|
on Economic Geography |
|
Issue of 2024‒11‒04
fifteen papers chosen by Andreas Koch, Institut für Angewandte Wirtschaftsforschung |
| By: | Andres Rodriguez-Pose; Federico Bartalucci; Nancy Lozano-Gracia; Maria Davalos; |
| Abstract: | Territorial development theory and practice have witnessed significant change in recent times. This change has increasingly put the spatial dimension at the centre of development policies. Where agglomeration-focused policies derived from urbanization and agglomeration economics were once prominent, their empirical limitations have become increasingly apparent. Greater territorial polarization and pervasive left-behindedness has underscored the need for a more inclusive territorial development approach prompting increased interest in understanding and addressing regional disparities to ensure more equitable economic growth. This article synthesizes the growing interest in territorial development, which has driven to the adoption of what are increasingly place-based and place-sensitive approaches to development. The article also emphasises the need for complementary between efficiency-driven and equity-focused interventions, while highlighting emerging topics in regional economics research, including the role of institutions, agency, and external megatrends such as the green transition. We conclude by advocating a place-sensitive approach that tailors policies to regional challenges, promoting economic potential, diversification, and inclusivity across all regions. |
| Keywords: | economic development, growth, efficiency, equity territories, regions |
| JEL: | R11 O18 R58 Q56 |
| Date: | 2024–10 |
| URL: | https://d.repec.org/n?u=RePEc:egu:wpaper:2434 |
| By: | Maximilian von Ehrlich |
| Abstract: | This chapter discusses factors that contributed to different economic dynamics across European regions and the prevailing disparities. The impact of EU Cohesion Policy in reducing disparities is studied based on the empirical evidence on the effects of EU regional policy. With more than thirty years of experience, several important conclusions can be drawn about the effectiveness and efficiency of place-based transfers in Europe. While EU regional policy has not completely countered market-driven processes that lead to regional disparities, it appears to have modestly alleviated them. To enhance the effectiveness of EU Cohesion Policy, this chapter advocates for an improved policy design and a shift in emphasis towards local institutions and governments in recipient regions, emphasizing that merely increasing the volume of transfers cannot compensate for these improvements. |
| Keywords: | : EU Structural Policy, Place-based policies, regional inequality, economic geography |
| JEL: | R10 R50 H20 F20 D70 |
| Date: | 2024–08 |
| URL: | https://d.repec.org/n?u=RePEc:rdv:wpaper:credresearchpaper46 |
| By: | Bruno Conte; Klaus Desmet; Esteban Rossi-Hansberg |
| Abstract: | Using a multisector dynamic spatial integrated assessment model (S-IAM), we argue that a carbon tax introduced by the European Union (EU) and rebated locally can, if not too large, increase the size of Europe’s economy by concentrating economic activity in its high-productivity non-agricultural core and by incentivizing immigration to the EU. The resulting change in the spatial distribution of economic activity improves global efficiency and welfare. A carbon tax introduced by the US generates similar effects. This stands in sharp contrast with standard models that ignore trade and migration in a world shaped by economic geography forces. |
| Keywords: | economic geography, climate change, carbon taxes |
| JEL: | R12 Q54 H23 |
| Date: | 2024–10 |
| URL: | https://d.repec.org/n?u=RePEc:bge:wpaper:1464 |
| By: | Jonathan Muringani; Rune Dahl Fitjar; Andres Rodriguez-Pose; ; |
| Abstract: | This paper examines the complex relationship between political and social trust, government quality, and economic development across 208 regions in the European Union (EU). We use a pooled data generalized structural equation model (GSEM) to show that political trust serves as a fundamental driver of regional economic development in the EU. Political trust is, in turn, influenced by both social trust and government quality. Social trust and government quality have quadratic effects on political trust, showing diminishing returns, while the effect of political trust on economic development is linear. Political trust mediates the relationship between social trust and economic development entirely, while government quality retains a direct relationship with economic development. These findings underscore the fundamental role that political trust plays as a mechanism through which both formal and informal institutions shape regional development. |
| Keywords: | EU, Political trust, Quality of government, regional economic development, social trust |
| JEL: | O43 D73 R11 H11 |
| Date: | 2024–10 |
| URL: | https://d.repec.org/n?u=RePEc:egu:wpaper:2436 |
| By: | Eduardo Hernandez-Rodriguez; ; ; ; |
| Abstract: | This paper studies technological diversification in European regions incorporating global value chain participation as interregional linkages. The empirical analysis is developed for 243 NUTS-2 European regions between 2000-2010. Results show that, while regional capabilities remain crucial, global value chain participation matters for technological diversification. Particularly, backward participation in global value chains increases the chances of regions to trigger technological diversification. Forward participation in global value chains only increases the likelihood of technological diversification when combined with regional capabilities. Finally, global value chain participation is found to be more relevant for transition regions rather than for less and more developed regions. |
| Keywords: | Global value chains, technological diversification, backward-forward participation, relatedness, interregional linkages, European regions |
| JEL: | F14 F63 O33 R11 R12 |
| Date: | 2024–09 |
| URL: | https://d.repec.org/n?u=RePEc:egu:wpaper:2429 |
| By: | Yoshifumi Konishi (Department of Economics, Keio University); Akari Ono (Graduate School of Economics, Keio University) |
| Abstract: | Economists are increasingly concerned with the heterogeneous impacts of transportation infrastructure investments on economic outcomes, particularly the phenomenon known as the “Straw Effect†: Core cities that were already in economic prosperity may gain more, and peripheral cities may lose, from transportation megaprojects. We empirically investigate whether such an effect manifests in the case of the Great Seto Bridges in Japan, a 70-billion-dollar project implemented in the 1980s-1990s as part of the “Building-a-New-Japan†initiative. We employ the recentered instrumental variable approach in the difference-in-differences design, exploiting the sharp decline in transport costs and its unexpected impacts on market access across cities as the exogenous sources of variation. Contrary to the Straw Effect, we find that large peripheral cities gain more than core cities from the megaproject, demonstrating that the distribution of winners and losers from the megaproject depends on how the transport cost reductions pass through in the existing network structures. |
| Keywords: | Market Access, Transportation Investment, Core-Periphery Model, Economic Geography, Quantitative Spatial Model, Treatment Effect under Spatial Network |
| JEL: | O18 R4 R11 R12 |
| Date: | 2024–08–11 |
| URL: | https://d.repec.org/n?u=RePEc:keo:dpaper:2024-018 |
| By: | Andrea Coveri (Department of Economics, Society & Politics, Università di Urbino Carlo Bo); Elena Paglialunga (Department of Economics, Roma Tre University, Italy); Antoenllo Zanfei (Department of Economics, Society & Politics, Università di Urbino Carlo Bo) |
| Abstract: | The geographic dispersion of production activities has led regions to increasingly specialize in specific value chain functions, giving rise to a finer spatial division of labour. In this work, we use georeferenced FDI data to investigate the geography of functions and the interdependencies between functional and sectoral specialization of European regions. We show that the most intangible-intensive functions at the upper ends of value chains are concentrated in few advanced regions, while lower-income ones are largely and persistently specialized in production operations. Moreover, we find that regions locked-into low value-adding functions are the least likely to upgrade towards more knowledge-intensive industries. By contrast, only the few regions which experienced functional upgrading trajectories have been able to diversify towards more innovative industries. Accordingly, regional policies should aim at favouring functional upgrading of laggard regions as a key vehicle for economic and spatial convergence in Europe. |
| Keywords: | Geography of functions; Inter-regional inequality; Foreign direct investment; Global value chains; European regions |
| JEL: | F21 F23 L23 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:urb:wpaper:24_01 |
| By: | Berliant, Marcus; Watanabe, Axel |
| Abstract: | This article demonstrates the emergence of agglomeration unaccompanied by conventional explanatory factors such as scale economies, externalities or comparative advantages. We construct a general equilibrium model with four commodities, four types of households and linear production over two regions. A pair of types behave disassortatively when their endowments complement each other. The resultant distribution involves an intense agglomeration consisting of varied types. In contrast, they behave assortatively when they are in direct competition for endowments that cannot be transported or produced. This results in a moderate agglomeration with a disproportionate presence of selected types. Complementarity and endowment portability are the primary causative factors behind consumer behavior and subsequent equilibrium agglomeration. |
| Keywords: | Agglomeration; General equilibrium; Spatial sorting |
| JEL: | R13 |
| Date: | 2024–10–02 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:122263 |
| By: | Eduardo Hernandez-Rodriguez; Ron Boschma; Andrea Morrison; Xianjia Ye; |
| Abstract: | This paper studies the role of complementary interregional value chain linkages in functional upgrading and downgrading in global value chains in EU regions. It adopts an evolutionary approach to assess functional upgrading and downgrading using relatedness and economic complexity metrics. The empirical analysis of 199 EU regions between the years 2000-2010 shows that, while local capabilities remain crucial, complementary interregional value chain linkages increase (decrease) the likelihood of functional upgrading (downgrading) in GVCs. Regions engaged in GVCs in which partner regions offer complementary capabilities are more likely to specialise in more complex functions and to retain such specialisations over time. By doing so, this paper proposes a new theoretical-analytical framework to identify partner regions that can offer complementary capabilities in GVCs. |
| Keywords: | Global value chains, upgrading/downgrading, interregional linkages, complementary capabilities, EU regions |
| JEL: | F14 F63 O19 R11 R12 |
| Date: | 2024–10 |
| URL: | https://d.repec.org/n?u=RePEc:egu:wpaper:2432 |
| By: | Koen Frenken; Frank Neffke; ; ; |
| Abstract: | The global economy operates as a complex system that allocates resources in a decentralized way across myriad agents. Over time, it exhibits an impressive rate of collective learning as evidenced by its growing productivity and the expanding variety of output it generates. However, growth, productivity and learning are not distributed equally across locations. On the contrary, wealth, opportunity, economic activity and innovation tend to all concentrate in a relatively small number of affluent places. Various strands of complexity Science have contributed to our understanding of these phenomena. However, they have done so in disconnected debates and communities. In this chapter, we use the framework of Economic Complexity to synthesize insights derived from three distinct literatures: urban scaling, evolutionary economic geography and global production networks. Economic complexity proposes that production requires access to capabilities, such that increasing the variety of economic production requires acquiring or accessing new capabilities. From this synthesis, we derive a research agenda that aims to understand how local economies develop, not only as individual units exploring their adjacent possible, but as parts of a system that allows local economies to mix their capabilities with those of distant counterparts by relying on the interplay of multinational corporations, global value chains and institutions to coordinate interactions at the local and global scale. |
| Date: | 2024–10 |
| URL: | https://d.repec.org/n?u=RePEc:egu:wpaper:2431 |
| By: | Jakob Vanschoonbeek |
| Abstract: | The recent rise and distinct geography of populism highlights the need for high resolution data on the economic and political landscapes and improved spatial political economy models that explain their interrelation. This paper shows that divergent development generates political externalities in lagging regions. To do so, it develops a dynamic spatial political economy model that integrates redistributive taxation and agglomerated economic growth in a standard economic geography framework. It finds that divergent development induces skill-biased labor mobility towards faster growing locations, simultaneously reducing their willingness to pay redistributive taxes and increasing their electoral influence on redistributive policy. To empirically validate and calibrate the model, the Spatial Political Economy in Europe Database (SPEED) is introduced, containing newly georeferenced electoral maps, political party classifications and gridded (per capita) GDP estimates for most European countries in the 17th release of the Constituency-Level Electoral Archive (CLEA). Instrumental variable regressions exploiting geographically-determined differences in economic growth potential confirm a strong constituency-level causal relation between underdevelopment and radical vote shares in the past two centuries. Counterfactual simulations suggests that policies that enhance labor mobility or income redistribution may both increase radical vote shares at least in the short run, as they risk fueling backlash in lagging and leading regions respectively. |
| Keywords: | Economic geography, political economy, political discontent, long term effects of divergent development, quantitative model |
| Date: | 2024–10–04 |
| URL: | https://d.repec.org/n?u=RePEc:ete:vivwps:750408 |
| By: | Busso, Matías; Fentanes, Oscar |
| Abstract: | What determines the aggregate and distributional effects of new transportation infrastructure? One key overlooked channel is the role that infrastructure policy plays in changing the incentives of firms to enter, exit, and grow--in turn generating endogenous changes in local productivity. In this paper, we document and quantify the importance of this channel by using detailed Mexican microdata and a spatial general-equilibrium model that incorporates firm dynamics. Leveraging random delays in the construction of highways, we empirically show that productivity grows in places with better transportation infrastructure. Firms play a critical role in driving these results: highways increase firms' size, entry rates, survival rates, and total factor productivity. Then, by calibrating our model on census data between 1998 and 2018, we find that new highways over this period increased welfare and income by half a percent, similar to its costs in terms of GDP. Moreover, we find substantial spatial reallocation of workers and production. Nearly half of these effects are explained by endogenous changes in local productivity, which is driven by firm dynamics. |
| Keywords: | Economic geography;firm dynamics;Infrastructure |
| JEL: | R12 D24 O18 O54 |
| Date: | 2024–10 |
| URL: | https://d.repec.org/n?u=RePEc:idb:brikps:13759 |
| By: | Kevin Andrew; Jevan Cherniwchan; Mamoon Kader; Hashmat Khan |
| Abstract: | The technique effect – the reduction in aggregate pollution emissions due to reductions in the pollution intensity of individual industries – is often interpreted as evidence that countries are getting cleaner because of improvements in how goods and services are produced. We extend the standard decomposition used in previous research to show the technique effect may also capture changes in the geography of economic activity. An empirical application to Canada suggests such changes may be economically important. While the technique effect decreased aggregate Canadian pollution intensity by 18.0% between 2009-2021, if the pollution intensity of production had remained fixed, within-industry shifts in production across Canada would have increased aggregate pollution intensity by over 11%. The technique effect decreased Canadian pollution intensity because these within-industry shifts were accompanied by reductions in pollution intensity that were greatest in provinces that received the largest within-industry reallocation of economic activity. |
| Keywords: | Pollution Decomposition; Technique Effect |
| JEL: | Q56 R11 |
| Date: | 2024–10 |
| URL: | https://d.repec.org/n?u=RePEc:mcm:deptwp:2024-08 |
| By: | Donges, Alexander; Streb, Jochen |
| JEL: | D22 N64 N94 R12 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:vfsc24:302389 |
| By: | Bekhtiar, Karim |
| JEL: | J21 J23 J61 O14 P25 R23 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:vfsc24:302396 |