locational Quotient (sLQ) of the sectorial jobs of the municipalities of the State. The results point out a spatial inequality in productive sectors, delimiting “sectorial islands”. In the industrial sector, the northeastern regions and the surroundings of the capital, Campo Grande, stand out. The northeast region of the State also stands out in the Civil Construction sector and, together with the north-central part of the MS, in the agriculture and livestock sector. In the trade sector, the southern region of the MS stands out, with proximity to Paraguay. In the services sector, there is a relative concentration in the capital and the extreme south of the State. In conclusion, we point out the urgent need for public policies to expand opportunities and mitigate the threats of integration managed by the route.
    Keywords: Productive integration; Regional development; Public policies; Latin American Integration Route (RILA).
    JEL: R11 R12
    Date: 2021–12–14
  5. By: Giammetti, Raffaele; Papi, Luca; Teobaldelli, Desiree; Ticchi, Davide
    Abstract: This paper investigates the effects of a retreat from global economic integration on the European regional production network for the period 2000-2010. We find that production has become increasingly fragmented, although the degree of heterogeneity across regions is substantial. This heterogeneity is also present in the direct and indirect effects of three different deglobalisation scenarios that we simulate. Our results show that deglobalisation generates winners and losers. Specifically, two groups of regions emerge; regions that would benefit from a return to a less integrated world, and regions that would instead gain from a strengthening of the European production network.
    Keywords: Reshoring, Global Value Chains, production networks, input-output, regional fragmentation, supply chains interruption.
    JEL: D57 F16 F62 F66
    Date: 2021–12–16
  6. By: Nikolas Kuschnig (Department of Economics, Vienna University of Economics and Business)
    Abstract: Bayesian approaches to spatial econometric models are relatively uncommon in applied work, but play an important role in the development of new methods. This is partly due to a lack of easily accessible, flexible software for the Bayesian estimation of spatial models. Established probabilistic software struggles with computational specifics of these models, while classical implementations cannot harness the flexibility of Bayesian modelling. In this paper, I present bsreg, an object-oriented R package, that bridges this gap. The package enables quick and easy estimation of spatial econometric models and is readily extensible. Using the package, I demonstrate the merits of the Bayesian approach by means of a well-known dataset on cigarette demand. Bayesian and frequentist point estimates coincide, but posterior inference affords better insights on uncertainty. I find that in previous works with distance-based connectivities the average spillover effects were overestimated considerably, highlighting the need for tried and tested software.
    Keywords: Bayesian inference, spatial models, R package, cigarette demand
    JEL: C11 C31 C87
    Date: 2021–12
  7. By: Javier Ortega (Kingston University [London]); Gregory Verdugo (EPEE - Centre d'Etudes des Politiques Economiques - UEVE - Université d'Évry-Val-d'Essonne - Université Paris-Saclay, OFCE - Observatoire français des conjonctures économiques - Sciences Po - Sciences Po)
    Abstract: We study the impact of local immigration inflows on natives' wages using a large French administrative panel from 1976-2007. We show that local immigration inflows are followed by reallocations of blue-collar natives across commuting zones. Because these reallocations vary with the initial occupation and blue-collar location movers have wages below the blue-collar average, controlling for changes in local composition is crucial to assess how wages adjust to immigration. Immigration temporarily lowers the wages of blue-collar workers, with unskilled workers experiencing larger losses. Location movers lose more than stayers in terms of daily wages but move to locations with cheaper housing.
    Keywords: Immigration,Wages,Employment,France
    Date: 2021
  8. By: Flögel, Franz; Hejnová, Tereza
    Abstract: An economy's ability to resist adverse shocks, such as an economic recession or natural disaster, is associated with its financial system structure due to different countercyclical funding capabilities. This paper uses a novel database of bank headquarter locations in a cross-country comparison to investigate whether a decentralised geographical structure cushioned economic shocks during the COVID-19 pandemic and the global financial crisis (GFC). Findings suggest that the impacts of decentralisation differ between the two crises: while a greater spread of regional banks was associated with economic resilience during the GFC, countries with more centralised banking systems performed better in the first year of the pandemic. Future studies of pandemic recovery paths will show if regional banks have lost their ability for countercyclical funding, or if this non-financial crisis has rendered financial structure less important.
    Keywords: COVID-19 pandemic,regional banks,soft information,economic resilience
    JEL: G21 D82 O47 R58 H12
    Date: 2021
  9. By: Stuetzer, Michael (Technische Universität Ilmenau); Brodeur, Abel (University of Ottawa); Obschonka, Martin (Queensland University of Technology); Audretsch, David (Indiana University); Rentfrow, Peter J. (University of Cambridge); Potter, Jeff (Atof Inc., Cambridge); Gosling, Samuel D. (University of Texas at Austin)
    Abstract: We study the origins of entrepreneurship (culture) in the United States. For the analysis we make use of a quasi-natural experiment – the gold rush in the second part of the 19th century. We argue that the presence of gold attracted individuals with entrepreneurial personality traits. Due to a genetic founder effect and the formation of an entrepreneurship culture, we expect gold rush counties to have higher entrepreneurship rates. The analysis shows that gold rush counties indeed have higher entrepreneurship rates from 1910, when records began, until the present as well as a higher prevalence of entrepreneurial traits in the populace.
    Keywords: gold rush, entrepreneurship, culture
    JEL: L26 R12 N5 N9
    Date: 2021–11

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