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on Economic Geography |
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Issue of 2025–05–19
twenty-two papers chosen by Andreas Koch, Institut für Angewandte Wirtschaftsforschung |
| By: | Andrea Stella |
| Abstract: | Using data on U.S. manufacturing plants, I estimate a production function model that includes agglomeration intensity as a component of total factor productivity and allows agglomeration benefits to vary across establishments, which can lead to sorting. I find that agglomeration benefits decline with unobserved establishment-level raw productivity. |
| Keywords: | Agglomeration; Sorting; Census of Manufactures |
| JEL: | D22 D24 E24 L11 R11 R32 |
| Date: | 2025–04–23 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fedgfe:2025-31 |
| By: | Peter R. Berkowitz; Michael Storper; Max Herbertson |
| Abstract: | The European place-based policy framework was established in the European Treaties and has a current budget of $60-70 billion per year. This paper identifies key features and directions for its future development with respect to three place-based problems: traditionally lagging regions; contemporary distressed (or left-behind regions), including those facing the structural challenges of the energy transition; the challenge of spreading prosperity faced with the uneven geography of technological clusters and routine technology-based manufacturing. We analyze the place-based features of EU Cohesion Policy, its commonalities and differences with place-based policies in the US. We evaluate policies against a structural backdrop of long-term convergence in the two continents and the contemporary geography of spatial divergence, using both historical perspectives and recent policy evaluation evidence. Key differences are identified in policy programming, implementation, budgeting and time horizons. While there has been evidence of the reduction of disparities and regional reconversion as a result of place-based policies on both continents, there are also serious impediments to effective implementation in both. These limits have to do with how well policy is designed with respect to economic geography fundamentals as well as political economy and organizational problems in policy design, implementation and governance. The paper concludes by drawing some general lessons on the design of place based policies and examines some of the issues that are particularly relevant for Europe. |
| JEL: | H59 O18 O25 O31 R58 |
| Date: | 2025–02 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:33513 |
| By: | Pablo D. Fajgelbaum; Cecile Gaubert |
| Abstract: | We revisit the rationale for place-based policies using a canonical urban framework with agglomeration spillovers. We derive six main lessons. First, the spatial allocation is inefficient even when spillover elasticities are constant across regions. Second, under constant and positive spillover elasticities, the optimal policy is a national wage subsidy funded by a lump sum tax, reallocating activity towards higher wage locations. Third, more generally, a region's optimal labor subsidy rate equals its spillover elasticity. Fourth, place-based policies that favor low-wage locations on efficiency grounds are justified when density has negative spillover effects, spillover elasticities are higher in low-wage locations, or across-skill spillovers favor more mixing in low-wage locations. Fifth, government spending on infrastructure, investment incentives, or housing policies cannot fully correct externalities from labor density. Sixth, housing supply elasticities do not affect the design of first-best place-based policies targeting agglomeration spillovers. |
| JEL: | H21 H23 R12 R13 R42 |
| Date: | 2025–02 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:33517 |
| By: | Dominguez, Alvaro |
| Abstract: | We study the spatial distribution of air pollutants in Honshu and Kyushu, before and after the Fukushima incident in 2011. For this, we use satellite data at the municipal level of fine particulate matter and ozone concentrations, along with population density, accessibility to cities, and night lights. We rely on dependence analysis and an algorithm to endogenously partition and classify municipalities into different clusters, based on their geographic andsimilar attributes, for the period under study. From the spatial analysis we are able to observe the specific locations of the hot spots (high-value clusters) and cold spots (low value clusters). These clusters reveal high positive correlations between air pollution and economic activity, throughout the years that we study. Furthermore, the regionalization analysis we perform partitions Honshu and Kyushu into different geographical regions that are intertemporally robust, allowing us to detect locations where targeting policies can improve the air quality of the population. |
| Keywords: | Air pollution, Japan, Regionalization, Spatial analysis |
| Date: | 2025–03 |
| URL: | https://d.repec.org/n?u=RePEc:agi:wpaper:02000198 |
| By: | Carolina Castaldi; Milad Abbasiharofteh; Sergio Petralia |
| Abstract: | The sustainability transition is high on the European agenda, with an emerging understanding that focusing on green technologies is not enough to achieve disruptive sustainability. An overall green transformation of current systems of production and consumption also requires market formation processes whereby green markets become viable economic opportunities for regions to specialize in. In this study, we draw on insights from evolutionary economic geography and geography of transitions to understand how regions develop green market specializations. To do so, we investigate two key sets of factors. First, we consider the evolutionary capability development process whereby new specializations emerge from existing related regional capabilities, in a path-dependent way. Second, we account for green public procurement initiatives to capture path-creation efforts in the form of deliberate regional policy directed towards green market formation. Our empirical analysis focuses on European regions in the period 2000-2020. We employ original trademark-based metrics to capture regional specializations in green markets and combine them with patent data to construct relatedness linkages between technologies and markets. Our results reveal that only a few regions have been able to develop specializations in green markets. We find that both prior capabilities in related technological domains and markets are positively associated with the emergence of these regional specializations. In addition, we also find that green public procurement is positively associated with the emergence of regional green market specializations. Our findings bear relevance for policy and research alike. |
| Keywords: | sustainability; regions; green markets; relatedness; public procurement; trademarks; patents |
| Date: | 2025–05 |
| URL: | https://d.repec.org/n?u=RePEc:egu:wpaper:2512 |
| By: | MARTINA PARDY; Andrés Rodríguez-Pose |
| Abstract: | This paper analyses how trade influences intra-regional income inequality across Europe’s NUTS-2 regions. Drawing on newly compiled datasets capturing both inter-regional trade and local-level inequality for all EU member states plus the UK, we employ an econometric framework —complete with Instrumental Variable estimations and robust sensitivity analyses— to gauge the impact of trade on regional interpersonal inequality. In addition to examining aggregate trade, we distinguish between various trade channels, including exchanges within the EU versus those with the rest of the world, links to neighbouring regions versus non-neighbours, and domestic versus international flows. Our findings reveal that higher levels of trade are positively associated with changes in regional income inequality, as measured by the Gini coefficient. Crucially, this link depends on trading partners: trade within a single country, within the EU, and with non-neighbouring regions correlates with rising inequality, whereas international trade, trade with non-EU partners, or trade with neighbouring regions shows no statistically significant effect. These conclusions withstand a battery of robustness checks, including new control variables and a population-weighted approach, further underscoring the role that particular types of trade play in shaping regional income disparities. |
| Keywords: | Trade, interpersonal inequality, regions, Europe |
| JEL: | D63 F14 R13 |
| Date: | 2025–05 |
| URL: | https://d.repec.org/n?u=RePEc:egu:wpaper:2511 |
| By: | Heblich, Stephan; Redding, Stephen J.; Zylberberg, Yanos |
| Abstract: | We examine the distributional consequences of trade using the New World Grain Invasion that occurred in the second half of the 19th century. We use a newly-created dataset on population, employment by sector, property values, and poor law transfers for over 10, 000 parishes in England and Wales from 1801-1901. In response to this trade shock, we show that locations with high wheat suitability experience population decline, rural-urban migration, structural transformation away from agriculture, increases in welfare transfers, and declines in property values, relative to locations with low wheat suitability. We develop a quantitative spatial model to evaluate the income distributional consequences of this trade shock. Undertaking counterfactuals for the Grain Invasion, we show that geography is an important dimension along which these income distributional consequences occur. |
| Keywords: | international trade; income distribution; geography |
| JEL: | F14 F16 |
| Date: | 2024–09–12 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:126842 |
| By: | Mohammad Reza Farzanegan; Rajeev K. Goel; James W. Saunoris; Mohammad Reza Farzanegan |
| Abstract: | The geographic spread of nations would pose logistics challenges in production, distribution and servicing, impacting costs, with implications for entrepreneurship. Using panel data from 62 countries spanning the years 2006 to 2021, we find that of the different oceanic geographic dimensions considered, the number of islands undermines entrepreneurship. Thus, the geographic scatter of a nation, in terms of the number of islands, does not foster entrepreneurship. The length of the coastline or being an island itself seem to not matter significantly in this regard. This main finding holds across different modeling variations. As expected, better institutional quality encourages entrepreneurship. The mediation analysis, to dissect the direct and indirect effects (through institutions) of geography reveals that the impact of the number of islands can work through institutional quality (as well as directly) to undermine entrepreneurship. Besides the considering of the number of islands, the spillovers of oceanic geography through institutions on entrepreneurship form the novel contributions of this work. However, the mediation analysis highlights a critical insight: geographic fragmentation, particularly in countries with numerous islands, weakens the positive impact of institutions. This is likely due to institutional fragmentation failing to align with geographic fragmentation. Some implications for policy are discussed. |
| Keywords: | entrepreneurship, geography, institutions, islands, coastline, latitude, economic freedom, mediation analysis. |
| JEL: | L26 P48 O17 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_11831 |
| By: | Hunt, Jennifer; Cockburn, Iain; Bessen, James |
| Abstract: | Using our own data on artificial intelligence publications merged with Burning Glass vacancy data for 2007-2019, we investigate whether online vacancies for jobs requiring AI skills grow more slowly in US locations farther from pre-2007 AI innovation hotspots. We find that a commuting zone which is an additional 200km (125 miles) from the closest AI hotspot has 17% lower growth in AI jobs' share of vacancies. This is driven by distance from AI papers rather than AI patents. Distance reduces growth in AI research jobs as well as in jobs adapting AI to new industries, as evidenced by strong effects for computer and mathematical researchers, developers of software applications, and the finance and insurance industry. 20% of the effect is explained by the presence of state borders between some commuting zones and their closest hotspot. This could reflect state borders impeding migration and thus flows of tacit knowledge. Distance does not capture difficulty of in-person or remote collaboration nor knowledge and personnel flows within multi-establishment firms hiring in computer occupations. |
| Keywords: | technological change; economic geography; growth; technology adoption and diffusion |
| JEL: | O33 R12 |
| Date: | 2024–10–01 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:126840 |
| By: | Yuya AIKAWA; Nobuaki HAMAGUCHI; Tomoko HASHINO; Keijiro OTSUKA |
| Abstract: | While agglomeration economies contribute to the performance of clustered firms, their changing roles are rarely analyzed. This study explores how technology choices and changing nature of agglomeration economies affected firm performance in the Japanese sake (rice wine) brewing industry from 1980 to 2020. Using plant-level data, we find that agglomeration benefits arose from the sale of sake from small unknown firms to large established firms when production was labor-intensive, but its role diminished as scale economies emerged with mechanization. As demand for high-quality sake increased, collective internalization of information spillover benefits appears to become a major source of agglomeration economies. |
| Date: | 2025–05 |
| URL: | https://d.repec.org/n?u=RePEc:eti:dpaper:25041 |
| By: | Stephen J. Redding |
| Abstract: | The recent development of quantitative urban models provides a new set of tools for evaluating transport improvements. Conventional cost-benefit analyses are typically undertaken in partial equilibrium. In contrast, quantitative urban models characterize the spatial distribution of economic activity within cities in general equilibrium. We compare evaluations of a transport improvement using conventional cost-benefit analysis, sufficient statistics approaches based on changes in market access, and model-based counterfactuals. We show that quantitative urban models predict a reorganization of economic activity within cities in response to a transport improvement, which can lead to substantial differences between the predictions of these three approaches for large changes in transport costs. |
| JEL: | R30 R40 R52 |
| Date: | 2025–02 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:33532 |
| By: | Jacob Greenspon; Gordon H. Hanson |
| Abstract: | How does improving access to the supply of energy affect regional specialization in manufacturing? We evaluate the long-run employment impacts of pipelines constructed by the U.S. government during World War II to transport oil and gas from the oil fields of the Southwest to wartime industrial producers in the Northeast. The pipelines were built rapidly to connect end points along a direct path that minimized use of scarce construction materials. Postwar they were converted to supply en route customers, giving counties close to the pipelines access to a cheap and plentiful source of energy. Between 1940 and 1950, counties with better access to pipeline gas had larger increases in their share of employment in energy-intensive industries. These impacts persisted to the mid-1980s for all energy-intensive industries and to the late 1990s for the subset of industries intensive in the direct use of electricity, despite the disruptive effects of the 1970s energy crisis. Our findings are relevant for understanding energy-related path dependence in local economic development patterns and how government intervention in energy markets affects industry location in the short and long run. |
| JEL: | F15 J23 N7 R12 |
| Date: | 2025–04 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:33721 |
| By: | Anton Yang; Jianwei Ai; Costas Arkolakis |
| Abstract: | We introduce a new methodology to detect and measure economic activity using geospatial data and apply it to steel production, a major industrial pollution source worldwide. Combining plant output data with geospatial data, such as ambient air pollutants, nighttime lights, and temperature, we train machine learning models to predict plant locations and output. We identify about 40% (70%) of plants missing from the training sample within a 1 km (5 km) radius and achieve R² above 0.8 for output prediction at a 1 km grid and at the plant level, as well as for both regional and time series validations. Our approach can be adapted to other industries and regions, and used by policymakers and researchers to track and measure industrial activity in near real time. |
| JEL: | Q50 Q53 R12 |
| Date: | 2025–03 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:33619 |
| By: | Pardy, Martina |
| Abstract: | his article examines the extent to which the presence of multinational enterprises (MNEs) influences the concentration of innovation among patenting firms within US states from 1976 to 2010. Merging patent and regional socioeconomic data, this study explores the effects within 50 US states over more than three decades using Ordinary-Least-Square and Instrumental Variable estimations. It shows that MNEs significantly contribute to the concentration of patenting activity, an effect predominantly driven by domestic-owned MNEs. The impact differs across space: states with a higher share of MNEs experience a sharper increase in patenting concentration. Crucially, it is the non-MNE firms that feel the squeeze the most, with those in the middle of the patenting hierarchy producing fewer patents when domestic MNEs ramp up their activity. This suggests that economic globalisation, while enhancing innovation opportunities for some, reinforces competitive pressures and barriers for others. These findings offer a new perspective on the forces shaping regional innovation dynamics, highlighting the role of MNEs in both amplifying innovation gains and exacerbating disparities in knowledge production. |
| Keywords: | globalisation; multinational enterprises; innovation; concentration; regional development |
| JEL: | J1 |
| Date: | 2025–07–31 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:127983 |
| By: | Rebecca Diamond; Juan Carlos Suárez Serrato |
| Abstract: | This chapter examines the role of spatial sorting in shaping economic inequality in the United States. We first document the evolution of firm and worker sorting by skill level between 1980 and 2017. We highlight a shift since 2000, where both high-education workers and firms increasingly sort away from high-wage, high-rent areas. Throughout the entire time period, high-education workers continue to sort to high amenity areas. We then develop a spatial equilibrium model that incorporates idiosyncratic worker and firm sorting and discuss estimation techniques to identify model parameters. We review recent empirical advancements in spatial sorting, including firm and worker location choices and their interactions with housing policy. We conclude by outlining the model’s limitations and proposing directions for future research. |
| JEL: | J2 R1 R2 |
| Date: | 2025–03 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:33609 |
| By: | Rodríguez-Pose, Andrés |
| Abstract: | This article examines the role of Swedish higher education institutions (HEIs) in economic development, focusing on the impact of their research capacities on local economic activity. Globally, HEIs are increasingly prioritising research, frequently at the expense of education and local economic engagement, as a means to climb the university ranking ladder. Sweden has been no exception. Our findings indicate that research intensity at Swedish HEIs does not correlate with higher local income. Rather, the opposite is the case: more emphasis on top-end research seems to undermine local income. We explore human capital and innovation as possible mechanisms for the limited local economic influence of Swedish HEIs. The results reveal that HEIs do not significantly improve local human capital. Moreover, despite Swedish HEIs holding intellectual property rights to foster innovation, the actual economic translation of this knowledge faces considerable hurdles, including a misalignment with industry needs and limited local business collaboration. |
| Keywords: | higher education institutions; Sweden; research capacity; innovation; human capital |
| JEL: | I23 I20 R11 |
| Date: | 2025–03–07 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:127188 |
| By: | Ziqi Li; Zhan Peng |
| Abstract: | Moran Eigenvector Spatial Filtering (ESF) approaches have shown promise in accounting for spatial effects in statistical models. Can this extend to machine learning? This paper examines the effectiveness of using Moran Eigenvectors as additional spatial features in machine learning models. We generate synthetic datasets with known processes involving spatially varying and nonlinear effects across two different geometries. Moran Eigenvectors calculated from different spatial weights matrices, with and without a priori eigenvector selection, are tested. We assess the performance of popular machine learning models, including Random Forests, LightGBM, XGBoost, and TabNet, and benchmark their accuracies in terms of cross-validated R2 values against models that use only coordinates as features. We also extract coefficients and functions from the models using GeoShapley and compare them with the true processes. Results show that machine learning models using only location coordinates achieve better accuracies than eigenvector-based approaches across various experiments and datasets. Furthermore, we discuss that while these findings are relevant for spatial processes that exhibit positive spatial autocorrelation, they do not necessarily apply when modeling network autocorrelation and cases with negative spatial autocorrelation, where Moran Eigenvectors would still be useful. |
| Date: | 2025–04 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2504.12450 |
| By: | Celli, Viviana; Crescenzi, Riccardo; de Blasio, Guido; Giua, Mara |
| Abstract: | This paper explores the role of governance in policy implementation, using the European Union (EU) Cohesion Policy as a case study. Leveraging a quasi-natural experiment in Italy, where certain projects were shifted from EU to national management, we evaluate the impact of governance structures on financial execution. Using a non-parametric generalization of the difference-in-differences estimator, we find that otherwise identical projects achieve better financial execution under EU governance. Projects reassigned to national management experience a significant slowdown in financial execution within ten months, with delays reaching nearly 20% after 24 months. These delays are particularly pronounced when projects are managed at the sub-national level rather than by the national government. Our findings contribute to the broader policy debate on the effectiveness of multi-level governance structures in public investment programs. |
| Keywords: | institutional quality; European Union; place-based policies; regional transfers; governance |
| JEL: | C21 O40 H54 R11 |
| Date: | 2025–02–24 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:127393 |
| By: | Haonan LI; Yasuyuki TODO |
| Abstract: | This study investigates the direct effect of a country's participation in China’s Belt and Road Initiative (BRI) on its exports to China, as well as its indirect effect on other countries' exports to China. Using an event study approach, staggered difference-in-differences methodology, and spatial econometric models, we find that participation in the BRI significantly increases member countries’ exports to China, partly because of improvements in infrastructure. We also find evidence showing that countries without strong pre-existing political ties with China are more likely to experience greater export gains after joining the BRI. Furthermore, employing the Spatial Durbin Model, we find that the BRI has a significantly negative indirect effect on exports of countries with a manufacturing share similar to those of BRI members. This result likely reflects heightened competitive pressures, as the BRI increases exports to China from members. However, when using a spatial weight matrix constructed based on geographic distance, we find no significant indirect effect, suggesting that the positive effect of the BRI does not spill over to geographic neighbor countries through infrastructure development. |
| Date: | 2025–04 |
| URL: | https://d.repec.org/n?u=RePEc:eti:dpaper:25038 |
| By: | Borusyak, Kirill; Hull, Peter; Jaravel, Xavier |
| Abstract: | A recent econometric literature shows two distinct paths for identification with shift-share instruments, leveraging either many exogenous shifts or exogenous shares. We present the core logic of both paths and practical takeaways via simple checklists. A variety of empirical settings illustrate key points. |
| JEL: | R15 J23 J82 R23 |
| Date: | 2025–02–01 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:127403 |
| By: | Boeing, Geoff (Northeastern University) |
| Abstract: | OSMnx is a Python package for downloading, modeling, analyzing, and visualizing urban networks and any other geospatial features from OpenStreetMap data. A large and growing body of literature uses it to conduct scientific studies across the disciplines of geography, urban planning, transport engineering, computer science, and others. The OSMnx project has recently developed and implemented many new features, modeling capabilities, and analytical methods. The package now encompasses substantially more functionality than was previously documented in the literature. This article introduces OSMnx's modern capabilities, usage, and design---in addition to the scientific theory and logic underlying them. It shares lessons learned in geospatial software development and reflects on open science's implications for urban modeling and analysis. |
| Date: | 2025–04–29 |
| URL: | https://d.repec.org/n?u=RePEc:osf:socarx:d5fp3_v1 |
| By: | Marcell Tamas Kurbucz; Bo Pieter Johannes Andree |
| Abstract: | Google Earth Engine has transformed geospatial analysis by providing access to petabytes of satellite imagery and geospatial data, coupled with the substantial computational power required for in-depth analysis. This accessibility empowers scientists, researchers, and non-experts alike to address critical global challenges on an unprecedented scale. In recent years, numerous R packages have emerged to leverage Google Earth Engine’s functionalities. However, constructing and managing complex spatio-temporal databases for monitoring changes in remotely sensed data remains a challenging task that often necessitates advanced coding skills. To bridge this gap, geeLite, a novel R package, is introduced to facilitate the construction, management, and updating of local databases for Google Earth Engine-computed geospatial features, which enables users to monitor their evolution over time. By storing geospatial features in SQLite format—a serverless and self-contained database solution requiring no additional setup or administration—geeLite simplifies the data collection process. Furthermore, it streamlines the conversion of stored data into native R formats and provides functions for aggregating and processing created databases to meet specific user needs. |
| Date: | 2025–05–07 |
| URL: | https://d.repec.org/n?u=RePEc:wbk:wbrwps:11115 |