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on Economic Geography |
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Issue of 2026–07–27
fourteen papers chosen by Andreas Koch, Institut für Angewandte Wirtschaftsforschung |
| By: | Desmet, Klaus; Nagy, Dávid Krisztián; Rossi-Hansberg, Esteban |
| Abstract: | This paper studies how human capital shapes the economic geography of development. We develop a model in which the cost of acquiring human capital varies across space, and regions with higher human capital innovate more. Locations are spatially connected through migration and trade. There are localized agglomeration economies, and human-capital-augmenting technology diffuses across space. Using high-resolution data on income and schooling, we quantify and simulate the model at the 1° x 1° resolution for the entire globe. Over the span of two centuries, the model predicts strong persistence in the spatial distribution of development — unlike spatial dynamic models without human capital, which predict convergence. Proportionally lowering the cost of education in sub-Saharan Africa or Central and South Asia raises local outcomes but reduces global welfare, whereas the same policy in Latin America improves global outcomes. An alternative policy equalizing educational costs across sub-Saharan Africa generates relatively worse outcomes, as population reallocates within the region toward less productive areas. Central to these results is the estimated negative correlation between the education costs and local fundamentals, as well as inefficiencies in the spatial allocation due to externalities. |
| Keywords: | Human capital; Geography; Development; Education policy; Global inequality; Dynamic spatial models |
| JEL: | E24 F10 I24 J24 O11 O18 O33 R12 R23 |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:20671 |
| By: | André Luis Squarize Chagas (Department of Economics, University of São Paulo) |
| Abstract: | Regional policies often affect untreated but spatially exposed units, making standard difference-in-differences comparisons difficult to interpret. This paper develops a treatment-exposure framework for regional policy evaluation with spatial spillovers. It shows that two-way fixed effects estimators that omit exposure conflate the direct treatment effect with spillover and treated-exposure components whose signs depend on the exposure design. A decomposed specification separates direct effects, spillovers on untreated exposed units, and reinforcement among treated exposed units, provided that the spatial weights matrix is specified as a causal exposure mapping before estimation. The paper translates these conditions into an identification protocol for selecting, diagnosing, and challenging exposure mappings. An application to London’s Ultra Low Emission Zone estimates a direct NO2 reduction of 6.6 percent and an implied reduction of 6.2 percent at the mean positive exposure level among untreated exposed units. Spatially bounded evaluations restricted to directly treated units may understate the affected population and misstate the costs and benefits of the intervention. |
| Keywords: | spatial spillovers; difference-in-differences; regional policy evaluation; exposure mapping; spatial counterfactuals; Ultra Low Emission Zone |
| JEL: | C21 C23 C31 C54 R11 R58 Q53 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ris:nereus:023113 |
| By: | Chikis, Craig A.; Kleinman, Benny; Prato, Marta |
| 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 the local spillovers they generate are 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. |
| Keywords: | Innovation |
| JEL: | O30 O40 R10 L10 |
| Date: | 2025–07 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:20408 |
| By: | Imke Rhoden; Jae-Hyuck Lee |
| Abstract: | The coal phase-out's regional economic impact is a key challenge of the energy transition, as employment and fiscal dependence in coal regions face structural adjustment without automatic market solutions. Analyzing European Union NUTS 2 regions from 2000-2022 with fixed effects and clustered errors, coal regions show a consistent 1.1 percentage points unemployment premium and grow faster in gross domestic product per capita at 0.2 percentage points annually, indicating a hollowing-out process where population exit raises per-capita output while employment conditions worsen. Spatial analysis shows strong geographic clustering, supporting coordinated local and sectoral targeted transition policies. South Korea's rapid phase-out, with Chungnam as a major coal-power region, underscores the need for proactive national support to enable concrete regional action before plants shut down. |
| Date: | 2026–07 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2607.09589 |
| By: | Rodríguez-Pose, Andrés; Bartalucci, Federico |
| Abstract: | The European Commission’s proposed Multiannual Financial Framework for 2028–2034 is the most far-reaching recasting of the European Union’s (EU) budget in the Union’s history. It folds fourteen funds into National and Regional Partnership Plans, tilts spending towards competitiveness, defence and strategic autonomy, and replaces cost reimbursement with performance-based milestones. The diagnosis behind the reform is broadly sound. Its likely consequences are risky for future European integration. Drawing on original cartographic analysis of competitiveness, defence capacity, trade exposure and industrial anxiety across European regions, we show that the proposed architecture will, in all likelihood, steer investment towards places that are already advantaged while hollowing out Cohesion Policy, the one instrument that has historically reached Europe’s most vulnerable territories and tempered the growing geography of discontent. A budget designed to make Europe more competitive, more secure and more strategically autonomous may instead make it less inclusive, more polarised and more fragile. Europe does not face a choice between competitiveness and cohesion. It faces a choice between mobilising its full territorial potential and gambling with the Union’s legitimacy and survival. |
| Keywords: | cohesion policy;multiannual financial framework;European integration;Euroscepticism;territorial inequality;regional development trap;place-based policy;competitiveness |
| JEL: | R11 R58 H77 O18 F15 D72 |
| Date: | 2026–06–26 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:139012 |
| By: | Egger, Dennis; Faber, Benjamin; Li, Ming; Lin, Wei |
| Abstract: | We combine a new collection of microdata from China with a natural policy experiment to investigate the extent to which reductions in rural-urban migration barriers affect flows of trade and investments between cities and the countryside. We find that increases in worker eligibility for urban residence registration (Hukou) across origin-destination pairs increase rural-urban exports, imports, capital inflows and outflows, both in terms of bilateral transaction values and the number of unique buyer-seller matches. To quantify the implications at the regional level, we interpret these estimates through the lens of a spatial equilibrium model in which migrants can reduce buyer-seller matching frictions. We find that a 10% increase in a rural county's migration market access on average leads to a 1.5% increase in the county's trade market access and a 2% increase in investment market access. In the context of China's recent Hukou reforms, we find that these knock-on effects on market integration were on average larger among the urban destinations compared to the rural origins, reinforcing incentives for rural-urban migration. |
| Keywords: | Economic development; market integration |
| JEL: | F63 O12 R11 |
| Date: | 2025–08 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:20521 |
| By: | Edcleutson de Souza Silva (Federal University of Paraíba); André Luis Squarize Chagas (Department of Economics, University of São Paulo); Carlos Roberto Azzoni (Department of Economics, University of São Paulo); Aléssio Tony Cavalcanti de Almeida (Federal University of Paraíba); Wallace Patrick Santos de Farias Souza (Federal University of Paraíba) |
| Abstract: | Wind power deployment is often framed as a source of regional job creation, but its local economic incidence may be sectorally uneven and spatially dispersed. This paper estimates the effects of wind farm expansion on formal labor markets in North eastern Brazil from 2004 to 2019. Using an annual panel of 1, 478 municipalities and a spatial difference-in-differences design, we estimate direct effects on host municipalities and spillover effects on nearby municipalities across industry, commerce and services, and agriculture. The results indicate a pattern of sectoral reallocation rather than broad-based employment growth. Host municipalities experience large short-run gains in industrial employment and establishment counts, while agricultural employment declines, with the strongest evidence in the short run and persistent negative point estimates at longer horizons. Neighboring municipalities also exhibit negative labor market spillovers, especially in industrial wages and wage bills and in short-run agricultural employment and wage bills. Exploratory analyses suggest more negative point estimates in inland municipalities and among low-skilled agricultural workers, although these results are based on smaller effective samples. The findings show that wind farms operate not only as energy-capacity investments, but also as spatially targeted infrastructure shocks with uneven distributive effects across sectors, workers, and municipalities. They also underscore the importance of accounting for spatial spillovers when designing quasi-experimental evaluations of renewable energy infrastructure. |
| Keywords: | wind power deployment; renewable energy infrastructure; local labor markets; spatial spillovers; difference-in-differences; just transition |
| JEL: | Q42 Q43 R11 R23 J21 C23 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ris:nereus:023114 |
| By: | Colson-Sihra, Eve; De Sousa, Jose; Mayer, Thierry |
| Abstract: | Does geography shape tastes? This paper investigates the geography of tastes using French household surveys from 1974 and 2005. We propose a two-step method: first, we estimate regional tastes using a structural demand system; then, we compute bilateral taste differences and link them to geographic distance. The 1974 results provide evidence of ‘gravity in taste’ — that is, geographically closer regions have more similar food tastes. By 2005, this geographic pattern has largely disappeared. However, tastes are not homogenized. Regional diversity persists, with differences in taste determined by sociocultural similarity rather than geographic distance. |
| Keywords: | Tastes; Geography |
| JEL: | D12 R10 Z10 |
| Date: | 2025–08 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:20563 |
| By: | Heblich, Stephan; Nagy, Dávid Krisztián; Trew, Alex; Zylberberg, Yanos |
| 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. |
| Keywords: | Quantitative economic geography |
| JEL: | F63 N93 O14 R13 |
| Date: | 2025–07 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:20420 |
| By: | Chaurey, Ritam; Nayyar, Gaurav; Sharma, Siddharth; Verhoogen, Eric |
| Abstract: | Knowledge spillovers among firms are widely viewed as a key driver of agglomeration and growth, but are difficult to estimate cleanly. We randomly allocated an energy-efficient motor — a “servo'†motor — among leather-goods firms in Dhaka, Bangladesh, and tracked adoption, information flows, beliefs about energy savings, and other variables. We use the difference between actual exposure and expected exposure (from simulated randomization draws) to identify the effect of exposure. We find a robust positive effect of exposure to treated neighbors within a small geographic area (500 meters in our baseline specification) on information flows and adoption. A marginal value of public funds (MVPF) calculation taking learning spillovers into account yields a significantly larger value than one considering only treated firms and suggests that adoption subsidies would be a cost-effective policy intervention. |
| JEL: | O14 R11 L67 L23 O12 |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:20713 |
| By: | Patacchini, Eleonora; Wu, Qi |
| Abstract: | We study how face-to-face interactions shape worker mobility through social networks. Using granular cellphone geolocation and sociodemographic data on 3.3 million workers in a large urban labor market, we exploit settings in which multiple friends of the same worker relocate to jobs within the same destination area. Within the same worker and destination, face-to-face interaction with a friend increases the probability of moving to that friend’s workplace by 36-43 percent relative to remote communication, with effects substantially larger than those of phone calls or digital messaging. Consistent with referral models, the effect emerges only after the friend joins the destination firm and disappears in pre-move placebo periods. A data-driven heterogeneity analysis using regularized machine learning reveals a pronounced targeting gradient: effects in the highest predicted-return settings are more than twice as large as the population average. We interpret these findings through a simple referral model in which interaction technology shapes the effectiveness of information transmission, showing that mobility depends not only on the presence of social ties but on how information flows within them. |
| Keywords: | Employment; Communication technology; Agglomeration economies |
| JEL: | R23 J60 L15 |
| Date: | 2025–07 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:20447 |
| By: | Rodríguez-Pose, Andrés |
| Abstract: | Industrial policy is back in vogue, with governments rediscovering their appetite for state-led development. Yet its fortunes often hinge on a neglected variable: institutional quality. This paper reviews the rise, fall, and resurgence of industrial policy, arguing that institutional capacity has been the decisive, if underappreciated, factor separating success from failure throughout this cycle. It then illustrates this argument empirically using EU Cohesion Policy as Europe’s de facto industrial policy, examining regional growth across NUTS-3 regions over 2006–2024 against fund intensity and both the level and the trajectory of regional government quality. The results reveal a systematic empirical pattern: cohesion spending is connected with faster growth only where institutional quality improved; in places with backsliding institutions the association is negligible. Sectorally, “hard” lines—energy, IT, transport, skills, environment—are linked to growth almost everywhere, while “soft” lines—R&D, social infrastructure, technical assistance—show a positive association chiefly in regions that managed to improve their governance. Spain offers a cautionary tale: substantial inflows amid deteriorating governance have coincided with thin convergence. These patterns point to a policy-relevant regularity: any industrial strategy that neglects institutional reform risks squandering resources. The analysis suggests that competitive allocation, rigorous monitoring, credible sunset clauses, and, above all, the checks and balances that sustain investments in state capacity should accompany EU transfers. Europe’s strategic ambitions will ultimately rest not just on how much it invests, but on whether it can strengthen the institutional scaffolding that shapes investment returns. |
| Keywords: | industrial policy;institutional quality;EU Cohesion funds;development;policy effectiveness;EU Spain |
| JEL: | H11 R58 |
| Date: | 2026–06–23 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:138852 |
| By: | Combes, Pierre-Philippe; Gorin, Clement; Nakamura, Shohei; Roberts, Mark |
| Abstract: | This paper analyzes urbanization patterns across Sub-Saharan Africa circa 2015 using a dartboard algorithm and high-resolution gridded population data to delineate urban areas and urban cores, cities and their population centers, and towns. Key empirical regularities are presented regarding urban hierarchies and internal city structures. Urbanization rates often exceed official ones and vary considerably across countries from 29.4% in Gabon to 78.1% in Kenya. Within countries, delineated areas show great size diversity following Zipf's law, without much urban primacy. Cities’ land area increases slightly less proportionally to their population. Monocentric population patterns with declining population density toward peripheries largely dominate, though some large multicentric extended, not necessarily capital, cities exist. |
| Keywords: | Urbanization; Dartboard approach; Satellite imagery; Population density |
| JEL: | R12 R23 O55 |
| Date: | 2025–08 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:20592 |
| By: | John Gibson (University of Waikato); Geua Boe-Gibson (University of Waikato); Frank Scrimgeour (University of Waikato) |
| Abstract: | Concerns about uneven regional development have focused attention on the long-run prospects of smaller towns in New Zealand. This paper examines changes in the physical extent of 133 New Zealand towns and cities between 1993 and 2021 using a reconstructed night-time lights dataset, exploiting the fact that urban areas emit light that can be observed from space. The reconstructed series combines the long temporal coverage of early satellite imagery with the spatial precision of modern sensors. A city-growing algorithm allows urban footprints to evolve rather than remaining constrained by administrative definitions. The results reveal substantial heterogeneity in urban trajectories. Rapid expansion is concentrated in commuter towns surrounding major cities and amenity-oriented settlements, while some smaller towns experience contraction associated with economic restructuring and changing locational advantages. Regional divergence in New Zealand therefore appears increasingly characterised by differentiated urban trajectories rather than by uniform decline among smaller settlements. |
| Keywords: | Urban change; small towns; Regional divergence; night-time lights; New Zealand |
| JEL: | R11 R12 C81 |
| Date: | 2026–07–22 |
| URL: | https://d.repec.org/n?u=RePEc:wai:econwp:26/04 |