nep-geo New Economics Papers
on Economic Geography
Issue of 2023‒11‒27
seven papers chosen by
Andreas Koch, Institut für Angewandte Wirtschaftsforschung

  1. The role of spillovers when evaluating regional development interventions: Evidence from administrative upgrading in China By Xiaoxuan Zhang; John Gibson; Chao Li
  2. Detecting economic growth pathways in the EU’s lagging regions By Ganau, Roberto; Kilroy, Austin
  3. Trading places: Mobility responses of native and foreign-born adults to the China trade shock By David Autor; David Dorn; Gordon H. Hanson
  4. Local and national concentration trends in jobs and sales: The role of structural transformation By David Autor; Christina Patterson; John Van Reenen
  5. Spatial heterogeneity in welfare reform success By Barbara Broadway; Anna Zhu
  6. Knowledge spillovers from clean innovation. A tradeoff between growth and climate? By Ralf Martin; Dennis Verhoeven
  7. Spatial patterns and drivers of SME digitalisation. By Adelheid Holl; Ruth Rama

  1. By: Xiaoxuan Zhang (University of Waikato); John Gibson (University of Waikato); Chao Li (University of Auckland)
    Abstract: Direct effects of regional development interventions on targeted areas may be amplified by positive spillovers from elsewhere or offset by negative spillovers. Yet spillovers are often ignored in the applied literature, where impact analyses based on difference-in-differences typically treat spatial units as independent of their neighbours. We study spatial spillovers from a popular regional development intervention in China – converting counties to cities. China’s top-down approach lets only central government bestow city status on an area, with over ten percent of counties upgraded to cities in the last two decades. A growing literature estimates impacts of these conversions, with spatial units typically treated as independent of their neighbours. In contrast, our spatial econometric models use a 20-year panel for almost 2500 county-level units to allow indirect spillover effects on indicators of local economic activity. The positive direct effects on GDP and luminosity of a county being upgraded are amplified through positive indirect effects, especially in the eastern regions of China where economic activity and population are more densely concentrated. The models without spatial lags that ignore spillovers give estimated effects of converting counties to cities that are only two-fifths to two thirds as large as the estimated effects coming from the spatial models.
    Keywords: County upgrading;luminosity;regional development;spatial spillovers;China
    JEL: R12
    Date: 2023–11–07
  2. By: Ganau, Roberto; Kilroy, Austin
    Abstract: We analyse growth pathways of European Union NUTS-3 regions from 2003 to 2017. We focus on lagging regions, using a taxonomy based on income level and long-run growth rate that combines the Cohesion Policy classification with that proposed under the ‘Catching Up’ initiative. We find that lagging areas can sometimes be found within larger and more prosperous regions, especially in Western Europe. We analyse the role of industrial structure, innovation and inward foreign direct investments as growth drivers, and find that economic growth is associated with different economic dimensions in different types of regions. The NUTS-3 scale of analysis is helpful to inform the design and implementation of development strategies catering to different opportunities at this smaller geographical scale.
    Keywords: development policy; economic growth; European Union; NUTS-3 regions; World Bank Group
    JEL: R11 R58
    Date: 2023–01–02
  3. By: David Autor; David Dorn; Gordon H. Hanson
    Abstract: Previous research finds that the greater geographic mobility of foreign than native-born workers following economic shocks helps to facilitate local labor market adjustment to shifting regional economic conditions. We examine the role that immigration may have played in enabling U.S. commuting zones to respond to manufacturing job loss caused by import competition from China. Although population headcounts of the foreign-born fell by more than those of the native-born in regions exposed to the China trade shock, the overall contribution of immigration to labor market adjustment in this episode was small. Because most U.S. immigrants arrived in the country after manufacturing regions were already mature, few took up jobs in industries that would later see increased import penetration from China. The foreign-born share of the working-age population in regions with high trade exposure was only three-fifths that in regions with low exposure. Immigration thus appears more likely to aid adjustment to cyclical shocks, in which job loss occurs in regions that had recent booms in hiring, rather than facilitating adjustment to secular regional decline, in which hiring booms occurred in the more distant past.
    Keywords: geographic mobility, foreign-born, native-born, economic shocks, China, immigration, labor
    Date: 2023–06–01
  4. By: David Autor; Christina Patterson; John Van Reenen
    Abstract: National U.S. industrial concentration rose between 1992-2017. Simultaneously, the Herfindahl Index of local (six-digit-NAICS by county) employment concentration fell. This divergence between national and local employment concentration is due to structural transformation. Both sales and employment concentration rose within industry-by-county cells. But activity shifted from concentrated Manufacturing towards relatively unconcentrated Services. A stronger between-sector shift in employment relative to sales explains the fall in local employment concentration. Had sectoral employment shares remained at their 1992 levels, average local employment concentration would have risen by 9% by 2017 rather than falling by 7%. JEL: L11, L60, O31, O34, P33, R3
    Keywords: Employment concentration, sales concentration, local labor markets, structural transformation
    Date: 2023–04–19
  5. By: Barbara Broadway (Melbourne Institute: Applied Economic & Social Research, The University of Melbourne); Anna Zhu (RMIT University, Melbourne)
    Abstract: We investigate if geography matters to the success of an exogenous change in a country's institutional settings. We examine the causal impact from one of the largest welfare reforms in Australia, which used the levers of reducing Income Support payments and increasing participation requirements, to reduce welfare dependency and to improve employment outcomes among single mothers. Using a new administrative dataset, which captures the full universe of single mothers targeted by this reform, along with information from five other data sources, we find significant heterogeneity in the reform effects by geography. The reform did not have the intended effect in geographic regions that were relatively disadvantaged. The effect of the reform for all the local labour market in Australia is estimated with Regression Discontinuity models and correlated with the characteristics of the local labour market region. Our aim is to ask: is there spatial heterogeneity in the local reform effects? And if so, can we find patterns that describe how the reform’s effectiveness varies with local conditions such as employment opportunities, access to services, and community characteristics?
    Keywords: welfare reform, earnings, disadvantage, spatial heterogeneity
    JEL: I38 R12
    Date: 2023–10
  6. By: Ralf Martin; Dennis Verhoeven
    Abstract: Innovation policy faces a tradeoff between growth and climate objectives when the knowledge spillover externality from clean innovation is low compared to other sectors. To make such a comparison, we use patent data to estimate field-specific spillover returns generated by R&D support. Supporting Clean presents itself as a win-win opportunity, yielding global returns one-eighth higher than those of an untargeted policy. Nevertheless, only a modest portion of the returns stays within country borders, raising the question of whether national interests distort efficient allocation. Our policy simulations underscore the benefits of supranational coordination in clean innovation policy, potentially boosting returns by approximately 25% for the EU and over 60% globally. Moreover, the EU benefits strongly from US Clean innovation spillovers, impacting the debate on the Inflation Reduction Act. Overall, we identify no explicit innovation policy tradeoff in tackling the twin challenges of economic growth and climate change but emphasize the necessity for international cooperation.
    Keywords: innovation, knowledge spillovers, clean technology, innovation policy, green transition, net-zero, patent data, Economic geography, Green Growth, Productivity, Technological change
    Date: 2023–07–12
  7. By: Adelheid Holl; Ruth Rama
    Abstract: Digital transformation plays an increasingly important role in the growth and competitiveness of small and medium-sized enterprises (SMEs), yet little is known regarding spatial inequalities in their adoption of advanced digital technologies. Using recent data from the Flash Eurobarometer 486, we study the spatial patterns of drivers for the implementation of new digital technologies in SMEs in Europe. In our analysis, the focus is on the possible influence of location. Considerable heterogeneity of SMEs is found in their propensity to adopt advanced digital technologies related to the strength of the local business environment and to the urban/rural hierarchy.
    Keywords: SMEs, Digitalisation, technology adoption, location.
    Date: 2022–07

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