nep-geo New Economics Papers
on Economic Geography
Issue of 2022‒11‒28
nine papers chosen by
Andreas Koch
Institut für Angewandte Wirtschaftsforschung

  1. The Impact of the Spatial Population Distribution on Economic Growth: Evidence from the United States By Constantin Bürgi; Nisan Gorgulu
  2. Supply and Demand in Space By Treb Allen; Costas Arkolakis
  3. Firm Sorting and Spatial Inequality By Ilse Lindenlaub; Ryungha Oh; Michael Peters
  4. Saved by the news? COVID–19 in German news and its relationship with regional mobility behavior By Burcu Ozgun; Tom Broekel; ;
  5. Confounded Local Inference: Extending Local Moran Statistics to Handle Confounding By Wolf, Levi John
  6. Mechanics of Spatial Growth By Sheng Cai; Lorenzo Caliendo; Fernando Parro; Wei Xiang
  7. Distributional Effects of Local Minimum Wages: A Spatial Job Search Approach By Petra E. Todd; Weilong Zhang
  8. Unfunded mandates and the economic impact of decentralisation. When finance does not follow function By Andres Rodriguez-Pose; Miquel Vidal-Bover; ;
  9. Intergenerational Mobility in the Land of Inequality By Diogo G. C. Britto; Alexandre Fonseca; Paolo Pinotti; Breno Sampaio; Lucas Warwar

  1. By: Constantin Bürgi; Nisan Gorgulu
    Abstract: We look at a part of the spatial angle of economic growth. We introduce a new measure Spatial Population Concentration (SPC) that captures the weighted average population surrounding every person within a geographic area. The weights are a function of the distance between the person in question and everyone else. One special case of the SPC would be to measure how many people live on average within a given radius of every person within a geographic area. We then calculate the SPC measure at the US county level for various radii and identify that the measure has the strongest relationship with subsequent economic growth for a 25km radius. Interacting SPC with various infrastructure measures increases the radius to 50km. This suggests that regional policies which affect density as infrastructure projects should target the 25-50km distance range to maximize the growth impact.
    Keywords: spatial population concentration, endogeneous growth, spillover, the United States
    JEL: O47 O51 R12
    Date: 2022
  2. By: Treb Allen; Costas Arkolakis
    Abstract: What do recent advances in economic geography teach us about the spatial distribution of economic activity? We show that the equilibrium distribution of economic activity can be determined simply by the intersection of labor supply and demand curves. We discuss how to estimate these curves and highlight the importance of global geography – i.e. the connections between locations through the trading network – in determining how various policy relevant changes to geography shape the spatial economy.
    JEL: F1 R0
    Date: 2022–10
  3. By: Ilse Lindenlaub; Ryungha Oh; Michael Peters
    Abstract: We study the importance of firm sorting for spatial inequality. If productive locations are able to attract the most productive firms, then firm sorting acts as an amplifier of spatial inequality. We develop a novel model of spatial firm sorting, in which heterogeneous firms first choose a location and then hire workers in a frictional local labor market. Firms' location choices are guided by a fundamental trade-off: Operating in productive locations increases output per worker, but sharing a labor market with other productive firms makes it hard to poach and retain workers, and hence limits firm size. We show that sorting between firms and locations is positive—i.e., more productive firms settle in more productive locations—if firm and location productivity are complements and labor market frictions are sufficiently large. We estimate our model using administrative data from Germany and find that highly productive firms indeed sort into the most productive locations. In our main application, we quantify the role of firm sorting for wage differences between East and West Germany, which reveals that firm sorting accounts for 17%-27% of the West-East wage gap.
    JEL: E20 E23 E24 E25 J30 J61 J63
    Date: 2022–11
  4. By: Burcu Ozgun; Tom Broekel; ;
    Abstract: There are substantial differences across regions regarding COVID–19 infections and deaths, which are partly explained by differences in practicing social distancing. In this paper, we argue that the portrayal of COVID–19 in regional media might be an important factor in explaining regional differences in social distancing. By using mobility as a proxy, and analyzing data on regional news coverage in Germany, we empirically investigate whether the geographical heterogeneity in COVID–19-related news reporting has translated into spatial variations in social distancing. Our results confirm that the frequency of and the element of fear in COVID–19 news has a significant albeit time-varying relationship with social distancing.
    Keywords: COVID–19, coronavirus, news media, mobility, regional analysis
    JEL: R10 I12 D10 L82
    Date: 2022–10
  5. By: Wolf, Levi John (University of Bristol)
    Abstract: Local geographic statistical analysis has long been of interest to scientists. In many cases, local statistics have been developed to identify spatial outliers --- areas that are markedly dissimilar from their surroundings --- or spatial clusters --- areas of strong similarity. Research into local spatial statistics experienced a step-change in the mid 1990s, which provided a large class of generalized estimators for local statistical analysis. The local Moran statistic is one commonly used local indicator of spatial association, obtained directly from the estimator for the global Moran statistic. However, this statistic (and local indicators more generally) have traditionally been univariate statistics. New developments provide a fully multivariate statistic for local spatial analysis: the multivariate Geary ratio. However, new arguments are needed to obtain a multivariable Moran statistic that can account for exogenous variation in its understanding of the local structure for spatial data. To do this, we return to the Moran Scatterplot as the critical analytical artifact for Moran-style analysis. Extending this concept, we develop a new method directly from a multivariable ``Moran-form'' spatial regression. We show the theoretical and empirical properties of this statistic, and contrast them to existing methods. Finally, we show how its use can change interpretations in an empirical analysis of rent in Bristol, England.
    Date: 2022–10–07
  6. By: Sheng Cai; Lorenzo Caliendo; Fernando Parro; Wei Xiang
    Abstract: We develop a dynamic spatial growth model to explore the role of trade and internal migration in the process of spatial development and aggregate growth. Growth is shaped by the best global and local ideas that contribute to the local stock of knowledge. Global ideas diffuse more to locations that are relatively more exposed to international trade. Local ideas are diffused across space when workers move to another location. We embed the diffusion of ideas through trade and migration into a multi-country, multi-region framework with international trade, forward-looking dynamic migration decisions, and endogenous capital accumulation. We apply our framework to study the role of initial conditions, international trade, and internal migration on China’s spatial development and aggregate growth during the 1990s and 2000s. We find that initial conditions across space, idea diffusion, and capital accumulation play an important role in understanding the process of spatial development and aggregate growth in China. Changes in international trade costs and mobility restrictions during the 1990s and 2000s also contribute to aggregate growth, with large heterogeneity across space.
    JEL: F1 F10 F16 O1 O15
    Date: 2022–10
  7. By: Petra E. Todd (University of Pennsylvania); Weilong Zhang (University of Cambridge)
    Abstract: This paper develops and estimates a spatial general equilibrium job search model to study the effects of local and universal (federal) minimum wage policies on employment, wages, job postings, vacancies, migration/commuting, and welfare. In the model, workers, who differ in terms of location and education levels, search for jobs locally and in a neighboring area. If they receive remote offers, they decide whether to migrate or commute. Firms post vacancies in multiple locations and make offers subject to minimum wage constraints. The model is estimated using multiple databases, including the American Community Survey (ACS) and Quarterly Workforce Indicators (QWI), and exploiting minimum wage variation across state borders as well as time series variation (2005-2015). Results show that local minimum wage increases lead firms to post fewer wage offers in both local and neighboring areas and lead lower education workers to reduce interstate commuting. An out-of-sample validation finds that model forecasts of commuting responses to city minimum wage hikes are similar to patterns in the data. A welfare analysis shows how minimum wage effects vary by worker type and with the minimum wage level. Low skill workers benefit from local wage increases up to $10.75/hour and high skill workers up to $12.25/hour. The greatest per capital welfare gain (including both workers and firms) is achieved by a universal minimum wage increase of $12.75/hour.
    Keywords: spatial equilibrium, minimum wage, labor relocation, commuting
    JEL: J61 J63 J64 J68 R12 R13
    Date: 2022–11–07
  8. By: Andres Rodriguez-Pose; Miquel Vidal-Bover; ;
    Abstract: Decentralisation has frequently been sold as a means to increase well-being and development. Yet, questions remain as to whether decentralisation improves economic performance. This is possibly because decentralisation processes have often led to “unfunded mandates†, that is a mismatch between the powers transferred to subnational tiers of government and the resources allocated to them. In this paper we analyse how unfunded mandates shape regional economic growth across 518 regions in 30 OECD countries over the period 1997-2018. There is a negative, statistically significant, and robust impact of unfunded mandates on economic growth. This effect is higher in more politically and less fiscally decentralised regions and in regions with a higher level of wealth. Unfunded mandates thus represent a serious drag on the potential positive economic effect of political decentralisation. Hence, for those benefits to materialise, better not more decentralisation —ensuring that finance follows function— should be pursued.
    Keywords: political decentralisation, fiscal decentralisation, unfunded mandates, economic growth, regions, OECD
    JEL: H70 H77 O47
    Date: 2022–10
  9. By: Diogo G. C. Britto; Alexandre Fonseca; Paolo Pinotti; Breno Sampaio; Lucas Warwar
    Abstract: We provide the first estimates of intergenerational income mobility for a developing country, namely Brazil. We measure formal income from tax and employment registries, and we train machine learning models on census and survey data to predict informal income. The data reveal a much higher degree of persistence than previous estimates available for developed economies: a 10 percentile increase in parental income rank is associated with a 5.5 percentile increase in child income rank, and persistence is even higher in the top 5%. Children born to parents in the first income quintile face a 46% chance of remaining at the bottom when adults. We validate these estimates using two novel mobility measures that rank children and parents without the need to impute informal income. We document substantial heterogeneity in mobility across individual characteristics - notably gender and race - and across Brazilian regions. Leveraging children who migrate at different ages, we estimate that causal place effects explain 57% of the large spatial variation in mobility. Finally, assortative mating plays a strong role in household income persistence, and parental income is also strongly associated with several key long-term outcomes such as education, teenage pregnancy, occupation, mortality, and victimization.
    Keywords: intergenerational mobility, inequality, Brazil, migration, place effects
    JEL: J62 D31 I31 R23
    Date: 2022

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