nep-geo New Economics Papers
on Economic Geography
Issue of 2023‒02‒20
eleven papers chosen by
Andreas Koch
Institut für Angewandte Wirtschaftsforschung

  1. The Economics of Cities: From Theory to Data By Stephen J. Redding
  2. The future geography of industries and occupations By Milene Tessarin; Deyu Li; Sergio Petralia; Ron Boschma
  3. Using Taxes to Attract the Creative Class in the Presence of a Region-Specific Rent By Batabyal, Amitrajeet; Yoo, Seung Jick
  4. Taste of home: Birth town bias in Geographical Indications By Resce, Giuliano; Vaquero-Piñeiro, Cristina
  5. Exploring European Regional Trade By Santamaria, Marta; Ventura, Jaume; Yesilbayraktar, Ugur
  6. Trade and Regional Economic Development By Mathias Bühler
  7. Trading Places: Mobility Responses of Native and Foreign-Born Adults to the China Trade Shock By David Autor; David Dorn; Gordon H. Hanson
  8. Sprouting Cities: How Rural America Industrialized By Fabian Eckert; John Juneau; Michael Peters
  9. Optimal minimum wages By Ahlfeldt, Gabriel M.; Roth, Duncan; Seidel, Tobias
  10. Effects of the Minimum Wage on U.S. County Labor Markets By Otterby, Dawn; Crawley, Andrew; Gabe, Todd
  11. The role of spatial inequalities on youth migration decisions: Empirical evidence from Nigeria By Amare, Mulubrhan; Abay, Kibrom A.; Chamberlin, Jordan

  1. By: Stephen J. Redding
    Abstract: Economic activity is highly unevenly distributed within cities, as reflected in the concentration of economic functions in specific locations, such as finance in the Square Mile in London. The extent to which this concentration reflects natural advantages versus agglomeration forces is central to a range of public policy issues, including the impact of local taxation and transport infrastructure improvements. This paper reviews recent quantitative urban models, which incorporate both differences in natural advantages and agglomeration forces, and can be taken directly to observed data on cities. We show that these models can be used to estimate the strength of agglomeration forces and evaluate the impact of transportation infrastructure improvements on welfare and the spatial distribution of economic activity.
    JEL: R32 R41 R52
    Date: 2023–01
  2. By: Milene Tessarin; Deyu Li; Sergio Petralia; Ron Boschma
    Abstract: In this report we evaluate the opportunities for regional diversification in Europe over the last decade. We use microdata from the European Labour Force Survey to empirically test the entry and exit of occupational specializations at the regional level. Our results show that NUTS 2 regions are more likely to diversify into new occupations that are related to their existing local labour markets. So, the new opportunities for diversification are path-dependent, that is, they depend on the previous (occupational) production structure of the regions. Relatedness is especially important for diversifying toward complex occupations, thus increasing the potential economic benefits of the regions. However, there are significant regional heterogeneities in this related diversification process. Relatedness is positively associated with occupational specialization, but it loses strength as GDP per capita increases among European regions. Finally, we point out some policy orientations that can guide the paths of occupational diversification for European regions.
    Date: 2023–01
  3. By: Batabyal, Amitrajeet; Yoo, Seung Jick
    Abstract: We analyze interregional competition between two regions A and B that use taxes to attract a representative creative class member (the entrepreneur). This entrepreneur establishes a firm in either region A or B and this action guarantees her profit. However, if the entrepreneur locates in region A then she also obtains a stochastic, location-specific rent that is either high with positive probability or low with positive complementary probability. In this setting, we accomplish three tasks. First, given values of the two tax rates, we determine the payoff to the entrepreneur in the two regions for the two possible values of the location-specific rent in A. Second, we ascertain when the entrepreneur will locate in A for both values of the rent and when she will locate in B. Finally, we compute the tax rate that B will set and then specify a condition which ensures that the entrepreneur locates in B.
    Keywords: Creative Class, Entrepreneur, Interregional Competition, Region-Specific Rent, Tax
    JEL: H25 R11
    Date: 2022–11–10
  4. By: Resce, Giuliano; Vaquero-Piñeiro, Cristina
    Abstract: We investigate the role of local favoritism in the Geographical Indications (GIs) quality scheme, one of the main pillars of agri-food policy in the EU. Taking advantage of a rich and unique municipalities' geo-referenced database over the 2000-2020 period, we evaluate whether the birthplaces of Regional council members are favored in the acknowledgment of GIs in Italy. To address the potential confounding effects and selection biases, we combine a Difference in Difference strategy with machine learning methods for counterfactual analysis. Results reveal that councilors' birth municipalities are more likely to obtain their products certified as GIs. The birth town bias is more substantial in areas where the level of institutional quality is lower, there is higher corruption, and lower government efficiency, suggesting that the mediation of politicians is determinant where the formal standardized procedures are muddled.
    Keywords: Political Economy; Geographical Indications; Political representation; Electoral success; Local Development.
    JEL: D72 L66 Q18 R11
    Date: 2023–02–07
  5. By: Santamaria, Marta (University of Warwick.); Ventura, Jaume (CREI, Universitat Pompeu Fabra and Barcelona School of Economics.); Yesilbayraktar, Ugur (Universitat Pompeu Fabra and Barcelona School of Economics)
    Abstract: We use the new dataset of trade flows across 269 European regions in 24 countries constructed in Santamaría et al. (2020) to systematically explore for the first time trade patterns within and across country borders. We focus on the differences between home trade, country trade and foreign trade. We document the following facts : (i) European regional trade has a strong home and country bias, (ii) geographic distance and national borders are important determinants of regional trade, but cannot explain the strong regional home bias and (iii) the home bias is heterogeneous across regions and seems to be driven by political regional borders.
    Date: 2023
  6. By: Mathias Bühler (LMU)
    Abstract: A central argument for trade liberalization is that when the `gains from trade' are shared, countries see large gains in economic development. In this paper, I empirically evaluate this argument and assess the impact of elite capture on regional development. Africa provides a unique study ground because the arbitrary placement of country borders during the colonial period partitioned hundreds of ethnic groups across borders. This partitioning is a source of variation in population heterogeneity and cross-country connectedness that is independent of economic considerations. Thus, African borders provide both a credible instrument for bilateral trade flows and enable the assignment of trade flows ---and their impacts--- to individuals. I find that while ethnic networks increase trade flows, increased trade activity decreases subnational economic development when measured by satellite data or individual wealth. I show that this counter-intuitive result comes from elite groups capturing the gains from trade, with detrimental impacts on trust and democratic progress in society.
    Date: 2023–02–02
  7. By: David Autor; David Dorn; Gordon H. Hanson
    Abstract: Previous research finds that the greater geographic mobility of foreign than native-born workers following economic shocks helps to facilitate local labor market adjustment to shifting regional economic conditions. We examine the role that immigration may have played in enabling U.S. commuting zones to respond to manufacturing job loss caused by import competition from China. Although population headcounts of the foreign-born fell by more than those of the native-born in regions exposed to the China trade shock, the overall contribution of immigration to labor market adjustment in this episode was small. Because most U.S. immigrants arrived in the country after manufacturing regions were already mature, few took up jobs in industries that would later see increased import penetration from China. The foreign-born share of the working-age population in regions with high trade exposure was only three-fifths that in regions with low exposure. Immigration thus appears more likely to aid adjustment to cyclical shocks, in which job loss occurs in regions that had recent booms in hiring, rather than facilitating adjustment to secular regional decline, in which hiring booms occurred in the more distant past.
    JEL: E24 F14 F16 J23 J31 L60 O47 R12 R23
    Date: 2023–01
  8. By: Fabian Eckert; John Juneau; Michael Peters
    Abstract: We study the joint process of urbanization and industrialization in the US economy between 1880 and 1940. We show that only a small share of aggregate industrialization is accounted for by the relocation of workers from remote rural areas to industrial hubs like Chicago or New York City. Instead, most sectoral shifts occurred within rural counties, dramatically transforming their sectoral structure. Most industrialization within counties occurred through the emergence of new "factory" cities with notably higher manufacturing shares rather than the expansion of incumbent cities. In contrast, today's shift towards services seems to benefit large incumbent cities the most.
    JEL: E0 R11
    Date: 2023–01
  9. By: Ahlfeldt, Gabriel M.; Roth, Duncan; Seidel, Tobias
    Abstract: We develop a quantitative spatial model with heterogeneous firms and a monopsonistic labour market to derive minimum wages that maximize employment or welfare. Quantifying the model for German micro regions, we find that the German minimum wage, set at 48% of the national mean wage, has increased aggregate worker welfare by about 2.1% at the cost or reducing employment by about 0.3%. The welfare-maximizing federal minimum wage, at 60% of the national mean wage, would increase aggregate worker welfare by 4%, but reduce employment by 5.6%. An employment-maximizing regional wage, set at 50% of the regional mean wage, would achieve a similar aggregate welfare effect and increase employment by 1.1%.
    Keywords: general equilibrium; minimum wage; monopsony; employment; Germany; inequality
    JEL: J31 J58 R12
    Date: 2022–01–20
  10. By: Otterby, Dawn; Crawley, Andrew; Gabe, Todd
    Abstract: This study investigates the impacts of the minimum wage on U.S. regional labor markets. The empirical analysis uses panel data covering ten years and (most) U.S. counties to examine the relationship between the minimum wage and several key components of the labor market. Following past research, we use data on the number of people in the labor force to represent labor supply, but—as an extension to the literature—we use job postings data as a measure of labor demand. Consistent with previous studies, our findings show a positive relationship between the number of people in the labor force and a county’s minimum wage. The results, however, show that the relationship between job postings and the minimum wage is not statistically significant in the full-sample analysis of U.S. counties. Additional analyses also suggest that metropolitan and urban labor markets react differently to changes in the minimum wage when compared to their non-metropolitan and rural counterparts.
    Keywords: Minimum Wage, U.S. Counties, Job Postings
    JEL: J38 J64 R11 R50
    Date: 2023–01–20
  11. By: Amare, Mulubrhan; Abay, Kibrom A.; Chamberlin, Jordan
    Abstract: We combine nationally representative data from Nigeria with spatiotemporal data from remote sensing and other sources to study how young migrants respond to observable characteristics of potential destinations, both in absolute terms and relative to origin locations. Migrants prefer destinations with better welfare, land availability and intensity of economic activity. We also find that migrants prefer shorter distances and those destinations with better urban amenities and infrastructure. However, responses vary by type of migrant and migration. For example, rural-rural migrants are more responsive to land availability and agricultural potential, while rural-urban and urban-urban migrants are more responsive to welfare and economic vibrancy (measured by nightlight intensity) in destinations. Distance induces varying impact on migration choices of poor and non-poor migrants as well as across more educated and less educated migrants. Longer distances discourage migration for female migrants, poorer migrants and less educated migrant while the implication for the non-poor and more educated migrants appears to be negligible. This is intuitive because poorer and less educated migrants have liquidity constraints to finance high migration costs. Our results suggest potential scope for predicting how labor mobility responds to alternative regional development policies.
    Keywords: NIGERIA; WEST AFRICA; AFRICA SOUTH OF SAHARA; AFRICA; data; data analysis; destinations; development policies; economics; educational opportunities; labour; land; land access; migration; migrants; provenance; remote sensing; welfare; spatiotemporal data
    Date: 2022

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