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on Economic Geography |
| By: | Stefan Leknes (Statistics Norway); Jorn Rattso (Department of Economics, Norwegian University of Science and Technology); Hildegunn E Stokke (Department of Economics, Norwegian University of Science and Technology) |
| Abstract: | Intangible capital, an asset class central to the knowledge economy, has been shown to contribute substantially to productivity growth. However, the importance for agglomeration economies has received limited attention. We examine how the agglomeration effect varies with industries’ intensity of intangible capital, combining international measures of industry-level intangible capital with rich Norwegian administrative employer–employee data. The analysis addresses methodological challenges related to endogenous intangible investment, unobserved worker characteristics, and correlation between worker moves and firm quality. We find that at mean intangible intensity, the elasticity of wages with respect to city size is 0.026, with each standard-deviation increase in intangible intensity raising the elasticity by 0.004. Dynamic wage returns to city-specific experience are also significantly higher in intangible-intensive industries. Employing the AKM framework and a complementary firm- based measure of local productivity, we show that our main results are robust to potential hierarchy effects arising from worker mobility. Moreover, we document that positive selection on unobserved ability into large cities is driven primarily by workers employed in intangible-intensive industries, irrespective of education level. We further document heterogeneity across intangible components, showing that agglomeration elasticities are strong for industries intensive in software and databases, and economic competencies. Taken together, these findings highlight the importance of intangible capital investments in shaping urban wage premia. |
| Keywords: | Agglomeration economies, knowledge spillover, intangible capital, AKM-model, sorting, worker experience |
| JEL: | J24 J31 J61 R12 R23 |
| Date: | 2025–12–19 |
| URL: | https://d.repec.org/n?u=RePEc:nst:samfok:20425 |
| By: | Raouf Boucekkine (Aix-Marseille Univ., CNRS, AMSE, Marseille, France); Carmen Camacho (Paris School of Economics and CNRS, France.); Weihua Ruan (Department of mathematics, Purdue University Northwest, USA) |
| Abstract: | The dynamics of capital distribution across space are an important topic in economic geography and, more recently, in growth theory. In particular, the spatial AK model has been intensively studied in the latter stream. It turns out that the positivity of optimal capital stocks over time and space for any initial capital spatial distribution has not been entirely settled even in the simple linear AK case. We use Ekeland’s variational principle together with Pontryagin’s maximum principle to solve an optimal spatiotemporal AK model with a state constraint (non-negative capital stock), where the capital law of motion follows a diffusion equation. We derive the necessary optimality conditions to ensure the solution satisfies the state constraints for all times and locations. The maximum principle enables the reduction of the infinite-horizon optimal control problem to a finite-horizon problem, ultimately proving the uniqueness of the optimal solution with positive capital and the non-existence of such a solution when the time discount rate is either too large or too small. |
| Keywords: | Diffusion and growth, Convergence, optimal control, State constraint, Ekeland’s variational principle |
| JEL: | C61 O44 Q15 Q56 R11 |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:aim:wpaimx:2533 |
| By: | Simonato, Thiago; van der Mensbrugghe, Dominique; Chepeliev, Maksym |
| Abstract: | This paper investigates how recent and potential changes in U.S. trade policy affect regional economic performance, labor markets, and income inequality across Brazil, using an integrated global-subnational computable general equilibrium (CGE) framework. The analysis combines the Global Trade Analysis Project (GTAP) model with Brazil’s highly disaggregated subnational TERM (The Enormous Regional Model), providing a novel methodological approach to capture detailed spatial and sectoral impacts of international trade shocks. Empirical findings reveal substantial regional heterogeneity in economic outcomes, with pronounced vulnerabilities in the North and Northeast, contrasting milder effects or even gains in more diversified southern regions. Labor market responses were similarly uneven, characterized by heightened informality and concentrated losses in high-skill, trade-dependent occupations. Agriculture, particularly soybean production, emerges as a critical transmission channel, reflecting Brazil’s deep integration into China-led global value chains. Income and consumption impacts are regressive, disproportionately affecting lower-income households. These results underscore the importance of accounting for subnational heterogeneity and global value chain interactions when designing compensatory and adjustment policies. Effective policy interventions thus require spatially targeted mechanisms to mitigate adverse regional and distributional effects while leveraging strategic sectoral opportunities arising from trade realignments. |
| Keywords: | International Relations/Trade |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ags:aaea25:361031 |
| By: | Felbermayr, Gabriel; Hinz, Julian; Krantz, Sebastian; Mahlkow, Hendrik; Wanner, Joschka |
| Abstract: | How do adverse global trade shocks affect sub-national outcomes, and what insurance does regional integration provide? We study the EU Single Market using a large-scale quantitative trade model with regional labour mobility, calibrated to a new NUTS2- based Regionalized Inter-Country Input-Output (REICIO) database. Comparing four baselines, from a fully frag-mented Europe to deep integration, we evaluate the 2025 US tariffs. Full integration of EU goods and labour markets reduces the average regional loss in real value added per capita by about 25% and more than halves its dispersion. Further deepening barely improves the mean but compresses the distribution of regional impacts even further. |
| Keywords: | Global Trade Wars, MRIO, ICIO, European Regions, NUTS2, Global Value Chains, Sectoral Mobility Frictions, Trade Integration |
| JEL: | F15 F16 F17 R15 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:ifwkwp:334528 |
| By: | Ester Faia; Edward L. Glaeser; Saverio Simonelli; Martina Viarengo |
| Abstract: | What explains the dramatic differences in earnings across locations? We employ an administrative employer-employee linked dataset from Italy that includes the country’s entire workforce to estimate firm-worker or location-worker effects. We also estimate differences in human capital accumulation across firms and cities. We find that the elasticity of the location premia to density is smaller than in other settings and that other locational characteristics, such as segregation in school or the workplace and inter-generational mobility, are more strongly correlated with earnings and earnings growth. Our place-based estimates are similar if we focus on movers who were forced to relocate after the L’Aquila Earthquake. Using a regression discontinuity design, we find that density levels jump up at the historic border between House of Savoy-ruled Piedmont and the Hapsburg Empire. Earnings today also jump at the border. This finding suggests that there may be some unintended effects of being a far-flung province of a distant empire, perhaps because of access to larger markets or the administrative and educational reforms that began under Empress Maria Theresa. |
| JEL: | J31 J61 N93 R10 R23 |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34582 |
| By: | Masahito Ambashi (Economic Research Institute for ASEAN and East Asia (ERIA)) |
| Abstract: | This paper reviews theoretical, empirical, and practical studies of industrial parks and examines their impact on development, particularly for developing countries. Theoretical mechanisms indicate positive impacts of industrial parks on economic development through agglomeration economies, including internal/external economies, reduced transaction costs, capital accumulation, and learning and knowledge spillovers. Meanwhile, empirical studies examining special economic zones (SEZs), i.e.industrial hubs with strong incentives for resident firms, show that they do not necessarily bring out high performance. This means that the design of industrial parks and supporting policies are critical for them to cause positive impacts on development for developing countries. This paper points to new issues of industrial park development that policymakers should note. Consideration of the Sustainable Development Goals (e.g. environment, female labour force, and human rights) is necessary to attract foreign direct investment (FDI) that has greater interest in these sustainability issues. This paper also indicates that digitalisation, the service economy, and natural resources should be incorporated into industrial park development strategies to create diversified and upgraded industries. Finally, this paper attempts to provide policy lessons to viable industrial parks based on the above-mentioned discussions, which can serve as a reference point for developing countries. |
| Keywords: | industrial parks; agglomeration economies; Sustainable Development Goals (SDGs); digitalisation; development strategy; industrial policy |
| JEL: | L52 O14 O25 |
| Date: | 2025–09–29 |
| URL: | https://d.repec.org/n?u=RePEc:era:wpaper:dp-2025-08 |