|
on Economic Geography |
|
Issue of 2026–01–26
eight papers chosen by Andreas Koch, Institut für Angewandte Wirtschaftsforschung |
| By: | Rodríguez-Pose, Andrés |
| Abstract: | This paper offers a critical review and synthesis of the literature on the relationship between urban agglomeration, density, and regional prosperity. Agglomeration and density have long been portrayed as the core drivers of urban and regional success. Yet the evidence remains stubbornly inconclusive: some large cities flourish while others stagnate, and many smaller cities quietly outperform their sprawling counterparts. If density were destiny, the world’s largest cities would consistently lead in wealth and opportunity. However, they frequently do not. The paper argues that genuine sources of growth lie instead in institutional quality, the resilience of local ecosystems, and the strength of inter-territorial linkages. Conventional models have mostly dwelt on a narrow set of negative externalities —congestion, high rents, pollution— while overlooking deeper structural costs: territorial inequalities that erode trust, trigger discontent, and consign whole cities and regions to prolonged decline. As political and social fractures within countries widen, it is increasingly evident that prosperity hinges not on agglomeration itself but on the conditions of cities and their relationships with their hinterlands. The way forward requires a shift in policy and analysis towards place-sensitive strategies and robust institutions capable of promoting inclusive prosperity across all cities and regions, rather than privileging a select few. |
| Keywords: | agglomeration economies; urban density; territorial inequality; institutions; regional development; geography of discontent; ecosystems; place-based policies; Agglomeration economies |
| JEL: | R11 R12 O18 P25 |
| Date: | 2026–01–07 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:130618 |
| By: | Jos\'e M. Gaspar; Minoru Osawa |
| Abstract: | We develop a Schumpeterian quality-ladder spatial model in which innovation arrivals depend on regional knowledge spillovers. A parsimonious reduced-form diffusion mechanism induces the convergence of regions' average distance to the global frontier quality. As a result, regional differences in knowledge levels stem residually from asymmetries in the spatial distribution of researchers and firms. We analytically characterize the processes of innovation and knowledge diffusion. We then explore how the weight of intra-relative to inter-regional knowledge spillovers interacts with freer trade to shape the spatial distribution of economic activities. If intra-regional spillovers are relatively stronger, a higher economic integration leads to progressive agglomeration. If inter-regional spillovers dominate, researchers and firms may re-disperse after an initial phase of agglomeration as integration increases. This happens because firms and researchers have incentives to relocate to the smaller region, where they can leverage the concentrated knowledge base of the larger region while avoiding congestion in innovation. The smoothness of the dispersion process depends on the particular weight of intra-regional spillovers. If inter-regional spillovers become stronger as trade becomes freer, then the latter induces a monotone dispersion process. When integration is high enough, stable long-run equilibria always maximize the growth rate of the global frontier quality and the average distance to the frontier, irrespective of whether spillovers are mainly local or global. |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2512.06402 |
| By: | Zoltan Elekes; Gergo Toth; Rikard Eriksson; Dieter Kogler |
| Abstract: | This paper examines how labour market segmentation shapes inter-occupational labour flows and the related diversification of regions, contributing new evidence to the evolutionary economic geography (EEG) literature. Using Swedish matched employer- employee data (2002-2012), we construct segment-specific occupation networks by sex, education, and country of origin to uncover heterogeneity in revealed skill-relatedness. Applying a novel measure based on normalized mutual information, we compare the structural similarity of these networks and demonstrate that while occupations may appear related on average, the underlying connections are often segment-specific. Regional diversification processes may therefore unevenly align with the redeployment potential of different worker groups. This unevenness implies that policies promoting related diversification, central to frameworks such as Smart Specialisation, may inadvertently reproduce labour market segmentation by privileging capabilities concentrated in certain groups (e.g., men, Nordic-born, or medium-educated workers). Conceptually, the paper advances the EEG agenda by integrating network science with labour segmentation theory, revealing that relatedness is not uniform but socially embedded. Regarding policy, it calls for diversification strategies that explicitly assess (i) how local skill-related activities are distributed across worker segments and (ii) whether new specialisations reinforce or mitigate local segmentation. Doing so would allow regional innovation and industrial policies to better balance efficiency and inclusiveness. This is particularly relevant in the context of “just†and “green†transitions, where aligning emerging activities with the capabilities of diverse local workforces is critical to ensuring broad-based opportunity creation rather than deepening existing divides |
| Keywords: | inter-occupation labour flows; skill-relatedness; labour market segments; regional diversification |
| Date: | 2026–01 |
| URL: | https://d.repec.org/n?u=RePEc:egu:wpaper:2601 |
| By: | Sebastian Kripfganz; Vasilis Sarafidis |
| Abstract: | We study the drivers and spatial diffusion of U.S. state population growth using a dynamic spatial model for 49 states, 1965-2017. Methodologically, we recover the spatial network structure from the data, rather than imposing it a priori via contiguity or distance, and combine this with an IV estimator that permits heterogeneous slopes and interactive fixed effects. This unified design delivers consistent estimation and inference in a flexible spatial panel model with endogenous regressors, a data-inferred network structure, and pervasive cross-state dependence. To our knowledge, it is the first estimation framework in spatial econometrics to combine all three elements within a single setting. Empirically, population growth exhibits broad yet heterogeneous conditional convergence: about three-quarters of states converge, while a small high-growth group mildly diverges. Effects of the core drivers, amenities, labour income, migration frictions, are stable across various network specifications. On the other hand, the productivity effect emerges only when the network is estimated from the data. Spatial spillovers are sizable, with indirect effects roughly one-third of total impacts, and diffusion extending beyond contiguous neighbours. |
| Date: | 2026–01 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2601.10444 |
| By: | Tatsuru Kikuchi |
| Abstract: | This paper develops a continuous functional framework for treatment effects propagating through geographic space and economic networks. We derive a master equation from three independent economic foundations -- heterogeneous agent aggregation, market equilibrium, and cost minimization -- establishing that the framework rests on fundamental principles rather than ad hoc specifications. The framework nests conventional econometric models -- autoregressive specifications, spatial autoregressive models, and network treatment effect models -- as special cases, providing a bridge between discrete and continuous methods. A key theoretical result shows that the spatial-network interaction coefficient equals the mutual information between geographic and network coordinates, providing a parameter-free measure of channel complementarity. The Feynman-Kac representation characterizes treatment effects as accumulated policy exposure along stochastic paths representing economic linkages, connecting the continuous framework to event study methodology. The no-spillover case emerges as a testable restriction, creating a one-sided risk profile where correct inference is maintained regardless of whether spillovers exist. Monte Carlo simulations confirm that conventional estimators exhibit 25-38% bias when spillovers are present, while our estimator maintains correct inference across all configurations including the no-spillover case. |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2512.12653 |
| By: | Edward L Glaeser (Harvard University and NBER); Martina Kirchberger (Department of Economics, Trinity College Dublin); Andrii Parkhomenko (University of Southern California) |
| Abstract: | This paper discusses the rebuilding of Ukrainian cities. We start by outlining key facts about Ukraine and its cities: (i) the country's population is declining; (ii) there is a shift in demand for housing from east to west; (iii) Kyiv's advantage is growing; (iv) house prices are rising in Kyiv and western cities, (v) Ukraine's cities are slow and congested. We then present a theoretical framework for maximizing the benefits of Ukraine's rebuilding effort to highlight the welfare effects of different allocations of post-war infrastructure. Finally, we consider the cost curve for reconstruction, as determined, in particular, by the cost of materials, labor, the industrial organization of the building industry and public practices in procurement and regulation. We highlight three broad strategies for shifting the cost curve: openness, standardization and investing‐in‐investing. We conclude by outlining areas for future research. |
| Keywords: | reconstruction; security; procurement; economic geography |
| JEL: | F51 H54 O40 R11 |
| Date: | 2026–01 |
| URL: | https://d.repec.org/n?u=RePEc:tcd:tcduee:tep0226 |
| By: | Ziyang Chen (NJU - Nanjing University); Pierre-Philippe Combes (ECON - Département d'économie (Sciences Po) - Sciences Po - Sciences Po - CNRS - Centre National de la Recherche Scientifique, CNRS - Centre National de la Recherche Scientifique, CEPR - Center for Economic Policy Research); Sylvie Démurger (CERGIC - Center for Economic Research on Governance, Inequality and Conflict - ENS de Lyon - École normale supérieure de Lyon - Université de Lyon, ENS de Lyon - École normale supérieure de Lyon - Université de Lyon); Xiuyan Liu (Southeast University [Jiangsu]) |
| Abstract: | We document variations in real income for high-skilled, low-skilled, and rural migrant households across Chinese cities. Using comprehensive data on land parcel transactions along with individual data for land development and household expenditure, we construct a city-specific housing cost index and assess how it varies across locations. All three components of housing costs – unit land prices, land share in construction, and housing share in expenditure – decrease from city centres to the periphery, increase with city population, and decrease with city land area, as predicted by theory. Overall, housing costs in China are high and vary widely between locations. While income gains outweigh housing costs when moving from smaller to larger cities, in the largest cities, housing costs begin to dominate, particularly for low-skilled and rural migrant households. This suggests a bell-shaped relationship between real income and city population in China, aligning with theoretical predictions. |
| Keywords: | Housing costs Income disparities, Housing costs; Income disparities; Land use regulation; City size; Quality of life; Agglomeration economies; China |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:hal:journl:hal-05446372 |
| By: | Paulo César Morceiro (South African Research Chair in Industrial Development (SARChI-ID), University of Johannesburg); Milene Simone Tessarin (Joint Research Centre, European Commission) |
| Abstract: | Este estudo exploratório analisa a desindustrialização brasileira em múltiplas escalas geográficas ao longo das últimas quatro décadas. Apresenta séries inéditas, longas e contínuas do grau de industrialização medido pelo emprego para o Brasil, estados, regiões metropolitanas, capitais e interior dos estados. Dado a elevada heterogeneidade regional e a concentração espacial da industrialização no país, é fundamental identificar quais territórios enfrentam desindustrialização intensa, moderada, leve ou até (re)industrialização. O artigo contribui ao eliminar o descompasso entre onde a desindustrialização de fato ocorre (regiões específicas) e qual é o foco da maioria dos estudos (escala nacional). Nossas evidências revelam que a desindustrialização é radicalmente assimétrica e concentrada regionalmente, e mais forte nas capitais e regiões metropolitanas do que no interior. Concluímos que a desindustrialização não é neutra espacialmente e que ela contribuiu para a semiestagnação econômica do Brasil ao enfraquecer os principais polos regionais que davam dinamismo para a nação. Sugerimos que as políticas públicas sejam menos centralizadas, mais adaptadas às especificidades regionais e à intensidade local da desindustrialização. |
| Keywords: | desindustrialização; desenvolvimento regional; desenvolvimento industrial; regiões metropolitanas; heterogeneidade regional |
| JEL: | R10 O14 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ris:nereus:022037 |