Regional variations in the price of building land: a spatial econometrics approach for West Germany

In this paper, we analyze the enormous variation in the price of building land across West German regions. We outline a theoretical model that ties a household’s willingness to pay for building land to the inter-temporal value of employment. Using data for NUTS 3 regions the theoretically derived impact of labor market variables and other influences is investigated. We show that spatial dependence through spatially lagged variables plays a crucial role. According to our findings, the variation in the price of building land can be explained reasonably well if one adequately takes into account the specific patterns of spatial interaction.     

The identification of functional regions: theory, methods, and applications

A functional region is characterised by a high frequency of intra-regional interaction. The text analyses how functional regions can be identified by using labour market data. Three approaches are applied in this task, named the local labour market, commuting zone, and accessibility approach, respectively. The text includes an application using the Fyrstad region. The situation is also studied at two points in time. The outcomes using the different approaches are compared, and the results combined have a richer flavour.

A land use model of the effects of eco-labeling in coffee markets

International non-profit organizations have started to implement eco-labeling for credence attributes programs aimed to inform consumers about environmentally sound or “sustainable” production standards for various products. Using coffee labeled as “shade grown” or “bird friendly” as an example, this paper describes the impact such labeling programs may have on local land use patterns in coffee producing regions. Shade grown coffee farms should provide a variety of external benefits, including the preservation of biodiversity, carbon sequestration, the prevention of soil erosion and aquifer recharge. Those externalities, however, are not expected to have observable land use impacts unless they are capitalized in the coffee market. The prospect of market capitalization of externalities suggests the extension of the conventional von Thünen model to the calculation of social location rent. Using the maximization of social location rent as a criterion allows the externality effect to play a direct role in market-based land use allocation of land between eco-labeled shade grown coffee production and other activities.     

Toll roads and economic development: exploring effects on property values

An increasing number of toll projects are being considered across the country, and questions are often raised about the impact of toll roads on the economy and economic development in the region. This paper examines the effects of toll roads in a major metro area. Toll roads in Dallas County, Texas, are examined for their impacts on property values, one indicator for economic development impacts. Particular emphasis is placed on the temporal and spatial nature of the impacts. The paper examines impacts of existing toll roads using residential transactions data spanning a period of 20 years and a combination of traditional and spatial econometric approaches.     

The geography of collaborative knowledge production in Europe

We analyse inter-regional research collaboration as measured by scientific publications and patents with multiple addresses, covering 1316 NUTS3 regions in 29 European countries. The estimates of gravity equations show the effects of geographical and institutional distance on research collaboration. We also find evidence for the existence of elite structures between excellence regions and between capital regions. The results suggest that current EU science policy to stimulate research collaboration is legitimate, but doubt the compatibility between EU science policy and EU cohesion policy.     

Regional economic instability: the role of industrial diversification and spatial spillovers

Within regional science there has been a long history of interest in the relationship between economic instability and regional diversification. Despite this interest there are many unresolved issues in the literature, and while regional economic theory suggests that greater diversity will make regional economies more stable, the evidence is far less convincing. In addition, very little is known about how other variables affect the level of instability experienced by regional economies. This paper intends to clarify some of these points, with developments in the field of spatial data analysis meaning that additional insights may be gathered using these techniques. The analysis uses data from the 125 Local Government Areas of Queensland, a state economy of Australia that consists of many types of regions, ranging from densely settled urban centres to sparsely settled rural regions.

An analysis of wage flexibility: evidence from the Spanish regions

The theory of Optimum Currency Areas poses that one of the most important costs that EMU may entail for countries belonging to it is the loss of some instruments of political economy (exchange rate and monetary policies) in response to shocks. The aim of this paper is to analyse real wage flexibility, which is one of the main alternative adjustment mechanisms to these policies. For this purpose, the case of the Spanish regions for the period 1985–1999 is reported. First, we develop a nonparametric approach to show that unemployment and productivity growth rates have reduced effects on wage evolution in the period of study. Second, semiparametric estimation techniques are applied to provide more econometric evidence regarding regional flexibility of real wages in Spain. Additionally, some suggestions are developed on the topic of EMU’s ability to improve the degree of regional wage flexibility. The general conclusion that we draw in the study is that regional wages are very rigid and the impact of EMU, though favourable, will be reduced.

Regional costs-of-living with congestion and amenity differences: an economic geography perspective

Standard models of the “new economic geography” predict that costs-of-living are low in the central and high in peripheral region, due to the fact that consumers in the periphery have to bear transportation cost for manufacturing varieties. In reality, however, only some goods are cheaper in economic centres, whereas the overall costs-of-living (including housing costs) tend to be higher. In this paper we use an analytically tractable economic geography model with an immobile housing stock, so that regional agglomeration drives up housing prices. We show that a core-periphery structure can endogenously emerge in which the core is the more expensive area in equilibrium. We also analyse the efficiency of spatial cost-of-living differences and augment the model to include an exogenous regional difference in the form of a consumption amenity.     

Agglomeration,job flows and unemployment

This paper examines how job flows and unemployment vary across regions in the context of a New Economic Geography (NEG) model with equilibrium employment. The in-migration that results from agglomeration economies leads to higher rates of both job creation and job destruction. In-migration also leads to lower rates of unemployment suggesting that the regional effects of job creation on unemployment dominate those of job destruction, a result consistent with empirical evidence. Since higher rates of job destruction correspond to higher productivity the results demonstrate that a NEG model can provide a microfoundation for labor market pooling.     

Is human capital accumulation a self-propelling process? Comparing educational attainment levels of movers and stayers

The paper aims at understanding changes in the distribution and accumulation of intellectual capital. It compares the educational profiles of in-migrants and non-migrants across a sample of 303 U.S. counties and tests a stock-flow model that poses that a well-educated population stock attracts a well-educated migrant flow. The results suggest that newcomers are better educated than the resident population, and the education gap is most pronounced for newcomers from other states. The results further suggest that the educational status of newcomers (“in-migrants”) is positively related to the educational status of the resident population (“stayers”), thus implying a further agglomeration of human capital across space. However, for interstate migrants the effect is context-dependent, playing a greater role in urban settings and diminishing in more rural settings.     

Sequencing and scheduling highway network expansion using a discrete network design model

The motive behind this paper is to produce an NDP model that prescribes the final shape of a transportation network and the sequence and schedule of facility construction during the planning span as well. The proposed bi-level NDP model fills the gap between existing NDP models and practitioners’ needs because, in practice, planners have to select investment projects on a year-by-year basis. Conversely, existing models suggest only the optimal network configuration for a planning horizon. A genetic algorithm and a simulated annealing algorithm are proposed along with an exhaustive search algorithm as solution algorithms. Testing these algorithms with an example problem revealed that the simulated annealing worked superiorly to the genetic algorithm. The paper also demonstrates that the model is applicable to a real world problem by showing that the computational time needed to solve the example problem is not prohibitively large.     

Where do foreign firms locate in transition countries? An empirical investigation

Firm-level data sets on foreign manufacturing plants in four Central and Eastern European Countries are used in this paper, to trace their location and estimate the determinants of their choice processes. A nested logit model as developed by McFadden (1974) is used in the analysis. A central focus of the analysis is foreign direct investment (FDI) which is a good indicator of where location of foreign investments is made. Several reasons explain the need for mapping the location of FDI. First of all, it facilitates understanding the real competitiveness of regions and countries in providing location advantages able to complement multi-national enterprises’ (MNE) specific advantages. Secondly, it directly shows the distribution of the benefits usually associated with FDI. Finally, an understanding of FDI location decisions is important for policy makers who believe that MNEs may offer a positive contribution to the economic development of disadvantaged areas and thus correct potential regional imbalances. The main results show that sector specific factors affect the choice of the final location. These unobserved characteristics influence both the determinants and the structure of MNEs location choice process. This paper has been written as a part of the Research Network on “The Impact of the European Integration and Enlargement on Regional Structural Change and Cohesion”, financed by the European Commission through the 5th Framework Programme. The authors are grateful to the other members of the Research Consortium and the participants at the international workshop “Modelling the Entrepreneurial and Innovative Space-Economy” organized by the Tinbergen Institute on 22–23 August 2005 for very helpful comments and suggestions provided on an earlier version of this work.     

On the measurement of comparative advantage

This paper shows that the standard measure of revealed comparative advantage (RCA), ranging from 0 to ∞, has problematic properties. Due to its multiplicative specification, it has a moving mean larger than its expected value of 1, while its distribution strongly depends on the number of countries and industries. These properties make its outcomes incomparable across time and place and its economic interpretation problematic. We propose an alternative measure, the additive RCA, ranging from −1 to +1, with a symmetric distribution that centers on a stable mean of zero, independent of the classifications used. Statistical tests show the distribution of the additive index to be more stable. Besides, we propose an aggregate RCA, a regional specialization index, ranging from 0 for pure intra-industry trade to 1 for pure inter-industry trade. The same conclusions and proposals hold for the multiplicative location quotient (LQ), which is used as a measure for the revealed locational attractiveness of certain regions or countries for certain types of industry.

The normalized revealed comparative advantage index

In this paper, we propose the normalized revealed comparative advantage (NRCA) index as an alternative measure of comparative advantage. The NRCA index is demonstrated capable of revealing the extent of comparative advantage that a country has in a commodity more precisely and consistently than other alternative RCA indices in the literature. As a result, the NRCA index is comparable across commodity, country, and time. Therefore, the NRCA index provides a useful tool for quantitative regional research, especially for studies on regional comparative advantage.     

Redispersion is different from dispersion: spatial economy of multiple industries

In the literature of new economic geography, it is observed that the manufacturing sector disperses because of high transportation costs, agglomerates for intermediate transportation costs, and redisperses for low transportation costs. This paper examines a model with multiple manufacturing industries and finds that the redispersion process is different from the dispersion process. More precisely, there is at most one industry that disperses in the redispersion process while all industries disperse in the dispersion process. Furthermore, it is shown that the interaction of demand, increasing returns, and transportation costs is enough to derive a separating equilibrium where at least two industries agglomerate in different regions.

Examining the location factors of R&D labor in the regions of Greece

In this paper two models are developed in an attempt to elucidate the factors that influence the regional distribution of R&D labor across the regions of Greece. The first one is based on an adaptation of the [Guerrero and Seró (1997) Regional Studies 31:381–390] model to the Greek context treating the regional distribution of R&D labor as a function of the extent of agglomeration and the prevailing economic conditions. The second model extends the first one by taking into account two additional factors, viz. the production structure and infrastructure. The econometric results indicate the superior performance of the extended model in the context of Greece as well as attribute the location of R&D labor mainly on the diversification of industrial activity and the number of establishments in innovation-intensive sectors. It is therefore suggested that the stimulation of the regional production structure and infrastructure is essential for ‘knowledge-lagging’ regions.

Locational disadvantage of the hub

We show how spatial evolution is different between the two representative models of economic geography: [Krugman 99:483–499, 1991] and [Ottaviano et al. 43:409–436, 2002]. We analyze the impacts of falling transport costs on the spatial distribution of economic activities and welfare for a network economy consisting of three regions located on a line. It is normally considered that a hub city, i.e., a central region, always has locational advantage and manufacturing workers gain from trade. This is true in the former model, but not in the latter when markets are opened up to trade. This is because the price competition is so keen in the central region that the manufacturing sector moves to the peripheral regions, which aggravates the social welfare. We then show that when goods are close substitutes and share of manufacturing is of an intermediate level, the manufacturing activities completely disappear from the central region leading to a full agglomeration in one peripheral region.

Emergent macrostructures of path-dependent location adoptions processes of firms

Agglomeration of firms in a regional context is a complex process that cannot be tamed easily using traditional economic models. Instead, in this paper, I conducted computer simulations to observe under the assumption of increasing returns how firms choose among competing locations to form regional agglomeration. By designing simple rules of firms’ spatial choice behavior, I observed through such simulations how firms moved across and within regions. The findings showed that firms tended to lock-in a particular region, that is, that region dominated all others in the firms’ movement, reminiscent of market domination of a technology among competing technologies. The emergent macrostructures were surprisingly orderly in that the distributions of sizes of spatial clusters in relation to frequencies followed a logarithmically linear form or a power law. Unpredictability, path dependence, and small events were present in the simulations and can be explained in the context of regional development. Useful insights as to how macrostructures of agglomeration emerge through microbehaviors of firms can be gained through the simulations.

Market access and regional disparities

New economic geography (NEG) has reached a theoretical consolidation while related empirical tests are still scarce. The present paper aims at providing some evidence on the validity of forces emphasized by NEG. The analysis starts from the nominal wage equation derived from the Krugman “core–periphery model” and focuses on one of the main propositions of NEG that access advantages raise factor prices. The paper investigates the significance of market access for regional wages and the geographic extent of demand linkages for a cross section of European regions, also taking into account the effects of national borders. The regression analysis covers the period between 1985 and 2000. The results are consistent with the implication of NEG that demand linkages affect the geographic distribution of economic activities, confirming the basic findings of previous analyses. However, regarding the spatial extent of demand linkages, our results differ significantly from previous findings that point to highly localised effects.

Growth and change in U.S. micropolitan areas

The U.S. Census Bureau has now recognized micropolitan places, which are sometimes called emerging metropolitan areas or mini-metros. After the 1990 census, a total of 581 different non-metropolitan counties, forming 496 consolidated micropolitan areas, were assigned to this new settlement category. The first half of the paper analyzes the evolving geographic distribution and the shifting employment attributes (emphasizing job specialization) of these places during 1980–2000. Changes in the U.S. micropolitan landscape, reflecting the impressive growth of these places during the late 20th century, mirror other well-known national demographic and economic trends. The second half of the paper analyzes simultaneous population and employment change in micropolitan counties, using a series of partial adjustment models that control for various demographic, economic, and geographic factors. Evidently (initial and adjusted) population levels have induced both employment and population change in these places, but employment levels have failed to have the same impact.