nep-geo New Economics Papers
on Economic Geography
Issue of 2022‒12‒12
seventeen papers chosen by
Andreas Koch
Institut für Angewandte Wirtschaftsforschung

  1. The Geography of Occupational Choice: Empirical Evidence from the Swiss Apprenticeship Market By Kuhn, Andrea
  2. Micro-geographic property price and rent indices By Ahlfeldt, Gabriel M.; Heblich, Stephan; Seidel, Tobias
  3. Remotely (and wrongly) too equal: Popular night-time lights data understate spatial inequality By Xiaoxuan Zhang; John Gibson; Xiangzheng Deng
  4. Spillover, Efficiency and Equity Effects of Regional Firm Subsidies By Sebastian Siegloch; Nils Wehrhöfer; Tobias Etzel
  5. The Impact of High-speed Railway on Labor Spatial Misallocation – Based on Spatial Difference-in-Differences Analysis By Yan, Linnan; Tu, Menger; Chagas, André; Tai, Lufeng
  6. The Distributional Impacts of Transportation Networks in China By Ma, Lin; Yang, Tang
  7. Place-Based Policies and Inequality Within Regions By Lang, Valentin; Redeker, Nils; Bischof, Daniel
  8. EU Cohesion Policy on the Ground: Analyzing Small-Scale Effects Using Satellite Data By Julia Bachtrögler-Unger; Mathias Dolls; Carla Krolage; Paul Schüle; Hannes Taubenböck; Matthias Weigand
  9. Investment Tax Credits and the Response of Firms By Lerche, Adrian
  10. What Do R&D Spillovers from Universities and Firms Contribute to Productivity? Plant level productivity and technological and geographic proximity in Japan By René BELDERBOS; IKEUCHI Kenta; FUKAO Kyoji; KIM Young Gak; KWON Hyeog Ug
  11. Heterogeneous employment effects of minimum wage policies By Aleksandra Majchrowska; Paweł Strawiński
  12. Using the web to predict regional trade flows: data extraction, modelling, and validation By Tranos, Emmanouil; Incera, Andre Carrascal; Willis, George
  13. Does Industry Agglomeration Attract Productive Firms? The role of product markets in adverse selection By René BELDERBOS; FUKAO Kyoji; IKEUCHI Kenta; KIM Young Gak; KWON Hyeog Ug
  14. Spatial Interaction Modelling: A Manisfesto By Rowe, Francisco; Lovelace, Robin; Dennett, Adam
  15. The Golden City on the Edge: Economic Geography and Jihad over Centuries By Masahiro Kubo; Shunsuke Tsuda
  16. Bit by Bit - Colocation and the Death of Distance in Software Developer Networks By Moritz Goldbeck
  17. Profit Shifting Frictions and the Geography of Multinational Activity By Alessandro Ferrari; S\'ebastien Laffitte; Mathieu Parenti; Farid Toubal

  1. By: Kuhn, Andrea (Bertelsmann Foundation)
    Abstract: This paper presents an empirical exploration of the geography of adolescents' occupational choices, using data covering a single cross-section of the population of all individual-level apprenticeship contracts in the canton of Bern in Switzerland. The unique feature of the data is that they cover both the training firm's location and the apprentice's domicile at a highly disaggregated level. Even though the geographic area covered by these data is small by any absolute standard, the data show that there are large and pervasive differences across different local apprenticeship markets. More specifically, the data show that apprenticeship positions are highly concentrated in a few local apprenticeship markets and that the same regions are also characterized by a larger number of distinct training occupations from which perspective apprentices may choose. Moreover, yet somewhat less obvious, there is also significant variation in the occupational task structure across local apprenticeship markets. These empirical regularities may have implications for various research questions in the context of adolescents' occupational choices.
    Keywords: occupational choice, apprenticeship, geography, spatial heterogeneity, regional occupational structure
    JEL: I21 J24 R12
    Date: 2022–10
  2. By: Ahlfeldt, Gabriel M.; Heblich, Stephan; Seidel, Tobias
    Abstract: We develop a programming algorithm that predicts a balanced-panel mixadjusted house price index for arbitrary spatial units from repeated crosssections of geocoded micro data. The algorithm combines parametric and non-parametric estimation techniques to provide a tight local fit where the underlying micro data are abundant, and reliable extrapolations where data are sparse. To illustrate the functionality, we generate a panel of German property prices and rents that is unprecedented in its spatial coverage and detail. This novel data set uncovers a battery of stylized facts that motivate further research, e.g. on the positive correlation between density and price-torent ratios in levels and trends, both within and between cities. Our method lends itself to the creation of comparable neighborhood-level rent indices (Mietspiegel ) across Germany.
    Keywords: index; real estate; price; property; rent; Elsevier
    JEL: R10
    Date: 2022–10–06
  3. By: Xiaoxuan Zhang (University of Waikato); John Gibson (University of Waikato); Xiangzheng Deng (IGSNRR, Chinese Academy of Sciences)
    Abstract: Several studies in economics and regional science use Defense Meteorological Satellite Program (DMSP) night-time lights data to measure spatial inequality. These DMSP data are a poor proxy in this context because they have spatially mean-reverting errors, yielding significantly lower inequality estimates than what sub-national GDP data show. Inequality estimates from DMSP are also lower than what newer, research-focused and more accurate, satellites show from their observations of the earth at night. In this paper, county-level data from the United States and China are used to demonstrate the understatement of spatial inequality when DMSP data are used. In both settings, benchmark data on sub-national GDP are available for establishing the level and trend in spatial inequality, which is then used to assess the accuracy of the estimates coming from remote sensing sources. In the rush to use big data it is important to not lose sight of basic measurement error features of some of these data sources.
    Keywords: DMSP;mean-reverting error;night lights;spatial inequality;VIIRS
    JEL: E01 R12
    Date: 2022–11–26
  4. By: Sebastian Siegloch (University of Cologne, CEPR, and ZEW); Nils Wehrhöfer (Deutsche Bundesbank and ZEW); Tobias Etzel (Deutsche Bundesbank)
    Abstract: We analyze the effects of a large place-based policy, subsidizing up to 50% of the investment costs of manufacturing firms in East Germany. We show that a one percentage-point decrease in the subsidy rate leads to a 1% decrease in manufacturing employment. We document important local spillovers for untreated construction and retail sectors, counties connected via trade, and local tax rates. There is no evidence for regional reallocation or changes in commuting and residential decisions. The cost per job amount to at most $23000. Last, we show that local subsidies are substantially more effective in curbing regional inequality than place-blind policies.
    Keywords: place-based policies, employment, spillovers, administrative microdata
    JEL: H24 J21 J23
    Date: 2022–11
  5. By: Yan, Linnan; Tu, Menger; Chagas, André (Departamento de Economia, Universidade de São Paulo); Tai, Lufeng
    Abstract: Existing studies neglected to assess the resource allocation effect of high-speed railway (HSR). This paper examines the impact of HSR on labor spatial misallocation in China by applying a modified spatial difference-in-differences approach, which identify local treatment effect, spillover effect on treated and untreated regions. The study finds: (1) Opening HSR alleviates not only the local labor misallocation but also the misallocation in surrounding areas to a greater extent, including cities with HSR (treatment group) and without HSR (control group), which contributes to the overall productivity increase. The spillover effect of HSR is larger than the direct effect. (2) The largest spillover effect occurs in adjacent areas near 350 km apart, while the spillover effect disappears beyond 500 km. (3) The direction and magnitude of HSR effect depend on the urban scale. For large-scale cities, the impact of opening HSR is greater versus small-scale ones.
    Keywords: high-speed railway; spatial difference-in-differences; labor spatial misallocation
    JEL: R10
    Date: 2022–09–01
  6. By: Ma, Lin (Singapore Management University); Yang, Tang (Nanyang Technological University)
    Abstract: This paper evaluates the distributional impacts of transportation networks in China. We show that the quality of roads and railroads vary substantially over time and space, and ignoring these variations biases the estimates of travel time. To account for quality differences, we construct a new panel dataset and approximate quality using the design speed of roads and railroads that varies by vintage, class, and terrain at the pixel level. We then build a dynamic spatial general equilibrium model that allows for multiple modes and routes of transportation and forward-looking migration decision. We find aggregate welfare gain and less spatial income inequality led by expanding transportation network.
    Keywords: regional trade; migration; welfare; economic geography
    Date: 2022–07–01
  7. By: Lang, Valentin (University of Mannheim); Redeker, Nils; Bischof, Daniel (Aarhus University)
    Abstract: Against the backdrop of rising inequality across regions, place-based policies have become an increasingly popular tool to support “left-behind” places. While existing research provides evidence for average growth effect of such policies, little is known about their distributional effects within regions. We compile a new panel data set on income inequality across and within regions in the European Union (EU), based on household data from more than 2.4 million respondents of national surveys and covering a maximum of 231 European regions in the 1989-2017 period. These data show that inequality within regions is substantial, tends to increase over time and contributes more to inequality in Europe than inequality across regions. We then study the distributional effects of one of the world’s largest placed-based policies, the EU Cohesion Policy, on household incomes. For causal identification we use, first, a discontinuity in disbursed amounts that results from EU eligibility criteria and, second, a difference-in-differences design. We find an economically substantial, positive effect of EU funds on household incomes that is larger at the top of regional income distributions than at the bottom. The place-based policy increases inequality within regions. To understand the policy’s mechanisms, we differentiate by production factors, sectors, and education levels with macro and micro data and find that these effects are driven by higher labor incomes for more highly educated individuals in multiple sectors. In sum, these results suggest that place-based policies can be effective for reducing inequality across regions but the supported regions tend to lift the incomes of the rich rather than those of the poor.
    Date: 2022–08–03
  8. By: Julia Bachtrögler-Unger; Mathias Dolls; Carla Krolage; Paul Schüle; Hannes Taubenböck; Matthias Weigand
    Abstract: We present a novel approach for analyzing the effects of EU cohesion policy on local economic activity. For all municipalities in the border area of the Czech Republic, Germany and Poland, we collect project-level data on EU funding in the period between 2007 and 2013. Using night light emission data as a proxy for economic development, we show that the receipt of a higher amount of EU funding is associated with increased economic activity at the municipal level. Our paper demonstrates that remote sensing data can provide an effective way to model local economic development also in Europe, where no comprehensive cross-border data is available at such a spatially granular level.
    Keywords: Regional Development, EU Cohesion Policy, Remote Sensing
    Date: 2022–11–29
  9. By: Lerche, Adrian (LMU Munich)
    Abstract: This paper estimates the direct effects of investment tax credits on firms' production behavior and the additional indirect effects arising from agglomeration economies. Exploiting a change in tax credit rates by firm size in Germany, I find that manufacturing firms increase capital and employment, with labor demand in information and communication technology-intensive industries shifting towards college-educated workers. Using geolocation data, I show that agglomeration benefits lead to a sizable further firm production expansion with these benefits materializing within distances of 5 kilometers. Worker flows from the service sector and from non-employment, rather than between manufacturing firms, explain the employment effects.
    Keywords: investment tax incentives, capital, labor demand, agglomeration
    JEL: D22 H25 H32 J23 R11
    Date: 2022–10
  10. By: René BELDERBOS; IKEUCHI Kenta; FUKAO Kyoji; KIM Young Gak; KWON Hyeog Ug
    Abstract: We examine the simultaneous effects of spillovers due to R&D by universities and by firms on total factor productivity in a panel of over 20,000 Japanese manufacturing plants. Estimating geographic decay functions based on the location of the universe of manufacturing plants run by R&D conducting firms and public research institutions in Japan, we find a positive influence of both private and public technologically proximate-R&D stocks, which decay in distance and become negligible at around 500 kilometers. Decomposition analyses show that declining R&D spillovers are responsible for a substantial part of the decline in the rate of TFP growth in Japanese manufacturing. The exit of geographically proximate plants operated by R&D intensive firms, which may be associated with a relocation of manufacturing activity overseas, plays a notable role in this process and is an important phenomenon in major industrial agglomerations such as Tokyo and Osaka.
    Date: 2022–11
  11. By: Aleksandra Majchrowska (University of Lodz, Chair of Macroeconomics); Paweł Strawiński (University of Warsaw, Faculty of Economic Sciences)
    Abstract: We explain the variations in the employment effects with respect to minimum wage changes among different groups of workers. Prior analyses considered only two dimensions, investigating employment effects over time across groups of workers or regions. We propose a multidimensional panel data approach to simultaneously analyze the heterogeneous employment effects of minimum wage changes across age groups, economic sectors, and regions over time. Latent heterogeneities in regional employment reactions are discovered, indicating that the employment effect in the regional labor market is the result of a combination of specific labor market features related to the composition of workers and employers.
    Keywords: Employment elasticity, minimum wage, regional labor markets, latent heterogeneities, intra-regional differences, Poland
    JEL: R23 J21 J31 J38
    Date: 2022
  12. By: Tranos, Emmanouil; Incera, Andre Carrascal; Willis, George
    Abstract: Despite the importance of interregional trade for building effective regional economic policies, there is very little hard data to illustrate such interdependencies. We propose here a novel research framework to predict interregional trade flows by utilising freely available web data and machine learning algorithms. Specifically, we extract hyperlinks between archived websites in the UK and we aggregate these data to create an interregional network of hyperlinks between geolocated and commercial webpages over time. We also use some existing interregional trade data to train our models using random forests and then make out-of-sample predictions of interregional trade flows using a rolling-forecasting framework. Our models illustrative great predictive capability with $R^2$ greater than 0.9. We are also able to disaggregate our predictions in terms of industrial sectors, but also at a sub-regional level, for which trade data are not available. In total, our models provide a proof of concept that the digital traces left behind by physical trade can help us capture such economic activities at a more granular level and, consequently, inform regional policies.
    Date: 2022–07–06
  13. By: René BELDERBOS; FUKAO Kyoji; IKEUCHI Kenta; KIM Young Gak; KWON Hyeog Ug
    Abstract: Do high or low productivity firms self-select into locations characterized by high industry agglomeration? On the one hand, productive firms may benefit more from the availability of specialized (labour) inputs and they are also more likely to survive heightened competition. On the other hand, productive firms face greater risks of knowledge dissipation to collocated rival firms, as they may contribute more than they receive in terms of knowledge spillovers. We examine location decisions for new plant establishments by firms in Japan with established productivity records (multi-plant firms) at the fine-grained level of towns, wards, and cities where knowledge spillovers are most likely to occur. We find that the adverse selection effects of industry agglomeration–the process of agglomerated areas attracting weaker rather than stronger firms–dominate if knowledge spillovers are most harmful to productive entrants when the focal firm and local incumbent establishments target the same (domestic) product market. We conclude that negative sorting processes do occur, but that these can only be uncovered in a more fine-grained analysis that takes into account ex ante measures of firm heterogeneity and the nature of product markets.
    Date: 2022–11
  14. By: Rowe, Francisco (University of Liverpool); Lovelace, Robin; Dennett, Adam
    Abstract: Spatial interaction (SI) modelling is a core tool in spatial data modelling to predict spatial flows and understand their underpinning factors. SI modelling has been applied to provide data insights and support decision making in multiple settings, notably in transport, human mobility, migration and epidemiology. While considerable progress has been made on advancing the theoretical and methodological underpinnings of spatial interaction modelling, key challenges remain facilitate the application of SI models, extend existing modelling approaches, leverage the greater opportunities afforded by Big Data. We identify three key challenges: reproducibility, calibration and Big Data modelling. We propose a blueprint to tackle these challenges by identifying four areas of development: (1) to enable essential infrastructure to facilitate the training, calibration and reproducibility of SI models; (2) to embrace modelling frameworks to capture spatial, temporal and population heterogeneity; (3) to enhance statistical inference to accommodate Big Data analysis; and, (4) to integrate data science approaches to enhance. SI model-generated predictions and statistical inference.
    Date: 2022–07–22
  15. By: Masahiro Kubo; Shunsuke Tsuda
    Abstract: This paper uncovers the evolution of cities and Islamist insurgencies, so called jihad, in the process of the reversal of fortune over the centuries. In West Africa, water access in ancient periods predicts the locations of the core cities of inland trade routes -- the trans-Saharan caravan routes -- founded up to the 1800s, when historical Islamic states played significant economic roles before European colonization. In contrast, ancient water access does not have a persistent influence on contemporary city formation and economic activities. After European colonization and the invention of modern trading technologies, along with the constant shrinking of water sources, landlocked pre-colonial core cities contracted or became extinct. Employing an instrumental variable strategy, we show that these deserted locations have today been replaced by battlefields for jihadist organizations. We argue that the power relations between Islamic states and the European military during the 19th century colonial era shaped the persistence of jihadist ideology as a legacy of colonization. Investigations into religious ideology related to jihadism, using individual-level surveys from Muslims, support this mechanism. Moreover, the concentration of jihadist violence in "past-core-and-present-periphery" areas in West Africa is consistent with a global-scale phenomenon. Finally, spillovers of violent events beyond these stylized locations are partly explained by organizational heterogeneity among competing factions (Al Qaeda and the Islamic State) over time.
    Date: 2022–11
  16. By: Moritz Goldbeck
    Abstract: Digital tools potentially enable remote collaboration. Analyzing how some 191 thousand software developers in the United States collaborate on the largest online open source code repository platform, I find 79.8% of users clustering in only ten economic areas. Conditional on economic-area characteristics, colocated users collaborate about nine times as much as non-colocated users. Apart from this colocation effect, distance is not significantly related to collaboration among software developers. Comparison to social networks shows the colocation effect is weaker for software developers and relative connectedness probability remains at a much higher (stable) level with increasing distance. Software developer and social networks show no significant regional overlap.
    Keywords: Geography, digitization, online, open-source, high-skilled, collaboration
    JEL: L84 O18 O30 R32
    Date: 2022
  17. By: Alessandro Ferrari; S\'ebastien Laffitte; Mathieu Parenti; Farid Toubal
    Abstract: We develop a quantitative general equilibrium model of multinational activity embedding corporate taxation and profit shifting. In addition to trade and investment frictions, our model shows that profit-shifting frictions shape the geography of multinational production. Key to our model is the distinction between the corporate tax elasticity of real activity and profit shifting. The quantification of our model requires estimates of shifted profits flows. We provide a new, model-consistent methodology to calibrate bilateral profit-shifting frictions based on accounting identities. We simulate various tax reforms aimed at curbing tax-dodging practices of multinationals and their impact on a range of outcomes, including tax revenues and production. Our results show that the effects of the international relocation of firms across countries are of comparable magnitude as the direct gains in taxable income.
    Date: 2022–11

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