nep-geo New Economics Papers
on Economic Geography
Issue of 2022‒10‒17
twenty-two papers chosen by
Andreas Koch
Institut für Angewandte Wirtschaftsforschung

  1. Unleashing Inventive Power - Solving cognitive, social and geographic distance issues with cultural proximity. By Cathrin Söllner; Dirk Fornahl
  2. Skills for Smart Specialization: Relatedness, Complexity and Evaluation of Priorities By Duygu Buyukyazici; ; ;
  3. Spatial externalities, R&D spillovers, and endogenous technological change By Spyridon Tsangaris; Anastasios Xepapadeas; Athanasios Yannacopoulos
  4. An urban-rural divide (or not?): Small firm location and the use of digital technologies By Thomä, Jörg
  5. New Region, New Chances: Does Moving Regionally for University Shape Later Job Mobility? By Felix Ehrenfried; Thomas A. Fackler; Valentin Lindlacher; Thomas Fackler; Thomas Fackler
  6. Place-Based Policies and the location of economic activity: evidence from the Italian Strategy for Inner areas By Monturano, Gianluca; Resce, Giuliano; Ventura, Marco
  7. Entrepreneurship in the long-run: Empirical evidence and historical mechanisms By Michael Fritsch; Michael Wyrwich
  8. When the rain comes, don’t stay at home! Regional innovation and trans-local investment in the aftermath of the Great Recession By Crescenzi, Riccardo; Ganau, Roberto
  9. Social Mobility in Germany By Dodin, Majed; Findeisen, Sebastian; Henkel, Lukas; Sachs, Dominik; Schüle, Paul
  10. What You See is What You Get: Local Labor Markets and Skill Acquisition By Benjamin Niswonger
  11. Price diffusion across international private commercial real estate markets By Bing Zhu; Dorinth van Dijk; Colin Lizieri
  12. Green Technologies, Environmental Policy and Regional Growth By Philip Kerner; Torben Klarl; Tobias Wendler
  13. Using Topic Modeling in Innovation Studies: The Case of a Small Innovation System under Conditions of Pandemic Related Change By Jessica Birkholz; Jutta Günther; Mariia Shkolnykova
  14. Do not neglect the periphery?! - the emergence and diffusion of radical innovations By Dirk Fornahl; Nils Grashof; Alexander Kopka
  15. Regional Employment Polarization in a Time of Crisis: The case of Interwar Britain By Ivan Luzardo-Luna
  16. Multidimensional Economic Complexity: How the Geography of Trade, Technology, and Research Explain Inclusive Green Growth By Viktor Stojkoski; Philipp Koch; C\'esar A. Hidalgo
  17. Solving the Longitude Puzzle: A Story of Clocks, Ships and Cities By Martina Miotto; Luigi Pascali
  18. Do Low-skilled Immigrants Improve Native Productivity but Worsen Local Amenities? Learning from the South Korean Experience By Hyejin Kim; Jongkwan Lee; Giovanni Peri
  19. Does Distance Matter? Proximity to Exporting Firms on Child Labour and Education Rates: Evidence from Bangladesh By Aubrey Keeler Saunders; Samuel Brazys
  20. Novel Shift-Share Instruments and Their Applications By Benjamin Ferri
  21. Testing Endogeneity of Spatial Weights Matrices in Spatial Dynamic Panel Data Models By Jieun Lee
  22. Noisy Night Lights Data: Effects on Research Findings for Developing Countries By Omoniyi Alimi; Geua Boe-Gibson; John Gibson

  1. By: Cathrin Söllner; Dirk Fornahl
    Abstract: Cognitive, social and geographic distances between collaborators impact the likelihood to succeed together. This paper argues that cultural proximity moderates this impact. While taking Boschma's (2005) proximity concept as a point of departure, the informal part of institutional distance - cultural distance - is emphasized. Culture is defined following the concept of Hofstede et al. (2010), applying it one of the first times to the regional level. Results reveal that cultural proximity has different layers, all moderating the impact of cognitive, social and geographic distances. Out of the six investigated cultural distance layers, five moderate the impact of geographic distance, another five the one of social distance and four moderate the impact of cognitive distance.
    Keywords: Research collaboration, cultural distance, proximity interactions, collaboration performance
    JEL: D91 R11 R12
    Date: 2021–05
  2. By: Duygu Buyukyazici; ; ;
    Abstract: The present study provides a framework to empirically integrate regional workplace knowledge and skills with the smart specialization concept. It evaluates the smart specialization priorities of regions with respect to skill relatedness and skill complexity measures to analyze to what extent they build on the regional skill base. It shows that leading and lagging regions strongly di↵er in their strategies. Leading regions tend to prioritize domains in which they have some experience and related capabilities while lagging regions choose domains in which they do not possess experience and capabilities.
    Keywords: skills, complexity, relatedness, smart specialization, diversification
    JEL: R11 O38 R58
    Date: 2022–09
  3. By: Spyridon Tsangaris; Anastasios Xepapadeas; Athanasios Yannacopoulos
    Abstract: We incorporate the spatial dimension into a standard expanding variety growth model based on R&D. The spatial interaction is introduced through spatial production spillovers, knowledge diffusion across space, and the capability for spatial heterogeneity. Forward-looking agents who operate in a nite continuous geographic area choose how much to innovate at each point in time and space. We study the properties of equilibrium and optimal allocations and argue that the characteristics are different from those of the non-spatial model, which alter the appropriate policy measures. We show how spatial interactions may lead regions with spatial homogeneity to differ in their growth rates and areas with spatial heterogeneity to share the same growth rates in the long run. Finally, we present numerical examples to illustrate the different dynamic outcomes and stylized facts from the US economy.
    Keywords: endogenous growth, knowledge diffusion, R&D, scale effects, spatial development, spatial production externalities
    Date: 2022–10–03
  4. By: Thomä, Jörg
    Abstract: Regarding the spatial impact of digitalization, the concern is often expressed that rural areas and the companies located there are disadvantaged by a digital divide compared to urban regions. Against this background, this paper explores the role of the urban/rural location of a small firm in the use of digital communication and information technologies (ICT). With the help of a cluster analysis approach, different modes of digitalization in the German small enterprise sector are identified. According to this, four groups of small firms can be distinguished in accordance to the maturity level concept of digital transformation: non-digital firms, digital beginners, platform-oriented firms and digital manufacturers. From a spatial perspective, it can be seen that the members of the platform-oriented group are relatively often located in urban regions, whereas the digital manufacturers are relatively often found in rural areas. These findings are interpreted as an indication that small firms at least partially consciously assign themselves to one of these digitalization modes, depending on which business model is most effective in the respective (urban or rural) business environment. By contrast, whether a small firm has not yet done anything in terms of digitalization or is only at the beginning of the digital transformation process does not significantly depend on the location of the company. The paper concludes with implications for policy and research.
    Keywords: Digitalization,Rural regions,Digital divide,Urban-rural typology,SMEs
    JEL: D22 O33 R11 R12
    Date: 2022
  5. By: Felix Ehrenfried; Thomas A. Fackler; Valentin Lindlacher; Thomas Fackler; Thomas Fackler
    Abstract: The extensive literature on university graduates’ regional mobility highlights the importance of early mobility but is primarily descriptive. We contribute the identification of the effect of mobility upon high-school graduation on subsequent mobility across labour market regions. The data permit a novel identification strategy that uses the distance to university as an instrument. To ensure comparability, we select high-school graduates from only the suburban region of a large German agglomeration in a university graduate survey. We find that early mobility leads to a sizable increase in later labour mobility, which has implications for labour market efficiency and distributional policy concerns.
    Keywords: regional mobility, job mobility, distance to university, students, spatial, instrumental variables estimation
    JEL: J61 R23 I23
    Date: 2022
  6. By: Monturano, Gianluca; Resce, Giuliano; Ventura, Marco
    Abstract: This paper investigates the effects on the economic activities location of a specific governmental place-based policy, the Italian Strategy for Inner Areas (SNAI). Taking advantage of the most recent developments in the econometrics of policy evaluation, we apply a staggered difference-in-difference estimator to evaluate the impact of the public policy in terms of number of plants at municipal level. The analysis is made possible thanks to a detailed panel dataset containing information about Italian municipalities over the years 2014-2020. The results show that the policy has produced effects since its inception, generating a significant number of extra plants in the treated municipalities over the first two years. A further key issue is whether the policy has generated spillover effects on neighbours which may (in)validate the results obtained. To answer this question we propose an empirical strategy, joining the new estimator with spatial analysis, and we find no spillover effects.
    Keywords: Rural development, Policy evaluation, Place-based policy, Event study analysis, Spillover effects
    JEL: C21 O12 O18
    Date: 2022–09–26
  7. By: Michael Fritsch (Friedrich Schiller University Jena and Halle Institute for Economic Research (IWH), Germany); Michael Wyrwich (University of Groningen, The Netherlands and Friedrich Schiller University Jena, Germany)
    Abstract: We review and discuss research on the development of regional entrepreneurship over time. A particular focus is on the long-term persistence of regional levels of entrepreneurship, its explanation, and its meaning for economic development. What is the state of empirical research in this field, and what can explain the empirical findings? How are long-term trends of entrepreneurial activity linked to regional performance in terms of employment, gross domestic product (GDP), and innovative activity? Based on our assessments we derive conclusions for theory, policy implications, and avenues for further research.
    Keywords: Entrepreneurship, self-employment, regional growth, entrepreneurial culture, historical analysis
    JEL: L26 M13 O1 O33 R11
    Date: 2022–09–16
  8. By: Crescenzi, Riccardo; Ganau, Roberto
    Abstract: Global connectivity and knowledge circulation are necessary for innovation to thrive. However, in response to external shocks, economies tend to reduce their external exposure in order to minimize risk and focus their resources on internal markets. Uncoordinated and often competitive responses to economic shocks are in sharp contrast with the need for innovative solutions for recovery. This paper explores this paradox by looking at regional innovation in the USA in the aftermath of the Great Recession. The paper compares Foreign Direct Investment (FDI) with similar domestic, inter-state investment in order to assess whether a ‘local innovation premium’ is associated with global connectivity vis-à-vis purely domestic linkages. The results show that what matters for post-crisis innovation is active internationalization in the form of outward FDI. Truly global outward connectivity matters the most: investing abroad offers the highest short-term returns vis-à-vis domestic inter-regional investments. FDI connectivity with highly innovative frontier systems offers the highest returns when innovation is needed to respond to the crisis. However, low-innovation regions can still profit (in the short-run) from connectivity with other relatively less technologically advanced regions, benefitting from stronger congruence in terms of technological capabilities. These results send a warning message on the potentially adverse consequences of current policies in most advanced economies that seek to manage foreign activities of domestic companies in attempts to foster domestic security and recovery.
    Keywords: innovation; foreign and domestic investment; Great Recession; regions; USA; 639633-MASSIVE-ERC- 2014-STG
    JEL: F21 O19 O30 O51 R12
    Date: 2022–10
  9. By: Dodin, Majed (University of Mannheim); Findeisen, Sebastian (University of Konstanz); Henkel, Lukas (European Central Bank); Sachs, Dominik (LMU Munich); Schüle, Paul (LMU Munich and ifo Institute)
    Abstract: We characterize intergenerational mobility in Germany using census data on educational attainment and parental income for 526,000 children. Our measure of educational attainment is the A-Level degree, a requirement for access to university. A 10 percentile increase in the parental income rank is associated with a 5.2 percentage point increase in the A-Level share. This parental income gradient has not changed for the birth cohorts of 1980-1996, despite a large-scale policy of expanding upper secondary education. At the regional level, there exists substantial variation in mobility estimates. Place effects, rather than sorting of households, account for most of these differences.
    Keywords: intergenerational mobility; educational attainment; local labor markets;
    JEL: I24 J62 R23
    Date: 2021–11–15
  10. By: Benjamin Niswonger
    Abstract: This paper highlights the potential for negative dynamic consequences of recent trends towards the formation of "skill-hubs". I first show evidence that skill acquisition is biased towards skills which are in demand in local labor markets. This fact along with large heterogeneity in outcomes by major and recent reductions in migration rates implies a significant potential for inefficient skill upgrading over time. To evaluate the impact of local bias in education in the context of standard models which focus on agglomeration effects, I develop a structural spatial model which includes educational investment. The model focuses on two sources of externalities: productivity through agglomeration and signaling. Both of these affect educational decisions tilting the balance of aggregate skill composition. Signaling externalities can provide a substantial wedge in the response to changes in skill demand and skill concentration with the potential for substantial welfare gains from a more equal distribution of skills.
    Date: 2022–09
  11. By: Bing Zhu; Dorinth van Dijk; Colin Lizieri
    Abstract: We explore spatio-temporal aspects of global commercial real estate price movements and consider two channels where prices may spill over between global cities: (i) through a dominant market and (ii) through “neighbouring†markets. Neighbouring, here, is defined as the degree of overlap in ownership. We document significant ripple effects from both channels in commercial real estate prices across 22 markets from 2005 to 2019. In particular, London is found to be the dominant market and price shocks significantly diffuse across other global cities in the short- to medium-run. Additionally, shocks from neighbouring markets are important in the short- to medium-run. In the long-run, macroeconomic factors play a much more critical role. The spillover effect through both channels is more predominant during the financial crisis. In fact, the dominant market channel is mostly driven by the financial crisis. By contrast, the neighbouring market channel is significant throughout the economic cycle.
    Keywords: Commercial Real Estate; Prices; Spillovers; Spatial Dependence; Global Markets
    JEL: R3 R12
    Date: 2021–11
  12. By: Philip Kerner; Torben Klarl; Tobias Wendler
    Abstract: Green technologies are at the very core of endeavors to combine economic and environmental targets to achieve sustainable growth. In this article, we aim to determine the impact of green technology development on total factor productivity of European regions. Our paper contributes to the literature on technological change and regional growth in various ways. i) Our paper is, to the best of our knowledge, the first to assess the specific role of green technologies for regional growth on a broad empirical base. ii) We advance methodologically on the pertinent literature by explicitly accounting for cross-sectional dependence in our empirical approach. iii) By providing a simple theoretical framework, we directly link our results to implications of environmental policies for capital accumulation and composition dynamics, contributing to the ongoing debate revolving around the strong version of the Porter hypothesis. Our results, based on a sample of 270 European NUTS-2 regions over 25 years, imply that general technology development is mostly associated with positive economic returns, but our data is not supportive of positive economic returns to green technologies.
    Keywords: Regional Growth, Green Technologies, Environmental Policy, Cross-Sectional Dependence
    JEL: C23 O0 O33
    Date: 2021–06
  13. By: Jessica Birkholz; Jutta Günther; Mariia Shkolnykova
    Abstract: It is a challenge to empirically investigate rapidly developing situations. An economic crisis is such a situation in which firms exit, enter, and create new business models. The current pandemic has caused a turbulent situation with hardship, but at the same time with creative potential of innovative change. It calls for empirical analyses, but firm level data based on surveys is hard to collect given the high speed of developments. An alternative data source are news articles reporting on innovation issues and assessed by text mining techniques. This is exemplified in this chapter. It shows how topic modeling can be used to scrutinize the shift of innovation topics since the beginning of the COVID-19 crisis. The results apply to a small innovation system in Germany and confirm that innovation priorities change during a crisis and that many different actors are involved.
    Keywords: Topic modeling, innovation, structural change, crisis
    JEL: O30 R11 R58
    Date: 2021–01
  14. By: Dirk Fornahl; Nils Grashof; Alexander Kopka
    Abstract: While innovations have been acknowledged as a key factor for economic growth, it appears that they are unique features of central actors. Recently, especially the outstanding opportunities arising from rather radical innovations have been highlighted. These kinds of innovations combine knowledge pieces that have not been combined before and consequently create something radically new. While the influence of firms' network position on innovativeness in general has already been investigated, it remains to be researched in the context of radical innovations. We address this research gap by empirically investigating the influence of firms' network position on the emergence and diffusion patterns of radical innovations. By analysing a unique dataset evidence is found that central firms are essential drivers of the emergence and diffusion of radical innovations. However, the results also indicate that under certain conditions (e.g. high knowledge diversity) also peripheral firms can contribute to the emergence of radical innovations.
    Keywords: Radical innovations, emergence, diffusion, core-periphery, firm-level
    JEL: O31 O33 R11
    Date: 2021–02
  15. By: Ivan Luzardo-Luna (University of Pennsylvania)
    Abstract: This article aims to identify the impact of regional employment polarization on labor frictions in a time of crisis and structural change by examining the case of interwar Britain. Using an original dataset from the regional returns of unemployment insurance administration, this article estimates the aggregate and regional Beveridge curve shifts, which allows the breakdown of labor frictions into spatial mismatching (interregional frictions) and frictions within regions (intraregional frictions). The latter were the main source of labor frictions during the interwar period, but the former significantly contributed to the mass unemployment observed in the Great Depression.
    Keywords: Unemployment, Spatial Mismatching, Beveridge Curve, Great Depression
    JEL: N12 J60 R11
    Date: 2022–09–26
  16. By: Viktor Stojkoski; Philipp Koch; C\'esar A. Hidalgo
    Abstract: To achieve inclusive green growth, countries need to consider a multiplicity of economic, social, and environmental factors. These are often captured by metrics of economic complexity derived from the geography of trade, thus missing key information on innovative activities. To bridge this gap, we combine trade data with data on patent applications and research publications to build models that significantly and robustly improve the ability of economic complexity metrics to explain international variations in inclusive green growth. We show that measures of complexity built on trade and patent data combine to explain future economic growth and income inequality and that countries that score high in all three metrics tend to exhibit lower emission intensities. These findings illustrate how the geography of trade, technology, and research combine to explain inclusive green growth.
    Date: 2022–09
  17. By: Martina Miotto; Luigi Pascali
    Abstract: In the 19th century, the process of European expansion led to unprecedented changes in the urban landscape outside of Europe, with the urban population moving towards the coast and tripling in size. We argue that the majority of these changes can be explained by a single innovation, the chronometer, which allowed European explorers and merchants to measure longitude at sea. We use high-resolution global data on climate, ship routes, and demography from 1750 to 1900 to investigate empirically (i) the role of the adoption of the marine chronometer in re-routing trans-oceanic navigation, and (ii) the impact of these changes on the distribution of cities and population across the globe. Our identification relies on the differential impact of the chronometer across trans-oceanic sailing routes.
    Keywords: longitude, chronometer, gravity, globalization, trade, development
    JEL: F1 F15 F43 R12 R4
    Date: 2022–03
  18. By: Hyejin Kim; Jongkwan Lee; Giovanni Peri
    Abstract: In this study, we first evaluate the effect of a significant increase in low-skilled immigration in Korean municipalities from 2010-2015 on the internal migration of natives. Using Korean survey data we are able to distinguish between natives moving for work-related and non-work-related reasons. Using a change in immigration policy and the pre-existing networks of immigrants to construct an instrument for immigration across Korean municipalities, we find that locations experiencing significant low-skilled immigration attracted natives who moved for working purposes. However, these locations saw outflows of natives that moved for non-work-related reasons, such as due to housing and local amenities. We then estimate that immigration had positive effects on local firm creation and on native wages but reduced the quality of local amenities. It had small to no impact on local housing prices. These facts together suggest that immigration attracted natives who value labor income over local amenities but pushed out those who place a higher value on local amenities. Thus, immigration, while generating little net native migration, changed the composition of natives in Korean municipalities.
    JEL: J21 J61 R12 R31
    Date: 2022–09
  19. By: Aubrey Keeler Saunders; Samuel Brazys (University College Dublin School of Politics and International Relations, and Geary Institute for Public Policy)
    Abstract: Child labour continues to be a major concern in developing countries. One of the main issues with child labour is that it interferes with a child’s right to education as the majority of child labourersâ do not attend school due to employment. In this study, we consider the issue in Bangladesh where education rates have recently stagnated despite economic growth, which typically leads to an increase of education rates. The Bangladeshi economy is driven by its export sector, which relies on low-cost labour and it is plausible that children are not attending school in order to work. To test the claim, we combine novel spatial data on the locations over 11,000 exporting firms with over 95,000 similarly geo-located child survey responses from three waves of the Bangladesh Household Income and Expenditure Survey. Using matching techniques, we show that, when controlling for external factors, such as household income, students living closer to an exporting firm are more likely to report work and less likely to report attending school, providing evidence to suggest that the exporting sector may be influencing macro trends in Bangladesh school attendance.
    Keywords: Child Labour; Education; Bangladesh; Export; Spatial
    JEL: I24 I25 R23
    Date: 2022–09–27
  20. By: Benjamin Ferri (Boston College)
    Abstract: Shift-Share (Bartik) instruments are among the most important tools for causal identification in economics. In this paper, I crystallize main ideas underlying Shift-Share instruments - their core structure, distinctive claim to validity as instruments, history, uses, and wealth of varieties. I argue that the essence of the Shift-Share approach is to decompose the endogenous explanatory variable into an accounting identity with multiple component parts; preserve that which is most exogenous in the accounting identity, and neutralize that which is most endogenous. Following this framework, I show clearly how several variants in the literature are related. I then develop formulas for several new variants. Particularly, I show how to develop Shift-Share instruments for distribution summaries beyond the mean - the variance, skew, absolute deviation around a central point, and Gini coefficient. As an empirical application that highlights the themes of the paper, I measure the effect of earnings inequality on rates of single parenting in the U.S., comparing results using each of various alternative instruments for the Gini coefficient.
    Keywords: shift-share, bartik, instrumental variables, panel data, labor demand and supply, earnings inequality, single parenting
    JEL: C23 C26 D31 J20 R12 R23
    Date: 2022–09–27
  21. By: Jieun Lee
    Abstract: I propose Robust Rao's Score (RS) test statistic to determine endogeneity of spatial weights matrices in a spatial dynamic panel data (SDPD) model (Qu, Lee, and Yu, 2017). I firstly introduce the bias-corrected score function since the score function is not centered around zero due to the two-way fixed effects. I further adjust score functions to rectify the over-rejection of the null hypothesis under a presence of local misspecification in contemporaneous dependence over space, dependence over time, or spatial time dependence. I then derive the explicit forms of our test statistic. A Monte Carlo simulation supports the analytics and shows nice finite sample properties. Finally, an empirical illustration is provided using data from Penn World Table version 6.1.
    Date: 2022–09
  22. By: Omoniyi Alimi (University of Waikato); Geua Boe-Gibson (University of Waikato); John Gibson (University of Waikato)
    Abstract: Night lights data are increasingly used by economists, especially for developing country research. Many of these countries have limited capacity to generate timely and accurate sub-national statistics on economic activity so satellite data seem attractive. Most studies have used Defense Meteorological Satellite Program (DMSP) data that are flawed by blurring, lack of calibration, and top- and bottom-coding. These noisy data are only weakly related to traditional economic activity measures for lower levels spatial units. More accurate data from VIIRS (the Visible Infrared Imaging Radiometer Suite) are available since 2012 but are rarely used by economists. This paper examines how recent published findings for developing countries based on DMSP data for very small spatial units change when the more accurate VIIRS night lights data are used. Our first example finds that economic activity is far more concentrated in low-lying, flood-prone, urban areas than is apparent with the DMSP data. Our second example shows that urbanization, as proxied by night lights, is not ceteris paribus associated with better child nutritional outcomes in Nigeria, contrary to claims in a study using DMSP data. In both examples, spatially mean-reverting errors in the DMSP data cause econometric bias that distorts policy implications.
    Keywords: Anthropometrics; DMSP; flooding; night lights; satellite data; VIIRS
    JEL: C80 O12 Q54
    Date: 2022–09–30

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