Showing papers in "Spatial Economic Analysis in 2009"

On the Specification of the Gravity Model of Trade: Zeros, Excess Zeros and Zero-inflated Estimation

Abstract: Conventional studies of bilateral trade patterns specify a log-normal gravity equation for empirical estimation. However, the log-normal gravity equation suffers from three problems: the bias created by the logarithmic transformation, the failure of the homoscedasticity assumption, and the way zero values are treated. These problems normally result in biased and inefficient estimates. Recently, the Poisson specification of the trade gravity model has received attention as an alternative to the log-normality assumption (Santos Silva and Tenreyro, 2006). However, the standard Poisson model is vulnerable for problems of overdispersion and excess zero flows. To overcome these problems, this paper considers modified Poisson fixed-effects estimations (negative binomial, zero-inflated). Extending the empirical model put forward by Santos Silva and Tenreyro (2006), we show how these techniques may provide viable alternatives to both the log-normal and standard Poisson specification of the gravity model of trade.

The Producer Service Sector in Italy: Long-term Growth and its Local Determinants

Abstract: This paper analyses the local determinants of producer service growth in Italy, focusing on agglomeration economies. From a methodological viewpoint, we address the critique on the Glaeser et al. (1992)-type employment growth regressions by deriving a reduced-form equation that incorporates variables affecting both local labour supply and local demand for the industry's output. At the same time, by implementing an error-correction approach, we improve on previous dynamic specifications that do not allow for short-term fluctuations along the steady-state growth path. It turns out that long-run employment growth is positively influenced by specialization, with a smaller role played by urbanization externalities. These results are in line with the empirical findings of recent analysis based on firm-level TFP (total factor productivity) estimates, thus providing them with a valuable cross-validation, considering that TFP measurement is far from being undisputed, especially in the service sector. Le s...

A Spatial Quantile Regression Hedonic Model of Agricultural Land Prices

Abstract: Land price studies typically employ hedonic analysis to identify the impact of land characteristics on price. Owing to the spatial fixity of land, however, the question of possible spatial dependence in agricultural land prices arises. The presence of spatial dependence in agricultural land prices can have serious consequences for the hedonic model analysis. Ignoring spatial autocorrelation can lead to biased estimates in land price hedonic models. We propose using a flexible quantile regression-based estimation of the spatial lag hedonic model allowing for varying effects of the characteristics and, more importantly, varying degrees of spatial autocorrelation. In applying this approach to a sample of agricultural land sales in Northern Ireland we find that the market effectively consists of two relatively separate segments. The larger of these two segments conforms to the conventional hedonic model with no spatial lag dependence, while the smaller, much thinner market segment exhibits considerab...

Growth and Convergence in Income Per Capita and Income Inequality in the Regions of the EU

Abstract: The neoclassical growth model predicts that there will be both a reduction of income per capita disparities over time and long-term convergence in income inequality levels. This paper examines whether this holds true for the EU using data from the European Community Household Panel for 102 regions over the period 1995–2000. The analysis is conducted using cross-sectional and panel data growth models with spatial interaction effects. The results reveal the presence of a conditional convergence in income per capita after controlling for educational attainment, unemployment, sectoral composition, spatially lagged growth of income per capita, and regional fixed effects, and that of an unconditional convergence in income inequality. Expansion et convergence dans les revenus par habitant et inegalite des revenus dans les regions de l'UE RESUME Le modele de croissance neoclassique prevoit que l'on assistera, a terme, a une reduction des disparites entre les revenus par habitant, ainsi qu’a une convergen...

Trade and Geography: Paul Krugman and the 2008 Nobel Prize for Economics

Abstract: The 2008 Nobel Prize for economics was awarded to Paul Krugman for three papers—Krugman (1979, 1980, 1991). In this paper we illustrate that, indeed, these three papers are closely connected. We present a summary of the papers using a unified framework. Central in the discussion is the so-called home market effect that was already alluded to in Krugman (1979). We evaluate his work and conclude that these three papers changed and improved the way in which economists think about trade and geography. Commerce et Geographie: Paul Krugman et le Prix Nobel 2008 en Economie Resume Dans la present communication, nous illustrons la facon dont ces trois communications sont en rapport etroit. Nous presentons un recapitulatif sur ces communications, en suivant un cadre unifie. Au cœur meme de ces discussions se trouve ce que l'on appelle l'effet du marche interieur, deja evoque dans Krugman (1979). Nous evaluons cet ouvrage, en concluant que ces communications ont change et optimise la facon dont les economi...

A Generalized Goals-Achievement Model in Data Envelopment Analysis: An Application to Efficiency Improvement in Local Government Finance in Japan

Abstract: Data envelopment analysis (DEA) has become an established benchmark tool in efficiency strategies in both the public and the private sectors. The aim of this paper is to present and apply a newly developed, emerging from a blend of a Distance Friction Minimization (DFM) and a Goals Achievements (GA), model in DEA. The above-mentioned DFM-GA model is illustrated empirically by using a data set of efficiency indicators for cities in Hokkaido prefecture in Japan. In summary, this paper presents a practical policy instrument that may contribute to efficient decision making of both public and private actors. Modele generalise de realisation des objectifs dans l'analyse par la methode d'enveloppe: application dans l'augmentation du rendement dans les finances des administrations regionales au Japon RESUME La methode d'enveloppe [data envelopment analysis (DEA)] est un etalon bien etabli pour les strategies d'efficacite tant dans le secteur public que dans le secteur prive. L'objectif de la presente com...

Spatial Nonstationarity and Spurious Regression: the Case with a Row-normalized Spatial Weights Matrix

Abstract: This paper investigates the spurious regression in the spatial setting where the regressant and regressors may be generated from possible nonstationary spatial autoregressive processes. Under the near unit root specification with a row-normalized spatial weights matrix, it is shown that the possible spurious regression phenomena in the spatial setting are relatively weaker than those in the nonstationary time series scenario. The regression estimates might or might not converge to 0. The divergence might occur only when the regressant has a near unit root much closer to unity than that of the regressor. For the t and F statistics, there could be over-rejection of the null of uncorrelatedness under certain situations, but they do not diverge. However, the coefficient of determination R 2 converges to 0, which provides strong evidence of the spurious regression even when t and F statistics are large. Simulation results about different statistics are in line with the theoretical results we derive in...

Centres and peripheries in Finland: Granger causality tests using panel data

Abstract: Despite their importance from a policy point of view, empirical studies on the effects of growth centres in their regions are rare. This paper analyses mutual relationships between growth processes in centres and their surrounding hinterlands in 19 Finnish regions. Annual population data from the period 1970–2004 are used. A novel testing procedure based on an extension of the Granger causality definition in a panel data context is applied. Heterogeneity between regions is allowed. Both the homogeneous non-causality hypothesis and the homogeneous causality hypothesis are rejected. Causal processes prove to be heterogeneous. Causality from centres to peripheries is found for nine regions and causality from peripheries to centres for twelve regions. Rapidly growing and large centres, in particular, have negative effects on their hinterlands. Centres et banlieues en Finlande: tests de causalite de Granger faisant usage de donnees de panel RESUME En depit de leur importance sur le plan de la politiqu...

Increasing Returns and the Growth of Industries in the EU Regions: Paradoxes and Conundrums

Abstract: Verdoorn's law is estimated in a spatial econometric framework for individual manufacturing industries using EU regional data. Estimates of encompassing returns to scale are large, but other explanatory variables, including measures of industrial specialization and diversity, tend to be insignificant. The method of normalization with either output or input growth as the regressor matters, and the use of an instrumental variable approach does not resolve this problem. As in other studies, the static-dynamic Verdoorn law paradox exists. A theoretical argument is made, however, that the dynamic Verdoorn law is the correct specification and this is confirmed empirically. Rendements croissants et croissance des industries dans les regions de l'UE: paradoxes et enigmes Resume La loi de Verdoorn est estimee dans un cadre conceptuel econometrique spatial pour les industries de fabrication individuelles en utilisant des donnees regionales de l'UE. Les estimations des rendements croissants a l’echelle, eng...

Spanish Internal Migration: Is there Anything New to Say?

Abstract: Spanish internal migration has long been resistant to traditional economic explanations. However, this paper examines the data for the period 1999–2006 after considerable changes in the Spanish economy. Moreover, it examines migration at the disaggregated level of Spanish provinces rather than regions, the usual unit of measurement. Using a spatial error model as well as a spatial autoregression model it finds the differentials in wages and unemployment between provinces to be significant explanatory variables. House prices are also important in accounting for the dynamics of internal migration. Les migrations internes en Espagne: qu'y a-t-il de nouveau? Les migrations internes en Espagne resistent, depuis toujours, a des explications economiques traditionnelles. Cependant, la presente communication examine les donnees relatives a la periode 1999–2006, dans le sillage des changements considerables qui sont survenus dans l’economie espagnole. Elle se penche egalement sur la migration au niveau des...

Bank Branch Location: a Count Analysis

Abstract: This study undertakes an analysis of the association between socio-economic variables and the spatial distribution of bank branches in South Africa. To analyse retail bank branch location, parametric Poisson, negative binomial, Poisson-hurdle, and finite-mixture count models that accommodate unobserved heterogeneity have been estimated with a data set of bank branches in municipalities in South Africa. The key finding is that aggregate income in a municipal area is a statistically significant determinant of the number of bank branches. The results also suggest that the four core banks tend to cluster their branches in the same areas—suggesting the possibility of oligopolistic collusion. A more recent entrant locates its urban branches slightly away from the cluster and in some areas where the core banks have no presence. In addition, several socio-economic variables, some of which are unique to South Africa, do not appear to affect branch location. Situation des filiales de banques: une analyse a...

Spatial Aspects of Contagion among Emerging Economies

Abstract: A spatial model is used to specify and then test for the existence of contagion among emerging market economies. We consider both trade and regional channels of contagion. Our results suggest that contagion is a statistically significant factor in foreign exchange markets and, furthermore, its effects are not uniform across the countries considered. Our results also suggest that trade links are significant channels of contagion transmission; on the other hand, geographic distances do not appear to be significant channels of contagion transmission. We also report results which indicate the extent of contagion. These results relate to effects which emanate from one country to another. Aspects spatiaux de la contagion parmi les economies emergentes Resume Nous faisons usage d'un modele spatial pour specifier, puis tester, l'existence d'une contagion parmi les economies des marches emergents. Nous nous penchons sur les vecteurs commercial et regional de cette contagion. Nos resultats indiquent d'une ...

Outsourcing vs FDI in Oligopoly Equilibrium

Abstract: We consider the make-or-buy decision of oligopolistic firms in an industry in which final good production requires specialized inputs. Factor price considerations dictate that firms acquire the intermediate abroad, by either producing it in a wholly owned subsidiary or outsourcing it to a supplier who must make a relationship-specific investment. Firms’ internationalization mode depends on cost and strategic considerations. Crucially, asymmetric equilibria emerge, with firms choosing different modes of internationalization, even when they are ex ante identical. With ex ante asymmetries, lower cost producers have a stronger incentive to vertically integrate (FDI), while higher cost firms are more likely to outsource. Externalisation contre FDI (Foreign Direct Investment) en equilibre oligopolistique Resume Cet article concerne la decision de fabriquer ou d'acheter des entreprises oligopolistiques dans une industrie dans laquelle la bonne production finale necessite des intrants specialises. Les co...

Maximum Likelihood Estimation of a General Unbalanced Spatial Random Effects Model: a Monte Carlo Study

Abstract: This paper discusses the maximum likelihood estimator of a general unbalanced spatial random effects model with normal disturbances, assuming that some observations are missing at random. Monte Carlo simulations show that the maximum likelihood estimator for unbalanced panels performs well and that missing observations affect mainly the root mean square error. As expected, these estimates are less efficient than those based on the unobserved balanced model, especially if the share of missing observations is large or spatial autocorrelation in the error terms is pronounced. Estimation de vraisemblance maximale d'un modele general d'effets aleatoires spatiaux desequilibre: une etude Monte Carlo RESUME La presente communication se penche sur l'estimateur du maximum de vraisemblance d'un modele general d'effets aleatoires spatiaux desequilibre avec des perturbations normales, en supposant l'absence aleatoire de certaines observations. Des simulations de Monte Carlo montrent que des groupes desequilib...

The Economic Impacts of a Terrorist Attack on the Downtown Los Angeles Financial District

Abstract: This paper summarizes a study on the economic impacts of a radiological bomb attack on a major office building in downtown Los Angeles financial district. A radiological bomb will generate effects within an extensive radiation plume that is divided into two zones with varying evacuation times: an Inner Zone with a 1-year evacuation and an Outer Zone with only a 1-month evacuation time. An up-to-date version of a Garin–Lowry-style regional input–output model called SCPM 2005 is employed to simulate household and firm relocation in three scenarios. The impact analysis focuses on business interruption effects only. Impact economique d'une attaque terroriste sur le quartier financier du centre de Los Angeles Resume Cet article concerne une etude sur l'impact economique d'une attaque par bombe radiologique sur un immeuble de bureaux dans le quartier financier du centre de Los Angeles. Une bombe radiologique engendre des effets au caeur d'un vaste panache radioactif, qui est divise en deux zones posseda...

The International Economic Order and Trade Architecture

Abstract: The world has lived through an accelerated globalization process over the last 15 years. Global trade relative to world GDP has grown from 39% in 1992 to 52% in 2005. At the same time, the share of world trade of OECD countries has gone down from 73% in 1992 to 64% in 2005. These shifts have led to changes in the structure of the world trade network and, in particular, how the role and influence of emerging markets on world trade have evolved. This paper is designed to elucidate some aspects of this changing trade architecture using network analysis. Ordre economique international et architecture commerciale Resume Au cours des 15 dernieres annees, le monde a traverse une periode de mondialisation acceleree. Le rapport entre le commerce mondial et le PNB du monde est passe de 39% en 1992 a 52% en 2005. Pendant la meme periode, la part du commerce mondial pour les pays de l'OCDE a baisse de 73% en 1992 a 64% en 2005. Ces variations ont engendre des variations dans la structure du commerce mondial,...

A Spatial Model of the Impact of Bankruptcy Law on Entrepreneurship

Abstract: This paper employs spatial econometrics techniques to estimate the impact of bankruptcy regulation on small firm formation. The estimation of the model is computationally challenging due to the joint appearance of a lagged endogenous variable and the unobserved heterogeneity which requires modelling of initial conditions as described in Heckman (1981). We test for the joint significance of the state dummy variables in a way that can be viewed as an interesting alternative to the Hausman procedure. This was important for our analysis since, as sometimes happens in finite samples, the estimated variance–covariance matrix was not positive semi-definite. We found that the predicted probability of starting a business is 25% higher in states with higher bankruptcy exemptions than their neighbours relative to states with lower exemptions than their neighbours. Un modele spatial de l'impact des lois sur la faillite sur la creation d'entreprises Resume La presente communication emploie des techniques d’ec...

Sectoral Productivity, Density and Agglomeration in the Wider Europe

Abstract: We then test this model using panel data for five sectors on regional-level data for 27 EU Member States. Our results for the aggregate economy confirm previous estimates. For our full sample of countries the sectoral-level results also indicate significant agglomeration effects. Considering differences in the extent of agglomeration effects between new and old EU Member States, however, leads to the conclusion that agglomeration effects tend to be stronger at both the aggregate and the sectoral level for new Member States. Productivite sectorielle, densite et agglomeration dans l'Europe elargie RESUME Nous testons ensuite ce modele en utilisant des donnees de panel pour cinq secteurs a l'echelon regional dans 27 etats membres de l'UE. Les resultats que nous obtenons pour l'economie dans son ensemble confirment les estimations precedent. Pour notre echantillon complet de pays, les resultats au niveau sectoriel font etat d'importants effets d'agglomeration. Si, toutefois, l'on tient compte des dif...

Onward the Spatial: an Essay on the Nature and Relevance of Regional Economics

Abstract: Regional economics appears to be losing its currency in academic discourse, with a clear preference over recent years for the term ‘spatial economics’. This essay examines the nature of the developments in order to explore their implications for regional economics, focusing on four key aspects: empirical methods and the ‘tools’ of regional economics; theory and the appropriate spatial scale; the ‘regional problem’; and regional policy. It finds reasons to suggest that the ‘region’ is of less importance, but argues that the use of the term ‘spatial’ does not reflect dissatisfaction with regional economics, but rather it signals the reinvigoration of the subject from its formal connection to mainstream economics. This is primarily in the form of the new economic geography model, although limitations with this have led to an unsatisfactory form of regional policy that is based on growth theory. Avance de l’economie spatiale: une communication sur la nature et la pertinence de l’economie regionale RE...

Returns to Scale and the Economic Impact of Migration: Some New Considerations

Abstract: This paper builds on an earlier paper by the author. It uses a simple model to analyse the economic impact of international migration on a large city. The paper assumes that immigration causes the population of the city to grow, thereby increasing the cost of living for existing residents. In one version of the model, the government responds by increasing public-sector wages so as to help offset the higher cost of living. The private sector follows suit. In another version, wages are determined by supply and demand. The paper investigates what happens to living standards, unemployment and the location of the native population under different assumptions about returns to scale. The mathematical analysis is supplemented by numerical simulations. Retours a l’echelle et l'impact de la migration sur l’economie: quelques considerations nouvelles RESUME La presente communication est basee sur un ouvrage precedent du meme auteur. Au moyen d'un simple modele, elle analyse l'impact economique des migration...