nep-geo New Economics Papers
on Economic Geography
Issue of 2023‒04‒17
twelve papers chosen by
Andreas Koch
Institut für Angewandte Wirtschaftsforschung

  1. Relatedness, Cross-relatedness and Regional Innovation Specializations: An Analysis of Technology, Design and Market Activities in Europe and the US By Carolina Castaldi; Kyriakos Drivas;
  2. Exploring European Regional Trade By Marta A. Santamaría; Jaume Ventura; Uğur Yeşilbayraktar
  3. How does the regional presence of foreign-owned multinational enterprises affect local start-up performance By Grillitsch, Markus; Martynovich, Mikhail; Nilsson, Magnus; Schubert, Torben
  4. Market Size and Trade in Medical Services By Jonathan I. Dingel; Joshua D. Gottlieb; Maya Lozinski; Pauline Mourot
  5. Does social trust determine social progress? Evidence for the European regions By Jesús Peiró-Palomino; Lisa Gianmoena; Andrés J. Picazo-Tadeo; Vicente Ríos
  6. Left-behind vs. unequal places: interpersonal inequality, economic decline, and the rise of populism in the US and Europe By Andres Rodriguez-Pose; Javier Terrero-Davila; Neil Lee
  7. Boosting, Sorting, and Complexity – Urban Scaling of Innovation Around the World By Tom Broekel; Louis Knupling; Lars Mewes
  8. The effect of air pollution on US aggregate production By Avila Uribe, Antonio
  9. Accumulating valuable work experience: the importance of large firms and big cities By Peters, Jan Cornelius; Niebuhr, Annekatrin
  10. Where is the Land of Hope and Glory? The geography of intergenerational mobility in England and Wales By Bell, Brian; Blundell, Jack; Machin, Stephen
  11. The Characteristics and Geographic Distribution of Robot Hubs in U.S. Manufacturing Establishments By Erik Brynjolfsson; Catherine Buffington; Nathan Goldschlag; J. Frank Li; Javier Miranda; Robert Seamans
  12. Bridging the short-term and long-term dynamics of economic structural change By James McNerney; Yang Li; Andres Gomez-Lievano; Frank Neffke

  1. By: Carolina Castaldi; Kyriakos Drivas;
    Abstract: This paper examines how regions develop new innovation specializations, covering different activities in the whole process from technological invention to commercialization. We develop a conceptual framework anchored in two building blocks: first, the conceptualization of innovation as a process spanning technology, design and market activities; second, the application and extension of the principle of relatedness to understand developments within and between the different innovation activities. We offer an empirical investigation where we operationalize the different innovation activities using three intellectual property rights (IPRs): patents, industrial designs and trademarks. We provide two separate analyses of how relatedness and cross-relatedness matter for the emergence of new specializations: for 259 NUTS-2 European regions and for 363 MSAs of the US. While relatedness is significantly associated with new regional specializations for all three innovation activities, cross-relatedness between activities also plays a significant role. Our study has important policy implications for developing and monitoring Smart Specialization regional strategies.
    Keywords: innovation, relatedness, regional specialization, patents, trademarks, designs, NUTS-2 regions, Metropolitan Statistical Areas.
    JEL: O34 O38 R11
    Date: 2023–03
  2. By: Marta A. Santamaría; Jaume Ventura; Uğur Yeşilbayraktar
    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.
    JEL: F0 F14 F15
    Date: 2023–03
  3. By: Grillitsch, Markus (CIRCLE, Lund University); Martynovich, Mikhail (CIRCLE, Lund University); Nilsson, Magnus (CIRCLE, Lund University); Schubert, Torben (CIRCLE, Lund University)
    Abstract: This paper analyses how the presence of foreign-owned multinational enterprises (MNEs) affects the performance of start-ups in the same region. Focusing on the population of Swedish start-ups and MNEs between 2007 and 2015, we investigate the relationship between start-up productivity and regional share of MNE employment. We find effects that differ by sectoral belonging of start-ups and MNEs. Notably, while the effects of the local presence of foreign-owned MNEs are negative when start-ups and local MNEs belong to the same sector, they are positive for the local presence of MNEs in related and (to some weaker extent) unrelated sectors. Moreover, we find that as start-ups mature the effect of the local presence of foreign-owned MNEs on start-up productivity increases, irrespective of their sectoral belonging. We interpret this as evidence of age-dependent processes of learning, legitimacy building, and resource accumulaton allowing start-ups to reap the benefits while mitigating negative effects of MNE proximity. Interestingly, we show that the documented effects are more pronounced for service firms, particularly in the knowledge-intensive sectors.
    Keywords: Productivity; start-ups; MNE
    JEL: M13 M16 R11
    Date: 2023–03–27
  4. By: Jonathan I. Dingel; Joshua D. Gottlieb; Maya Lozinski; Pauline Mourot
    Abstract: We measure the importance of increasing returns to scale and trade in medical services. Using Medicare claims data, we document that “imported” medical care — services produced by a medical provider in a different region — constitute about one-fifth of US healthcare consumption. Larger regions specialize in producing less common procedures, which are traded more. These patterns reflect economies of scale: larger regions produce higher-quality services because they serve more patients. Because of increasing returns and trade costs, policies to improve access to care face a proximity-concentration tradeoff. Production subsidies and travel subsidies can impose contrasting spillovers on neighboring regions.
    JEL: F12 F14 I11 R12
    Date: 2023–03
  5. By: Jesús Peiró-Palomino (Universiy of Valencia and INTECO); Lisa Gianmoena (University of Pisa); Andrés J. Picazo-Tadeo (Universiy of Valencia and INTECO); Vicente Ríos (Universiy of Pisa)
    Abstract: Social trust is a heavily rooted element whose positive impact on economic performance has been widely corroborated for many contexts. However, the understanding of social progress disparities in aspects other than income is attracting increasing attention and is a key goal for the European Commission. European regions present notable disparities in many non-economic aspects that characterize advanced societies such as personal rights, freedom, tolerance and inclusion and access to advanced education. This paper provides fresh evidence on the impact of social trust on a wide array of aspects categorized as advanced features of social progress in the framework of the European Social Progress Index 2020 (EU-SPI). The results show a positive impact of social trust on most of the indicators, which is robust to endogeneity issues. These insights help to understand the enormous differences in terms of social progress across European regions and provide useful information for the design of future policies that pursue a more equal Europe.
    Keywords: European regions; European Social Progress Index; Social trust
    JEL: R11 Z10
    Date: 2023–04
  6. By: Andres Rodriguez-Pose; Javier Terrero-Davila; Neil Lee
    Abstract: Economic change over the past twenty years has rendered many individuals and territories vulnerable, leading to greater interpersonal and interterritorial inequality. This rising inequality is seen as a root cause of populism. Yet, there is no comparative evidence as to whether this discontent is the consequence of localised interpersonal inequality or stagnant growth in ‘left-behind’ places. This paper assesses the association between levels and changes in local GDP per capita and interpersonal inequality, and the rise of far-right populism in Europe and in the US. The analysis —conducted at small region level for Europe and county level for the US— shows that there are both similarities and differences in the factors connected to populist voting on both sides of the Atlantic. In the US, neither interpersonal inequality nor economic decline can explain populist support on their own. However, these factors gain significance when considered together with the racial composition of the area. Counties with a large share of white population where economic growth has been stagnant and where inequalities have increased supported Donald Trump. Meanwhile, counties with a similar economic trajectory but with a higher share of minorities shunned populism. In Europe, the most significant factor behind the rise of far-right populism is economic decline. This effect is particularly large in areas with a high share of immigration.
    Keywords: populism, anti-system voting, interpersonal inequality, interterritorial inequality, economic growth, Europe, US.
    JEL: D31 D72 R11
    Date: 2023–03
  7. By: Tom Broekel; Louis Knupling; Lars Mewes
    Abstract: It is widely understood that innovations tend to be concentrated in cities, which is evidenced by innovative output increasing disproportionately with city size. Yet, given the heterogeneity of countries and technologies, few studies explore the relationship between population and innovation numbers. For instance, in the USA, innovative output scaling is substantial and is particularly pronounced for complex technologies. Whether this is a universal pattern of complex technologies and a potential facilitator of scaling, is unknown. Our analysis compared urban scaling in urban areas across 33 countries and 569 technologies. Considerable variation was identified between countries, which is rooted in two fundamental mechanisms (sorting and boosting). The sorting of innovation-intensive technologies is found to drive larger innovation counts among cities. Among most countries, this mechanism contributes to scaling more than city size boosting innovation within specific technologies. While complex technologies are concentrated in large cities and benefit from the advantages of urbanization, their contribution to the urban scaling of innovations is limited.
    Keywords: innovation, urban scaling, complexity, patents, sorting, geography of innovation
    JEL: R12 O33 O18 O57
    Date: 2023–03
  8. By: Avila Uribe, Antonio
    Abstract: A growing literature has documented sizeable negative effects of air pollution on individuals’ health, labour market performance and human capital accumulation, all determinants of a country’s overall economic activity. So what are the effects of air pollution on aggregate economic production? To answer this, I study the effects of PM2.5 on county-level GDP, GDP per capita, and GDP per employee in the United States (2006-2018) by exploiting a detailed dataset of yearly air pollution exposure by county and a set of instrumental variables. In my main specification, I use exogenous year-to-year variation in wildfire-induced PM2.5 exposure from air trajectories simulations. Contrary to recent studies in China and the EU, which find large negative effects in all regions, my results show no effect for the US. However, these headline results mask spatial and temporal heterogeneity. Economically relevant negative effects appear to be present in rural areas during working days or when base levels or air pollution are above the median, and in the trade sector and educational services. The results are robust to various alternative specifications and alternative instruments previously used in the literature, such as thermal inversions or smoke plume polygons.
    Keywords: air pollution; GDP; productivity; US; wildfires
    JEL: R11 Q53 Q54 O40 O47 O51
    Date: 2023–03–14
  9. By: Peters, Jan Cornelius (Thünen Institute); Niebuhr, Annekatrin (Institute for Employment Research (IAB), Nuremberg, Germany ; Univ, Kiel)
    Abstract: "Using linked employer-employee data on labor market biographies of workers in Germany, this paper analyzes where valuable work experience is primarily acquired. It distinguishes between learning effects related to firm size and labor market size. We show that wages increase with the size of the cities and establishments in which experience was accumulated. Almost 40 percent of the dynamic benefits of working in large cities are in fact due to working in large firms. We provide evidence on two potential explanations for the role of size: formal training increases with firm size and the frequency of job changes with city size." (Author's abstract, IAB-Doku) ((en))
    Keywords: IAB-Open-Access-Publikation
    JEL: J31 R12 R23
    Date: 2023–03–30
  10. By: Bell, Brian; Blundell, Jack; Machin, Stephen
    Abstract: We present a new analysis of intergenerational mobility across three cohorts in England and Wales using linked decennial census microdata, focusing on occupation, homeownership, and education. Four main results emerge. First, area-level differences in upward occupational mobility are highly persistent over time. Second, measures of absolute and relative mobility tend to be spatially positively correlated. Third, there is a robust relationship between upward educational and upward occupational mobility. Last, there is a small negative relationship between upward homeownership mobility and upward occupational mobility, revealing that social mobility comparisons based on different outcomes can have different trends.
    Keywords: Intergenerational mobility; ES/R00823X/1; Europe Center at Stanford University
    JEL: J62 R23 R31
    Date: 2023–01–01
  11. By: Erik Brynjolfsson; Catherine Buffington; Nathan Goldschlag; J. Frank Li; Javier Miranda; Robert Seamans
    Abstract: We use data from the Annual Survey of Manufactures to study the characteristics and geography of investments in robots across U.S. manufacturing establishments. We find that robotics adoption and robot intensity (the number of robots per employee) is much more strongly related to establishment size than age. We find that establishments that report having robotics have higher capital expenditures, including higher information technology (IT) capital expenditures. Also, establishments are more likely to have robotics if other establishments in the same Core-Based Statistical Area (CBSA) and industry also report having robotics. The distribution of robots is highly skewed across establishments’ locations. Some locations, which we call Robot Hubs, have far more robots than one would expect even after accounting for industry and manufacturing employment. We characterize these Robot Hubs along several industry, demographic, and institutional dimensions. The presence of robot integrators and higher levels of union membership are positively correlated with being a Robot Hub.
    Keywords: robot, technology adoption, manufacturing, labor
    Date: 2023–03
  12. By: James McNerney; Yang Li; Andres Gomez-Lievano; Frank Neffke
    Abstract: Economic transformation – change in what an economy produces – is foundational to development and rising standards of living. Our understanding of this process has been propelled recently by two branches of work in the field of economic complexity, one studying how economies diversify, the other how the complexity of an economy is expressed in the makeup of its output. However, the connection between these branches is not well understood, nor how they relate to a classic understanding of structural transformation. Here, we present a simple dynamical modeling framework that unifies these areas of work, based on the widespread observation that economies diversify preferentially into activities that are related to ones they do already. We show how stylized facts of long-run structural change, as well as complexity metrics, can both emerge naturally from this one observation. However, complexity metrics take on new meanings, as descriptions of the long-term changes an economy experiences rather than measures of complexity per se. This suggests relatedness and complexity metrics are connected, in a hitherto overlooked way: Both describe structural change, on different time scales. Whereas relatedness probes transformation on short time scales, complexity metrics capture long-term change.
    Date: 2023–03

This nep-geo issue is ©2023 by Andreas Koch. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.