Showing papers in "Annals of Regional Science in 2015"

Innovation in peripheral regions: Do collaborations compensate for a lack of local knowledge spillovers?

Abstract: It is widely accepted that firms in peripheral regions benefit to a lesser extent from local knowledge spillovers than firms located in agglomerations or industrial clusters. This paper investigates the extent to which innovative firms in peripheral regions compensate for the lack of access to local knowledge spillovers by collaborating at other geographical scales. So far, the literature predominantly suggests that collaborations complement rather than compensate for local knowledge spillovers. Using data on the collaboration patterns of innovative firms in Sweden, this paper provides evidence that firms with low access to local knowledge spillovers tend to collaborate more. This effect, however, depends on firm size and in-house capabilities. Our findings suggest that firms with strong in-house capabilities do indeed compensate for a lack of local knowledge spillovers with collaborations while firms with weaker in-house capabilities depend more on the regional knowledge infrastructure.

Entrepreneurship and economic development in cities

Abstract: Policy makers have identified the relationship between entrepreneurship and economic development. Yet, little is known about how this relationship varies over time in cities with different market sizes. This study examines the link between entrepreneurship and economic development using a panel of 127 European cities between 1994 and 2009. We found that the immediate economic development impact of new firm start-ups is positive for both small-/medium-size cities and large cities. The relationship is U-shaped for large cities, with the indirect effect taking 7 years, but the indirect effect does not occur in small-/medium-size cities. We offer useful information for policy makers, practitioners, and scholars.

Considering Disaster Vulnerability and Resiliency: The Case of Hurricane Effects on Tourism-based Economies

Abstract: In this study, we examine the vulnerability and resiliency of 10 tourism-based regional economies which include US national parks or seashores (situated on the Gulf of Mexico or Atlantic Ocean coastline) affected by several hurricanes over a 26-year period. The vulnerability of each economy to natural disasters was estimated using a panel linear model, while resilience was estimated by employing a negative binomial panel regression and a difference-in-difference model. Natural disaster damage, related to physical damage and human loss, was shown to have a negative effect on regional economies. Regions with stronger economies prior to natural disasters have lower disaster losses than regions with weaker economic characteristics. More effort to improve regional economic conditions before natural disasters is necessary to minimize disaster loss. Lessons learned from the economic impacts of past natural disasters, in particular in tourism-based regions, can help regional planners and policy makers predict problems related to disasters and more effectively prepare for future events.

Variety, economic growth and knowledge intensity of European regions: a spatial panel analysis

Abstract: Although the theoretical framework on agglomeration externalities and the channels through which they influence the regional economy appear well established, the empirical evidence on their magnitude and impact has been rather ambiguous and inconclusive. Applying the concepts of related and unrelated variety to an interregional European dataset and using spatial panel analysis, this paper provides critical information on the type and functioning of agglomeration externalities in relation to regional heterogeneity in knowledge intensity and innovation. We demonstrate that modeling this regional heterogeneity in a spatial panel setting is a crucial condition for identifying the positive agglomeration effects of (un)related variety on regional growth. The outcomes have substantial implications for European regional policy: We argue that policies should be both conceptually enriched and more empirically informed.

Up in the air: the role of airports for regional economic development

Abstract: Our research examines the role of airports in regional development. Specifically, we examine two things: (1) the factors associated with whether or not a metro will have an airport, and (2) the effect of airport activities on regional economic development. Based on multiple regression analysis for U.S. metros, our research generates four key findings. First, airports are more likely to be located in larger metros with higher shares of cultural workers and warmer winters. Second, airports add significantly to regional development measured as economic output per capita. Third, the effect of airports on regional development occurs through two channels—their capacity to move both people and cargo, with the former being somewhat more important. Fourth, the impact of airports on regional development varies with their size and scale.

Exploring, modelling and predicting spatiotemporal variations in house prices

Abstract: Hedonic price modelling has long been a powerful tool to estimate house prices in the real estate market. Increasingly, traditional global hedonic price models that largely ignore spatial effects are being superseded by models that deal with spatial dependency and spatial heterogeneity. In addition, many novel methods integrating spatial economics, statistics and geographical information science (GIScience) have been developed recently to incorporate temporal effects into hedonic house price modelling. Here, a local spatial modelling technique, geographically weighted regression (GWR), which accounts for spatial heterogeneity in housing utility functions is applied to a 19-year set of house price data in London (1980–1998) in order to explore spatiotemporal variations in the determinants of house prices. Further, based on the local parameter estimates derived from GWR, a new method integrating GWR and time series (TS) forecasting techniques, GWR–TS, is proposed to predict future local parameters and thus future house prices. The results obtained from GWR demonstrate variations in local parameter estimates over both space and time. The forecasted future values of local estimates as well as house prices indicate that the proposed GWR–TS method is a useful addition to hedonic price modelling.

Patterns of innovation and collaboration in small and large firms

Abstract: This paper explores the patterns of innovation and collaboration by using unique regional survey data on more than 600 Swedish firms. The data also include the smallest firms, which have been largely neglected in the existing literature on innovations. In the context of collaboration, however, small firms are of particular interest because external interactions and joint projects can be expected to play a very central role in innovation processes in firms where internal resources are very limited. The results show that the probability of innovation is higher among collaborating firms, yet not all types of collaborations matter. Extra-regional collaborations appear as most important in promoting firm innovation, and collaboration seems to be most favourable when the partners involved have some organizational or knowledge relatedness. Small firms, in particular, seem to gain from such extra-regional linkages.

The neglected heterogeneity of spatial agglomeration and co-location patterns of creative employment: evidence from Portugal

Abstract: Empirical literature on the geographical location of creative activities has been traditionally based on the spatial analysis of industries, often disregarding the creative employment that lies outside the necessarily limited boundaries of creative industries. As an extension to the most recent methodologies using industry and occupational data on industrial cluster analysis, this paper analyses agglomeration and co-location patterns of core creative activities, considering both ‘embedded’ (creative professionals working outside the creative sectors) and ‘specialized’ (creative professionals working in the creative sectors) creative employment. Using location quotients and principal component factor and cluster analyses, applied to all 308 Portuguese municipalities, we found that the geographical agglomeration and co-location patterns of core creative groups differ substantially. The typical arguments sustained by the literature—the tendency of creative industries/employment to agglomerate and co-locate in large metropolises—are only supported in the case of knowledge-intensive activities subjected to Intellectual Property Rights, most notably ‘Advertising/Marketing’, ‘Publishing’, ‘TV/Radio’, and ‘Software/Digital Media’, densely concentrated and co-located in highly developed, large urban centres, with high levels of human capital. These arguments do not hold for the traditional creative activities of ‘Architecture’, ‘Design/Visual Arts’ and ‘Crafts’, which, although co-located, appear mostly dispersed with small concentrations around intermediate urban centres. ‘Teaching/training/research’ present quite dispersed geographical patterns with some clusterization around municipalities with tertiary education institutions. ‘Film/video/photography’ and ‘Music/Performing Arts’ show some dispersion throughout the Portuguese territory with concentration around small urban centres and in rural areas. It is evident that, from agglomeration to co-location patterns, creative employment reveals heterogeneous characteristics across creative groups.

Entrepreneurship and the business cycle: the “Schumpeter” effect versus the “refugee” effect—a French appraisal based on regional data

Abstract: We study the influences of new-firm start-ups on growth at the regional and macroeconomic level in France using a quarterly database over the 1993–2011 period. We find that fluctuations in GDP are an early indicator of new-firm start-ups. Nevertheless, the most important relationships are found between the unemployment rate and new-firm start-ups. Entrepreneurship is mainly driven by an unemployment “push” effect that have consequences upon the potential of growth of new-firm start-ups in most of the French regions. The Ile-de France region is an exception since the “Schumpeter” effect prevails in the long term.

Cultural impact on regional development: application of a PLS-PM model to Greece

Abstract: This paper seeks to find evidence for the impact of local culture—living culture and cultural heritage—on regional socio-economic development in Greece. The main aim of the paper is to operationalize the culture-based development hypothesis for the existence of a cumulative causation process of cultural impact on Greek local development. To test this hypothesis empirically, we employ an original and uniquely compiled dataset of over 130 economic and social indicators about Greece on a NUTS3 level, assembled from various international and local sources. Employing a combined nonparametric partial-least squares path modelling approach, we find evidence that—in contrast to results from other European countries and the USA—in Greece, culture influences not only the human capital, but also the overall labour force structure. This appears to affect not only the economic productivity, but also the overall quality of life in the locality concerned. These results, based on nonparametric estimations, were confirmed through triangulation with parametric 3SLS and structural equation model tests. The latter use of parametric and nonparametric techniques in a mutually complementary manner is one of the novelties in this contribution.

Price formulation and the law of one price in internationally linked markets: an examination of the natural gas markets in the USA and Canada

Abstract: The degree to which the law of one price holds (integration) along with determining each individual markets’ role in price discovery is examined for 11 major natural gas markets, six from the USA and five from Canada. Deregulation, technological advances, and trade agreements have opened the USA’s and Canada’s natural gas market to new and extensive interactions. The 11 natural gas market prices are tied together with ten long-run co-integration relationships with all markets included in the co-integration space, providing evidence the markets are integrated. The degree of integration varies by region. Markets geographically adjacent to each other tend to be more highly integrated than markets separated by distance. Further results indicate that there is no clear price leader among the 11 markets. Including more US and Canadian markets than previous studies, show markets in both eastern and western USA and Canada are important in the price discovery process.

The value of the greenbelt in Vienna: a spatial hedonic analysis

Abstract: This paper employs the hedonic price method to examine whether the implicit value of the greenbelt is capitalized into apartment prices in the city ofVienna, Austria. We improve the traditional model using spatial econometric techniques and compare the estimates from different spatial models, namely the spatial lag model, the spatial error model, and the spatial Durbin model (SDM). While our use of spatial models addresses the common problem of omitted variable bias, the SDMspecifically allows for controlling possible nearby proximity effects (i.e., small-scale neighborhood) that are rarely included in this type of analyses. Findings indicate that distance from the greenbelt is important in explaining apartment prices in Vienna and that the greenbelt exerts a centrifugal force. The SDM is found to be the best performing model indicating the existence of small-scale neighborhood effects and presenting a solid case for the consideration of this model in valuation of green amenities.

Multilevel assessment of public transportation infrastructure: a spatial econometric computable general equilibrium approach

Abstract: Impact assessment of transportation investment policy is a challenging task as assessment outcome is sensitive to various attributes such as methodology, time period, scale and location of analysis. This study is conducted to evaluate regional impact of public transportation infrastructure in the USA at multilevel geographic scales. The assessment is implemented using a spatial econometric computable general equilibrium approach which integrates spatial econometric techniques with computable general equilibrium models to control for spatial spillover effects. The results found that regional economic impacts of public transportation infrastructure vary substantially by mode and geographic scale. The US highway infrastructure tends to have consistent and dominant impacts on both the US national and regional economy across different geographic scales. The impact of public airport infrastructure tends to be much larger at the national level than state and metropolitan level, whereas the economic contribution of public transit including passenger rail infrastructure tends to be much stronger at the US northeast metro level than the national level of analysis.

Regional well-being indicators and dispersion from a multidimensional perspective: evidence from Italy

Abstract: Interest in measuring well-being, as opposed to the more traditional economic indicators of growth, has increased significantly over recent years. This paper aims to contribute to the empirical literature on well-being indicators and dispersion across regions in terms of both quality of life and economic progress. Italian regions are used as case studies and 10 different multidimensional determinants of well-being are considered: culture and free time; education; employment; environment; availability of essential public services; health; material living conditions; personal security; research and innovation; and the strength of social relations. We calculated, by applying principal component analysis, synthetic indicators for each well-being determinant and for each region so as to generate—again, by means of the same methodology—an index of overall well-being. The study was conducted for every year over the period 2004–2010. Results clearly show that differences in well-being between regions are not necessarily in line with those based on per capita GDP, suggesting a need to give more attention to quality-of-life features of economic progress in public policy goals and design. Furthermore, the paper looked at dispersion across regions and regional rank mobility over the same period. Italian regions have tended to become more similar in terms of well-being over time, but no evidence of significant intra-distributional mobility emerges.

Culture-led city brands as economic engines: theory and empirics

Abstract: Cultural re-imaging through iconic art museums aims to create symbolic capital for a place in the form of creative images, reputation and associations with innovation. While literature has long identified architectural uniqueness as a potential driver of brand competitiveness, we argue diffusion of that image is equally important. This work draws upon economic concepts from other cultural industries (such as film, music and art) to develop a framework for understanding how cultural brands are built: How reproducible images of singular architecture accumulate in the media to strengthen a brand. We then test an art brand’s impact on visitors. This work aims to offer evidence that the Guggenheim Museum Bilbao brand generates tourism to the city of Bilbao. By understanding how iconic cultural infrastructures create symbolic capital, policy makers may better tailor similar culture-led branding strategies to other places.

What’s behind the disparities in firm innovation rates across regions? Evidence on composition and context effects

Abstract: Empirical evidence on innovation activity points to both significant disparities in innovation output across regions and important differences in firm innovation rates. These differences suggest that firm characteristics as well as regional factors might impact on innovation. Evidence on the relative importance of the two groups of factors is still scarce and ambiguous. We analyze the impact of firm characteristics and the regional context on differences in firm innovation rates in Germany for the period 1998–2009. By combining firm-level data with information on the regional environment, we can distinguish between composition effects caused by the selection of highly innovative firms in specific regions and the impact of regional factors. Our results indicate that the propensity to innovate of firms located in agglomerations significantly exceeds the innovation output of plants in rural regions. To analyze the role of the regional context for the firm’s probability to innovate, we use a multilevel approach. Besides controlling for important firm-level factors such as R&D employment, size and age of the firm, we also account for different regional factors. The regression results point to a positive association between regional R&D activity and the firm’s innovation output. Moreover, the effect of the regional context seems to differ with the size, age and R&D intensity of the firms.

Linkage between geographic space and knowledge transfer by multinational enterprises: a structural equation approach

Abstract: This paper discusses the current links between international business, economic geography and knowledge management. Despite the recent proliferation of papers dealing with knowledge transfer by multinational enterprises (MNEs) in China, there is limited work investigating the role of geographic space on knowledge transfer. Given the growing interest in knowledge transfer by MNEs, the lack of research on geographic space in the Chinese context is a significant gap in our knowledge. In response, we have conducted what we believe to be the first study on the relationship between geographic space and knowledge transfer by the Japanese MNEs to their subsidiaries in China. The paper reviews the relevant literature from which it develops a theoretical model which is then tested empirically. We then provide empirical results on the relationship between geographic space, perceived distance and knowledge transfer. A LISREL model is employed to study the impact of the latent variables associated with geographic space on knowledge transfer. Based on the results, this study provides useful insights for economic geographers who wish to study knowledge transfer between parent companies and their subsidiaries across geographic space.

On the parametric description of the French, German, Italian and Spanish city size distributions

Abstract: We study the parametric description of the city size distribution of four European countries: France, Germany, Italy and Spain. The parametric models used are the lognormal, the double Pareto lognormal, the normal-Box–Cox and the threshold double Pareto Singh–Maddala (last two of these are defined in this paper). The results are quite regular. The preferred model is always the threshold double Pareto Singh–Maddala in the four countries. However, the dPln is not rejected always for the case of France, and in the case of Italy, the dPln is the runner-up distribution.

Local quality of government and voting with one’s feet

Abstract: In this paper, we investigate the impact of local quality of government on regional attractiveness to migrants inferred from individual revealed preferences and net migration. The analysis is based on panel data estimations of 254 European regions for the period between 1995 and 2009. Different instrumental variable techniques have been employed in order to assess the extent to which differences in local government quality affect preference rankings for different locations and to account for potential endogeneity concerns. The results point towards an important influence of specific factors related to the regional quality of government, such as the fight against corruption or government effectiveness, on the ability of European regions to position themselves as attractive places for future residents.

Agglomeration economies in Japanese industries: the Solow residual approach

Abstract: This paper proposes a new approach to measuring agglomeration economies in Japan. Under the proposed approach, we used the Solow residual to measure agglomeration economies and confirmed that agglomeration economies exist in both manufacturing and non-manufacturing industries. Furthermore, this paper shows that social overhead capital has a positive effect on agglomeration economies. Currently, agglomeration economies are robust only in metropolitan areas; however, they are present throughout Japan because of the disproportionate allocation of social overhead capital within the nation.

Internal migration, regional labor markets and the role of agglomeration economies

Abstract: We analyze the determinants and regional implications of internal migration flows across Danish municipalities in 2006–2012. Besides assessing the role of labor market and housing market factors in driving a region’s net migration rate, we particularly focus on agglomeration factors identified by “new” migration theories related to regional growth models and the new economic geography. The work contributes to the field in the following way: we extend the scarce literature on the different channels through which agglomeration economies act as an attractor for mobile labor. Moreover, we account for the role of space–time dynamic adjustment processes and simultaneity among migration and labor market variables and finally test for heterogeneity in the migration response to regional labor market disparities among low- and high-skilled migrants. Our results support the view that agglomeration economies are indeed key drivers of internal migration flows in Denmark. That is, while we obtain mixed evidence with regard to the role of traditional labor and housing market variables, most of the included proxies for agglomeration economies such as the region’s population density, patent intensity, endowment with human capital as well as the region’s employment share of knowledge-intensive services are positively correlated with the region’s net in-migration rate. Regarding the regional implications of internal migration flows, the results hint at a process of cumulative causation for the time period of analysis running from agglomeration economies to the inflow of mobile labor and subsequent regional income development.

Industrial structure and total factor productivity: the Tunisian manufacturing sector between 1998 and 2004

Abstract: Using a panel of manufacturing firms operating in 138 delegations across the Tunisian coast and observed over the 1998–2004 period, we study the impact of industrial structure on regional economic growth measured by total factor productivity. The results of an unbalanced panel data-based model indicate that the diversity of the industrial scene seems to be a local growth-promoting factor for high-tech sectors. Specialization often articulates the impact of diversity, while competition positively affects productivity.

On the regionalization of input–output tables with an industry-specific location quotient

Abstract: The purpose of this study is to contribute to the ongoing debate about the performance of several location quotients (LQs), including Flegg’s location quotient (FLQ) and the industry-specific FLQ (SFLQ), which was newly developed by Kowalewski (Reg Stud, 240–250, 2015) Unlike FLQ, which has one unique $$\delta $$ -value for all industries in a region, SFLQ allows for a variation in the exponential parameter value of $$\delta $$ for each industrial sector in order to capture specialization and to reduce the tendency for overestimation or underestimation of each of the industries in a given region Since the national and regional survey data are available for South Korea, this study evaluates and compares the results for SFLQ against those of other non-survey techniques The findings prove that SFLQ is superior to other LQs, including FLQ and augmented FLQ In addition, empirical evidence shows that the optimal values for the exponential parameters vary drastically among industries SFLQ provides more detailed information on regional industries with individual $$\delta $$ values, which is definitely helpful when analyzing regional specialization and shifts in industrial structure Furthermore, to determine the optimal exponential $$\delta ({\delta _j })$$ value in FLQ and SFLQ in advance, Flegg’s and Kowalewski’s regression models are tested with the use of Korean data The statistics indicate that the regression equations are debatable and still need major improvement

The impacts of corruption on wage inequality and rural–urban migration in developing countries

Abstract: This paper establishes three-sector general equilibrium models and separately investigates how sector-biased corruption influences the wage rates of skilled and unskilled workers, the wage inequality, and the amount of unskilled rural–urban migrants in developing countries. Corrupt activities are introduced in our theoretical models as transaction costs. We find that the reductions in different sector-biased corrupt behaviors exert different impacts through various economic mechanisms. In addition, the change in urban unskilled unemployment due to the decrease in the degree of sector-biased corruption is also taken into account.

The geography of innovation and entrepreneurship

Abstract: This introduction to the special issue “The Geography of Innovation and Entrepreneurship” in the Annals of Regional Science surveys a collection of nine papers which consider agglomeration economie ...

Linking collaborative R&D strategies with the research and innovation performance of SMEs in peripheral regions: Do spatial and organizational choices make a difference?

Abstract: We examine the empirical link between collaborative R&D strategies and the research and innovation performance of small- and medium-sized enterprises in peripheral locations. Using a survey of German firms combined with time series information on patent applications obtained from the European Patent Office, we apply a comparison-group approach and estimate different “treatment effect” models to assess the notion of causality underlying this relationship. Besides accounting for observed and unobserved firm-specific heterogeneity, we thereby also control for the likely endogeneity of R&D collaboration as a strategic choice in the course of research and innovation activities. Our results for the period 2001–2007 indicate that engaging in R&D collaboration vis-a-vis a non-collaborative research strategy is related to higher outcome levels for a firm’s key research and innovation indicators such as R&D and patent intensity. We also find that this latter link varies by firm size and the organizational type of cooperating partner, and especially those firms that simultaneously engage in research collaborations with other private businesses and research institutes/universities show above average innovation performance. In contrast, the notion of spatial proximity to research partners is shown to be of less importance. Our results may be of help for the future design of regional policies supporting the research and innovation activity of small firms in peripheral and remote locations outside large metropolitan areas.

The city and the region as contrasts in spatial organization

Abstract: Within a number of disciplines, the terms “city” and “region” are frequently referred to in combination, raising the obvious question as to the relationship between two. The central focus of the paper involves an attempt to identify the more significant differences between the city and the region in terms of their respective modes of spatial organization. This is undertaken from three broad perspectives. The first compares the individual city and the individual region as independent entities, while the second perspective considers the city in relation to the region in which it is located. A third perspective is concerned with a system of cities in comparison with a system of regions. The latter part of the discussion examines alternative definitions of the city, and the extent to which these may be regarded as satisfactory.

On the trail of core–periphery patterns in innovation networks: measurements and new empirical findings from the German laser industry

Abstract: It has been frequently argued that a firm’s location in the core of an industry’s innovation network improves its ability to access information and absorb technological knowledge. The literature has still widely neglected the role of peripheral network positions for innovation processes. In addition to this, little is known about the determinants affecting a peripheral actors’ ability to reach the core. To shed some light on these issues, we have employed a unique longitudinal dataset encompassing the entire population of German laser source manufacturers (LSMs) and laser-related public research organizations (PROs) over a period of more than two decades. The aim of our paper is threefold. First, we analyze the emergence of core–periphery (CP) patterns in the German laser industry. Then, we explore the paths on which LSMs and PROs move from isolated positions toward the core. Finally, we employ non-parametric event history techniques to analyze the extent to which organizational and geographical determinates affect the propensity and timing of network core entries. Our results indicate the emergence and solidification of CP patterns at the overall network level. We also found that the paths on which organizations traverse through the network are characterized by high levels of heterogeneity and volatility. The transition from peripheral to core positions is impacted by organizational characteristics, while an organization’s geographical location does not play a significant role.

How shaky was the regional economy after the 1995 Kobe earthquake? A multiplicative decomposition analysis of disaster impact

Abstract: The long-run effects of the 1995 Kobe earthquake have been studied in various papers (Chang in Disasters 34(2):303–327, 2010; DuPont and Noy in Econ Dev Cult Change, 2015; Okuyama in Singap Econ Rev, 2015), and their findings have revealed the continuous and significantly negative economic trend in Kobe, suggesting that considerable structural changes occurred in the Kobe economy resulting from the damages from and subsequent reconstruction activities after the earthquake. At the same time, Fujiki and Hsiao (Disentangling the effects of multiple treatments—measuring the net economic impact of the 1995 Great Hanshin-Awaji Earthquake. IMES Discussion Paper 2013-E-3. Institute for Monetary and Economic Studies, Bank of Japan, 2013) concluded that the effects from the event were only short-lived and the persistent decline of the Hyogo economy had come from structural change of the economy. In order to investigate the disaster-induced structural changes further, this paper aimed to analyze the extent to and the composition of the structural change, based on the input–output framework. While the previous study (Okuyama in Econ Syst Res 26(1):98–117, 2014) lacked the 1995 data and was inclined toward a longer-run analysis, this paper examined immediate structural changes after the event employing the estimated 1995 input–output tables for the damaged region based on the observed macroeconomic data and with a set of different assumptions (Ashiya and Jinushi in Kokumin Keizai Zasshi 183(1):79–97, 2001). The results show that the significant structural changes were observed in the damaged region and that many manufacturing sectors tightened the regional interindustry linkages, whereas service sectors weakened their regional linkages in the aftermath. In addition, the assumptions of how the reconstruction demands would have been leaked out appear to make some critical differences in the results.

Spatial Distribution of Skills and Regional Trade Integration

Abstract: This study is a theoretical and empirical analysis of the effects of regional trade integration on the spatial distribution of skills. We first develop a theoretical model in the economic geography field to integrate heterogeneous workers, housing, local entrepreneurs and skill upgrading by unskilled workers. We then analyse how the domestic integration of each state in the USA, approximated by truck registrations, influenced the location choice of skilled and unskilled workers in 1940–1960. By using inter- and intrastate trade flow from the US Commodity Flow Survey, we also analyse the impact of regional trade costs for the contemporary period (1997, 2002, 2007). The theoretical model shows that the bell-shaped curve of spatial development displays a sorting of individuals and firms. Only high-skilled workers increasingly choose the core region during the process of regional integration, while intermediate-skilled workers move to the periphery due to the increase in the price of housing. By impacting differently on the opportunity cost to invest in skill acquisition in the core and the periphery, this sorting influences the regional creation of human capital. First a regional divergence in education investment occurs and then a convergence, but only for high-level regional integration. The empirical analysis confirms that regional trade integration has been a determinant of the spatial distribution of skills in the USA.