nep-geo New Economics Papers
on Economic Geography
Issue of 2023‒01‒30
nine papers chosen by
Andreas Koch
Institut für Angewandte Wirtschaftsforschung

  1. The global geography of income and export patterns By Dorothee Hillrichs
  2. Local Public Goods and the Spatial Distribution of Economic Activity By Arthur Guillouzouic; Emeric Henry; Joan Monras
  3. On the relative contributions of national and regional institutions to economic development By Daniel Aparicio-Pérez; Maria Teresa Balaguer-Coll; Emili Tortosa-Ausina
  4. RAIL STATIONS TO DEVELOPMENT: EVIDENCE FROM COLONIAL MALAYA By Yit Wey Liew; Muhammad Habibur Rahman; Audrey Kim Lan Siah
  5. Economic Crises and Regional Disparities in Brazil in the XXI Century By Azzoni, Carlos R.; Castro, Gustavo H. L.
  6. Government-Directed Urban Growth, Firm Entry, and Industrial Land Prices in Chinese Cities By Jan K. Brueckner; Wenhua Liu; Wei Xiao; Junfu Zhang
  7. Investment Tax Credits and the Response of Firms By Lerche, Adrian
  8. Three essays on spatial frictions By Pierre Cotterlaz
  9. Public sector wage compression and wage inequality: Gender and geographic heterogeneity By Jørn Rattsø; Hildegunn E Stokke

  1. By: Dorothee Hillrichs (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES))
    Abstract: This paper studies heterogeneity in the income elasticity of exports across origin countries. Combining insights of the economic geography literature and the home market effect literature, I argue that foreign consumer preferences drive product specifications and thus export patterns. I capture foreign consumer preferences with a multilateral income term, “quality market potential”. Analysing product-level trade flows with a gravity framework, I show that countries with high quality market potential export more to high-income destinations. The effect outweighs the standard home market effect of domestic per capita income, is strongest for developing countries, and works chiefly through the quantity margin.
    Keywords: Non-homothetic preferences, home-market effect, trade margins
    JEL: F14 R12 O19
    Date: 2023–01–11
  2. By: Arthur Guillouzouic (IPP - Institut des politiques publiques, PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris sciences et lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement); Emeric Henry (ECON - Département d'économie (Sciences Po) - Sciences Po - Sciences Po - CNRS - Centre National de la Recherche Scientifique, CEPR - Center for Economic Policy Research - CEPR); Joan Monras (ECON - Département d'économie (Sciences Po) - Sciences Po - Sciences Po - CNRS - Centre National de la Recherche Scientifique, UPF - Universitat Pompeu Fabra [Barcelona])
    Abstract: Using French data, we provide: a) causal evidence that a drop in local public goods provision decreases private sector activity, and b) evidence consistent with monopsony power of the public sector in local labor markets. We introduce a public sector with these two key characteristics in an otherwise standard spatial equilibrium model, and show that it delivers the main stylized facts established in our data, in particular, that the share of the public sector relative to the private is independent of the productivity of the city. We emphasize the tradeoffs between allowing governments to freely choose local public employment and wages (as in most of the US public sector), versus imposing rules that constrain public sector pay with some indexation to the local cost of living (as in many European countries). We show that wage indexation limits monopsony power – leading to a larger public sector – and is optimal if the indexation is sufficiently strong.
    Keywords: Local public goods, Public service, Market power, Spatial economics
    Date: 2021–06–01
  3. By: Daniel Aparicio-Pérez (Department of Finance and Accounting, Universitat Jaume I, Castellón, Spain); Maria Teresa Balaguer-Coll (Department of Finance and Accounting, Universitat Jaume I, Castellón, Spain); Emili Tortosa-Ausina (IVIE, Valencia and IIDL and Department of Economics, Universitat Jaume I, Castellón, Spain)
    Abstract: Institutions have been proved as a fundamental driver of long-run growth (Acemoglu et al., 2005) and, therefore, their functioning, i.e., their quality of governance, is a well-known theoretical fact in the literature on economic growth, which has been widely studied at both country and regional levels. Nevertheless, there is a lack of literature on how this relationship behaves when considering the hierarchical structure that regions and countries present. To solve this problem, we propose a novel approximation to the question, relying on multilevel econometric techniques, highly applied in other fields such as education or psychology, but much less employed in economics. We empirically analyze how much of the effect shown by the quality of government on the economic development of a given region can be attributed to the quality of government of its belonging cluster i.e the country. We argue that ignoring the multilevel logic may lead to overweighting the real influence of regional governance quality and, conversely, under-weighting (or directly overlooking) the effect of the country’s governance quality on the economic development of a given region. We show empirically that the aggregate framework (and its quality) given by the national level of institutions outweighs the effect that lower government ties may present on the economic development of a region.
    Keywords: economic development; Europe; quality of government; multilevel; regions
    JEL: D04 E02 H7 H11 O43
    Date: 2023
  4. By: Yit Wey Liew (Monash University); Muhammad Habibur Rahman (Durham University); Audrey Kim Lan Siah (Monash University)
    Abstract: This study examines how the historical rail stations condition long-run development, using Colonial Malaya as a laboratory. Constructing a novel historical data on rail stations, agglomeration centers, tin mines and rubber plantations dated back to a century and matching with contemporary data on economic activity at one-kilometer cell level, we find that the earlier a region obtains rail stations, the higher level of economic activity it performs today due to agglomeration economies. These results hold even in regions that have already abandoned colonial stations. This study signifies the role of investment on transport infrastructure to accelerate local economic activity.
    Date: 2023–01
  5. By: Azzoni, Carlos R. (Departamento de Economia, Universidade de São Paulo); Castro, Gustavo H. L. (Departamento de Economia, Universidade de São Paulo)
    Abstract: The paper deals with the effects of two recent crises on regional disparities in Brazil. We consider the impact of The Great Recession of 2008 and a more intense national crisis starting in 2014. We calculate the yearly average latitude and longitude weighted by the regional share of the national GDP between 2002 and 2019 for agriculture, manufacturing, commerce & services, government, and the aggregate value added. We analyze the evolution of the average latitude and longitude over the period to check for changes in their trends after the national shocks. We analyze per capita income dispersion and associate it with the national economic performance. We estimate convergence equations, introducing the effect of the two crises on the convergence of per capita income and average wage. We present the effect of the Covid-19 crisis on regional wage convergence. Finally, we analyze the convergence pattern of skill intensity across regions, highlighting the impacts caused by the two shocks.
    Keywords: cycles and regional inequality; economic center of gravity; labor skill intensity
    JEL: R10
    Date: 2023–01–13
  6. By: Jan K. Brueckner; Wenhua Liu; Wei Xiao; Junfu Zhang
    Abstract: We examine the effect of a large-scale administrative reorganization in China, where counties are annexed into cities to accommodate urban growth. We present a simple model to illustrate how this annexation may affect firm entry decisions and in turn land market outcomes. Using nationwide data on land-lease transactions, we find that annexation raises industrial land prices in the annexed counties by 7 percent but does not reduce land prices in neighboring counties and central cities. We show that the annexed counties experienced increases in firm entry and investment, offering a plausible mechanism for the effect on industrial land prices.
    Keywords: urban growth, industrial land prices, annexation, China
    JEL: R11 R12 R14 R33 R58
    Date: 2022
  7. By: Lerche, Adrian (Institute for Employment Research (IAB), Nuremberg, Germany ; LMU Munich ; IZA)
    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." (Author's abstract, IAB-Doku) ((en))
    Keywords: IAB-Open-Access-Publikation
    JEL: H25 H32 J23 R11 D22
    Date: 2022–12–27
  8. By: Pierre Cotterlaz (ECON - Département d'économie (Sciences Po) - Sciences Po - Sciences Po - CNRS - Centre National de la Recherche Scientifique)
    Abstract: Spatial frictions are key to explain many economic phenomena. This thesis provides three pieces of evidence on the origins, prevalence and consequences of such frictions.In the first chapter, we focus on spatial frictions in the diffusion of knowledge. We explain the puzzling persistence and stability of the spatial decay in patent citation flows by innovator networks. We establish that knowledge percolates: firms disproportionately cite new patents from prior contacts, and form links with contacts of their contacts. Embedding this percolation into a network formation model is sufficient to rationalize the negative link between aggregate knowledge flows and distance.In the second chapter, we shed some light on the role of spatial information frictions in shaping international trade flows. We use the specific context of the XIXth Century, during which the creation of international news agencies facilitated the transmission of information across countries. We show that trade between a pair of countries increases when both are covered by a news agency. The reduction in information friction was therefore one of the many factors behind the First Globalization.The last chapter investigates whether transport costs are the main component of within-country trade costs. While it is well-established that international trade costs are not limited to transport costs, evidence is much scarcer for intra-national trade flows. We use hurricane Sandy as a natural experiment shifting upwards transport costs in some areas of the US to establish that if transport costs were the sole driver of the distance elasticity of trade flows within the US, this distance elasticity would be much lower.
    Abstract: Les frictions spatiales jouent un rôle crucial dans l'explication de nombreux phénomènes économiques. Dans cette thèse, nous étudions les origines, la prévalence et les conséquences de telles frictions à travers trois exemples. Dans le premier chapitre, nous nous intéressons aux frictions spatiales pesant sur la diffusion de la connaissance. Nous expliquons l'effet négatif de la distance sur les flux de citations entre brevets par la structure des réseaux d'innovation. Nous montrons que la connaissance percole: les entreprises tendent à citer davantage les nouveaux brevets de leurs contacts existants, et à former de nouveaux liens avec des contacts de leurs contacts. Dans le second chapitre, nous explorons les liens entre frictions informationnelles et commerce international. Nous utilisons le contexte spécifique du XIXe siècle, au cours duquel émergent des agences de presse mondiales, facilitant le partage d'informations sur les marchés étrangers. Nous montrons que deux pays commercent davantage une fois qu'ils bénéficient de ce choc positif sur la capacité à obtenir de l'information. Les agences de presse s'insèrent donc parmi les nombreux facteurs explicatifs de la Première Mondialisation. Le dernier chapitre cherche à déterminer si les coûts de transport constituent l'essentiel des obstacles au commerce à l'intérieur d'un pays. Nous utilisons l'ouragan Sandy comme une expérience naturelle à l'origine d'une hausse des coûts de transport pour les flux transitant par certaines zones, et montrons que l'élasticité intra-USA des flux commerciaux à la distance serait bien plus faible si les coûts de transport étaient les seuls responsables de cette élasticité.
    Keywords: Trade costs, Innovation, Networks, News agencies, Coûts du commerce, Réseaux, Agences de presse
    Date: 2021–06–03
  9. By: Jørn Rattsø (Department of Economics, Norwegian University of Science and Technology); Hildegunn E Stokke (Department of Economics, Norwegian University of Science and Technology)
    Abstract: Studies of wage inequality concentrate on private wages. Public sector wages are typically assumed to contribute to overall wage equality. We challenge this understanding in an analysis of the relative skill premium in public versus private sectors. The analysis of heterogeneity across gender and geography is based on rich register data for Norway. The raw data confirm the relative wage compression in the public sector. However, this is a male phenomenon and only prevalent in large cities when unobserved worker and firm characteristics are taken into account. With identification based on shifters between private and public sectors and movers between city-size groups, wage setting for female workers in the public sector increases wage inequality in all regions, particularly in the periphery. The result is consistent with policies promoting recruitment of high-educated female workers and expansion of public services in the periphery counterbalancing the desired equality effect of public wages.
    Keywords: Wage inequality, skill premium, geography, private-public wages
    JEL: J31 J45 R23
    Date: 2022–12–20

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