nep-geo New Economics Papers
on Economic Geography
Issue of 2023‒07‒10
four papers chosen by
Andreas Koch
Institut für Angewandte Wirtschaftsforschung

  1. Centrality Bias in Inter-City Trade By Mori, Tomoya; Wrona, Jens
  2. The dark side of green innovation? Green transition and regional inequality in Europe By Nils Grashof; Stefano Basilico;
  3. Unpacking Moving: A Quantitative Spatial Equilibrium Model with Wealth By Elisa Giannone; Qi Li; Nuno Paixao; Xinle Pang
  4. Putting Quantitative Models to the Test: An Application to Trump’s Trade War By Rodrigo Adão; Arnaud Costinot; Dave Donaldson

  1. By: Mori, Tomoya; Wrona, Jens
    Abstract: Large cities (central places) excessively export to smaller cities in their surrounding hinterland. Using Japanese inter-city trade data, we identify a substantial centrality bias: Shipments from central places to their hinterland are 50%-125% larger than predicted by gravity forces. This upward bias stems from aggregating across industries, which are hierarchically distributed across large and small cities, and therefore does not arise in sectoral gravity estimations. When decomposing the centrality bias along the margins of our data, we find that the by far largest part of this aggregation bias can be attributed to the extensive industry margin.
    Keywords: Inter-city trade, central place theory, gravity equation, aggregation bias
    JEL: C43 F10 F12 F14 R12
    Date: 2023
  2. By: Nils Grashof; Stefano Basilico;
    Abstract: This study explores the regional diversification processes into green technologies (2000- 2017) and their implications for regional inequalities. Utilizing patent and Eurostat data, we analyze these processes along the economic strength of regions and the nature of their knowledge base. Our findings reveal that both structurally strong and weak regions can successfully diversify into green technologies if they possess related technological capabilities. However, brown regions cannot do so. Already existing patterns of divergence between these two types of regions are unlikely to be exacerbated by a green transition, but new regional disparities between brown regions and other regions could emerge.
    Keywords: dark side of innovation, inequality, regional diversification, regional inequality, green innovation, green transition
    JEL: O32 O33 R11
    Date: 2023–06
  3. By: Elisa Giannone; Qi Li; Nuno Paixao; Xinle Pang
    Abstract: We argue that the interaction between mobility and wealth provides a view that rationalizes low geographic migration rates, despite migration costs being lower than currently thought. We reach this conclusion by developing and solving a quantitative dynamic spatial equilibrium model with endogenous wealth accumulated through liquid and illiquid assets. We estimate a yearly moving cost between Canadian cities of 196, 303 CAD for an average adult, substantially lower than previous estimates. To demonstrate the model’s validity, we study policies advocated to reduce disparities: Do moving vouchers or housing affordability policies enhance welfare, especially for the poor? Our findings suggest that moving vouchers only marginally increase the welfare of eligible households, and those who receive the vouchers tend to move to locations with lower house prices and wages. In contrast, our model shows that lower housing regulations in Vancouver can decrease the welfare gap between rich and poor by lowering house prices nationwide through spatial reallocation. Thus, the insurance value of living in high-income cities becomes higher, reducing the incentive for low-wealth families to move precautionarily to locations with low housing costs.
    Keywords: Housing; Regional economic developments
    JEL: G51 R13 R2 R31 R52
    Date: 2023–06
  4. By: Rodrigo Adão; Arnaud Costinot; Dave Donaldson
    Abstract: The primary motivation behind quantitative modeling in international trade and many other fields is to shed light on the economic consequences of policy changes. To help assess and potentially strengthen the credibility of such quantitative predictions we introduce an IV-based goodness-of-fit measure that provides the basis for testing causal predictions in arbitrary general-equilibrium environments as well as for estimating the average misspecification in these predictions. As an illustration of how to use our IV-based goodness-of-fit measure in practice, we revisit the welfare consequences of Trump’s trade war predicted by Fajgelbaum et al. (2020).
    Keywords: model testing and validation, computational general equilibrium, international trade, economic geography
    JEL: C52 F10 R10 E17 C68
    Date: 2023

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