nep-geo New Economics Papers
on Economic Geography
Issue of 2023‒11‒13
eleven papers chosen by
Andreas Koch, Institut für Angewandte Wirtschaftsforschung

  1. The effect of national industry shocks on local employment: impacts on geographical inequality and inefficiency By Dorn, David; Kircher, Philipp; Salzmann, Oliver
  2. The spatial evolution of economic activities and the emergence of cities By Davide Fiaschi; Cristiano Ricci
  3. Climate change and migration: the case of Africa By Bruno Conte
  4. Marshallian and Jacobian Externalities in Creative Industries By Goya, Daniel
  5. The linear algebra of economic geography models By Benny Kleinman; Ernest Liu; Stephen J. Redding
  6. Divided we fall? The effect of manufacturing decline on the social capital of US communities By Diemer, Andreas
  7. Temperature and Local Industry Concentration By Jacopo Ponticelli; Qiping Xu; Stefan Zeume
  8. Internationalisation, specialisation and technological collaboration in the EU Outermost Regions: A patent data-based analysis By OECD
  9. Spatial Durbin Model of Regional Incomes in India: The Role of Public, Private and Human Capital By Vivek Jadhav; Brinda Viswanathan
  10. Local Labor Markets with Non-homothetic Preferences By Cardullo, Gabriele; Sechi, Agnese
  11. Moran's I Lasso for models with spatially correlated data By Sylvain Barde; Rowan Cherodian; Guy Tchuente

  1. By: Dorn, David; Kircher, Philipp; Salzmann, Oliver
    Abstract: We analyse the effect of national industry shocks on local employment. By providing a novel structural view on the Bartik framework, we show that the difference in national and regional employment growth trends can be attributed to within-region spillovers. These spillovers can be quantified in a simple regression of regional employment change predictions versus actual regional employment changes, where regional employment change predictions are based on national shocks. We find consistent evidence that a predicted change in employment by 1% is associated with a 1.3% change in actual employment in a region. We hypothesize that agglomeration plays a key role in explaining the difference between the predicted and the actual employment growth. When we allow for non-linearities in a variety of setups, we find that the main driver of agglomeration effects are regions with particularly strong growth in employment which outperform their predictions. Taking the employment weighted mean as inflection point, regions with below mean predicted employment growth show a roughly 1:1 translation of predicted job creation to actual job creation. For regions with above mean predictions this ratio increases to 1:1.7.
    Date: 2023–04–01
  2. By: Davide Fiaschi; Cristiano Ricci
    Abstract: This paper studies the spatial agglomeration of workers and income in a continuous space and time framework. Production and consumption are decided in local markets, characterized by the presence of spatial spillovers and amenities. Workers move across locations maximizing their instantaneous utility, subject to mobility costs. We prove the existence of a short-run Cournot-Nash equilibrium, and that, in the limit of an infinite number of workers, the sequence of short-run equilibria can be expressed by a partial differential equation. We characterize the conditions under which the long-run equilibrium displays spatial agglomerations. Social welfare is non-decreasing over time, and in the long-run equilibrium the expected utility of a representative worker is equalized over space and, therefore, the spatial allocation is efficient. The model can reproduce several stylized effects, such as the emergence of spatial agglomerations (cities) with different sizes and shapes; the dependence by history of spatial pattern of economic activities; a non-linear out-of-equilibrium dynamics; and finally, the phenomenon of metastability, where a long period of apparent stability in the spatial distribution is followed by a sharp transition to a new equilibrium.
    Date: 2023–10
  3. By: Bruno Conte
    Abstract: How will future climate change affect rural economies like sub-Saharan Africa (SSA) in terms of migration and welfare losses? How can policy enhance SSA’s capacity to adapt to this process? I answer these questions with a quantitative framework that, coupled with rich spatial data and forecasts for the future, estimates millions of climate migrants and sizeable and unequal welfare losses in SSA. Investigating migration and trade policies as mitigating tools, I find a tradeoff associated with the former: reducing SSA migration barriers to the European Union (EU) standards eliminates aggregate welfare losses at the cost of more climate migration and high regional inequality. Reducing tariffs to the EU levels attenuates this cost.
    Keywords: climate change, migration, economic geography
    JEL: O15 Q54 R12
    Date: 2023–10
  4. By: Goya, Daniel
    Abstract: Marshallian externalities are the benefits obtained by a sector due to geographical agglomeration, and Jacobian effects are spillovers related to the novel combinations that can occur in cities with diversified economic activities. This paper argues that most of the quantitative literature on creative industries is asking whether they are a source of Marshallian or Jacobian effects, inasmuch as a stronger creative sector is a direction of diversification that is likely to have positive spillovers to the rest of the economy. Exploring both questions under a common framework, the results are consistent with the existence of Marshallian but not of Jacobian effects, which calls to caution when making policy suggestions regarding the sector. The degree of specialization in creative sectors is associated with higher sales and a higher number of rms in those sectors, albeit at a decreasing rate. A similar relationship is found for specialization in creative occupations and the incomes of those workers. Though there is no evidence of spillovers from creative industries in general to the rest of the economy, analyses at a more disaggregated level could produce different results and useful insights for policy.
    Keywords: creative economy;Marshallian externalities;Jacobian externalities;agglomeration effects
    JEL: R12 Z19 R58
    Date: 2022–01
  5. 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.
    Keywords: economic geography, trade, migration
    Date: 2023–07–11
  6. By: Diemer, Andreas
    Abstract: What happens to local communities when manufacturing disappears? I examine changes in associational density over nearly two decades as a proxy for social capital in US labor markets. Exploiting plausibly exogenous trade‐induced shocks to local manufacturing activity, I test whether deindustrialization is associated with greater or lower organizational membership. I uncover a robust negative relationship between the two variables, particularly acute in rural and mostly‐White areas. My findings, however, are sensitive to measurement: There are no clearly discernible effects of deindustrialization on social capital when I consider alternative proxies for the outcome. To reconcile these results, I present evidence suggesting that economic adversity may induce a qualitative, rather than quantitative, change in social capital.
    Keywords: deindustrialization; regional labor markets; social capital
    JEL: R14 J01
    Date: 2023–09–01
  7. By: Jacopo Ponticelli; Qiping Xu; Stefan Zeume
    Abstract: We use plant-level data from the US Census of Manufacturers to study the short and long run effects of temperature on manufacturing activity. We document that temperature shocks significantly increase energy costs and lower the productivity of small manufacturing plants, while large plants are mostly unaffected. In US counties that experienced higher increases in average temperatures between the 1980s and the 2010s, these heterogeneous effects have led to higher concentration of manufacturing activity within large plants, and a reallocation of labor from small to large manufacturing establishments. We offer a preliminary discussion of potential mechanisms explaining why large manufacturing firms might be better equipped for long-run adaptation to climate change, including their ability to hedge across locations, easier access to finance, and higher managerial skills.
    Keywords: Climate Change, Manufacturing, US, Local Industry Concentration
    JEL: Q54 O14 G3 L11
    Date: 2023–10
  8. By: OECD
    Abstract: This paper explores the innovation dynamics of the EU Outermost Regions (EU ORs) through patenting behaviour. It emphasises the potential for international collaborations with a wide range of partners, and recommends to mobilise the resources and strategies provided by the EU to strengthen research and innovation in the private sector; enhance the impact of public research centres and universities; and foster intra-regional co-operation. It also calls for stronger ties with African countries, the Latin American and Caribbean region, as well as Small Island Developing States (SIDS), to foster innovation-based collaborations, particularly around sustainable agriculture, renewable energy and the ocean economy. The paper is developed within the framework of the EU-OECD project on Global Outermost Regions.
    Keywords: EU Outermost Regions, Global Value Chains, Intellectual Property Rights, Research and Development, Technological Innovation
    JEL: O33 O34 O52 O55 R11 R58 O54
    Date: 2023–10–30
  9. By: Vivek Jadhav ((Corresponding Author)Ph.D. Scholar, Madras School of Economics, Chennai); Brinda Viswanathan (Professor & Dean Research, Madras School of Economics, Chennai)
    Abstract: Most regional income studies in India examine only the convergence of regional per capita incomes with a limited number of studies analyzing the relative role of its determinants. Spatial Durbin model of regional income and growth based on the augmented Mankiw-Romer-Weil (MRW) -with public, private, household and human capitals as the determinants - is estimated using the 2015 Indicus data on per worker incomes for 103 regions (clusters of districts) of India. The results of the spatial model support spillover effect of public, human and private capital from neighbouring regions on per worker Gross Regional Domestic Product (GRDP) as found in several studies for European regions. We additionally find that public capital, which is not accounted for separately in the developed country regional models, is a relatively more important determinant for a developing country like India than private capital or human capital for this data. In the spatial growth model of per worker GRDP, none of the determinants except the state capital dummy variable have significant impact on the regional growth rate between 2001 and 2015. This may be a data limitation and perhaps a panel data model may be more suited for such an analysis.
    Keywords: Public capital, Regional Income, Spatial Durbin Model, Augmented MRW model
    JEL: O47 R12 R53 C21
  10. By: Cardullo, Gabriele (University of Genova); Sechi, Agnese (University of Genoa)
    Abstract: We study the effects on employment, costs of living, and income inequality of local shocks in the housing market or in the productivity of a tradable good. We construct a two-region search and matching model in which housing is considered a necessity good. Mobility of labor implies that any change in one region propagates into the other. The model is analytically tractable and provides some intuitive comparative statics results. We then calibrate the model on the basis of German data. Our simulations indicate that both types of shock produce limited employment gains but have a significant impact on housing prices and real income inequality: poorer, unemployed workers experience a larger increase in their cost of living index. This depends on the assumption of a non-homothetic utility function that generates a specific nominal wage to housing price positive relationship, partially safeguarding employed individuals against the rising cost of living.
    Keywords: local labor markets, income inequality, costs of living, housing expenditures, housing prices
    JEL: R23 R21 R31 J31 J61 J64 D31
    Date: 2023–10
  11. By: Sylvain Barde; Rowan Cherodian; Guy Tchuente
    Abstract: This paper proposes a Lasso-based estimator which uses information embedded in the Moran statistic to develop a selection procedure called Moran's I Lasso (Mi-Lasso) to solve the Eigenvector Spatial Filtering (ESF) eigenvector selection problem. ESF uses a subset of eigenvectors from a spatial weights matrix to efficiently account for any omitted cross-sectional correlation terms in a classical linear regression framework, thus does not require the researcher to explicitly specify the spatial part of the underlying structural model. We derive performance bounds and show the necessary conditions for consistent eigenvector selection. The key advantages of the proposed estimator are that it is intuitive, theoretically grounded, and substantially faster than Lasso based on cross-validation or any proposed forward stepwise procedure. Our main simulation results show the proposed selection procedure performs well in finite samples. Compared to existing selection procedures, we find Mi-Lasso has one of the smallest biases and mean squared errors across a range of sample sizes and levels of spatial correlation. An application on house prices further demonstrates Mi-Lasso performs well compared to existing procedures.
    Date: 2023–10

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