|
on Economic Geography |
|
Issue of 2025–05–12
thirteen papers chosen by Andreas Koch, Institut für Angewandte Wirtschaftsforschung |
| By: | Gordon H. Hanson; Enrico Moretti |
| Abstract: | We examine changes in the spatial distribution of good jobs across US commuting zones over 1980-2000 and 2000-2021. We define good jobs as those in industries in which full-time workers attain high wages, accounting for individual and regional characteristics. The share of good jobs in manufacturing has plummeted; for college graduates, good jobs have shifted to (mostly tradable) business, professional, and IT services, while for those without a BA they have shifted to (non-tradable) construction. There is strong persistence in where good jobs are located. Over the last four decades, places with larger concentrations of good job industries have tended to hold onto them, consistent with a model of proportional growth. Turning to regional specialization in good job industries, we find evidence of mean reversion. Commuting zones with larger initial concentrations of good jobs have thus seen even faster growth in lower-wage (and mostly non-tradable) services. Changing regional employment patterns are most pronounced among racial minorities and the foreign-born, who are relatively concentrated in fast growing cities of the South and West. Therefore, good job regions today look vastly different than in 1980: they are more centered around human-capital-intensive tradable services, are surrounded by larger concentrations of low-wage, non-tradable industries, and are more demographically diverse. |
| JEL: | J01 R0 |
| Date: | 2025–03 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:33631 |
| By: | Taylor Jaworski; Dongkyu Yang |
| Abstract: | The participation of the United States in World War II led to a substantial mobilization of domestic resources to produce the materiel used on the battlefields of Europe and in the Pacific. We produce new estimates for the impact of war mobilization on long-run economic growth and regional development in the United States over the postwar period. Guided by an economic geography model, we interpret our estimates as the direct effect of mobilization on local productivity. The findings suggest the largest likely aggregate welfare impact was modest, although there is variation across region. In addition, industrial mobilization contributed to manufacturing growth relatively more in the Northeast and Midwest, and less in the South and West. |
| JEL: | N92 |
| Date: | 2025–04 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:33705 |
| By: | David Card; Jesse Rothstein; Moises Yi |
| Abstract: | We use detailed location information from the Longitudinal Employer-Household Dynamics (LEHD) database to develop new evidence on the effects of spatial mismatch on the relative earnings of Black workers in large US cities. We classify workplaces by the size of the pay premiums they offer in a two-way fixed effects model, providing a simple metric for defining “good” jobs. We show that: (a) Black workers earn nearly the same average wage premiums as whites; (b) in most cities Black workers live closer to jobs, and closer to good jobs, than do whites; (c) Black workers typically commute shorter distances than whites; and (d) people who commute further earn higher average pay premiums, but the elasticity with respect to distance traveled is slightly lower for Black workers. We conclude that geographic proximity to good jobs is unlikely to be a major source of the racial earnings gaps in major U.S. cities today. |
| Date: | 2025–04 |
| URL: | https://d.repec.org/n?u=RePEc:cen:wpaper:25-23 |
| By: | van der List, Catherine (University of Essex) |
| Abstract: | To study the distribution of economic activity across space and place-based policies, I develop a model of the location choice of new establishments incorporating monopsonistic labor markets, taxes, and spillovers. Estimates using German administrative data indicate that establishments prefer lower taxes and lower worker outside options which enable establishments to pay lower wages. The degree to which various types of productivity spillovers matter in the location decision varies between industries. I also quantify the effects of a counterfactual place-based policy and find that the response of a commuting zone to the place-based policy depends on the degree of labor market power in that commuting zone. More monopsonistic labor markets receive more benefit from the place-based policy. |
| JEL: | J42 J23 H71 R12 |
| Date: | 2025–02 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp17742 |
| By: | Randall Akee; Maggie R. Jones; Emilia Simeonova |
| Abstract: | Tribal lands in the U.S. have historically experienced some of the worst economic conditions in the nation. We review some existing research on the effect of American Indian tribal casinos on various measures of local economic development. This is an industry that began in the early 1990s and currently generates more than $40 billion annually. We also review the state of the literature on the effects of casino operations on communities in or adjacent to tribal areas. Using a new dataset linking individual and enterprise-level data longitudinally, this study examines the industry- and location-specific impacts of tribal casino operations. We focus in particular on the employment of American Indians. We document positive flows from unemployment and non-casino geographies to work in sectors related to casino operations. Tribal casinos differ from other standard place-based economic development projects in that they are focused on a single industry; we discuss these differences and note that some of the positive spillover effects may be similar to other, more standard place-based policies. Finally, we discuss additional and open-ended questions for future research on this topic. |
| Keywords: | Employment, Business Enterprises, Regional Economic Development, American Indians, Place Based Policies |
| JEL: | R11 J20 O2 |
| Date: | 2025–04 |
| URL: | https://d.repec.org/n?u=RePEc:cen:wpaper:25-24 |
| By: | Giovanni Facchini; Anja Neundorf; Sergi Pardos-Prado; Cecilia Testa |
| Abstract: | Regional economic conditions affect livelihoods and the geography of political resentment. Yet, individuals do not equally partake in their region’s economic fortunes, and their perceptions of relative deprivation need not be the same. Grievances are likely to be shaped not only by income disparities but also by how personal prospects are tied to regional conditions. We argue that the interaction between subjective individual and regional relative deprivation crucially affects perceptions of shared experience and systemic unfairness. Through a large-scale survey experiment in Britain, we provide causal evidence that poor individuals in poor regions express more political resentment due to diminished personal financial prospects and social status. In contrast, political attitudes among poor and wealthy individuals are indistinguishable in affluent regions. Our findings reveal how reference groups affect subjective perceptions of relative deprivation and highlight the importance of egocentric mechanisms, whereby the local economy shapes expectations of individual prospects. |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:not:notnic:2025-01 |
| By: | Cécile Gaubert; Frédéric Robert-Nicoud |
| Abstract: | We propose a spatial equilibrium model with heterogeneous households holding general non-homothetic preferences over tradable goods and housing. In equilibrium, desirable and productive locations command high housing prices. So long as housing is a necessity, these locations are disproportionately inhabited by high-income earners who are relatively less affected by high housing prices. We clarify how this source of sorting complements other potential sorting forces in spatial equilibrium models, namely, comparative advantage in production and heterogeneous preferences for locations. We show how to measure changes in welfare inequality across income groups in a theoretically-consistent way when housing is a necessity, extending the approach popular in models with homothetic preferences. We use our framework to track the evolution of welfare inequality between college and non-college graduates in the United States between 1980 and 2020. We find that, accounting for change in prices, it has risen by more than nominal wage inequality, even as college graduates increasingly sort into cities with expensive housing over this time period. |
| JEL: | R0 R12 R2 |
| Date: | 2025–04 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:33652 |
| By: | Katja Gehr; Michael Pflüger |
| Abstract: | This paper explores the macroeconomic consequences of regulatory barriers in housing markets. We take a European perspective, allowing us to offer novel facts, theory, and methodology. Our focus is on Germany, a compelling case exemplifying key characteristics unique to European city systems. To take our model to the data, we estimate its structural equations for the population elasticities of urban benefits and costs using rich micro-data. The quantified model receives strong support from several sources of independent evidence. We study the effects of a counterfactual reduction of land-use regulations on aggregate welfare and evaluate the effect of cities on growth. |
| Keywords: | city systems, urban growth, urban benefits and costs, land-use regulations, amenities, location fundamentals |
| JEL: | C52 R12 D24 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_11716 |
| By: | Michael Gechter; Namrata Kala |
| Abstract: | Firm location decisions are a key managerial choice, usually optimized over factors like proximity to customers or suppliers. These decisions may also impose externalities on the environment, and on other firms due to competitive or agglomerative forces. The inherent endogeneity of location decisions makes estimating the impact of firm presence difficult. In this paper, we study an environmental place-based policy that randomly moved over 20, 000 small firms in New Delhi to industrial areas outside the city over several years. We find that a reduction in firm presence improves air quality, reducing industrial pollution by 8% for the average neighborhood. However, industrial relocation is costly for firms, significantly increasing the probability of firm exit. We combine the exogenous assignment of firms to industrial plots with a model of firms playing a game of incomplete information to estimate the effect of neighborhood composition on firm survival through Marshallian agglomeration forces. We find that proximity to neighboring firms with input-output linkages increases the likelihood of firm survival, and taking these into account while determining firm placement in industrial areas would have halved the costs imposed on firms by the policy. These results provide causal evidence on the trade-offs between firm presence and environmental quality, and show that firm spillovers can be a useful force to minimize the costs on regulated firms. |
| JEL: | D22 L20 O10 Q52 Q53 Q56 Q58 R38 |
| Date: | 2025–04 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:33707 |
| By: | Angelos Alexopoulos; Ilias Kostarakos; Christos Mylonakis; Petros Varthalitis |
| Abstract: | This paper quantifies the causal effect of cohesion policy on EU regional output and investment focusing on one of its least studied instruments, i.e., the Cohesion Fund (CF). We employ modern causal inference methods to estimate not only the local average treatment effect but also its time-varying and heterogeneous effects across regions. Utilizing this method, we propose a novel framework for evaluating the effectiveness of CF as an EU cohesion policy tool. Specifically, we estimate the time varying distribution of the CF's causal effects across EU regions and derive key distribution metrics useful for policy evaluation. Our analysis shows that relying solely on average treatment effects masks significant heterogeneity and can lead to misleading conclusions about the effectiveness of the EU's cohesion policy. We find that the impact of the CF is frontloaded, peaking within the first seven years after a region's initial inclusion in the program. The distribution of the effects during this first seven-year cycle of funding is right skewed with relatively thick tails. This indicates positive effects but unevenly distributed across regions. Moreover, the magnitude of the CF effect is inversely related to a region's relative position in the initial distribution of output, i.e., relatively poorer recipient regions experience higher effects compared to relatively richer regions. Finally, we find a non-linear relationship with diminishing returns, whereby the impact of CF declines as the ratio of CF funds received to a region's gross value added (GVA) increases. |
| Date: | 2025–04 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2504.13223 |
| By: | Biewen, Martin (University of Tuebingen); Glaisner, Stefan (University of Tübingen) |
| Abstract: | This paper utilises distributional random forests as a flexible machine learning method for analysing income distributions. Distributional random forests avoid parametric assumptions, capture complex interactions among covariates, and, once trained, provide full estimates of conditional income distributions. From these, any type of distributional index such as measures of location, inequality and poverty risk can be readily computed. They can also efficiently process grouped income data and be used as inputs for distributional decomposition methods. We consider four types of applications: (i) estimating income distributions for granular population subgroups, (ii) analysing distributional change over time, (iii) spatial smoothing of income distributions, and (iv) purging spatial income distributions of differences in spatial characteristics. Our application based on the German Microcensus provides new results on the socio-economic and spatial structure of the German income distribution. |
| Keywords: | small area estimation, poverty, inequality, grouped income data |
| JEL: | D31 C55 I3 |
| Date: | 2025–03 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp17774 |
| By: | Michael Koch; Antonella Nocco |
| Abstract: | This paper introduces a novel mechanism by emphasizing benefits for firms through participation in buyer networks among firms that source the same locally produced inputs. In a first step, we utilize register-based data from Denmark to generate a firm-specific buyer network variable which relies on firms’ industrial input structures and imports. Utilizing this proxy we provide evidence of cost savings from network participation, as larger buyer networks reduce firms’ input demand. Subsequently, we develop a trade model incorporating vertical linkages and introduce network effects that result in savings in intermediate costs. Our theory posits that the magnitude of these savings may be associated with the effectiveness of knowledge transmission among network participants. Consequently, firms operating in regions with efficient knowledge transmission networks may realize greater savings in intermediate input costs, leading to increased profits from local and export sales. In a last step, we provide empirical evidence supporting our theoretical predictions by demonstrating the positive impact of buyer networks based on relationship-specific products on domestic firm revenues. |
| Keywords: | new trade theory, vertical linkages, network effects. |
| JEL: | F12 F15 R12 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_117815 |
| By: | Stefano DellaVigna; Guido Imbens; Woojin Kim; David M. Ritzwoller |
| Abstract: | Empirical research in economics often examines the behavior of agents located in a geographic space. In such cases, statistical inference is complicated by the interdependence of economic outcomes across locations. A common approach to account for this dependence is to cluster standard errors based on a predefined geographic partition. A second strategy is to model dependence in terms of the distance between units. Dependence, however, does not necessarily stop at borders and is typically not determined by distance alone. This paper introduces a method that leverages observations of multiple outcomes to adjust standard errors for cross-sectional dependence. Specifically, a researcher, while interested in a particular outcome variable, often observes dozens of other variables for the same units. We show that these outcomes can be used to estimate dependence under the assumption that the cross-sectional correlation structure is shared across outcomes. We develop a procedure, which we call Thresholding Multiple Outcomes (TMO), that uses this estimate to adjust standard errors in a given regression setting. We show that adjustments of this form can lead to sizable reductions in the bias of standard errors in calibrated U.S. county-level regressions. Re-analyzing nine recent papers, we find that the proposed correction can make a substantial difference in practice. |
| Date: | 2025–04 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2504.13295 |