nep-ure New Economics Papers
on Urban and Real Estate Economics
Issue of 2018‒07‒09
fifty papers chosen by
Steve Ross
University of Connecticut

  1. Cities and the Structure of Social Interactions: Evidence from Mobile Phone Data By Konstantin Buechel, Maximilian von Ehrlich
  2. How Does School Accountability Affect Teachers? Evidence from New York City By Rebecca Dizon-Ross
  3. Transborder Ethnic Kin and Local Prosperity : Evidence from Night-Time Light Intensity in Africa By Christophe Muller; Pierre Pecher
  4. The Housing Market Impacts of Constraining Second Home Investments By Christian A. L. Hilber, Olivier Schoeni
  5. The Impact of Exogenous Demand Shock on the Housing Market: Evidence from the Home Purchase Restriction Policy in the People’s Republic of China By Cao, Xiaping; Huang, Bihong; Lai, Rose Neng
  6. Fast Track to Growth? The Impact of Railway Access on Regional Economic Development in 19th Century Switzerland By Konstantin Buechel, Stephan Kyburz
  7. Economic Shocks and Internal Migration By Monras, Joan
  8. The effect of grade retention on secondary school performance: Evidence from a natural experiment By Ferreira Sequeda, Maria; Golsteyn, Bart; Parra Cely, Sergio
  9. The Effect of Grade Retention on Secondary School Performance: Evidence from a Natural Experiment By Ferreira Sequeda, Maria; Golsteyn, Bart; Parra Cely, Sergio
  10. School Finance Reforms, Teachers’ Unions, and the Allocation of School Resources By Eric J. Brunner; Joshua Hyman; Andrew Ju
  11. The supply side of discrimination: evidence from the labor supply of Boston taxi drivers By Jackson, Osborne
  12. “What drives the spatial wage premium for formal and informal workers? The case of Ecuador” By Alessia Matano; Moisés Obaco; Vicente Royuela
  13. Nonlinear Class Size Effects on Cognitive and Noncognitive Development of Young Children By Marie Connolly; Catherine Haeck
  14. Inter-ethnic Relations of Teenagers in England’s Schools: the Role of School and Neighbourhood Ethnic Composition By Simon Burgess; Lucinda Platt
  15. Estimation of a Scale-Free Network Formation Model By Anton Kolotilin; Valentyn Panchenko
  16. “An Overview of Urbanization in Ecuador under FUAs Definition” By Moisés Obaco; Juan Pablo Díaz-Sánchez
  17. “An Overview of Urbanization in Ecuador under FUAs Definition” By Moisés Obaco; Juan Pablo Díaz-Sánchez
  18. Analyzing Decisiveness of Migration Intentions: Social Kinship that Matters By Aubrey D. Tabuga
  19. Cohesive Institutions and Political Violence By Fetzer, Thiemo; Kyburz, Stephan
  20. The Financial Transmission of Housing Bubbles: Evidence from Spain By Alberto Martín; Enrique Moral-Benito; Tom Schmitz
  21. The Nexus of Entrepreneurship and Regional Development By Fischer, Manfred M.; Nijkamp, Peter
  22. Generation of regional input-output tables: a spatial econometric approach with illustrative simulations for France,Germany and Poland By Andrzej Toroj
  23. Geography Dictates, But How? Topography, Spatial Concentration and Sectoral Diversification By Chowdhury, Mohammad Tarequl Hasan; Rahman, Muhammad Habibur; Ulubasoglu, Mehmet Ali
  24. Teacher Performance and Accountability Incentives By Hugh Macartney; Robert McMillan; Uros Petronijevic
  25. Do higher salaries yield better teachers and better student outcomes? By Cabrera, José María; Webbink, Dinand
  26. Housing Taxation and Financial Intermediation By Hamed Ghiaie; Jean-François Rouillard
  27. Accounting for Mismatch Unemployment By Herz, Benedikt; van Rens, Thijs
  28. The Long-term Effects of Long Terms: Compulsory Schooling Reforms in Sweden By Fischer, Martin; Karlsson, Martin; Nilsson, Therese; Schwarz, Nina
  29. Student Mobility Across Schools and its Links to Underachievement By Sylvia Dixon
  30. Has Eastern European Migration Impacted UK-born Workers? By Becker, Sascha O.; Fetzer, Thiemo
  31. State Merit Aid Programs and Youth Labor Market Attachment By David E. Frisvold; Melinda Pitts
  32. Social distance, immigrant integration, and welfare chauvinism in Sweden By Goldschmidt, Tina; Rydgren, Jens
  33. Tourism, amenities, and welfare in an urban setting By G. Lanzara; G. A. Minerva
  34. Pedagogy versus school readiness : the impact of a randomized reading instruction intervention and community-based playgroup intervention on early grade reading outcomes in Tonga By Macdonald,Kevin Alan David; Brinkman,Sally Ann; Jarvie,Wendy; Machuca-Sierra,Myrna; Mcdonall,Kristen Andrew; Messaoud-Galusi,Souhila; Tapueluelu,Siosiana; Vu,Binh Thanh
  35. On critical dynamics and thermodynamic efficiency of urban transformations By Emanuele Crosato; Ramil Nigmatullin; Mikhail Prokopenko
  36. Population aging and housing prices: who are we calling old? By Ye Jin Heo
  37. Regional economic disparities in Finland By Fornaro, Paolo
  38. A Framework to Study the Role of Structural Transformation in Productivity Growth and Regional Convergence By Fukao, Kyoji; Paul, Saumik
  39. Do digital information technologies help unemployed job seekers find a job? Evidence from the broadband internet expansion in Germany By Gürtzgen, Nicole; Nolte, André; Pohlan, Laura; van den Berg, Gerard J.
  40. Disinvesting in the future?: a comprehensive examination of the effects of state appropriations for public higher education By Zhao, Bo
  41. Historical Roots of Entrepreneurial Culture and Innovation Activity - An Analysis for German Regions By Michael Fritsch; Michael Wyrwich; Martin Obschonka
  42. Future green economies and regional development: a research agenda By Gibbs, David; O'Neill, Kirstie
  43. Contagion of Pro- and Anti-Social Behavior Among Peers and the Role of Social Proximity By Eugen Dimant
  44. What kinds of regional innovation systems occur around federal agencies? By Martin Warland
  45. Lending by Regional Financial Institutions Driven by Hometown Tax Donation and Ensuing Prospects for Intra-regional Industry-Government-Banking Collaboration By Takaaki Hoda; Yuichiro Kubo
  46. Rethinking Path Creation: A Geographical Political Economy Approach By Danny Mackinnon; Stuart Dawley; Andy Pike; Andrew Cumbers
  47. Improved Modelling of Spatial Cost of Living Differences in Developing Countries: A Comparison of Expert Knowledge and Traditional Price Surveys By John Gibson; Trinh Le
  48. What is a foreign firm? Implications for productivity spillovers By La Cour, Lisbeth; McGaughey, Sara; Raimondos, Pascalis
  49. Local budgets and procurements: Qualitative insights from the municipalities of Prilep, Krushevo and Krivogashtani By Despina Tumanoska
  50. The Hardships of Long Distance Relationships: Time Zone Proximity and Knowledge Transmission within Multinational Firms By Dany Bahar

  1. By: Konstantin Buechel, Maximilian von Ehrlich
    Abstract: Social interactions are considered pivotal to urban agglomeration forces. This study employs a unique dataset on mobile phone calls to examine how social interactions differ across cities and peripheral areas. We first show that geographical distance is highly detrimental to interpersonal exchange. We then reveal that individuals residing in high-density locations do not benefit from larger social networks, but from a more efficient structure in terms of higher matching quality and lower clustering. These results are derived from two complementary approaches: Based on a link formation model, we examine how geographical distance, network overlap, and sociodemographic (dis)similarities impact the likelihood that two agents interact. We further decompose the effects from individual, location, and time specific determinants on micro-level network measures by exploiting information on mobile phone users who change their place of residence.
    Keywords: Social Interactions; Agglomeration Externalities; Network Analysis; Sorting
    JEL: R1 R23 Z13 D85
    Date: 2016–12
  2. By: Rebecca Dizon-Ross
    Abstract: Does holding schools accountable for student performance cause good teachers to leave low-performing schools? Using data from New York City, which assigns accountability grades to schools based on student achievement, I perform a regression discontinuity analysis and find evidence of the opposite effect. At the bottom end of the school grade distribution, I find that a lower accountability grade decreases teacher turnover and increases joining teachers’ quality. A likely channel is that accountability pressures induce increases in principal effort at lower-graded schools, especially among high-quality principals, and teachers value these changes. In contrast, at the top end of the school grade distribution, where accountability pressures are lower, low accountability grades may negatively impact joining teachers’ quality.
    JEL: I2
    Date: 2018–05
  3. By: Christophe Muller (Aix-Marseille Université); Pierre Pecher (Aix-Marseille Université)
    Abstract: Ethnicity often occupies a core role in integrated social, economic, and political development processes, which have mostly been studied within specific countries. Across countries, social and economic development may be supported by political capabilities achieved by ethnic kin abroad, although there is little hard evidence on politico-economic interactions through ethnic networks. We fill this gap by providing the first robust empirical evidence of the substantial effects of political predominance of transborder ethnic kin on local economic development in Africa. This is achieved by specifying and estimating dynamic spatial models of geolocalised luminosity and matching these data with other geolocalised information on geographic, political, and ethnic characteristics. Spatial and ethnic network effects are separately identified and jointly analysed. Not only distinct spatial effects and transborder ethnic effects are exhibited, but also are their complex dynamics and spatial distribution features in terms of local development. The results draw attention to the relevance of a broader international perspective on policies affecting ethnic politics within countries.
    Keywords: Local Development, Ethnic Networks, Institutions
    JEL: D72 R11 O43
    Date: 2018–05–26
  4. By: Christian A. L. Hilber, Olivier Schoeni
    Abstract: We investigate how political backlash against wealthy second home investors in high-amenity places – tourist areas and superstar cities – affects local residents. We exploit a quasi-natural experiment: the ‘Swiss Second Home Initiative’ (SHI), which banned the construction of new second homes in desirable tourist locations. Consistent with our model, we find that the SHI lowered transaction prices of primary homes in affected areas by around 12% but did not adversely affect prices of second homes. Our findings suggest that the negative effect on local economies dominated positive amenity-preservation effects. Constraining second home investments may reinforce rather than reduce wealth inequality.
    Keywords: Second homes; wealth inequality; land use regulation; house prices; homeownership; real estate investments
    JEL: D63 G12 R11 R21 R31 R52
    Date: 2016–08
  5. By: Cao, Xiaping (Asian Development Bank Institute); Huang, Bihong (Asian Development Bank Institute); Lai, Rose Neng (Asian Development Bank Institute)
    Abstract: To deal with the rampant increase in housing prices, the Government of the PRC implemented the home purchase restriction (HPR) policy to curb speculation and prevent housing bubbles. This policy triggered an exogenous demand shock to the housing market. Employing a two-step difference-in-differences approach, we find significantly negative policy effects on property transaction volume but a small impact on housing prices. Cities that rely heavily on land sales for fiscal revenue experience a considerably higher increase in property investments after implementing the HPR policy.
    Keywords: home purchase restriction policy; demand shock; housing bubble; land financing
    JEL: G12 G18 H83
    Date: 2018–03–19
  6. By: Konstantin Buechel, Stephan Kyburz
    Abstract: We study the effect of railway access on regional development in 19th century Switzerland. The identification strategy in our analysis of geo-referenced railway network information, population growth rates, sectoral work shares and body height, relies on panel data techniques and an inconsequential units IV approach. Gaining railway access increased annual population growth by 0.4 percentage points compared to unconnected municipalities, mainly via the local migration balance. Railway improvements also promoted structural shifts from the primary to the secondary/tertiary sectors, and marginally accelerated body height growth.
    Keywords: Railway Access, Regional Development, Population Growth, Structural Change, Body Height, Switzerland
    JEL: I30 N33 N73 O18
    Date: 2016–08
  7. By: Monras, Joan
    Abstract: Internal migration can respond to local shocks through either changes in in- or out-migration rates. This paper documents that most of the response of internal migration is accounted for by variation in in-migration. I develop and estimate a parsimonious general equilibrium dynamic spatial model around this fact. I then use the model to evaluate the speed of convergence and long run change in welfare across metropolitan areas given the heterogeneous incidence of the Great Recession at the local level. The paper shows that while there are some lasting effects of the Great Recession across locations, at least 60 percent of the initial differences potentially dissipate across space within around 10 years. This is true even when locals from the most affected metropolitan areas do not out-migrate in higher proportions in response to local shocks.
    Keywords: Internal migration and local labor market dynamics
    JEL: F22 J20 J30 J43 J61 R23 R58
    Date: 2018–06
  8. By: Ferreira Sequeda, Maria (Research Centre for Educ and Labour Mark); Golsteyn, Bart (General Economics 2 (Macro)); Parra Cely, Sergio (General Economics 0 (Onderwijs))
    Abstract: We study the effects of grade retention on secondary school performance by considering a change in Colombia’s educative legislation. In 2010, the rule that forced schools to retain up to a 5% of students was abolished. Exploiting variation in schools’ retention rates in a difference-in-differences framework, we find that retained (marginally non-retained) students improve (decline) their performance on language but not on math test scores. We suggest the school’s position in the retention distribution, and the proportion of inexperienced teachers in the classroom, can be the mechanisms by which the marginally decreasing returns of grade retention are determined.
    Keywords: retention, Colombia, difference-in-differences
    JEL: I20 I24 J24
    Date: 2018
  9. By: Ferreira Sequeda, Maria (Research Centre for Educ and Labour Mark); Golsteyn, Bart (General Economics 2 (Macro)); Parra Cely, Sergio (General Economics 0 (Onderwijs))
    Abstract: We study the effects of grade retention on secondary school performance by considering a change in Colombia’s educative legislation. In 2010, the rule that forced schools to retain up to a 5% of students was abolished. Exploiting variation in schools’ retention rates in a difference-in-differences framework, we find that retained (marginally non-retained) students improve (decline) their performance on language but not on math test scores. We suggest the school’s position in the retention distribution, and the proportion of inexperienced teachers in the classroom, can be the mechanisms by which the marginally decreasing returns of grade retention are determined.
    Keywords: retention, Colombia, difference-in-differences
    JEL: I20 I24 J24
    Date: 2018–06–18
  10. By: Eric J. Brunner (University of Connecticut); Joshua Hyman (University of Connecticut); Andrew Ju (University of Connecticut)
    Abstract: School finance reforms caused some of the most dramatic increases in intergovernmental aid from states to local governments in U.S. history. We examine whether teacher unions affected the fraction of reform-induced state aid that passed through to local spending and the allocation of these funds. Districts with strong teacher unions increased spending nearly dollar-for-dollar with state aid, and spent the funds primarily on teacher compensation. Districts with weak unions used aid primarily for property tax relief, and spent remaining funds on hiring new teachers. The greater expenditure increases in strong union districts led to larger increases in student achievement.
    Keywords: School finance reform, teachers’ unions, intergovernmental grants
    JEL: H7 I2 J5
    Date: 2018–06
  11. By: Jackson, Osborne (Federal Reserve Bank of Boston)
    Abstract: This paper investigates supply-side discrimination in the labor market for Boston taxi drivers. Using data on millions of trips from 2010–2015, I explore whether the labor supply behavior of taxi drivers differs by the gender, racial/ethnic, or age composition of Boston neighborhoods. I find that disparities in shift hours due to neighborhood demographics exist even when differences in local earnings opportunities are taken into account. I observe heterogeneity in the amount that drivers discriminate and find that this discrimination is primarily statistical rather than taste-based. As drivers gain experience and learn to better anticipate wage variation, discrimination decreases.
    Keywords: discrimination; labor supply; Boston taxis; wage elasticity
    JEL: J22 J31 J71 L91
    Date: 2018–06–01
  12. By: Alessia Matano (AQR-IREA, University of Barcelona,); Moisés Obaco (AQR-IREA, University of Barcelona,); Vicente Royuela (AQR-IREA, University of Barcelona,)
    Abstract: This article investigates the incidence of agglomeration externalities in a typical developing country, Ecuador. In particular, we analyze the role of the informal sector within these relations, since informal employment accounts for a significant part of total employment in the developing countries. Using individual level data and instrumental variable techniques, we investigate the impact of spatial externalities, in terms of population size and local specialization, on the wages of workers in Ecuadorian cities. The results show that spatial externalities matter also for a typical developing country, especially as far as urbanization externalities are concerned. Moreover, analysis of the interaction between spatial externalities and the informal economy shows a general penalization for informal workers in terms of benefits arising from agglomeration externalities. Finally, by investigating the possible channels behind the heterogeneity found in spatial agglomeration gains between formal and informal workers, we show that the advantages from agglomeration for formal workers may well be accounted for by positive sorting and better gains from job changes, while for informal workers they arise from positive learning externalities.
    Keywords: Agglomeration Externalities; Developing Economies; Informal Employment; Workers’ Wages; FUAs; Ecuador. JEL classification: J31, J46, R23, R12
    Date: 2018–06
  13. By: Marie Connolly (Department of Economics, University of Quebec in Montreal); Catherine Haeck (Department of Economics, University of Quebec in Montreal)
    Abstract: We estimate the nonlinear impact of class size on student achievement by exploiting regulations that cap class size at 20 students per class in kindergarten. Using student-level information from a previously unexploited large-scale census survey of kindergarten students, this study provides clear evidence of the nonlinearity of class size effects on both cognitive and noncognitive measures. While the effects are largest on cognitive development, class size reductions also improve social competence and communication skills in small classes of fewer than 15 students. Above that threshold, the impacts of class size reduction are limited. We also find stronger effects for students in disadvantaged areas. These findings suggest that sizeable class size reductions targeted at disadvantaged areas would achieve better results than a marginal reduction across the board, and even that large reductions in a limited number of classes could be financed by marginal increases in the vast majority of schools not experiencing high poverty rates.
    Keywords: class size, cognitive development, noncognitive development, kindergarten, nonlinear effects
    JEL: I21 I28 J24 C31
    Date: 2018–06
  14. By: Simon Burgess; Lucinda Platt
    Abstract: The paper presents an empirical analysis of inter-ethnic relations among adolescents in England’s schools, the first national study of schools throughout England to relate inter-ethnic attitudes to both school and area ethnic composition. We combine survey data on ‘warmth’ of feeling for specific ethnic groups, friendships and attitudes with administrative data on the shares of those groups at school and area level. We confirm that the pupils have warmer feelings for their own ethnic group than for others. Second, we show that in schools with more pupils from another ethnic group the gap between a pupil’s views of those from her own group and from another ethnic group is smaller. This is true for attitudes of the majority and of minority ethnic groups. Third, we show that school composition (interpreted as contact) mitigates area composition (interpreted as exposure).
    Date: 2018–05–30
  15. By: Anton Kolotilin (School of Economics, UNSW Business School); Valentyn Panchenko (School of Economics, UNSW Business School)
    Abstract: Growing evidence suggests that many social and economic networks are scale free in that their degree distribution has a power-law tail. A common explanation for this phenomenon is a random network formation process with preferential attachment. For a general version of such a process, we develop the pseudo maximum likelihood and generalized method of moments estimators. We prove consistency of these estimators by establishing the law of large numbers for growing networks. Simulations suggest that these estimators are asymptotically normally distributed and outperform the commonly used non-linear least squares and Hill (1975) estimators in finite samples. We apply our estimation methodology to a co-authorship network.
    Keywords: law of large numbers, consistency, degree distribution, scale-free network
    JEL: C15 C45 C51 D85
    Date: 2018–06
  16. By: Moisés Obaco (AQR-IREA, University of Barcelona, Av. Diagonal 690 (08034), Barcelona, Spain.); Juan Pablo Díaz-Sánchez (Escuela Politécnica Nacional, Facultad de Ciencias, Quito, Ecuador.)
    Abstract: This paper analyzes the urbanization of Ecuador in the period 1950 – 2010 under the Functional Urban Areas (FUAs) definition. When Ecuadorian FUAs population evolution over time is explored, it is possible to observe that the urbanization of Ecuador had its peak between 1960 and 1980. Moreover, the highest increase of population in recent decades is mostly driven by the urban growth of small FUAs. In addition, the analysis suggests that the FUAs in Ecuador are in line with the size and structure of the FUAs of a similar developing country, Colombia, and the whole OECD sample of FUAs. Finally, it is pointed that the population of Ecuador is concentrated in the FUAs of metropolitan size (1.5 million of inhabitants or more), which are below the average of the metropolitan areas of the OECD.
    Keywords: Developing economies, Ecuador, FUAs, physical well-being, slum index, urbanization. JEL classification:R12, R23.
    Date: 2018–06
  17. By: Moisés Obaco (AQR-IREA, University of Barcelona); Juan Pablo Díaz-Sánchez (Escuela Politécnica Nacional, Facultad de Ciencias.)
    Abstract: This paper analyzes the urbanization of Ecuador in the period 1950 – 2010 under the Functional Urban Areas (FUAs) definition. When Ecuadorian FUAs population evolution over time is explored, it is possible to observe that the urbanization of Ecuador had its peak between 1960 and 1980. Moreover, the highest increase of population in recent decades is mostly driven by the urban growth of small FUAs. In addition, the analysis suggests that the FUAs in Ecuador are in line with the size and structure of the FUAs of a similar developing country, Colombia, and the whole OECD sample of FUAs. Finally, it is pointed that the population of Ecuador is concentrated in the FUAs of metropolitan size (1.5 million of inhabitants or more), which are below the average of the metropolitan areas of the OECD.
    Keywords: Developing economies, Ecuador, FUAs, physical well-being, slum index, urbanization JEL classification: R12, R23
    Date: 2018–07
  18. By: Aubrey D. Tabuga
    Abstract: Analyzing future migration intentions is essential to understanding how migration perpetuates. International migration is such a complex and nuanced phenomenon that those who desire to participate in it go through an elaborate process of intention-formation, planning, and decisionmaking. And yet the literature on migration intentions rarely view it in such manner. Instead, many studies treat migration decisionmaking as a binary stay-or-leave variable. Moreover, the lens more commonly implemented is economic; there is less focus on the social dimensions of migration decisions. This analysis seeks to explain the influence of social networks on the decisiveness to migrate while controlling for the effects of economic forces, subjective perceptions on well-being, and demographic factors. Using information gathered from individuals residing within a village with high migration incidence, this study found that differentiating migrant networks into the degree of association or strength of ties is crucial because different networks have different effects. Furthermore, considering the individuals’ current level in the migration decisionmaking process is also deemed crucial in analyzing the factors that influence the decision. For instance, migrant networks particularly the closest of kin are important in the advanced phase of concrete migration planning, and not in the initial stage. Know more about the results of the study in this paper.
    Keywords: migration, , migration intention, migration decisionmaking, Philippine migration, generalized ordered logit, tie strength, social networks
    Date: 2018
  19. By: Fetzer, Thiemo (University of Warwick); Kyburz, Stephan (Center for Global Development)
    Abstract: Can institutionalized transfers of resource rents be a source of civil conflict? Are cohesive institutions better in managing distributive conflicts? We study these questions exploiting exogenous variation in revenue disbursements to local governments together with new data on local democratic institutions in Nigeria. We make three contributions. First, we document the existence of a strong link between rents and conflict far away from the location of the actual resource. Second, we show that distributive conflict is highly organized involving political militias and concentrated in the extent to which local governments are non-cohesive. Third, we show that democratic practice in form having elected local governments significantly weakens the causal link between rents and political violence. We document that elections (vis-a-vis appointments), by producing more cohesive institutions, vastly limit the extent to which distributional conflict between groups breaks out following shocks to the available rents. Throughout, we confirm these findings using individual level survey data.
    Keywords: conflict ; ethnicity ; natural resources ;political economy ; commodity prices
    JEL: Q33 O13 N52 R11 L71
    Date: 2018
  20. By: Alberto Martín; Enrique Moral-Benito; Tom Schmitz
    Abstract: What are the effects of a housing bubble on the rest of the economy? We show that if firms and banks face collateral constraints, a housing bubble initially raises credit demand by housing firms while leaving credit supply unaffected. It therefore crowds out credit to non-housing firms. If time passes and the bubble lasts, however, housing firms eventually pay back their higher loans. This leads to an increase in banks’ net worth and thus to an expansion in their supply of credit to all firms: crowding-out gives way to crowding-in. These predictions are confirmed by empirical evidence from the recent Spanish housing bubble. In the early years of the bubble, non-housing firms reduced their credit from banks that were more exposed to the bubble, and firms that were more exposed to these banks had lower credit and output growth. In its last years, these effects were reversed.
    Keywords: housing bubble, credit, investment, financial frictions, financial transmission, Spain
    JEL: E32 E44 G21
    Date: 2018–06
  21. By: Fischer, Manfred M.; Nijkamp, Peter
    Abstract: This chapter offers a review on modern entrepreneurship analysis, against the background of regional development. Regions with an entrepreneurial culture tend to be forerunners in a competitive economic process. After a conceptual discussion on the importance and the measurement of entrepreneurship, the contribution discusses critical success factors and key determinants of entrepreneurship. Next, much focus is laid on the geography of entrepreneurship as well as on industrial agglomeration, while also due attention is paid to the relevance of networks for modern entrepreneurship. The chapter concludes with some retrospective and prospective remarks.
    Keywords: Entrepreneurship, definition and measurement issues, spatial aspects of entrepreneurship, regions with an entrepreneurial culture, cluster agglomeration factors, entrepreneurship and networks
    Date: 2018–06–18
  22. By: Andrzej Toroj
    Abstract: This paper investigates the construction of multisector-multiregion input-output tables by using spatial econometric methods. I demonstrate that, under reasonable assumptions, the problem of finding Leontief's technical coeffecients can be formulated as a modified multi-equation spatial Durbin model and the missing parameters can be estimated via maximum likelihood. The resulting coefficients are computed as a function of country-wide coeffiecients, as well as distance and regional-sectorial data on value added. The statistical performance of the model is scrutinized and the method is illustrated with simulations of regional (NUTS-3 level) economic impact assessment - for generic companies located in Southern France, Germany and Poland.
    Keywords: input-output modelling, GRIT(generation of regional input-output tables), spatial econometrics, SDM (spatial Durbin model), regional EIA (economic impact assessment)
    JEL: C31 C67 R12 R15
    Date: 2018–05
  23. By: Chowdhury, Mohammad Tarequl Hasan; Rahman, Muhammad Habibur; Ulubasoglu, Mehmet Ali
    Abstract: This study investigates the ways in which terrain ruggedness affects sectoral diversification. A cross-country analysis using data from 142 countries over the period 1970‒2007 documents an inverted U-shaped link between terrain ruggedness and sectoral diversification, which mainly works through the extensive margin of diversification. A within-country analysis based on United States (US) state-level data over the period 1997‒2011 confirms this non-monotonic relationship. The within-country analysis further reveals that an important mechanism through which terrain ruggedness affects sectoral diversification is the spatial concentration of economic activity, as measured by the concentration of satellite-based night lights.
    Keywords: sectoral diversification, spatial concentration, extensive margin, intensive margin, terrain ruggedness.
    JEL: O11 R12
    Date: 2018–05–31
  24. By: Hugh Macartney; Robert McMillan; Uros Petronijevic
    Abstract: This paper documents a new empirical regularity: teacher value-added increases within-teacher when accountability incentives are strengthened. That finding motivates a strategy to separate value-added into incentive-varying teacher effort and incentive-invariant teacher ability, combining rich longitudinal data with exogenous incentive-policy variation from North Carolina. Our estimates indicate that teacher effort and ability both raise current and future test scores, with ability having stronger effects. These estimates feed into a framework for comparing the cost-effectiveness of alternative education policies. For illustration, we show incentive-oriented reforms can outperform policies targeting teacher ability, given their potential to influence all teachers rather than a subset.
    Keywords: Incentives, Teacher Performance, Value-Added, Effort, Ability, Education Production, Accountability, Education Policy, Cost-Effectiveness, Persistence
    JEL: I21 J24 M52
    Date: 2018–06–25
  25. By: Cabrera, José María; Webbink, Dinand
    Abstract: We study the effects of a policy aimed at attracting more experienced and better qualified teachers in primary schools in disadvantaged neighborhoods in Uruguay. Teachers in these schools could earn higher salaries. Estimates from regression discontinuity models show that the policy increased experience by two to three years. The policy was especially successful in ‘hiring experience from other schools’, but also increased tenure. However, the effect on student outcomes appears to be small. The distinction between ‘hiring or keeping’ teachers seems important for explaining this result. Keeping teachers appears to be more beneficial for students than hiring experienced teachers. We also find that the effect of the policy is better for schools that replaced teachers with less than five years of experience.
    Keywords: teacher salaries, teacher experience, student performance, disadvantaged students.
    JEL: I2 J24
    Date: 2018
  26. By: Hamed Ghiaie (Département d'économique, Université de Cergy-Pontoise); Jean-François Rouillard (Département d'économique, Université de Sherbrooke)
    Abstract: Through the lens of a multi-agent dynamic general equilibrium model, we examine the effects of four permanent changes in housing taxes and deductions on macroeconomic aggregates and welfare. Our main result is that the presence of borrowing-constrained bankers dampen the negative consequences of housing taxation on output. The long-run tax multipliers found range from -1.02 to -0.6. The reduction in the deduction of mortgage interest payments delivers the lowest multiplier. We also implement revenue-neutral tax reforms and find that the repeal of mortgage deductibility is the only policy that generates gains in output.
    Keywords: Housing taxation, banking, dynamic general equilibrium.
    JEL: E62 G28 H24 R38
    Date: 2018–01
  27. By: Herz, Benedikt; van Rens, Thijs
    Abstract: We investigate unemployment due to mismatch in the United States over the past three and a half decades. We propose an accounting framework that allows us to estimate the contribution of each of the frictions that generated labor market mismatch. Barriers to job mobility account for the largest part of mismatch unemployment, with a smaller role for barriers to worker mobility. We find little contribution of wage-setting frictions to mismatch.
    Keywords: job mobility; mismatch; structural unemployment; worker mobility
    JEL: E24 J61 J62
    Date: 2018–06
  28. By: Fischer, Martin (University of Duisburg-Essen, Essen); Karlsson, Martin (University of Duisburg-Essen, Essen); Nilsson, Therese (Research Institute of Industrial Economics (IFN)); Schwarz, Nina (University of Duisburg-Essen, Essen)
    Abstract: We evaluate the impact on earnings, pensions, and further labor market outcomes of two parallel educational reforms increasing instructional time in Swedish primary school. The reforms extended the annual term length and compulsory schooling by comparable amounts. We find striking differences in the effects of the two reforms: at 5%, the returns to the term length extension were at least half as high as OLS returns to education and bene ted broad ranges of the population. The compulsory schooling extension had small (2%) albeit significant effects, which were possibly driven by an increase in post-compulsory schooling. Both reforms led to increased sorting into occupations with heavy reliance on basic skills.
    Keywords: Educational reforms; Compulsory schooling; Term length; Returns to Education
    JEL: I28 J24 J31
    Date: 2018–06–25
  29. By: Sylvia Dixon (The Treasury)
    Abstract: This paper provides information on the extent of student mobility between schools in New Zealand, measuring mobility rates at both the student and school level. It explores the characteristics of mobile students, the extent to which they become disengaged from school, and their NCEA level 1 achievement rates. It also compares the student turnover rates of different types of schools. We find that mobile students make up a sizeable sub-group within the set of students who do not achieve NCEA level 1. Analysing data for the 1998 birth cohort, we find that mobile students (defined as those attending five or more schools while aged 8-14 years) represented 9% of all students, but 26% of those who did not achieve NCEA level 1. The association of mobility with poorer attainment means that strategies to raise student achievement must work well for children who change schools frequently, as well as for children with more stable schooling patterns. At the school level, we find large variations between schools in student turnover rates and in the proportion of students who are frequent movers. Because high student turnover increases a school’s workload and costs and the complexity of teaching, it could have implications for the schooling system in areas such as resourcing, learning support and information exchange.
    Keywords: Transience; mobility; achievement; schools
    JEL: I21
    Date: 2018–04
  30. By: Becker, Sascha O. (University of Warwick); Fetzer, Thiemo (University of Warwick)
    Abstract: The 2004 accession of 8 Eastern European countries to the European Union (EU) was accompanied by fears of mass migration. The United Kingdom - unlike many other EU countries - did not opt for temporary restrictions on the EU’s free movement of labour. We document that following EU accession more than 1 million people (ca. 3% of the UK working age population) migrated from Eastern Europe to the UK. We show that they mostly settled in places that had limited prior exposure to immigration. We provide evidence that these areas subsequently saw smaller wage growth at the lower end of the wage distribution and increased pressure on the welfare state, housing and public services. Using novel geographically disaggregated data by country-of-origin, we measure the effects of Eastern European migration on these outcomes for the UK-born and different groups of immigrants. Our results are important in the context of the UK’s Brexit referendum and the ongoing EU withdrawal negotiations in which migration features as a key issue.
    Keywords: Political Economy ; Migration ; Globalization ; EU
    JEL: R23 N44 Z13
    Date: 2018
  31. By: David E. Frisvold; Melinda Pitts
    Abstract: This paper examines the impact of state merit-aid programs on the labor market attachment of high school-aged youths. The labor force participation rate of teenagers has fallen substantially in recent decades, coinciding with the introduction of merit-aid programs. These programs reduce the price of attending an in-state public college or university for high-achieving students and have the potential to influence students’ allocation of time and effort between labor market activities, human capital development, and other forms of leisure. We examine the influence of these programs based on their generosity, both in the amount of aid provided to a recipient and the percent of students who are recipients of aid, and in their selectivity. Our results suggest that programs that are more selective reduce labor force participation, but are not a significant cause in the decline in teenage labor force participation in recent decades.
    JEL: I2 J2
    Date: 2018–05
  32. By: Goldschmidt, Tina; Rydgren, Jens
    Abstract: Populist radical right-wing parties across Europe garner support for welfare chauvinistic promises to limit government spending on immigrants and focus on natives' welfare instead. However, most research on the so-called immigration-welfare nexus does not study welfare chauvinism but instead focuses on generalized support for the welfare state. Using Swedish register-linked survey data from 2013, we study three hypothetical pathways into welfare chauvinism: via ethnic prejudice, operationalized as a desire for social distance; via the direct experience of immigrant unemployment and putative welfare receipt in the neighborhood context; and via immigrant competition at the workplace. Based on our sample of native-born Swedes, we find that both negative prejudice and the share of unemployed immigrants among the neighborhood population provide two distinct and independent routes into chauvinism, while workplace competition does not.
    Keywords: welfare chauvinism,government spending,immigration,integration,prejudice,Sweden
    Date: 2018
  33. By: G. Lanzara; G. A. Minerva
    Abstract: Using data on Italian cities, we document that, over the period 2001 – 2011, the number of establishments and employment in some key service industries are positively related to the inflow of tourists. We then build a general equilibrium model of small open cities to study the impact of tourism on endogenous amenities, factors’ allocation across sectors, prices, and welfare. Tourism has two main effects on the urban economy: first, consistently with the observed pattern in the data, it increases the number of firms (an endogenous consumption amenity) and employment in the non-tradable sector; second, it increases prices. In the model tourism may hurt the resident population: with unequal land endowments, poorer residents are hurt by tourism because the rise in city prices offsets the positive impact on the urban consumption amenity. Along with several other extensions to the baseline model, we study the interplay of historical (exogenous) amenities, tourism and residents welfare in a system of two cities.
    JEL: R13 R31 R32
    Date: 2018–06
  34. By: Macdonald,Kevin Alan David; Brinkman,Sally Ann; Jarvie,Wendy; Machuca-Sierra,Myrna; Mcdonall,Kristen Andrew; Messaoud-Galusi,Souhila; Tapueluelu,Siosiana; Vu,Binh Thanh
    Abstract: : Identifying cost-effective interventions to improve early literacy is vital to developing countries, given the importance of early literacy for an individual's future education outcomes and subsequent human capital formation. This paper presents the impact on early grade reading outcomes of two low-cost randomized interventions in Tonga: a reading instruction intervention and a community play-based activity intervention. The first intervention aims to improve early grade reading outcomes specifically; estimated impacts are approximately 0.3 standard deviation, although in some reading domains impacts are substantial, ranging from 0.6 to 0.7 standard deviation. The second intervention aims to improve school readiness and subsequently early grade reading outcomes, by providing communities with support to establish a community play-based activity. Using an instrumental variables approach, the play-based activity demonstrates positive impacts of around 0.2 standard deviation in many but not all reading domains. For the domains where a statistically significant impact is measured, the community play-based activity intervention is as at least as cost effective as the reading instruction intervention. The play-based activity intervention is shown to improve test scores by 0.21 to 0.47 standard deviation per US$100, depending on the reading test domain. The reading instruction intervention improves test scores by 0.08 to 0.34 standard deviation per US$100. These findings contribute further evidence on the effectiveness of reading instruction interventions, and possibly the first estimates of the impact of play group?type interventions on primary school reading outcomes.
    Keywords: Economic Growth,Educational Sciences,Economic Theory&Research,Industrial Economics
    Date: 2017–01–18
  35. By: Emanuele Crosato; Ramil Nigmatullin; Mikhail Prokopenko
    Abstract: Urban transformations within large and growing metropolitan areas often generate critical dynamics affecting social interactions, transport connectivity and income flow distribution. We develop a statistical-mechanical model of urban transformations, exemplified for Greater Sydney, and derive a thermodynamic description highlighting critical regimes. We consider urban dynamics at two time scales: fast dynamics for the distribution of population and income, modelled via the maximum entropy principle, and slower dynamics evolving the urban structure under spatially distributed competition. We identify phase transitions between dispersed and polycentric phases, induced by varying the social disposition---a factor balancing the suburbs' attractiveness---in contrast with the travel impedance. Using the Fisher information we identify critical thresholds and quantify the thermodynamic cost of urban transformation, as the minimal work required to vary the underlying parameter. Finally, we introduce the notion of thermodynamic efficiency of urban transformation, as the ratio of the order gained during a change to the amount of required work, showing that this measure is maximised at criticality.
    Date: 2018–06
  36. By: Ye Jin Heo (Graduate Institute of International and Development Studies)
    Abstract: This paper empirically studies through which channel - between short expected remaining life and withdrawal from the labor market - population aging affects real house price more and how the effect can vary if old-age population is defined alternatively in a way to reflect different aspects of aging, using a panel data of OECD countries. It finds that the main driver of a negative relationship between aging and real house price comes from the later stage of life and not immediately after the age of 65 or retirement. It also shows that the effective retirement age matters more in explaining the relationship between aging and real house price than the age 65, since the share of retired population has a nonlinear effect on real house price, while the standard old-age population aged over 65 does not. When I project future real house price, the standard old-age population only predicts a further decrease in real house price as aging continues, whereas the retired population captures a positive marginal effect and leaves room for policy intervention.
    Keywords: J11, G12, R21
    JEL: J11 G12 R21
    Date: 2018
  37. By: Fornaro, Paolo
    Abstract: In this note, I study the Finnish regional dispersion of economic indicators such as the GDP per capita, labour productivity, the employment rate and the compensation of employees. Moreover, I examine the regional-level correlation between these variables. The results are then compared with what has been found for the German and Italian economies. Finnish regional economies display substantial variation, but their GDP per capita, productivity and employment rate have converged. However, the compensation of employees has diverged. Compared to Germany and Italy, the Finnish economy has a lower regional dispersion, with a similar convergence process as in Germany. The correlation between regional productivity and the employment rate is lower than what is found in Italy and Germany, and the same holds for productivity and wages. The picture gathered from this analysis is mixed. Convergence of economic conditions is certainly positive, but the divergence of the compensation of employees can be problematic for the long-term sustainability of the Finnish regional markets. If well-paid jobs concentrate in richer regions, there will be higher incentives for young and well-educated workers to move away from peripheral (in economic terms) areas, which would be at risk of stagnation.
    Keywords: Convergence, regional inequalities, productivity, wages
    JEL: O47 R11 R23
    Date: 2018–06–25
  38. By: Fukao, Kyoji (Asian Development Bank Institute); Paul, Saumik (Asian Development Bank Institute)
    Abstract: We show that σ-convergence in regional productivity growth can be approximated by σ-convergence in sectoral productivity growth and σ-convergence in structural transformation-led productivity growth. Applying this framework to Japanese prefecture-level data from 1874 to 2008, we find support for substantial convergence effects of structural transformation in the post-WWII years.
    Keywords: structural transformation; labor productivity; regional convergence; Japan
    JEL: O10 O40
    Date: 2018–04–23
  39. By: Gürtzgen, Nicole; Nolte, André; Pohlan, Laura; van den Berg, Gerard J.
    Abstract: This paper studies effects of the introduction of a new digital mass medium on reemployment of unemployed job seekers. We combine data on high-speed (broadband) internet availability at the local level with individual register data on the unemployed in Germany. We address endogeneity by exploiting technological peculiarities in the network that affected the roll-out of high-speed internet. The results show that high-speed internet improves reemployment rates after the first months of the unemployment spell. This is confirmed by complementary analysis with individual survey data suggesting that online job search leads to additional formal job interviews after a few months in unemployment.
    Keywords: unemployment,online job search,information frictions,matching technology,search channels
    JEL: J64 K42 H40 L96 C26
    Date: 2018
  40. By: Zhao, Bo (Federal Reserve Bank of Boston)
    Abstract: In aggregate, state appropriations are the largest revenue source for public higher education in the United States. However, these appropriations have significantly declined over past decades, drawing serious concerns about the potential negative impact on schools and students. This paper provides a more comprehensive study of the effects of state appropriations than previous research, while explicitly exploring and testing the heterogeneity of the effects by institutional type. It finds strong evidence of the negative effects of state appropriation cuts in the areas of tuition and fees, student financial aid, instructional and other school expenditures, and degree completion. Community colleges, which serve the most undergraduates but have not been well studied by past research, are shown to be particularly vulnerable to the negative effects of state funding cuts.
    Keywords: state appropriations; public higher education; community colleges; state funding cuts
    JEL: H2 H4 H7 I2
    Date: 2018–06–01
  41. By: Michael Fritsch (FSU Jena); Michael Wyrwich (FSU Jena); Martin Obschonka (Queensland University of Technology Business School Brisbane)
    Abstract: There is a research gap with respect to understanding the role of entrepreneurial culture and tradition for actual start-up behaviour. We combine historical self-employment data (entrepreneurial tradition) with a psychological measure for entrepreneurial attitudes (entrepreneurial culture). The results reveal a positive relationship between the historical level of self-employment in a region and the presence of people with an entrepreneurial personality structure today. Our measure for a regional culture of entrepreneurship is positively related not only to the level of new business formation but also the amount of innovation activity.
    Keywords: Entrepreneurship, self-employment, new business for mation, personality traits, culture, innovation
    JEL: L26 N94 O11 O30 R11
    Date: 2018–06–25
  42. By: Gibbs, David; O'Neill, Kirstie
    Abstract: The past thirty years have seen an explosion of interest and concern over the detrimental impacts of economic and industrial development. Despite this, the environmental agenda has not featured substantially in the regional studies literature. This paper explores a range of options for regional futures from a ‘clean tech’ economy and the promise of renewed accumulation, through to more radical degrowth concepts focused on altering existing modes of production and consumption, ecological sustainability and social justice. In so doing, we investigate the potential role of regions as drivers of the new green economy, drawing on research into sustainability transitions.
    Keywords: Green economy; Transitions research; Clean tech; Degrowth; Regional Development
    JEL: Q5 Q58
    Date: 2017–01–02
  43. By: Eugen Dimant (University of Pennsylvania)
    Abstract: This paper uses a novel experimental design to study the contagion of pro- and antisocial behavior and the role of social proximity among peers. Across systematic variations thereof, we find that anti-social behavior is generally more contagious than pro-social behavior. Surprisingly, we also find that social proximity amplifies the contagion of anti-social behavior more strongly than the contagion of pro-social behavior, and that anti-social individuals are most susceptible to behavioral contagion of other anti-social peers. These findings paired with the methodological contribution are informative for the design of effective norm-based policy interventions directed at facilitating (reducing) pro- (anti-)social behavior in social and economic environments.
    Keywords: Behavioral Contagion, Peer Effects, Anti-Social & Pro-Social Behavior
    Date: 2018–04
  44. By: Martin Warland
    Abstract: Scholars in innovation studies increasingly highlight that federal governments on the demand side spur innovation activities of government contractors. While government contractors tend to concentrate in capital cities, the kinds of regional innovation system (RIS) that occur around federal agencies remain poorly understood. Drawing on the RIS approach, this paper examines the actors and activities that are placed at the interface between public demand and private supply. The analysis draws on 122 interviews with RIS actors in Bern, The Hague, Ottawa and Washington, D.C. The results indicate that intermediaries play crucial roles in stimulating knowledge exchange between public demand and private supply. One important role relates to getting involved in policy formulation in order to enhance interactive learning in federal procurement practices. In interaction inspiring federal procurement policies, government contractors generate technical knowledge that they also can exploit through private sector clients.
    Date: 2016–07
  45. By: Takaaki Hoda (Graduate School of Business Administrations, Kobe University); Yuichiro Kubo (Graduate School of Business Administration, Kobe University)
    Abstract: The purpose of this study is to reveal the current state of intra-regional lending by financial institutions prompted by Hometown Tax Donation, and to explore the ensuing prospects for intra-regional collaboration among businesses, governmental organizations and financial institutions. To achieve this end, we surveyed regional financial institutions across Japan, and found that although a significant number of financial institutions expect Hometown Tax Donation to promote industry-government-banking collaboration, few have actually extended loans, while many are taking a wait-and-see stance. The survey also revealed that while regional financial institutions recognize that Hometown Tax Donation can contribute to local businesses and economies, for example, through raising local businesses’ incentives for new product development and enhancing their designing capabilities, or through “city marketing,†they do not foresee a rise in migration/resettlement or lending. Meanwhile, it was revealed that most regional financial institutions that extended new or additional loans to gift providers?local businesses providing gifts in return for Hometown Tax Donations?had comprehensive partnerships with municipalities. Thus, for Hometown Tax Donation to contribute to regional development, collaboration between municipalities and financial institutions is essential, and the scheme itself should be enhanced so that it would gain the confidence of regional financial institutions.
    Date: 2018–06
  46. By: Danny Mackinnon; Stuart Dawley; Andy Pike; Andrew Cumbers
    Abstract: A burgeoning strand of Evolutionary Economic Geography (EEG) research is addressing questions of regional path creation, based upon the idea that place-specific legacies and conditions play a critical role in supporting the emergence of new economic activities. Yet there has been little effort thus far to take stock of this emerging body of research. In response, the aims of this paper are to offer a fresh synthesis of recent work and to develop a broader theoretical framework to inform future research. First, it presents a critical appraisal of the state of the art in path creation research. In an effort to address identified gaps in EEG research, this incorporates insights from sociological perspectives, the global production networks (GPN) approach and transition studies. Second, the paper?s development of a systematic theoretical framework is based upon the identification of key dimensions of path creation and their constitutive inter-relations. This contribution is underpinned by a geographical political economy (GPE) approach which provides the ontological basis for the integration of the five key dimensions of path creation within an overarching framework and the positioning of regional processes in relation to the broader dynamics of uneven development. Informed by GPE, the argument is that knowledgeable actors, operating within multi-scalar institutional environments, create paths through the strategic coupling of regional and extra-regional assets to mechanisms of path creation and associated markets. To inform further research, the paper outlines four concrete propositions regarding the operation of path creation processes in different types of regions and explores these through case studies of Berlin and Pittsburgh.
    Keywords: Entrepreneurship, Path creation, evolutionary economic geography, geographical political economy, agency, strategic coupling
    JEL: R11
    Date: 2018–06
  47. By: John Gibson (University of Waikato); Trinh Le (Motu Economic and Public Policy Research)
    Abstract: Most developing countries lack spatially disaggregated price data, despite the importance of spatial transactions costs in these settings. We experimented in Vietnam with a new way of obtaining disaggregated price data, using local expert knowledge to derive the mean and variance for prices of 64 items in over 1000 communities. We use these prices to calculate regional cost-of-living indexes. These provide a better approximation to benchmark multilateral price indexes calculated from traditional market price surveys than do two no-price methods, based on using food Engel curves to derive deflators and based on unit values (survey group expenditure over group quantity).
    Keywords: expert knowledge; inequality; prices; regional cost-of-living
    JEL: D12 E31 O15
    Date: 2018–06–30
  48. By: La Cour, Lisbeth; McGaughey, Sara; Raimondos, Pascalis
    Abstract: When searching for productivity spillovers from foreign firms, a firm is typically classified as foreign using a low threshold of direct foreign ownership. Instead, we advocate an `ultimate owner' definition because (i) ultimate ownership includes indirect ownership links that are prevalent in our complex, interdependent world; and (ii) it confers control. Control brings greater willingness to transfer knowledge to foreign affiliates but, paradoxically, also greater potential for spillovers. Adopting this alternate definition of what is foreign turns out to be pivotal for identifying spillovers: while we find no horizontal productivity effects using the low threshold direct ownership definition, we find positive and significant effects under the ultimate-owner definition. Moreover, we find evidence that indirectly controlled foreign firms exert the most persistent horizontal spillovers to domestic firms.
    Keywords: control vs influence; direct vs. ultimate owner; Foreign direct investment; indirect ownership links; productivity spillovers
    JEL: F23
    Date: 2018–06
  49. By: Despina Tumanoska
    Date: 2018–05
  50. By: Dany Bahar
    Abstract: Using a unique dataset on worldwide multinational corporations with precise location of headquarters and affiliates, I present evidence of a trade-off between distance to the headquarters and the knowledge intensity of the foreign subsidiary’s economic activity, emerging from dynamics related to the proximity-concentration hypothesis. This trade-off is strongly diminished the higher the overlap in working hours between the headquarters and its foreign subsidiary. In order to rule out biases arising from confounding factors, I implement a regression discontinuity framework to show that the economic activity of a foreign subsidiary located just across the time zone line that increases the overlap in working hours with its headquarters is, on average, about one percent higher in the knowledge intensity scale. I find no evidence of the knowledge intensity and distance trade-off weakening when a non-stop flight exists between the headquarters and the foreign subsidiary. The findings suggest that lower barriers to real-time communication within the multinational corporation play an important role in the location strategies of multinational corporations.
    Keywords: multinational firms, multinational corporations, knowledge, location, proximity concentration hypothesis, FDI
    JEL: F23 L22 L25
    Date: 2018

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