nep-geo New Economics Papers
on Economic Geography
Issue of 2024‒01‒08
nineteen papers chosen by
Andreas Koch, Institut für Angewandte Wirtschaftsforschung

  1. Evaluating the spatial mismatch between population and factor endowments: The case of the European Union By Luisa Alamá-Sabater; Yolanda de Llanos; Miguel Ángel Márquez; Emili Tortosa-Ausina
  2. Turning technological relatedness into industrial strategy: The productivity effects of Smart Specialisation in Europe By Giacomo Lo Conte; Andrea Mina; Silvia Rocchetta
  3. Urban-Biased Structural Change By Natalie Chen; Dennis Novy; Carlo Perroni; Horng Chern Wong
  4. The Role of Regulation and Regional Government Quality for High Growth Firms: The Good, the Bad, and the Ugly By Sara Amoroso; Benedikt Herrmann; Alexander S. Kritikos
  5. The Entrepreneurial League Table of German Regions 1895 and 2019 By Michael Fritsch; Maria Greve; Michael Wyrwich
  6. Output Market Power and Spatial Misallocation By Santiago Franco
  7. Local and National Concentration Trends in Jobs and Sales: The Role of Structural Transformation By David Autor; Christina Patterson; John Van Reenen
  8. The Development of Ski Areas and Its Relation to the Alpine Economy in Switzerland By Pascal Troxler, Marcus Roller, Monika Bandi Tanner
  9. Spatial Unit Roots By Müller, Ulrich; Watson, Mark
  10. Illuminating Africa? By Tanner Regan; Giorgio Chiovelli; Stelios Michalopoulos; Elias Papaioannou
  11. The Skyscraper Revolution: Global Economic Development and Land Savings By Gabriel M. Ahlfeldt; Nathaniel Baum-Snow; Remi Jedwab; Gabriel Ahlfeldt
  12. Job relatedness, local skill coherence and economic performance. A job postings approach By Martin Henning; Rikard Eriksson; Petrus Garefelt; Hanna Martin; Zoltán Elekes
  13. The World’s Rust Belts: The Heterogeneous Effects of Deindustrialization on 1, 993 Cities in Six Countries By Luisa Gagliardi; Enrico Moretti; Michel Serafinelli
  14. A Review of Cross-Sectional Matrix Exponential Spatial Models By Ye Yang; Osman Dogan; Suleyman Taspinar; Fei Jin
  15. Tangible and intangible proximities in the access to Venture Capital: evidence from Italian innovative start-ups By Ghinami, Francesca; Montresor, Sandro
  16. Agency and Structure in Regional Development: In Search of a Social Science Research Programme By Grillitsch, Markus; Sotarauta, Markku
  17. Companion to the Interregional Input-Output System for Croatia By Haddad, Eduardo A.; Araújo, Inácio F.; Šimundić, Blanka
  18. Do co-ethnic commuters disseminate labor market information? Evidence from geocoded register data By Johan Klaesson; Özge Öner; Dieter Pennerstorfer
  19. The spatial and scalar implications of missions: Challenges and opportunities for policy By Elvira Uyarra; Iris Wanzenböck; Kieron Flanagan

  1. By: Luisa Alamá-Sabater (Department of Economics and IIDL, Universitat Jaume I, Castellón, Spain); Yolanda de Llanos (Department of Economics, Universidad de Extremadura, Spain); Miguel Ángel Márquez (Department of Economics, Universidad de Extremadura, Spain); Emili Tortosa-Ausina (IVIE, Valencia and IIDL and Department of Economics, Universitat Jaume I, Castellón, Spain)
    Abstract: Considerable research has been conducted on the trade-off between reducing regional inequality and promoting regional growth. However, no empirical research has explored the relationship between this trade-off and the spatial mismatch between the distribution of the regional population and the spatial distribution of regional factor endowments, such as labour and capital. The location of labour and capital is crucial in determining regional economic growth and inequalities. Therefore, we aim to assess the impact of spatial mismatches between factors of production (employment and physical capital stock) and population on regional growth and regional inequality. The study first calculates the Spatial Mismatch Indices for capital stock and employment with respect to the distribution of population across regions. Then, we use a VAR approach to detect the dynamic interactions in the short run among the location of the European regional population with respect to regional labour and physical capital, economic growth, and inequality growth. The research does not find a direct trade-off between regional European economic growth and inequality growth. Instead, the results support the view that the best strategy to mitigate economic inequality is to generate spatial mismatches between the spatial distribution of population and employment and between population and physical capital. When addressing regional disparities, the distribution of employment and physical capital should not be based solely on population criteria. Instead, spatial mismatches should be increased. However, the typical approach to implementing regional policies to allocate resources based on population-related criteria does not reduce economic inequality.
    Keywords: European regions, population, regional economic growth, regional inequality, regional factors production
    JEL: O18 O21 R1 R23 R3
    Date: 2023
  2. By: Giacomo Lo Conte; Andrea Mina; Silvia Rocchetta
    Abstract: In this paper we explore the impact of place-based innovation policy in Europe. We focus on the effects of Smart Specialisation strategies on the labour productivity of regional economies. We design an analytical framework that takes into account the entrepreneurial discovery process through which the policy is implemented, and connect the technological relatedness of regions with their specialisation choices. We use an IV estimation approach capable of handling endogeneity problems, and apply it to an extensive dataset of 102 NUTS2 regions extracted from the European Commission Smart Specialisation Portal. The results show that Smart Specialisation strategies increase labour productivity as long as the priorities are set in sectors related to pre-existing technological capabilities, indicating the fundamental importance of path-dependency in diversification choices. The findings deepen our understanding of regional development and innovation strategies, and have relevant implications for the implementation of appropriate policy instruments.
    Keywords: Related diversification; Specialization; Regional policy; Innovation policy; Place-based Policies
    JEL: O33 R11
    Date: 2023–12
  3. By: Natalie Chen; Dennis Novy; Carlo Perroni; Horng Chern Wong
    Abstract: Using firm-level data from France, we document that the shift of economic activity from manufacturing to services over the last few decades has been urban-biased: structural change has been more pronounced in areas with higher population density. This bias can be accounted for by the location choices of large services firms that sort into big cities and large manufacturing firms that increasingly locate in suburban and rural areas. Motivated by these findings, we estimate a structural model of city formation with heterogeneous firms and international trade. We find that agglomeration economies have strengthened for services but weakened for manufacturing. This divergence is a key driver of the urban bias but it dampens aggregate structural change. Rising manufacturing productivity and falling international trade costs further contribute to the growth of large services firms in the densest urban areas, boosting services productivity and services exports, but also land prices.
    Keywords: agglomeration, cities, export, firm sorting, manufacturing, productivity, services, trade costs
    JEL: F15 F61 R12 R14
    Date: 2023
  4. By: Sara Amoroso; Benedikt Herrmann; Alexander S. Kritikos
    Abstract: High growth firms (HGFs) are important for job creation and considered to be precursors of economic growth. We investigate how product- and labor-market regulations, as well as the quality of regional governments that implement these regulations, affect HGF development across European regions. Using data from Eurostat, OECD, WEF, and Gothenburg University, we show that both regulatory stringency and the quality of the regional government influence the regional shares of HGFs. Additionally, we find that the effect of labor- and product-market regulations ultimately depends on the quality of regional governments. The institutional quality has a moderating role in defining the effect of regulations on the regional shares of HGFs. Our findings contribute to the debate on the effects of regulations by showing that regulations are not, per se, “good, bad, and ugly", rather their impact depends on the efficiency of regional governments. Our paper offers important building blocks to develop tailored policy measures that may influence the development of HGFs in a region.
    Keywords: Business dynamics, Regulation, Institutions, Regional data
    JEL: L50 L25 H11 O43 R11 R50
    Date: 2023
  5. By: Michael Fritsch (Friedrich Schiller University Jena, Germany); Maria Greve (Utrecht University, The Netherlands, and Friedrich Schiller University Jena, Germany); Michael Wyrwich (University of Groningen, The Netherlands, and Friedrich Schiller University Jena, Germany)
    Abstract: We describe and analyze the long-term development of self-employment in German regions between 1895 and 2019. Based on rankings ("league tables") for the two years we identify those regions where the relative level of self-employment significantly increased ('leapfroggers'), and those where the level of self-employment as compared to other regions deteriorated ('plungers'). Germany is a particularly interesting case due to the turbulent history of the country over the 20th century that includes two lost World Wars, occupation by foreign armies, forty years of division into a capitalist and a socialist state, as well as reunification and shock transformation of the eastern part to a market economy. While there is some persistence of regional self-employment despite all the disruptive changes, we also find and discuss considerable changes of regional levels of entrepreneurial activity.
    Keywords: Entrepreneurship, self-employment, regional dynamics
    JEL: L26 R11 O52
    Date: 2024–01–02
  6. By: Santiago Franco
    Abstract: Most product industries are local. In the U.S., firms selling goods and services to local consumers account for half of total sales and generate more than sixty percent of the nation’s jobs. Competition in these industries occurs in local product markets: cities. I propose a theory of such competition in which firms have output market power. Spatial differences in local competition arise endogenously due to the spatial sorting of heterogeneous firms. The ability to charge higher markups induces more productive firms to overvalue locating in larger cities, leading to a misallocation of firms across space. The optimal policy incen tivizes productive firms to relocate to smaller cities, providing a rationale for commonly used place-based policies. I use U.S. Census establishment-level data to estimate markups and to structurally estimate the model. I document a significant heterogeneity in markups for local industries across U.S. cities. Cities in the top decile of the city-size distribution have a fifty percent lower markup than cities in the bottom decile. I use the estimated model to quantify the general equilibrium effects of place-based policies. Policies that remove markups and relocate firms to smaller cities yield sizable aggregate welfare gains.
    Date: 2023–11
  7. By: David Autor; Christina Patterson; John Van Reenen
    Abstract: National U.S. industrial concentration rose between 1992-2017. Simultaneously, the Herfindhahl 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 un-concentrated 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%.
    Keywords: Employment concentration, sales concentration, local labor markets, structural transformation
    JEL: L11 L60 O31 O34 P33 R3
    Date: 2023–11
  8. By: Pascal Troxler, Marcus Roller, Monika Bandi Tanner
    Abstract: Cableways alleviate access to the Alps and were crucial in establishing the skiing tourism boom of the after-war years. Moreover, cableway operators employ a large share of residents, are complemented by tourism-related services and are therefore a key economic pillar in otherwise laggard regions. We exploit comprehensive historical data of all ever-built cableways in Switzerland linked to federal tax and population data to show how much ski area access benefits the municipality's economy. Evaluating difference-in-differences sheds light on how ski area access municipalities evolved economically compared to those without access. We find that opening a ski area between 1940 and 1980 is related to economic growth that persists until today. Particularly, it attracted new residents and created more productive employment opportunities in tourism-related services. Thereby raising incomes and tax revenues. Our results contribute to the debate of what economic risks access municipalities face once the decreasing snowpack forces a ski area to close.
    Keywords: Tourism development, regional economics, historical ski area data, climate change exposure
    JEL: N74 N94 O18 R11 Z32
    Date: 2023–12
  9. By: Müller, Ulrich; Watson, Mark
    JEL: C12
    Date: 2023
  10. By: Tanner Regan (George Washington University); Giorgio Chiovelli (Universidad de Montevideo); Stelios Michalopoulos (Brown University); Elias Papaioannou (London Business School)
    Abstract: Satellite images of nighttime lights are commonly used to proxy local economic conditions. Despite their popularity, there are concerns about how accurately they capture local development in low-income settings and different scales. We compile a yearly series of comparable nighttime lights for Africa from 1992 to 2020, considering key factors that affect accuracy and comparability over time: sensor quality, top coding, blooming, and, importantly, variations in satellite systems (DMPS and VIIRS) using an ensemble, machine learning, approach. The harmonized luminosity series outperforms the unadjusted series as a stronger predictor of local development, particularly over time and at higher spatial resolutions.
    Keywords: Night Lights, Economic Development, Measurement, Africa
    JEL: O1 R1 E01 I32
    Date: 2023–11
  11. By: Gabriel M. Ahlfeldt; Nathaniel Baum-Snow; Remi Jedwab; Gabriel Ahlfeldt
    Abstract: Tall buildings are central to facilitating sustainable urbanization and growth in cities worldwide. We estimate average elasticities of city population and built area to aggregate city building heights of 0.12 and -0.17, respectively, indicating that the largest global cities in developing economies would be at least one-third smaller on average without their tall buildings. Land saved from urban development by post-1975 tall building construction is over 80% covered in vegetation. To isolate the effects of technology-induced reductions in the cost of height from correlated demand shocks, we use interactions between static demand factors and the geography of bedrock as instruments for observed 1975-2015 tall building construction in 12, 877 cities worldwide, a triple difference identification strategy. Quantification using a canonical urban model suggests that the technology to build tall generates a potential global welfare gain of 4.8%, of which only about one-quarter has been realized. Estimated welfare gains from relaxing existing height constraints are 5.9% in the developed world and 3.1% in developing economies.
    Keywords: urban density, international buildings heights, skyscrapers, tall buildings, sustainable urbanization, city growth, commercial real estate, housing supply, urban sprawl, land savings, housing affordability, geographical constraints, environment
    JEL: R11 R12 R14 R31 R33 O18 O13
    Date: 2023
  12. By: Martin Henning; Rikard Eriksson; Petrus Garefelt; Hanna Martin; Zoltán Elekes
    Abstract: The local presence and composition of skills is commonly thought to have enormous implications for economic development. Yet, skills and the relations between them are notoriously difficult to pinpoint and measure. We develop a method that uses information available in Swedish job postings to measure the skill-relatedness of jobs and the skill- coherence of local economies. Our skill-relatedness measure can be assumed to be exogenous to local economic outcomes such as wages, productivity and labour mobility. We corroborate some previous research findings and show that workers tend to switch between related jobs and that local economies are on average skill-coherent. However, less coherent local economies are associated with higher average wages and productivity. Local economies where workers switch between related jobs though enjoy higher average wages. In all, this points to the benefit of local labour market clusters within more diverse regions. We conclude that job postings provide a wealth of information on the skill-foundations of local development. A job-level skill- relatedness matrix accompanies the paper.
    Keywords: job postings; skill-relatedness; local skill coherence; regional agglomeration; labour flows
    Date: 2023–12
  13. By: Luisa Gagliardi; Enrico Moretti; Michel Serafinelli
    Abstract: We investigate the employment consequences of deindustrialization for 1, 993 cities in France, Germany, Great Britain, Italy, Japan, and the United States. In all six countries we find a strong negative relationship between a city’s share of manufacturing employment in the year of its country’s manufacturing peak and the subsequent change in total employment, reflecting the fact that cities where manufacturing was initially more important experienced larger negative labor demand shocks. But in a significant number of cases, total employment fully recovered and even exceeded initial levels, despite the loss of manufacturing jobs. Overall, 34% of former manufacturing hubs–defined as cities with an initial manufacturing employment share in the top tercile–experienced employment growth faster than their country’s mean, suggesting that a surprisingly large number of cities was able to adapt to the negative shock caused by deindustrialization. The U.S. has the lowest share, indicating that the U.S. Rust Belt communities have fared relatively worse compared to their peers in the other countries. We then seek to understand why some former manufacturing hubs recovered while others didn’t. We find that deindustrialization had different effects on local employment depending on the initial share of college-educated workers in the labor force. While in the two decades before the manufacturing peak, cities with a high college share experienced a rate of employment growth similar to those with a low college share, in the decades after the manufacturing peak, the employment trends diverged: cities with a high college share experienced significantly faster employment growth. The divergence grows over time at an accelerating rate. Using an instrumental variable based on the driving distance to historical colleges and universities, we estimate that a one standard deviation increase in local college share results in a rate of employment growth per decade that is 9.1 percentage points higher. This effect is in part explained by faster growth in human capital-intensive services, which more than offsets the loss of manufacturing jobs.
    Keywords: local labor markets, cities, manufacturing, human capital
    JEL: J21 R12 J24
    Date: 2023
  14. By: Ye Yang; Osman Dogan; Suleyman Taspinar; Fei Jin
    Abstract: The matrix exponential spatial models exhibit similarities to the conventional spatial autoregressive model in spatial econometrics but offer analytical, computational, and interpretive advantages. This paper provides a comprehensive review of the literature on the estimation, inference, and model selection approaches for the cross-sectional matrix exponential spatial models. We discuss summary measures for the marginal effects of regressors and detail the matrix-vector product method for efficient estimation. Our aim is not only to summarize the main findings from the spatial econometric literature but also to make them more accessible to applied researchers. Additionally, we contribute to the literature by introducing some new results. We propose an M-estimation approach for models with heteroskedastic error terms and demonstrate that the resulting M-estimator is consistent and has an asymptotic normal distribution. We also consider some new results for model selection exercises. In a Monte Carlo study, we examine the finite sample properties of various estimators from the literature alongside the M-estimator.
    Date: 2023–11
  15. By: Ghinami, Francesca; Montresor, Sandro
    Abstract: This paper aims to investigate the role that different forms of proximity have in the access to Venture Capital (VC) by Innovative Startup Companies (ISC). By referring to the population of Italian innovative startups, we find that tangible (spatial) proximity account for this matching, but more in functional than in geographical terms. Industrial proximity between the two actors matters too, and makes the role of functional proximity less binding for the matching. The greatest correlation emerges with respect to a relational kind of proximity, due to the closeness between partners in organisational and social terms.
    Date: 2023–11–28
  16. By: Grillitsch, Markus (CIRCLE, Lund University); Sotarauta, Markku (Tampere University)
    Abstract: As a concept, agency stretches from philosophical and meta-theoretical elaborations to studies documenting largely idiosyncratic happenings in a particular empirical context, which could be dismissed as anecdotal. In between, and source for the recent revival of scholarly interest, lies the promise to explain transformation processes, multiplex governance, and varieties in wellbeing and development pathways, which are needed in a world overshadowed by crises. Have studies on agency and structure lived up to the promise? Only partly, we argue, and suggest that we need to develop a common ontological commitment as well as adequate mid-range theories and methods coherent with such a commitment. We suggest critical realism as backbone of such a common ontological commitment and discuss potential ways forward for a social science research programme with emancipatory potential, this is to say to contribute to our capabilities to make a difference in the world.
    Keywords: Agency and structure; regional development; path development; critical realism; social science methodology
    JEL: R00 R10 R50
    Date: 2023–12–11
  17. By: Haddad, Eduardo A. (Departamento de Economia, Universidade de São Paulo); Araújo, Inácio F. (Departamento de Economia, Universidade de São Paulo); Šimundić, Blanka (Department for Tourism and Economy, University of Split)
    Abstract: This paper reports on the recent developments in constructing an interregional input-output matrix for Croatia (IIOM-HRV). As part of an ongoing project that aims to specify and implement an interregional CGE (ICGE) model for the country, the BMCRO model, a fully specified interregional input-output database was developed under conditions of limited information. Such a database is needed for future calibration of the ICGE model. This research venture is part of a technical cooperation initiative involving researchers from the Regional and Urban Economics Lab at the University of São Paulo (Nereus) and the Faculty of Economics, Business and Tourism, Department for Tourism and Economy at the University of Split.
    Keywords: Interregional input-output table; Croatia
    JEL: R10
    Date: 2023–12–10
  18. By: Johan Klaesson; Özge Öner; Dieter Pennerstorfer
    Abstract: This article provides causal evidence of the significant role ethnic networks play in facilitating labor market integration by reducing information frictions. Using full population geocoded employer-employee matched Swedish register data, we investigate how co-ethnic commuters can influence the work location of immigrants for their initial employment. We argue that these ethnic peers transmit job specific information from their places of work to fellow ethnic peers within the same residential neighborhood who seek jobs. We find that a new immigrant’s likelihood of securing their first job at a certain location increases with the presence of co-ethnic commuters from their residential neighborhood: Each additional commuter of the same ethnic network increases the probability of finding employment in a specific neighborhood by 2.3%. This effect is more pronounced for women, co-ethnic commuters with similar education levels, and immigrants who land their first jobs in larger firms.
    Keywords: Co-ethnic commuters, information frictions, ethnic networks, labor market integration, ethnic enclaves
    JEL: F22 J61 J64 O18 R23
    Date: 2023–12
  19. By: Elvira Uyarra (Manchester Institute of Innovation Research, The University of Manchester); Iris Wanzenböck (Copernicus Institute of Sustainable Development, Utrecht University); Kieron Flanagan (Manchester Institute of Innovation Research, The University of Manchester)
    Abstract: In recent years, debates about innovation policy have highlighted a broader scope for action and a widening of the range of policy goals such policies are expected to (or might be expected to) address. Scholars and analysts have both detected but also advocated a shift from generic and primarily R&D-based innovation support measures towards a new (or third) 'generation' of innovation policy - variously referred to as challenge-led, mission-orientated or transformative innovation policies. This new generation of innovation policy thinking is a response to major societal challenges such as climate change, migration, or food and energy security - the implication being that traditional innovation policies were either inadequate in response to or else uninterested in such challenges. A more targeted and challenge-oriented innovation policy should, it is argued, help to deliver desired, and not just more, innovations. This implies a more active role of the state in funding risk-taking activities and in creating - not just correcting - markets. This 'normative turn' in innovation policy has also been observed in the design and implementation of regional policies, with a greater emphasis on the socio-ecological dimension of innovation, particularly in the context of the European Green Deal and the Innovation Strategies for Sustainability (S4). Whilst there is much agreement that bolder, more customised and directional policies are needed to tackle the societal challenges of our time, there is less consensus about how such policies should be implemented in practice.
    Keywords: Transformative innovation policies, Mission-oriented approaches, Societal challenges, Spatial and scalar dimensions, Regional innovation
    Date: 2023–05

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