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on Economic Geography |
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Issue of 2025–08–11
fifteen papers chosen by Andreas Koch, Institut für Angewandte Wirtschaftsforschung |
| By: | Craig A. Chikis; Benny Kleinman; Marta Prato |
| Abstract: | Most U.S. innovation output originates from firms that operate R&D facilities across multiple local markets. We study how this geographic structure influences aggregate innovation and growth, and whether it is socially optimal. First, we develop an endogenous growth model featuring multi-market innovative firms that generate knowledge spillovers to geographically proximate firms. In equilibrium, firms may operate in too few or too many local markets, depending on how sensitive are the local spillovers they generate to their local size. Second, to quantify these effects, we link the model to data on firms’ R&D locations, patents, and citation networks. Using an event-study design, we show that firms’ spatial expansion increases spillovers to other firms and estimate how these spillovers depend on a firm's local footprint. Our estimates imply that U.S. innovative firms operate in too few markets relative to the social optimum. Third, using quantitative counterfactuals, we find that policies promoting broader spatial scope yield larger welfare gains than standard R&D subsidies. Moreover, unlike R&D subsidies, such policies can also reduce regional inequality. |
| JEL: | E0 F0 L0 O0 R0 |
| Date: | 2025–07 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34010 |
| By: | Denti, Daria; Iammarino, Simona |
| Abstract: | Do spatial socio-economic features influence the demand for forced labour also in places where it is illegal and socially unacceptable? This article provides an answer to this question by estimating the effect of the characteristics of the local industry structure on forced labour in manufacturing (FLM hereafter) using Italy as a case study. Conceptually, we bridge the literature on forced labour with economic geography to empirically test the effect of local industry specialization and firm size. Exploiting a novel database of geo-tagged episodes of FLM across Italian local labour market areas, we find that industry specialization and the share of micro-firms in the industry that specializes a place are key predictors for FLM. Instrumental variable estimates relying on novel data on the geography of Italian firms in 1911 show that results are robust to endogeneity threats. Findings also hold to the inclusion of potential confounding features, like the presence of migrants and institutional quality, and to spatial dependency tests. Moreover, results support the relevance of addressing the spatial dimension for a thorough understanding of FLM. Overall, the article contributes to the currently scant quantitative evidence on the micro-regional determinants of forced labour in the Global North, which is still relatively unexplored. |
| Keywords: | forced labour in manufacturing; local labour markets; local industry specialisation; firm size |
| JEL: | J70 J80 L10 L25 L60 R12 R23 |
| Date: | 2025–07–22 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:128498 |
| By: | David Autor (MIT); David Dorn (University of Zurich); Gordon Hanson (Harvard University); Maggie Jones (US Census Bureau); Bradley Setzler (Pennsylvania State University) |
| Abstract: | This chapter analyzes the distinct adjustment paths of U.S. labor markets (places) and U.S. workers (people) to increased Chinese import competition during the 2000s. Using comprehensive register data for 2000-2019, we document that employment levels more than fully rebound in trade-exposed places after 2010, while employment-to population ratios remain depressed and manufacturing employment further atrophies. The adjustment of places to trade shocks is generational: affected areas recover primarily by adding workers to non-manufacturing who were below working age when the shock occurred. Entrants are disproportionately native-born Hispanics, foreign-born immigrants, women, and the college-educated, who find employment in relatively low-wage service industries in healthcare, education, retail, and hospitality. Using the panel structure of the employer-employee data, we decompose changes in the employment composition of places into trade-induced shifts in the gross flows of people across sectors, locations, and non-employment status. Contrary to standard models, trade shocks reduce geographic mobility, with both in- and out-migration remaining depressed through 2019. The employment recovery stems almost entirely from young adults and foreign-born immigrants taking their first U.S. jobs in affected areas, with minimal contributions from cross-sector transitions of former manufacturing workers. Although worker inflows into non-manufacturing more than fully offset manufacturing employment losses in trade-exposed locations after 2010, incumbent workers neither fully recover earnings losses nor predominantly exit the labor market, but rather age in place as communities undergo rapid demographic and industrial transitions. |
| Keywords: | China trade shock, Local labor markets, Sectoral reallocation, Manufacturing decline, Worker mobility |
| JEL: | F16 J23 J31 J62 L6 R12 |
| Date: | 2025–07 |
| URL: | https://d.repec.org/n?u=RePEc:crm:wpaper:2537 |
| By: | Laura Conti (Bank of Italy); Marco Francesconi (University of Essex); Giulio Papini (Bank of Italy); Michel Serafinelli (King’s College London) |
| Abstract: | This paper documents how the local labor market (LLM) responds to a change in touristic attractiveness. Leveraging largely underutilized data from several sources, we exploit a unique classification of Italian localities based on their main touristic assets and aggregate trends in foreign tourists' choices in a shift-share research design. Looking at all LLMs, we find a positive relationship between changes in attractiveness and changes in the local tourism-related economic activity, with a positive impact on tourism expenditure and tourism employment, but no effect on total employment. In high-unemployment LLMs, however, we find evidence of sizable total employment effects and indirect effects generated through industries related to tourism and firms in the nontradable sector and the manufacturing sector. |
| Keywords: | local economic activity; tourism; job growth; unemployment; heterogeneity; natural resource curse. |
| JEL: | R11 J21 R12 R23 Z30 |
| Date: | 2025–07 |
| URL: | https://d.repec.org/n?u=RePEc:crm:wpaper:2532 |
| By: | Arvanitopoulos, Theodoros; Wilson, Charlie; Morton, Craig |
| Abstract: | Air source heat pumps are the principal means of decarbonising residential heating. What drives local uptake of heat pumps? We present and examine a unique, highly disaggregated, spatial-temporal dataset for heat pump diffusion across Great Britain at the local authority level from 2010 to 2020. We find average total installed cost of 1075 £/kW and a negative learning rate of −3.3 %, with most installations in owner-occupied houses. Using spatial econometric models, we investigate how local conditions drive heat pump installations. We find early adopting local areas tend to be rural, off the gas grid, with prior use of solid fuel or oil for heating, and participate in renewable and community energy projects. Early adopting areas benefit from a combination of more readily accessible properties, low-carbon energy skills, and local supply chains. We find robust evidence of spatial spillover effects that show early adopting areas serve as deployment test beds, indirectly stimulating deployment in contiguous areas. We reason that spatial spillovers are driven by installer availability and local supply chains materialised around installation activity. We estimate for every three heat pumps installed, one heat pump is subsequently installed in a neighbouring local authority with less advantageous conditions. This implies an important policy trade-off for low-carbon heat between maximising effectiveness (incentivise early adopters) and widening equality of access (support later adopters). Concerted policy action to tackle fragmented supply chains and skills shortages which inflate installation costs of heat pumps relative to gas boilers is also urgently needed. |
| Keywords: | decarbonisation; residential heating; heat pumps; local conditions; spatial spillovers; spatial econometrics |
| JEL: | C31 Q40 R11 |
| Date: | 2025–11–30 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:128927 |
| By: | Bergeaud, Antonin; Deter, Max; Greve, Maria; Wyrwich, Michael (University of Groningen) |
| Abstract: | We investigate the causal relationship between inventor migration and regional innovation in the context of the large-scale migration shock from East toWest Germany between World War II and the construction of the Berlin Wallin 1961. Leveraging a newly constructed, century-spanning dataset on Germanpatents and inventors, along with an innovative identification strategy based onsurname proximity, we trace the trajectories of East German inventors and quantify their impact on innovation in West Germany. Our findings demonstrate a significant and persistent boost to patenting activities in regions with higher inflows of East German inventors, predominantly driven by advancements in chemistry and physics. We further validate the robustness of our identification strategy against alternative plausible mechanisms. We show in particular that the effect is stronger than the one caused by the migration of other high skilled workers and scientists. |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:gro:rugfeb:2025002-i&o |
| By: | Torben Klarl; Alexander S. Kritikos; Knarik Poghosyan |
| Abstract: | While Equity Crowdfunding (ECF) platforms are a virtual space for raising funds, geography remains relevant. To determine how location matters for entrepreneurs using equity crowdfunding (ECF), we analyze the spatial distribution of successful ECF campaigns and the spatial relationship between ECF campaigns and traditional investors, such as banks and venture capitalists (VCs). Using data from the two leading German platforms – Companisto and Seedmacht – we employ spatial eigenvalue filtering and negative binomial estimations. In addition, we introduce an event study based on the implementation of the Small Investor Protection Act in Germany allowing us to obtain causal evidence. Our combined analysis reveals a significant geographic concentration of successful ECF campaigns in some, but not all, dense areas. ECF campaigns tend to cluster in dense areas with VC activity, while they are less prevalent in dense areas with high banking activity, and are rarely found in rural areas. Thus, rather than closing the so-called regional funding gap, our results suggest that, from a spatial perspective, ECF fills the gap when firms in dense areas seek external financing below the minimum equity threshold offered by VCs and when there are few banks offering loans. |
| Keywords: | Crowdfunding, Finance Geography, Entrepreneurial Finance, Venture Capital (VC) Proximity |
| JEL: | G30 L26 M13 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:diw:diwwpp:dp2134 |
| By: | Roy Cequeti (GRANEM - Groupe de Recherche Angevin en Economie et Management - UA - Université d'Angers - Institut Agro Rennes Angers - Institut Agro - Institut national d'enseignement supérieur pour l'agriculture, l'alimentation et l'environnement, UNIROMA - Università degli Studi di Roma "La Sapienza" = Sapienza University [Rome]); Pierpaolo D’urso (UNIROMA - Università degli Studi di Roma "La Sapienza" = Sapienza University [Rome]); Raffaele Mattera (Università degli studi della Campania "Luigi Vanvitelli" = University of the Study of Campania Luigi Vanvitelli) |
| Abstract: | The paper discusses the problem of estimating group heterogeneous fixed-effect panel data models under the assumption of fuzzy clustering, that is each unit belongs to all the clusters with a membership degree. To enhance spatial clustering, a spatio-temporal approach is considered. An iterative procedure, alternating panel data estimation and spatio-temporal clustering of the residuals, is proposed. The proposed method can be of relevance to researchers interested in using fuzzy group fixed-effect methods, but want to leverage spatial dimension for clustering units. Two empirical examples, the first on cigarette consumption in the US states and the second on non-life insurance demand in Italy, are presented to illustrate the performance of the proposed approach. The spatial fuzzy GFE model reveals important regional differences in both the US cigarette consumption and non-life insurance determinants in Italy. In the case of the US, we found a distinction in two main clusters, East and West. For the Italy provinces data, we find a distinction in North and South clusters. Regarding the regression results, for cigarette consumption data, different from the previous studies, we find that the smuggling effect is significant only in east regions, thus suggesting localised impacts of bootlegging. In the context of Italian non-life insurance demand, we find that while population density explains insurance consumption in northern provinces, the trust issues in the south explain the lower insurance demand. |
| Keywords: | Longitudinal data, Clusterwise regression, Grouped fixed effect, Fuzzy approach, Heterogeneous coefficient, Spatial econometrics |
| Date: | 2025–01–03 |
| URL: | https://d.repec.org/n?u=RePEc:hal:journl:hal-05109570 |
| By: | Francesco Roncone |
| Abstract: | Both the demand for skilled labor and the skill wage premium have become increasingly dispersed across the United States. This paper examines how technological change within occupations drives these uneven local developments. Combining a novel measure of technological change - capturing shifts in task intensities within 430 detailed occupations - with patent data and microdata, I demonstrate that innovation reallocates labor toward cognitive-intensive tasks, especially in densely populated areas. Motivated by this, I show that greater exposure to technological change increases the relative employment of college-educated workers while causing within-occupation wage declines for less-educated workers, widening the college wage premium. |
| JEL: | J23 J24 J31 O33 R12 |
| Date: | 2025–07 |
| URL: | https://d.repec.org/n?u=RePEc:bol:bodewp:wp1208 |
| By: | Stephan Heblich; Dávid Krisztián Nagy; Alex Trew; Yanos Zylberberg |
| Abstract: | Does industrial concentration shape the life and death of cities? We identify settlements from historical maps of England and Wales (1790–1820), isolate exogenous variation in their late 19th-century size and industrial concentration, and estimate the causal impact of size and concentration on later dynamics. Industrial concentration has a negative effect on long-run productivity—independent of industry trends and consistent with cross-industry Jacobs externalities. A spatial model quantifies the role of fundamentals, industry trends, and Jacobs externalities in shaping industry-city dynamics and isolates a new, dynamic trade-off in the design of place-based policies. |
| JEL: | F63 N93 O14 R13 |
| Date: | 2025–07 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34029 |
| By: | Kostarakos Ilias (European Commission - JRC); Marques Santos Anabela (European Commission - JRC); Molica Francesco (European Commission - JRC) |
| Abstract: | The impacts of the green and the digital transitions on the regional economic structure of the European Union are of paramount importance and have been at the forefront of the recent policy discussions. This paper contributes to the ongoing discussion by developing a composite indicator to assess the overall risks imposed by the twin transition on the EU’s NUTS2 regions. The indicator focuses on two key aspects: the regions’ vulnerabilities and their readiness to adapt to the challenges of the transition. The risk index highlights the large degree of heterogeneity in terms of the risk imposed by the transition process, with the less-developed regions emerging as the most vulnerable. |
| Date: | 2025–07 |
| URL: | https://d.repec.org/n?u=RePEc:ipt:termod:202508 |
| By: | Keisuke KONDO |
| Abstract: | This study utilizes micro-geographic data to examine wage premiums across different residential and employment agglomerations. In the existing literature on economies of density, the distinction between residents and workers is often addressed without a clear differentiation between the two. This oversight hinders the formulation of practical policy recommendations for compact urban planning and industrial location strategies. Amid Japan’s ongoing population decline, certain regions retain the capacity to attract industrial activity despite their waning appeal as residential areas. However, when policy discussions focus exclusively on residential agglomeration, regions with substantial potential to revitalize local industrial clusters may be overlooked. To bridge this gap, the study integrates manufacturing establishment data with regional mesh data on both residents and workers. This study finds that employment concentration, rather than residential concentration within compact geographic areas accounts for wage premiums, thereby highlighting the critical role of spatial locality of employment in shaping industrial location strategies. |
| Date: | 2025–07 |
| URL: | https://d.repec.org/n?u=RePEc:eti:dpaper:25069 |
| By: | Kensuke Ohtake |
| Abstract: | This paper studies the Footloose Entrepreneur model in new economic geography in continuous space. In an appropriate function space, the model is formulated as an initial value problem for an infinite-dimensional ordinary differential equation. A unique global solution is constructed based on the Banach fixed point theorem. The stability of a homogeneous stationary solution is then investigated and numerical simulations of the asymptotic behavior of the solution are performed. Numerical solutions starting near the unstable homogeneous stationary solution converge to spike-shaped stationary solutions, and the number of spikes decreases with decreasing transport costs and strengthening preference for variety. |
| Date: | 2025–05 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2505.11241 |
| By: | Manuel Gómez-Zaldívar (Universidad de Guanajuato); Fernando Gómez-Zaldívar (School of Government and Public Transformation, Tecnológico de Monterrey) |
| Abstract: | The development of Mexico's manufacturing sector has progressed unevenly across regions and industry groups, with the underlying causes varying over time. Using data from 2004 to 2019, we find that all Mexican regions experienced increased specialization and diversification. However, only those regions that shifted toward more complex manufacturing activities were able to expand their share of national manufacturing output. These findings underscore the critical role of industrial sophistication in shaping regional economic relevance. Consistent with prior research, our results highlight the importance of a clear and strategic industrial policy to support less dynamic regions. Such policy is essential for enabling structural transformation, fostering more balanced and inclusive economic growth, and overcoming persistent institutional and productive constraints that continue to hinder regional development. |
| Keywords: | Industry Groups, Economic Complexity, Mexico's Municipalities |
| JEL: | L60 R11 R12 |
| Date: | 2025–07 |
| URL: | https://d.repec.org/n?u=RePEc:gnt:wpaper:4 |
| By: | Shyamal Chowdhury; Manuela Puente-Beccar; Hannah Schildberg-Hörisch; Sebastian O. Schneider; Matthias Sutter |
| Abstract: | We investigate how strongly the local environment beyond the family can contribute to understanding the formation of children's economic preferences. Building on precise geolocation data for around 6.000 children, we use fixed effects, spatial autoregressive models and Kriging to capture the relation between the local environment and children's preferences. The spatial models explain a considerable part of so far unexplained variation in preferences. Moreover, the "spatial stability" of preferences exceeds the village level. Our results highlight the importance of the local environment for the formation of children's preferences, which we quantify to be as large as that of parental preferences. |
| Keywords: | skill formation, spatial models, kriging, local environment, patience, risk attitudes, prosociality, experiments with children, Bangladesh |
| JEL: | D01 C21 C99 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12001 |