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on Economic Geography |
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Issue of 2024‒10‒07
twelve papers chosen by Andreas Koch, Institut für Angewandte Wirtschaftsforschung |
| By: | Bathelt, Harald; Storper, Michael |
| Abstract: | Evolutionary approaches in economic geography have contributed substantially to the growing body of knowledge of regional development processes and their underlying mechanisms. One key concept in the literature on evolutionary economic geography is that of related variety. Herein, regional industry structure is represented through the level of related variety of technologies, skills, or outputs. The related variety concept proposes that regional economic development is favored when an economy diversifies into products or technologies that are closely related to the stock of existing activities. In this article, we raise substantive questions regarding the internal logic of the concept of related variety, its spatial expressions, measurement specifics, empirical regularities and biases, and its possible short- and long-term effects on regional development. Based on this investigation, we make suggestions for improvements to future research. |
| Keywords: | economic geographies of places; evolutionary economic geography (EEG); regional development; regional specialization; related variety |
| JEL: | L23 R11 |
| Date: | 2023–11–01 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:120162 |
| By: | Kemeny, Tom; Storper, Michael |
| Abstract: | Spatial income disparities have increased in the US since 1980, a pattern linked to major social, economic, and political challenges. Yet, today’s spatial inequality, and how it relates to the past, remains insufficiently well understood. The primary contribution of this article is to demonstrate a deep polarization in the American spatial system—yet one whose character differs from that commonly reported on in the literature. The increase in spatial inequality since 1980 is almost entirely driven by a small number of populous, economically important, and resiliently high-income superstar city-regions. But we also show that the rest of the system exhibits a long-run pattern of income convergence over the study period. A secondary contribution is historical: today’s superstars have sat durably atop the urban hierarchy since at least 1940. Third, we describe six distinctive pathways of development that regions follow between 1940 and 2019, with certain locations catching up, falling behind, and surging ahead. We explore the role played by initial endowments in driving locations down these pathways, finding population, education, industrial structure, and immigrant attraction to be key distinguishing features. These insights are enabled by a fourth contribution: methodologically, we use group-based trajectory modeling—an approach new to the field that integrates top-down and bottom-up views of the evolving national spatial system. We conclude by exploring implications for the mid-twenty-first century. |
| Keywords: | cities; convergence; economic history; geography; inequality |
| JEL: | D30 R10 |
| Date: | 2023–08–17 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:120155 |
| By: | Bruna, Fernando |
| Abstract: | The New Economic Geography (NEG) provides a historical explanation for the spatial agglomeration of economic activity. One of its predictions, the ‘wage equation’, relates regional income to market accessibility. Although the NEG is a long-term theory, empirical literature has tested it using panel data methods, which capture short-term relation-ships between temporal changes in variables. For a sample of European regions, I show that panel data estimations of the wage equation identify only potential spillover effects of the European business cycle on the synchronic evolution of regional per capita income. That is, the panel data results are not due to the mechanisms proposed by the NEG. The paper concludes with a cautionary note about misinterpretation of panel data estimations. |
| Keywords: | NEG, agglomeration, wage equation, fixed effects, first differences, European cycle |
| JEL: | C18 C23 E32 F12 R12 |
| Date: | 2024–08–29 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:121949 |
| By: | Sanchis-Guarner, Rosa; Szumilo, Nikodem; Vernet, Antoine |
| Abstract: | We study the impact of improved rail access on entrepreneurship rates in England and Wales. We use data from the Census spanning 2001, 2011, and 2021 to analyse self-employment rates in granular geographic areas of around 200 residents. Specifically, we study how they respond to changes in the distance to the nearest train station occurring due to 56 new station openings. We find that all else equal, moving 1 km further away from a station reduces self-employment rates by 0.12 percentage points, with the effect dissipating beyond 7 km. Secondary results suggest that access to rail makes it easier to become self-employed while not making it more attractive compared to employment. Our findings suggest that rail infrastructure improvements can support local entrepreneurship and economic activity, contributing to regional development and reducing economic inequality. |
| Keywords: | entrepreneurship; rail; self-employment |
| JEL: | L20 O18 R11 |
| Date: | 2024–08–01 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:124680 |
| By: | Schwab, Thoms |
| Abstract: | The European Cohesion Policy is currently undergoing a profound identity crisis. The ongoing reform debate fundamentally questions the direction and methods of promoting regional development. This debate is further intensified by changing geopolitical conditions, which introduce new, fundamental trade-offs. This paper provides a comprehensive overview of the key discussion threads, analyses their implications, and offers initial recommendations for addressing the trade-offs Cohesion Policy is facing. |
| Keywords: | EU Cohesion Policy, European Integration, Structural Funds, Regional Policy |
| JEL: | F15 O52 R58 |
| Date: | 2024–06–13 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:121841 |
| By: | Xiaoming Cai (Peking University HSBC Business School); Pieter Gautier (VU University Amsterdam); Ronald Wolthoff (University of Toronto) |
| Abstract: | This paper considers a random search model where some locations provide sellers with better chances of meeting many buyers than other locations (for example popular shopping streets or the first page of a search engine). When sellers are heterogeneous in terms of the quality of their product and/or the probability that a given buyer likes their product, it is desirable that sellers of high-quality niche products sort into the best locations. We show that this does not always happen in a decentralized market. Finally, we allow for endogenous location distributions and show that more trades are realized when locations are similar (in which case the aggregate matching function is urn-ball) but that quality weighted trade can be higher when locations are heterogeneous. |
| Keywords: | search frictions, spatial equilibrium, sorting |
| JEL: | C78 D44 D83 |
| Date: | 2024–02–29 |
| URL: | https://d.repec.org/n?u=RePEc:tin:wpaper:20240015 |
| By: | Alexandra Tsvetkova |
| Abstract: | To mark the 40th anniversary of the OECD Local Employment and Economic Development (LEED) Programme, this paper examines determinants and consequences of employment resilience, or lack of, in European NUTS3/TL3/TL3 regions over the last 40 years. Descriptive evidence shows that the least resilient regions (those with the largest percentage drop in employment during a recession) slip to persistently lower post-recession employment-to-population ratio trajectories. On the other hand, regions with higher productivity pre-recession lost proportionally fewer jobs during a recession and were more likely to recover to the pre-recession employment levels (except for the recession induced by the COVID-19 pandemic). Overall, the findings point to the ability of productivity to serve as a shield against negative employment impacts of economic crises. |
| JEL: | J01 O18 R11 |
| Date: | 2024–09–19 |
| URL: | https://d.repec.org/n?u=RePEc:oec:cfeaaa:2024/08-en |
| By: | Nicholas Bloom; Marcela Carvalho; Tarek A. Hassan; Aakash Kalyani; Joshua Lerner; Ahmed Tahoun |
| Abstract: | We identify phrases associated with novel technologies using textual analysis of patents, job postings, and earnings calls, enabling us to identify four stylized facts on the diffusion of jobs relating to new technologies. First, the development of economically impactful new technologies is geographically highly concentrated, more so even than overall patenting: 56% of the most economically impactful technologies come from just two U.S. locations, Silicon Valley and the Northeast Corridor. Second, as the technologies mature and the number of related jobs grows, hiring spreads geographically. But this process is very slow, taking around 50 years to disperse fully. Third, while initial hiring in new technologies is highly skill biased, over time the mean skill level in new positions declines, drawing in an increasing number of lower-skilled workers. Finally, the geographic spread of hiring is slowest for higher-skilled positions, with the locations where new technologies were pioneered remaining the focus for the technology’s high-skill jobs for decades. |
| Keywords: | employment; geography; innovation; research and development |
| JEL: | O31 O32 |
| Date: | 2024–08–26 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fedlwp:98770 |
| By: | Jose Asturias; Marco Sanfilippo; Asha Sundaram |
| Abstract: | We study the impact of FDI on domestic welfare using a model of internal trade with variable markups that incorporates intranational transport costs. The model allows us to disentangle the various channels through which FDI affects welfare. We apply the model to the case of Ethiopian manufacturing, which received considerable amounts of FDI during our study period. We find substantial gains from the presence of foreign firms, both in the local market and in other connected markets in the country. FDI, however, resulted in a modest worsening of allocative efficiency because foreign firms tend to have significantly higher markups than domestic firms. We report consistent findings from our empirical analysis, which utilises microdata on manufacturing firms, information on FDI projects, and geospatial data on improvements in the road network. |
| Date: | 2024–09 |
| URL: | https://d.repec.org/n?u=RePEc:cen:wpaper:24-45 |
| By: | Sara Calligaris; Chiara Criscuolo; Josh De Lyon; Andrea Greppi; Oliviero Pallanch |
| Abstract: | This paper develops a taxonomy of 151 industries, mainly defined at the 3-digit level, indicating at which geographical level competition takes place. It classifies 40 industries as competing at the domestic level, 85 at the European level, and 26 at the global level. First, this paper creates a novel dataset that combines production and international trade data for both goods and services industries, defined at a detailed level of industry aggregation for 15 European countries (based on data availability). Then, by comparing domestic sales with international trade flows, and their source/destination, it identifies the geographic level of competition of each industry. The proposed classification can be used in numerous applications, from the design of trade policies to the assessment of competition by antitrust authorities. The paper shows that the taxonomy is broadly consistent with external data sources that provide alternative ways of inferring the degree of internationalisation of each industry. |
| Keywords: | Competition, International Trade, Market Boundaries, Trade Costs |
| JEL: | F14 F60 L11 |
| Date: | 2024–09–13 |
| URL: | https://d.repec.org/n?u=RePEc:oec:stiaaa:2024/05-en |
| By: | Tomas Boukal (Institute of Economic Studies, Charles University, Prague, Czech Republic) |
| Abstract: | Multinational enterprises are increasingly using offshore locations to pay lower taxes on their profits. This behavior has distortive effects on the global economy, as the concentration of multinational activities mirrors global tax patterns. In this paper, I exploit the OECD country-by-country reporting statistics to analyze the determinants behind the location of profits. I find that profit allocation is sensitive to both effective tax rates and geographical proximity, confirming the significance of these factors in MNEs´ tax planning strategies. Building on the work of Dharmapala and Hines (2009), this study also uncovers that MNEs are more likely to report profits to jurisdictions with superior governance quality, integrating both Global Governance Indicators and factors linked to financial secrecy. However, the findings indicate that tax haven jurisdictions exhibit a degree of reluctance when it comes to implementing recently introduced policies aimed at combating corruption and tax abuses. |
| Keywords: | international taxation, tax havens, country-by-country reporting, gravity models, governance quality |
| JEL: | F23 G15 G28 H26 H32 |
| Date: | 2024–09 |
| URL: | https://d.repec.org/n?u=RePEc:fau:wpaper:wp2024_31 |
| By: | Sara Calligaris; Chiara Criscuolo; Josh De Lyon; Andrea Greppi; Oliviero Pallanch; Miguel Chavez |
| Abstract: | Concentration – the share of an industry’s output accounted for by its largest firms and a frequently used proxy of competition – has increased in European countries. This paper provides evidence about this development by introducing several methodological refinements in the cross-country measurement of concentration: it defines industries at a disaggregated level, mostly 3-digit; it takes into account the geographic level at which competition takes place - domestic, European or global; and it accounts for linkages between firms within the same domestic and multinational business group in the relevant geographic region of competition. It then applies these improvements to representative data for fifteen European countries, showing that average concentration increased by about 5 percentage points over the period 2000-2019, from 26% to more than 31%. Third, the paper investigates how each of the methodological improvements affects the levels and trends of concentration. |
| Keywords: | Competition, Concentration, Market power |
| JEL: | F14 F60 L11 L22 D22 |
| Date: | 2024–09–13 |
| URL: | https://d.repec.org/n?u=RePEc:oec:stiaaa:2024/06-en |