nep-geo New Economics Papers
on Economic Geography
Issue of 2023‒08‒21
fourteen papers chosen by
Andreas Koch
Institut für Angewandte Wirtschaftsforschung

  1. Frontier workers, and the seedbeds of inequality and prosperity By Connor, Dylan Shane; Kemeny, Tom; Storper, Michael
  2. The geography of environmental innovation: a rural/urban comparison By Danielle Galliano; Simon Nadel; Pierre Triboulet
  3. The Linear Algebra of Economic Geography Models By Benny Kleinman; Ernest Liu; Stephen J. Redding
  4. How Much Should We Trust Regional-Exposure Designs? By Jeremy Majerovitz; Karthik Sastry
  5. Regional Economic Impacts of the Øresund Cross-Border Fixed Link: Cui Bono? By Michael Funke; Kadri Männasoo; Helery Tasane
  6. The Regional Keynesian Cross By Marco Bellifemine; Adrien Couturier; Rustam Jamilov
  7. Local labor markets as a taxable location factor? Evidence from a shock to foreign labor supply By Nover, Justus
  8. Capital Shocks and UK Regional Divergence By Michiel Daams; Philip McCann; Paolo Veneri; Richard Barkham
  9. Do Primary Healthcare Facilities in More Remote Areas Provide More Medical Services? Spatial Evidence from Rural Western China By Shen, Chi; Lai, Sha; Deng, Qiwei; Cao, Dan; Zhao, Dantong; Zhao, Yaxin; Zhou, Zhongliang; Dong, Wanyue; Chen, Xi
  10. Consumption Zones By Andrea Batch; Benjamin R. Bridgman; Abe C. Dunn; Mahsa Gholizadeh
  11. Nighttime light pollution and economic activities: A spatio-temporal model with common factors for US counties By Georges Bresson; Jean-Michel Etienne; Guy Lacroix
  12. Remote Work, Foreign Residents, and the Future of Global Cities By Pedro Teles; João Guerreiro; Sérgio Rebelo
  13. The Local Origins of Business Formation By Emin Dinlersoz; Timothy Dunne; John Haltiwanger; Veronika Penciakova
  14. How institutions shape the economic returns of public investment in European regions By Kerui Du; Luis Orea; Inmaculada C. Alvarez

  1. By: Connor, Dylan Shane; Kemeny, Tom; Storper, Michael
    Abstract: This paper examines the role of work at the cutting of technological change – frontier work – as a driver of prosperity and spatial income inequality. Using new methods and data, we analyze the geography and incomes of frontier workers from 1880 to 2019. Initially, frontier work is concentrated in a set of ‘seedbed’ locations, contributing to rising spatial inequality through powerful localized wage premiums. As technologies mature, the economic distinctiveness of frontier work diminishes, as ultimately happened to cities like Manchester and Detroit. Our work uncovers a plausible general origin story of the unfolding of spatial income inequality.
    Date: 2023–07–13
  2. By: Danielle Galliano (AGIR - AGroécologie, Innovations, teRritoires - Toulouse INP - Institut National Polytechnique (Toulouse) - UT - Université de Toulouse - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement); Simon Nadel (CLERSÉ - Centre Lillois d’Études et de Recherches Sociologiques et Économiques - UMR 8019 - Université de Lille - CNRS - Centre National de la Recherche Scientifique); Pierre Triboulet (AGIR - AGroécologie, Innovations, teRritoires - Toulouse INP - Institut National Polytechnique (Toulouse) - UT - Université de Toulouse - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement)
    Abstract: This paper aims to contribute to enlarge a geography of eco-innovation. The objective is to study what kind of spatial externalities (specialization, related and unrelated variety) has the most positive impact on eco-innovation, according to firm's location (rural, peri-urban, urban). We empirically test this framework using a hurdle negative binomial model on firm-level data drawn from the French Community Innovation Survey (CIS). The results show that spatial externalities have different effects depending on the firm's engagement and breadth of eco-innovation as well as on its location. Marshallian specialization has a positive effect both on engagement and breadth of eco-innovations unlike unrelated variety, which negatively impacts breadth of eco-innovation. With regard to the firm's location, related variety is particularly correlated with the eco-innovation breadth of rural firms, whereas specialization is positively correlated with the breadth of eco-innovations of peri-urban firms. As for urban firms, spatial externalities seem to have less impact on their eco-innovation related behavior.
    Keywords: Eco-innovation, spatial externalities, related variety, rural, French industry
    Date: 2023
  3. By: Benny Kleinman; Ernest Liu; Stephen J. Redding
    Abstract: We provide sufficient statistics for nominal and real wage exposure to productivity shocks in a constant elasticity economic geography model. These exposure measures summarize the first-order general equilibrium elasticity of nominal and real wages in each location with respect to productivity shocks in all locations. They are readily computed using commonly-available trade data and the values of trade and migration elasticities. They have an intuitive interpretation in terms of underlying economic mechanisms. Computing these measures for all bilateral pairs of locations involves a single matrix inversion and therefore remains computational efficient even with an extremely high-dimensional state space. These sufficient statistics provide theory-consistent measures of locations' exposure to productivity shocks for use in further economic and statistical analysis.
    JEL: F10 F15 R12
    Date: 2023–07
  4. By: Jeremy Majerovitz; Karthik Sastry
    Abstract: Many prominent studies in macroeconomics, labor, and trade use panel data on regions to identify the local effects of aggregate shocks. These studies construct regional-exposure instruments as an observed aggregate shock times an observed regional exposure to that shock. We argue that the most economically plausible source of identification in these settings is uncorrelatedness of observed and unobserved aggregate shocks. Even when the regression estimator is consistent, we show that inference is complicated by cross-regional residual correlations induced by unobserved aggregate shocks. We suggest two-way clustering, two-way heteroskedasticity- and autocorrelation-consistent standard errors, and randomization inference as options to solve this inference problem. We also develop a feasible optimal instrument to improve efficiency. In an application to the estimation of regional fiscal multipliers, we show that the standard practice of clustering by region generates confidence intervals that are too small. When we construct confidence intervals with robust methods, we can no longer reject multipliers close to zero at the 95% level. The feasible optimal instrument more than doubles statistical power; however, we still cannot reject low multipliers. Our results underscore that the precision promised by regional data may disappear with correct inference.
    Keywords: applied econometrics; regional data; shift-share instruments
    JEL: C12 C18 C21 C23 C26 F16 R12
    Date: 2023–07–27
  5. By: Michael Funke; Kadri Männasoo; Helery Tasane
    Abstract: Recently, there has been a growing interest in newly developed econometric tools to conduct counterfactual analysis when a treated unit experiences a policy intervention, and an artificial control group has to be constructed. Adopting novel penalized synthetic control methods, we quantify the causal impact of the multi-modal Øresund fixed link on the adjacent cross-border regions in Skåne and Zealand. The treatment impacts on the intertwining metropolitan regions of Copenhagen and Malmö are positive. However, the impact on the Copenhagen metropolitan area is overlaid by the Great Belt strait fixed link, which was opened shortly before. An array of robustness tests supports our interpretations, and several appendices supplement the presentation in the paper.
    Keywords: Øresund fixed link, cities, infrastructure, economic development, synthetic control method
    JEL: C21 C54 H54 O11 R12 R42
    Date: 2023
  6. By: Marco Bellifemine (London School of Economics (LSE)); Adrien Couturier (London School of Economics (LSE)); Rustam Jamilov (University of Oxford)
    Abstract: We study the transmission of monetary policy across space in a heterogeneous agents New Keynesian (HANK) model of a monetary union. Using sequence-space methods, we derive the regional Keynesian cross: a characterization of the response of local employment to unexpected changes in interest rates along two dimensions of spatial heterogeneity: (i) openness to national trade and (ii) intertemporal marginal propensities to consume (iMPCs). At the core of our mechanism is an equilibrium complementarity between these two channels, which we validate in the data. We provide an aggregation result and derive the national Keynesian cross that summarizes the role of the joint distribution of regional iMPCs and trade openness across space for the nation-wide response to aggregate shocks. We provide empirical support for our theory using detailed county-level data and identified monetary surprises for the United States. Our main result is that the joint regional distribution of county-level openness to national trade and iMPCs is crucial for the amplification of monetary shocks and the potency of fiscal stabilization policies.
    Date: 2023–03
  7. By: Nover, Justus
    Abstract: This paper examines how municipal taxes respond to the local impact of a labor market shock. The analysis exploits a commuting policy that liberalized cross-border labor markets between Switzerland and the EU. The reform was implemented at a time of skilled labor shortages and led to a substantial inflow of cross-border workers into Swiss border municipalities. Identification rests on exogenous regional variation in treatment intensities based on commuting times. The results show that corporate tax changes are significantly larger than zero in highly-treated border municipalities after the reform and when compared to less-affected regions. This is consistent with the theory according to which governments can tax rents that arise from productive location factors - an interpretation supported by several model extensions and robustness tests. The results on personal income taxation indicate a similar yet smaller and lagged response.
    Keywords: productive amenities, agglomeration, cross-border commuting, skill shortage, tax competition, Swiss-EU agreement
    JEL: H71 R23
    Date: 2023
  8. By: Michiel Daams (University of Groningen); Philip McCann (Alliance Manchester Business School, The University of Manchester and The Productivity Institute); Paolo Veneri (OECD, Paris and GSSI, Italy); Richard Barkham (CBRE, Dallas)
    Keywords: real estate investment, UK regions, productivity
    Date: 2023–07
  9. By: Shen, Chi; Lai, Sha; Deng, Qiwei; Cao, Dan; Zhao, Dantong; Zhao, Yaxin; Zhou, Zhongliang; Dong, Wanyue; Chen, Xi
    Abstract: Primary healthcare institutions (PHIs) in China have experienced a sizable decline in medical services in recent years. Despite the large regional disparities in China, there is a lack of evidence on the differential patterns of medical services offered by PHIs, especially from a spatial perspective. This study examines whether residents in more remote areas use more medical services offered by township healthcare centers (THCs), a main type of PHIs. Linking medical visits to 923 THCs in a western Chinese province in 2020 with the driving time and geographic coordinates from the Gaode map, a leading map navigation provider in China, we applied a multilevel linear model and a geographically weighted regression to examine spatial heterogeneity in medical service utilization. We showed that a one-hour increase in the shortest driving time between THCs and the local county hospitals was associated with an average 6% increase in THCs outpatient visits and a 0.6% increase in THCs inpatient visits. Our findings suggest that THCs located in more remote areas provided more medical services, especially outpatient services.
    Keywords: Primary healthcare institutions, Spatial remote, Medical Service, China
    Date: 2023
  10. By: Andrea Batch; Benjamin R. Bridgman; Abe C. Dunn; Mahsa Gholizadeh (Bureau of Economic Analysis)
    Abstract: Local area data are important to many economic questions, but most local area data are reported using political units, such as counties, which often do not match economic units, such as product markets. Commuting zones (CZs) group counties into local labor markets. However, CZs are not the most appropriate grouping for other economic activities. We introduce consumption zones (ConZs), groupings of counties appropriate for the analysis of household consumption. We apply the CZ methodology to payment card data, which report spending flows across U.S. counties for 15 retail and service industries. We find that different industries have different market sizes. Grocery stores have more than five times the number of ConZs as live entertainment. Industries with more frequent purchases are more local than those with infrequent purchases. We apply ConZs to measuring industry concentration. ConZs give lower concentration levels than counties, with the largest gap for infrequent purchase industries. The difference is economically important. Some industries are below the antitrust enforcement thresholds with ConZs but above them for counties. We further demonstrate the importance of ConZs by analyzing the proposed merger of Albertsons and Kroger.
    JEL: R12
    Date: 2023–05
  11. By: Georges Bresson; Jean-Michel Etienne; Guy Lacroix
    Abstract: Excessive nighttime light is known to have detrimental effects on health and on the environment (fauna and flora). The paper investigates the link between nighttime light pollution and economic growth, air pollution, and urban density. We propose a county model of consumption which accounts for spatial interactions. The model naturally leads to a dynamic general nesting spatial model with unknown common factors. The model is estimated with data for 3071 continental US counties from 2012–2019 using a quasi-maximum likelihood estimator. Short run and long run county marginal effects emphasize the importance of spillover effects on radiance levels. Counties with high levels of radiance are less sensitive to additional growth than low-level counties. This has implications for policies that have been proposed to curtail nighttime light pollution. L’éclairage nocturne de forte intensité est connu pour avoir des effets néfastes sur la santé et sur l'environnement (faune et flore). Cet article étudie le lien entre la pollution lumineuse nocturne et la croissance économique, la pollution de l'air et la densité urbaine. Nous proposons un modèle de consommation au niveau des comtés américains qui tient compte des interactions spatiales. Le modèle conduit naturellement à un modèle spatial dynamique général emboîté avec facteurs communs inconnus. Le modèle est estimé avec les données de 3 071 comtés continentaux américains de 2012 à 2019 à l'aide d'un estimateur de quasi-maximum de vraisemblance. Les effets marginaux des comtés à court et à long terme soulignent l'importance des effets de débordement sur la radiance locale. Les comtés caractérisés par de hauts niveaux de radiance sont moins sensibles à un accroissement de l’activité économique que ceux avec de faibles niveaux. Cela a des implications pour le design de politiques visant à réduire la pollution lumineuse nocturne.
    Keywords: Nighttime light pollution, air pollution, GDP, satellite data, space-time panel data model, Pollution lumineuse nocturne, pollution de lâair, PIB, données satellitaires, modèle panel spatio-temporel
    JEL: C23 Q53
    Date: 2023–07–24
  12. By: Pedro Teles; João Guerreiro; Sérgio Rebelo
    Abstract: As remote work opportunities expand, more people are seeking residence in foreign destinations. The resulting surge in foreign residents generates capital gains for property owners but negatively impacts renters and creates potentially important production, congestion, and amenities externalities. We study the optimal policy toward foreign residents in a model with key features emphasized in policy discussions. Using this model, we provide sufficient statistics to evaluate the impact of an influx of foreign residents and to calculate the tax/transfer policies required to implement the optimal policy. This policy involves implementing transfers to internalize agglomeration, congestion, and other potential externalities. Importantly, we find that it is not optimal to restrict, tax, or subsidize home purchases by foreign residents.
    JEL: H00 J61 R3 R58
    Date: 2023
  13. By: Emin Dinlersoz; Timothy Dunne; John Haltiwanger; Veronika Penciakova
    Abstract: What locations generate more business ideas, and where are ideas more likely to turn into businesses? Using comprehensive administrative data on business applications, we analyze the spatial disparity in the creation of business ideas and the formation of new employer startups from these ideas. Startups per capita exhibit enormous variation across granular units of geography. We decompose this variation into variation in ideas per capita and in their rate of transition to startups, and find that both components matter. Observable local demographic, economic, financial, and business conditions accounts for a significant fraction of the variation in startups per capita, and more so for the variation in ideas per capita than in transition rate. Income, education, age, and foreign-born share are generally strong positive correlates of both idea generation and transition. Overall, the relationship of local conditions with ideas differs from that with transition rate in magnitude, and sometimes, in sign: certain conditions (notably, the African-American share of the population) are positively associated with ideas, but negatively with transition rates. We also find a close correspondence between the actual rank of locations in terms of startups per capita and the predicted rank based only on observable local conditions – a result useful for characterizing locations with high startup activity.
    Date: 2023–07
  14. By: Kerui Du; Luis Orea; Inmaculada C. Alvarez
    Abstract: In this article, we introduce a new command spxtsfa for fitting spatial stochastic frontier models in Stata. Over the last decades, an important theoretical progress of stochastic frontier models is the incorporation of various types of spatial components. Models with the ability to account for spatial dependence and spillovers have been developed for efficiency and productivity analysis, drawing extensive attention from industry and academia. Due to the unavailability of the statistical packages, the empirical applications of the new stochastic frontier models appear to be lagging. The spxtsfa command provides a routine for estimating the spatial stochastic frontier models in the style of Orea and Álvarez (2019) and Galli (2022), enabling users to handle different sources of spatial dependence. In the presented article, we introduce the spatial stochastic frontier models, describe the syntax and options of the new command, and provide several examples to illustrate its usage.
    Date: 2023

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