Spatial markets and the potential for economic integration between Canadian and U.S. regions

The potential for further economic integration among Canadian and American regions is measured by comparing province-to-state trade with state-to-state trade, where the latter is used as a benchmark of integration. To accomplish this, an attraction constrained gravity model is derived from micro foundations and estimated. The analysis demonstrates that after controlling for variations in output, distance, wages, productivity, and localization economies, the border remains a significant barrier to trade, although much less than previous estimates of the border effect using internal Canadian trade as a benchmark. The model's results also indicate that the border's influence varies across sectors, and the influence appears to be, in part, related to the presence of tariff and non-tariff barriers. Received: 1 February 1999 / Accepted: 8 August 2000     

Pan-European regional income growth and club-convergence

Club-convergence analysis provides a more realistic and detailed picture about regional income growth than traditional convergence analysis. This paper presents a spatial econometric framework for club-convergence testing that relates the concept of club-convergence to the notion of spatial heterogeneity. The study provides evidence for the club-convergence hypothesis in cross-regional growth dynamics from a pan-European perspective. The conclusions are threefold. First, we reject the standard Barro-style regression model which underlies most empirical work on regional income convergence in favour of a two regime [club] alternative in which different regional economies obey different linear regressions when grouped by means of Getis and Ord’s local clustering technique. Second, the results point to a heterogeneous pattern in the pan-European convergence process. Heterogeneity appears in both the convergence rate and the steady-state level. But, third, the study also reveals that spatial error dependence introduces an important bias in our perception of the club-convergence and shows that neglect of this bias would give rise to misleading conclusions.     

The paradox of unequal regional investment and equal regional economic growth in China

China's policy on Special Economic Zones has attracted increasing flows of direct foreign investment to China. The investment has been very unequally distributed among China's 30 regions.  The article focuses on the regional economic growth as a result of the direct foreign investment in the region and its spillover effects on neighboring regions. The unequal distribution of direct foreign investment should in principle tend to enlarge the regional economic differences. The article, however, shows that this is not the result of the investment.  The empirical findings highlight the impact of direct foreign investment on the Chinese regional economies in transition. Received: November 2000/Accepted: August 2001     

Beyond neoclassical orthodoxy: A view based on the new economic geography and UK regional wage data

Abstract.  The article examines the performance of two competing non-nested models of regional wage variations in Great Britain, one motivated by the Solow-Swann neoclassical growth model which assumes constant returns to scale, the other by new economic geography theory, which assumes internal and external increasing returns. Both models also include controls for labour efficiency variations across regions. The empirical analysis, which is based on the bootstrap J test, shows that the neoclassical model does not reject the new economic geography specification, but the converse is not true and the model with a basis in new economic geography has significantly superior explanatory power. This adds support to the notion that in order to correctly understand differential regional economic development, we should move beyond neoclassical orthodoxy and that an increasing returns stance is more appropriate. However, the article also highlights some limitations of new economic geography theory.     

R&;D accessibility and regional export diversity

This paper examines the influences of accessibility to R&D on the export diversity in Swedish regions. A theoretical model with fixed R&D cost predicts that spatial knowledge spillovers generate external economies of scale in R&D activities. These external effects are presumed to increase regions’ innovative capacity. Moreover, the model implies that the effects of R&D on regional export performance are reflected by the size of the export base rather than by the export volumes. The empirical analysis focuses on three different indicators of export diversity: the number of exported goods, the number of exporting firms and the number of export destinations. The hypothesis that regional accessibility to R&D facilities in the private business sector, on the one hand, and university research departments on the other hand, increases the export diversity in regions is tested in a spatial cross-regressive model. Since knowledge cannot be regarded as a spatially trapped resource the empirical analysis includes two measures of R&D accessibility: intra-regional and inter-regional. The empirical results indicate that the three indicators of regional export diversity are positively affected by the intra-regional accessibility to company R&D in commodity groups that have a relatively high R&D-intensity in production. Inter-regional accessibility to company R&D has significant positive impacts on the number of export goods and the number of export destinations also in less R&D-intensive industries. In the case of university R&D, the empirical results are weaker, in particular in the case of intra-regional accessibility. Yet, the inter-regional accessibility to university R&D has a significant positive impact on the number of export goods and the number of export destinations in the majority of commodity groups.     

Multinationals and regional indigenous development

We investigate in how far foreign multinationals have fostered regional indigenous development in Ireland. Specifically, we examine whether foreign presence has induced indigenous plant entry within the same regions and in bordering regions. To this end we employ an entry rate model on an exhaustive panel level data set for Irish manufacturing plants. Our results show that multinationals can foster local development both within and in surrounding regions, although the extent of these effects varies between policy preferential and non-preferential regions.Received: December 2002/Accepted: January 2004This research has benefited from financial support through the RTN research project Specialization versus diversification: the microeconomics of regional development and the spatial propagation of macroeconomic shocks in Europe of the European Commission (grant No. HPRN-CT-2000-00072). We would like to thank Rosella Nicolini for helpful comments. The second author gratefully acknowledges financial support from the Belgian FNRS and the third author acknowledges support from a Marie Curie grant. Usual disclaimers apply.     

The role of universities in regional development Endogenous human capital and growth in a two-region model

This paper proposes a dynamic two-region model with human capital accumulation. This economic system is assumed to produce two commodities – one in each region. The only university in the economy which carries out higher education (=teaching) is located in region 1. The model describes the dynamic interdependence between human capital accumulation, regional division of labour, the spatial price structure under perfect economic competition, and the government intervention in higher education. Thus the analysis examines how differences in human capital improvements and environmental conditions between the two regions affect the economic geography. Received: October 1998/Accepted: April 2000     

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.

Accounting for migration in regional occupational employment projections

Occupational employment projections are one of the primary products produced by state labor market information agencies to assist with state and regional job training and worker assistance programs. In theory, the information from occupational employment forecasts should improve both interregional and intertemporal labor market efficiency through better matching between training efforts and job openings. Until recently, the projections methodology was predominantly a demand-requirements approach that failed to incorporate important labor supply effects and interstate/interregional dependencies. Recent research has focused on improving the labor supply specification. This paper reports on one such effort to evaluate the importance of interstate occupational migration and to develop methods to incorporate migration into the existing projections methodology. Initial results indicate that the total number of estimated job openings by occupation have to be revised significantly upwards when migration is taken into account.     

Employment,income, migration and public services: A simultaneous spatial panel data model of regional growth*

We estimate a regional spatial panel simultaneous‐equations growth model, using a five‐step new estimation strategy that generalizes an approach outlined in Kelejian and Prucha. The study region consists of the 418 Appalachian counties 1980?2000. Estimates show feedback simultaneities among the endogenous variables, conditional convergence with respect to the respective endogenous variables, and spatial autoregressive lag and spatial cross‐regressive lag effects with respect to the endogenous variables. A key policy conclusion is that sector‐specific programs should be integrated and harmonized and that regionally differentiated development policies may yield greater returns than treating all locations the same. Estimamos un modelo de crecimiento de panel espacial regional por ecuaciones simultaneas, utilizando una nueva estrategia de estimación de cinco pasos que generaliza una enfoque descrito en Kelejian y Prucha. La región de estudio comprende los 418 condados Apalaches 1980‐2000. Las estimaciones muestran simultaneidades de retroalimentación entre las variables endógenas, convergencia condicional con respecto a las variables endógenas respectivas, y un retardo espacial autorregresivo y efectos de retardo regresivos cruzados espaciales con respecto a las variables endógenas. Una conclusión clave sobre políticas es que los programas sectoriales específicos deberían estar integrados y armonizados, y que las políticas de desarrollo diferenciadas regionalmente podrían producir mejores retornos que si se tratasen todas las localizaciones del mismo modo.      

The effects of trade openness on regional inequality in Mexico

This paper attempts to shed light on the debate about the effect of trade openness on regional inequality, by exploring the specific mechanisms through which this relationship might operate. It does so by testing the hypothesis, based on endogenous growth theory, that a region’s ability to capture the benefits of trade openness depends on key regional characteristics—its critical endowments—and therefore the degree to which trade will reduce regional inequality in a given country is mediated by the geographic distribution of its endowments. I test the hypothesis in Mexico, using statistical analysis of an original sub-national dataset that runs from 1940 to the present. The results indicate that opening up to trade benefits more those regions with lower levels of education, thereby tending to reduce regional inequality. However, opening up to trade also benefits more those regions with higher levels of income and infrastructure, thereby tending to increase regional inequality. This latter effect is greater than the former, so that the overall effect of trade openness is to increase regional inequality.     

The impact of convergence in the industrial mix on regional comparative growth: Empirical evidence from the French case

The aim of this article is to explain heterogeneities in French regional labor productivities since the mid-seventies at both aggregate and sectoral level. This paper extends the works of Baumol and of Barro and Salai-Martin, firstly by pointing out sources of growth linked to the new growth theories (research effort, size effects) and secondly by emphasizing the impact of cross-sectoral labor reallocations through a shift-share analysis. Our results show the importance of regional asymmetries and the key role played by the dynamic of sectoral composition in the convergence of labor productivities within France.Received: November 2000/Accepted: February 2004     

The regional distribution of Spanish unemployment: A spatial analysis

In this article we propose a set of tools for analysing the regional distribution of unemployment. As we are interested in the characteristics of the distribution as a whole, results from a traditional regression analysis are complemented with those obtained by estimating its external shape before and after being conditioned to factors underlying regional unemployment. In addition, we specifically consider the spatial characteristics of the distribution, and the empirical model we develop to determine explanatory factors includes spatial effects. This framework is applied to the study of the provincial distribution of unemployment rates in Spain. Results point to increasing spatial dependence in the distribution of regional unemployment rates, and a change in the factors causing regional differentials over the last decade.     

Infrastructure and regional growth,growth dynamics and policy relevance for India

The role of infrastructure in economic growth has been the subject of considerable research in the fields of public policy, economics, and planning. In this paper, I examine the contribution of publicly supplied infrastructure to sub national regional growth in India. I first develop and numerically examine a regionally disaggregated model of economic growth to understand the dynamics of private capital and public infrastructure. For the empirical analysis, I use a pooled data set for Indian states to examine if publicly supplied infrastructure is a significant determinant of regional growth and whether there are spatial variations in the productivity effects of infrastructure. The main findings are that transport and communications infrastructure expenditures are significant determinants of regional growth, and the positive benefits accruing from these expenditures come not only from investments made by individual states, but there are positive externalities from network expenditures made by neighboring states. Finally, the out of sample simulated regional growth predictions show divergence in private capital formation between lagging and leading states. The findings, interpretations, and conclusions are entirely those of the authors, and do not necessarily represent the views of the World Bank, its executive directors, or the countries they represent.     

Impacts of regional development strategies on growth and equity of Korea: A multiregional CGE model

This paper is concerned with the assessment of major regional development strategies such as the three Coastal area development strategies (East Coast Development, South Coast Development, and West Coast Development) and the Seoul-Pusan development corridor strategy in terms of efficiency and equity. Multiregional Computable General Equilibrium for Korea is developed to capture the economic impact of regional investment expenditures, estimating the time-series influences of regional development alternatives on economic growth, inflation, welfare, income distribution, and interregional economic inequality for ten periods. In a sense that the main point of concern in the national development planning of Korea is with the question of improvement of national competitiveness with more equitable interregional income distribution, it is necessary to promote the West Coast region rather than the Seoul-Pusan development corridor. The West Coast regional development can lead to substantial gain in GDP and reduction in regional income disparity. In a multinational economic perspective, this regional development is expected to contribute to the economic cooperation of Northeast Asia and to enhancing the joint comparative advantages between China and Korea. However, it might worsen the income inequality in the long run. Received: September 1999/Accepted: September 2001     

σ-convergence in the presence of spatial effects

Abstract.  This paper explores the implications that spatial effects can hold for the application of measures of σ -convergence. The bias of a common indicator of σ -convergence is examined for a family of spatial process models including: [a] spatial lag, [b] spatial error, and [c] spatial moving average. We show that the measure of σ -convergence is sensitive to a number of distinct influences including global dispersion, spatial dependence, and a variety of forms of spatial heterogeneity. We suggest a decomposition of the convergence indicator into two components: one reflecting global dispersion, and one reflecting the influence of spatial effects. We then illustrate this approach with a case study of the U.S. states over the 1929–2000 period.     

The agglomeration of U.S.-owned and foreign-owned plants across the U.S. States

Agglomeration in U.S. manufacturing is more common than initially thought. This clustering arises from location natural advantages and spillovers. Extant studies on agglomeration do not distinguish the activities of U.S.-owned plants from those that are foreign owned. This distinction is crucial since policies seem to have differential impacts on both types of plants. I find that industry scale, resource intensity and urbanization economies have larger impacts on foreign plant agglomeration whereas knowledge intensity has a larger effect on domestic plant agglomeration. Received: September 2001/Accepted: April 2002 I would like to thank the UNO University Committee on Research for support of this project and Ke Yang for invaluable research assistance. The paper has benefited from the comments made by an anonymous referee. The usual caveats apply.     

Marshallian theory of regional agglomeration

Most models of regional agglomeration are based on the new economic geography (NEG) model in which returns to scale are pecuniary. We investigate the implications for regional agglomeration of a 'Marshallian' model in which returns to scale derive from technological externalities. Workers are assumed to have heterogeneous 'home region' preferences. The model is designed to explain how 'second nature' determines regional wage inequality and the regional distribution of economic activity. We show that agglomeration is not a necessary outcome of Marshallian externalities. However, if centrifugal or positive externalities are sufficiently strong relative to their centripetal or negative counterparts, the model generates multiple agglomerating equilibria. These equilibria multiply if, in addition, there are scale economies in amenities. A dynamic version of the model is developed in which external economies and inter-regional labour mobility grow over time. Regional wage inequality overshoots its long run equilibrium and, there is more agglomeration in the long run.     

From physical to general spaces: A spatial econometric analysis of cross-country economic growth and institutions

In this paper I extend the use of space as the organizing framework from the physical space to a socio-economic one and, based on an established institutional space, I conduct a cross-country analysis of institutions and economic performance from a spatial econometric perspective. While my results corroborate previous findings on the institutional dimensions of economic development, I am able to provide precise insights as to the spatial dimensions of national per capita GDP growth rates as well as new evidence on the role of spatial effects in the formal econometric analysis of cross-country growth performance. This paper is important in that it represents the first detailed evidence in the two aspects aforementioned. I would like to thank Arthur Getis for his invaluable help throughout my research period. I would also like to thank Tschangho John Kim and anonymous referees for their very constructive critiques and valuable comments on earlier drafts of this article. I do, however, retain responsibility for any remaining errors and misrepresentations. This research is financially supported by the National Natural Science Foundation of China. Received: December 2003/Accepted: April 2004