nep-geo New Economics Papers
on Economic Geography
Issue of 2023‒03‒27
nine papers chosen by
Andreas Koch
Institut für Angewandte Wirtschaftsforschung

  1. Exploring European Regional Trade By Marta Santamaría; Jaume Ventura; Ugur Yesilbayraktar
  2. Spatial Production Networks By Costas Arkolakis; Federico Huneeus; Yuhei Miyauchi
  3. Quarterly GDP Estimates for the German States: New Data for Business Cycle Analyses and Long-Run Dynamics By Robert Lehmann; Ida Wikman
  4. Entrepreneurial Ecosystems and Structural Change in European Regions By Mirella Schrijvers; Niels Bosma; Erik Stam
  5. The transition of brown regions: A matter of timing? By Stefano Basilico; Nils Grashof
  6. How does the COVID-19 pandemic affect regional labour markets and why do large cities suffer most? By Hamann, Silke; Niebuhr, Annekatrin; Roth, Duncan; Sieglen, Georg
  7. Adapting to Climate Risk? Local Population Dynamics in the United States By Indaco, Agustín; Ortega, Francesc
  8. Estimating Firm-level Production Functions with Spatial Dependence in Output, Input, and Productivity By CHANG Pao-Li; MAKIOKA Ryo; NG Bo Lin; YANG Zhenlin
  9. The Evolution of Local Labor Markets after Recessions By Hershbein, Brad J.; Stuart, Bryan

  1. By: Marta Santamaría; Jaume Ventura; Ugur Yesilbayraktar
    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: 2023–01
  2. By: Costas Arkolakis; Federico Huneeus; Yuhei Miyauchi
    Abstract: We use new theory and data to study how firms endogenously form production networks across regions and countries. Supplier and buyer relationships form depending on firms' productivity and geographic location. We characterize the normative and positive properties of the spatial distribution of economic activity and welfare in general equilibrium. We calibrate the model using domestic and international firm-to-firm trade data from Chile. Both iceberg trade costs and search and matching frictions are important for aggregate trade flows and production networks. Endogenous formation of production networks leads to larger and more dispersed effects of international and intra-national trade cost shocks.
    JEL: F10 R13
    Date: 2023–02
  3. By: Robert Lehmann; Ida Wikman
    Abstract: To date, only annual information on economic activity is published for the 16 German states. In this paper, we calculate quarterly regional GDP estimates for the period between 1995 to 2021, thereby improving the regional database for Germany. The new data set will regularly be updated when quarterly economic growth for Germany becomes available. We use the new data for an in-depth business cycle analysis and to estimate long-run growth dynamics. The business cycle analysis reveals large heterogeneities in the duration and amplitudes of state-specific fluctuations as well as in the degrees of cyclical concordance. Long-run trends are found to vary tremendously, with positive developments in economically strong regions and flat or even negative trends for economically much weaker states.
    Keywords: regional economic activity, mixed-frequency Vector Autoregression, regional business cycles, concordance, Bayesian methods
    JEL: C32 C53 E32 R11
    Date: 2023
  4. By: Mirella Schrijvers; Niels Bosma; Erik Stam
    Abstract: The process of structural change is investigated in six European regions that were recently confronted with a severe decline in manufacturing jobs. Entrepreneurs are key actors in this process, as they are the agents driving creative destruction that is needed to transform the economy. The entrepreneurial ecosystem of each of the regions is analysed using ecosystem metrics and case study methods. Having a strong entrepreneurial ecosystem helps regions to be resilient to shocks, such as a decline in traditional industries or closures of large focal firms. Institutions, knowledge, and skilled labour play key roles in a successful economic transformation. Formal institutions can provide the leadership and investment needed to quickly adapt to shocks, as shown in the West Midlands (UK), Eindhoven (NL), and Oulu (Finland). The cases of Sofia, Bulgaria, and the Ruhr region, Germany, show however that a strong ecosystem does not guarantee a swift structural transformation. To explain these exceptions, it is important to consider the economic history and regional context. For example, a strong dependence on one industry or firm can create a lock-in effect that prevents resilience in the face of shocks. When diagnosing ecosystems to inform policies, it is therefore crucial to combine metrics with a thorough understanding of the regional context.
    Keywords: Structural change, entrepreneurship, entrepreneurial ecosystem, regional diversity, economic resilience
    Date: 2022
  5. By: Stefano Basilico (University of Bremen, Faculty of Business Studies and Economics, and Gran Sasso Science Institute, Social Sciences); Nils Grashof (Friedrich Schiller University Jena, Faculty of Economics and Business Administration)
    Abstract: Green innovations aim to improve and reduce the environmental impact of economic activities. Thus far, research focus on the positive trajectories of green transition. Recent studies focus also on the speed of transition and on its effects on economic outcomes. Continuing in this direction we focus on brown regions (i.e. specialized in fossil-fuel technologies) and the challenges that they face to become sustainable. Taking as example German Labour Market Regions we identify brown regions and measure their transition using an innovative approach based on Social Network Analysis and Knowledge Spaces. We find that the earlier a region transitioned to green technologies, the better it is for both its social and economic outcomes. Our findings imply that the transition of brown regions has effects on socio-economic outcomes not yet accounted for in the sustainability transition literature.
    Keywords: green transition, green technologies, knowledge spaces, network embeddedness, socio-economic development
    JEL: O32 O33 R11
    Date: 2023–03–09
  6. By: Hamann, Silke (Institute for Employment Research (IAB), Nuremberg, Germany); Niebuhr, Annekatrin (Institute for Employment Research (IAB), Nuremberg, Germany ; Univ. Kiel); Roth, Duncan (Institute for Employment Research (IAB), Nuremberg, Germany); Sieglen, Georg (Institute for Employment Research (IAB), Nuremberg, Germany)
    Abstract: "We estimate spatially heterogeneous effects of the COVID-19 pandemic on labour market dynamics in Germany until December 2021. While initially slightly larger in rural regions, adverse effects quickly become more pronounced and persistent in large agglomerations. We ascribe the larger impact of the pandemic in large agglomerations to two factors. First, a combination of a higher share of skilled workers and jobs suitable for working-from-home is positively related to an increased inflow rate into unemployment. We argue that spillover effects from reduced product market demand in large cities caused by changes in behaviour such as working-from-home or online shopping are a possible explanation. Second, a higher pre-crisis unemployment rate in large agglomerations is associated with a lower outflow rate out of unemployment. This might reflect the less favourable composition of unemployment in large cities which reduces the probability of transitions into employment during crises." (Author's abstract, IAB-Doku) ((en))
    JEL: J23 J63 R23
    Date: 2023–03–03
  7. By: Indaco, Agustín (Carnegie Mellon University); Ortega, Francesc (Queens College, CUNY)
    Abstract: Using a new composite climate-risk index, we show that population in high-risk counties has grown disproportionately over the last few decades, even relative to the corresponding commuting zone. We also find that the agglomeration is largely driven by increases in the (white) working-age population. In addition, we show that high-risk tracts have typically grown more than low-risk tracts within the same county, suggesting the presence of highly localized amenities in high-risk areas. We also document heterogeneous population dynamics along a number of dimensions. Specifically, population has been retreating from high-risk, low urbanization locations, but continues to grow in high-risk areas with high residential capital. The findings above hold for most climate hazards. However, we document that tracts with high risk of coastal flooding have grown significantly less than other tracts in the same county.
    Keywords: climate risk, agglomeration, migration
    JEL: J3 J7
    Date: 2023–03
  8. By: CHANG Pao-Li; MAKIOKA Ryo; NG Bo Lin; YANG Zhenlin
    Abstract: This paper proposes a three-stage GMM estimation procedure for estimating firm-level productivity in the presence of potential spatial dependence across firms via the product market, the input market, and the supply chain. The procedure builds on Ackerberg, Caves and Frazer (2015) and Wooldridge (2009), but in addition, allows the productivity process to depend on the lagged output levels and input usages of related firms, and to accommodate spatially correlated productivity shocks across firms. The procedure provides the estimates of the production function parameters (the capital and labor shares in value-added, and the degree of serial correlation in the productivity process), and the spatial dependence parameters (of productivity on related firms’ past outputs and inputs, and current innovation shocks), where the set of related firms can differ across the three dimensions of spatial dependence. We establish the asymptotic properties of the proposed estimator, and conduct Monte Carlo simulations to validate these properties. In particular, our proposed estimator is consistent under DGPs with or without spatial dependence. In contrast, the conventional estimators are biased when the true DGPs are indeed characterized by spatial dependence.
    Date: 2023–03
  9. By: Hershbein, Brad J. (Upjohn Institute for Employment Research); Stuart, Bryan (Federal Reserve Bank of Philadelphia)
    Abstract: This paper studies how U.S. local labor markets respond to employment losses that occur during recessions. Following recessions from 1973 through 2009, we find that areas that lose more jobs during the recession experience persistent relative declines in employment and population. Most importantly, these local labor markets also experience persistent decreases in the employment-population ratio, earnings per capita, and earnings per worker. Our results imply that limited population responses result in longer-lasting consequences for local labor markets than previously thought, and that recessions are followed by persistent reallocation of employment across space.
    Keywords: local labor markets, recessions, employment rates, migration
    JEL: J21 J61 R23
    Date: 2023–03

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