Spillovers and growth in a local interaction model

This theoretical model investigates the extent of the effects of local technological spillovers on growth. We add to a growth model with vertical quality ladder innovations the assumption that firms are exogenously located around a circle and technological spillovers affecting R&D efficacy occur between neighbors. As a result, the presence of local spillovers makes it optimal for a firm to innovate intensively only if the neighbors do so. However, they do not produce clear effects on either growth or welfare. On one hand positive spillovers improve the quality of local goods—hence growth—but, on the other, a high level of positive spillovers generate discrepancies across intermediate sectors which reduce the level of household welfare. We are grateful to J. Caballé, D. Fridman, K. Kletzer, the participants to EUNIP Conference in Porto as well as XXVIII Simposio de Análisis Económico, and the editor R. Stough for useful suggestions. R. Nicolini research is supported by a Ramón y Cajalcontract and research grants 2005SGR00470 and SEJ2005-01427/ECON.     

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 national and regional effects of fiscal decentralisation in China

Fiscal decentralisation has been an important part of the restructuring of China’s economy over the past three decades. Yet, there has been only limited analysis of the way in which decentralisation in China might affect variables such as welfare, output and income at the aggregate level and none at the regional level. This paper makes a start at filling this gap by analysing the aggregate and regional effects of various policies which aim to change the balance between fiscal activities of the national and regional governments. For this, we use a small theoretical model designed to capture some of the features of the Chinese economy, and we solve it numerically using a parameterisation based on Chinese data. We analyse the effects of four different shocks; all of them involve a transfer of resources to the regional governments financed by a cut in central government expenditure, but they differ in the way in which regional governments use the additional funds: (1) they adjust expenditure on the consumption good, (2) they adjust infrastructure expenditure, (3) they maximise the size of their own budget, and (4) they maximise the welfare of the representative citizen. We find that the aggregate economic effects of decentralisation depend on the precise nature of the policy and that aggregate benefits may often mask a deterioration in the inter-regional distribution of those benefits.     

Welfare effects of regional income taxes Results of an interregional CGE analysis for Germany

 This paper deals with the question, whether in a federal state the regions should obtain the right to levy regional income taxes. It is shown that a revenue sharing system influences the optimal income tax rates and causes distortions. In a federal system with other distorting taxes, several states and a revenue sharing system the welfare effects of regional income taxes can be positive or negative due to second best problems. Therefore the welfare effects of regional income taxes are computed by means of an interregional computable general equilibrium analysis (CGE). The results suggest that in the German federal economy the sign of the welfare effects of the introduction of regional income taxes is very sensitive to the particular institutional arrangements. Received: February 1996 / Accepted in revised form: April 1997     

Interregional transfers: A political-economy CGE approach

We model the effects of changes in a federal governments inter-regional transfers within the context of a CGE model of a federal system in which regional governments act to maximise the welfare of the residents of their region subject to the effects of their decision on regional economic outcomes. Regional governments are modelled as players in a non-cooperative game. Simulations are conducted with six versions of a small two-region model, each calibrated for a particular Australian state and the rest of the nation. We show that a change in the level of transfers has little influence on per-capita private consumption, government consumption and welfare, and that its main effect is to induce migration from the donor region to the recipient region.Received: 27 June 2001, Accepted: 20 December 2002, JEL Classification: C72, D58, H73, R13, R23The research reported in this article was supported by a SPIRT Grant from the Australian Research Council. We are indebted to Peter Dixon, James Giesecke, Sang-Hee Han, Peter McGregor, Alex Scherini, two anonymous referees, and the Pacific editor for their valuable comments and suggestions. The usual disclaimer applies.     

Regional policy from a supra-regional perspective

The issue of the interplay between the two objectives of equity and efficiency for national policy-makers in charge of regional policy is becoming topical once again in regional economics. This paper first reviews this issue theoretically and looks at recent literature contributions to show that, although many advances have been made, little attention has been paid to the effects of regional structural differences on the trade-off between the two objectives. Then, to demonstrate that differences between the regions of which a country is composed may influence the results of the models, a new simple short-run two-country four-region model is introduced to study the trade-off (differentiating for different regional productivity and different strengths of agglomeration economies—which are innovatively modelled on the demand side). In this short-term model, the national policy-maker can affect entrepreneurship through the set-up costs of firms. Similarly to the traditional literature, for countries composed of identical regions, spatially dispersed allocations of public support to production are more efficient with low agglomeration economies whereas spatially concentrated allocations are more efficient with high agglomeration economies. As the regions become different, however, unbalanced allocations of public support to the most advanced region become more efficient even in the case of relatively weak agglomeration economies, until, when regions are sufficiently different, the most efficient allocation of public support to production is always concentrated in the most advanced territories. If some sort of compensating mechanisms were available, in the short-run the policy-makers could decide to support the competitiveness of the already more-productive regions and transfer income to the lagging ones. All these issues are studied with reference to southern Italy (“Mezzogiorno”) and eastern Germany (former DDR) in order to show not only the similarities with the model’s predictions but also the many differences, resulting from the far greater complexity of actual development processes. Discussions and comments from an anonymous referee, Marco Alderighi, Roberto Camagni, Roberta Capello and Andrés Rodríguez-Pose are gratefully acknowledged.     

Welfare benefits in highly decentralized fiscal systems: Evidence on interregional mimicking

This paper analyses the determinants of welfare benefit levels within a highly fiscally decentralized context. More specifically, we analyse the role of mimicking as a driver of the institutional design of subnational government policies in the absence of federal co-ordination and financing. Empirically, we focus on the welfare benefit programmes of Spanish regional governments during the period 1996–2015. Our results strongly support the significant role played by mimicking: regional public agents observe what their peers are doing and act accordingly, and this holds even in a context of low mobility of households.     

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     

The efficiency of Swedish regional policy

In this paper, I evaluate the efficiency of Swedish regional policy. I analyze the government’s regional policy goals and means as presented in Government Bills 1997/1998:62 and 2001/2002:4. In the light of the literature on where growth occurs as well as the results of the regional policy so far, the realism of the government’s goal of “sustainable economic growth in the whole country” could be questioned. Subsidies to companies in problematic regions have uncertain or even negative effects. The government could therefore eliminate these subsidies and replace them with venture capital loans. It could also stop its subsidies to municipal housing companies for shutting down apartments. The positive effects of the government’s tax and subsidy system for the municipalities, motivated by its distribution goal, come at the price of negative effects on incentives for a high national rate of growth. The government could replace this system with extended general subsidies. Investments in transportation projects that do not show a net benefit, such as the large Bothnia Railway in northern Sweden should be reconsidered. However, I find significant and systematic evidence that the government’s investments in regional colleges, particularly in research, have been successful.     

An argument for metropolitan government in Australia

The federal government of Australia seeks to determine the selection and forms of financing of infrastructure projects in cities, and to prescribe how cities are planned and managed. This role is rationalised through reference to the UK City Deals model and is made possible by vertical fiscal imbalance (the tax revenue it raises considerably exceeds its expenditure responsibilities). Referring to the Constitution, this role is assigned to state governments that are responsible for planning, infrastructure investment and service delivery in the cities. The cities themselves comprise multiple local governments that are ‘creatures’ of state government legislation. State government metropolitan strategic plans and projects inevitably serve the interests of the constituencies needed to win the next state elections. There is no recognition of a metropolitan constituency. Documenting the economic and social disadvantages arising from Australia's form of metropolitan governance, and providing an example for expensive infrastructure mishaps arising from federal and state governments prioritising different transport modes and projects, the paper argues for the creation of representative, accountable and fiscally autonomous metropolitan governments.     

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     

Testing for fiscal competition among French municipalities: Granger causality evidence in a dynamic panel data model

The purpose of this article is to produce further empirical insights into fiscal competition among local governments within an original framework. Relying on Granger's methodology, we address the question of possible causality at municipal level, between local budget variables (public expenditure and taxes) and residential location patterns. Tests are performed on a sample of 27 French municipalities belonging to the same suburban area for the 1987–1996 period. We identify two different strategies. Some localities compete in the tax rate variable while others act on public expenditure. If we consider public investment spending and taxes results strongly reject the adaptive hypothesis and clearly support the idea of fiscal competition. If we retain operating expenditure results indicate that both behaviors are accepted. Received: 31 August 2000 / Accepted: 11 May 2002 RID="*" ID="*" I would like to thank Jean-Sébastien Pentecote for his Wingauss assistance as well as three anonymous referees for their helpful comments.     

The economic effects of local authority mergers: empirical evidence for German city regions

Cooperation of neighbouring local authorities in the provision of regional public goods can be efficiency enhancing due to economies of scale, a better realisation of fiscal equivalence or dynamic efficiency gains. While the need for such cooperation between local authorities is undisputed, there are different positions concerning the form the cooperation should take. Some argue that local authority mergers are the most efficient and democratic strategy. Others argue that functional cooperation is more appropriate and that mergers reduce the welfare enhancing effects of competition between local authorities. Based on the conditions in Germany that can be interpreted as a natural experiment it is shown in a cross-section analysis that local authority mergers in monocentric city regions have indeed significant economic effects. All else equal the financial situation of city regions where the core and the hinterland are separate administrative districts is worse than in single district regions. Radical mergers of core cities and suburban towns in the 60s and 70s led to higher economic growth in the period 1980–1998.     

The use of activity-based modeling to analyze the effect of land-use policies on travel behavior

This paper suggests that in order to analyze the effect of land-use policies on travel behavior an integrated framework that extend travel activity-based models to include various land-use issues such as residential location and work place should be developed and use. The importance of analyzing various land-use policies on travel behavior is continuously increasing as various policies such as transit-oriented developments, mixed land-use, different concentrations schemes, and more broadly Smart Growth, are often suggested as a means to mitigate transportation problems. Given our limited understanding of the effects of the various land-use polices on travel behavior it is imported to develop better approaches to analyze such policies. Activity-based models, that treat travel as a derivation of the demand for personal activities, provides an opportunity to better understand travel behavior as the explicit modeling of activities and the consequent tours and trips enable a more credible analysis of responses to policies and their effect on traffic and air quality. The theoretical framework of activity-based models starts with urban and land-use development as inputs; however, there is a need to translate this framework to analyze specific land-use policies. This paper discusses the advantages and potential of activity-based models for analyzing the effect of land-use policies on travel behavior. It suggests improvements that will extend the general framework to achieve a better understanding of travelers’ responses to various land-use policies and shows its advantages over tip-based models, which simply do not have such capabilities. The improved activity-based approach is illustrated through a case study based on the Portland activity-based model combined with a stated-preference residential choice model. A package of land-use policies— including improved land-use, school quality, safety, and transit service in the city center—is introduced, and its effect on household redistribution and regional travel is tested using this integrated framework. The results of this case study show that the effects of the land-use policies introduced had only marginal effects on regional travel.     

County-level determinants of local public services in Appalachia: a multivariate spatial autoregressive model approach

We develop a multivariate spatial autoregressive model of local public expenditure determination based on the maximization of a strictly quasi-concave community utility function. The existence of spatial interdependence is tested for both the spatial error and spatial lag model. The full model is estimated by efficient GMM following Kelejian and Prucha (J Real Estate Finan Econ 17(1):99?C121, 1998). The results indicate significant spillover effects among local governments with respect to spending on public services. The OLS estimates of the conventional (non-spatial) model and the corresponding maximum likelihood estimates of the spatial lag and the spatial error models are presented for comparison purposes. The GMM estimates are found to be more efficient.     

Impacts of the development of large cities on economic growth and income distribution in Korea: A multiregional CGE model

A multiregional Computable General Equilibrium (CGE) model of Korea is used to assess urban development strategy in terms of national economic growth and income distribution. We find that the dispersion of total investment expenditure to six large cities would be the best policy if the emphasis of national development were to be placed on economic growth, together with a reduction in regional income disparity. Conversely, a heavy concentration of investment expenditure in Seoul and Pusan would lead to an amelioration of inequality in the distribution of personal income, but it would be difficult to implement due to hostility towards a primarily city-oriented value system. Received: 6 September 1999 / Accepted: 10 January 2002 RID="*" ID="*" An earlier version of this article was presented at the 16th Pacific Regional Science Conference held in Seoul, Korea, July 12–16, 1999.     

A forecasting territorial model of regional growth: the MASST model

The profound and unique institutional and economic processes which characterise the historic period Europe is facing and will face call for appropriate methodologies to forecast the impact of these processes on Europe and its territory. Few regional econometric models as the basis of forecasting exercises have been developed, either replicating national macroeconomic models, or through complex systems of equations for each region that are linked to both the national aggregate economy and to the other regional economies through input—output technical coefficients that determine intra- and inter-regional trade and output. This paper presents a new regional forecasting model, labelled MASST (macroeconomic, sectoral, social and territorial), built on a modern conceptualization of regional growth. In MASST, regional growth is conceived as a competitive, endogenous and cumulative process in which social and a spatial elements play an important role: local resource endowments and increasing returns in the form of agglomeration economies and spatial growth spillovers perform an important role in the explanation of regional growth differentials. MASST is generative in nature, since local factors matter, but it is also a model that considers a second family of development factors, these being macroeconomic and national. This structure of the model gives rise to the possibility of producing an efficient interactive national—regional approach, combining top-down and bottom-up approaches.     

重庆瑞达城市规划设计有限公司招聘启事美国"特别区"政府之经验与启示研究——兼论中国设置跨界功能区的基本思路

美国是一个以大都市区为主的地方政府多元化、复杂化的国家,但在其无序化的背后保持着区域治理的有序化和有效性。通过研究美国特区政府的运作模式发现,其跨界治理具有明显的有效性,具体而言,特别区能够提供区域性、专业化、多元化的公共服务,这是其生存与发展的核心价值;特别区具有独立的政府特权,为独立自主地运转提供了强有力的政治保障;特别区是美国协调地方政府横向关系的常规化制度安排。这些对我国大都市区的跨界治理具有一定的借鉴价值。本文提出我国在行政区划不做大调整的前提下应尝试"跨界功能区"的实践探索,尤其是在长三角、京津唐等成熟区域率先设立跨界"特别规划区"的跨界治理新单元。     

Crowd out or crowd in?: The effects of common interest developments on political participation in California

Individuals are increasingly opting to contract directly with “private governments,” or common interest developments (CIDs) such as condominiums, cooperatives, and planned developments, for many of the traditional functions of general-purpose local government. Over the past thirty years, CIDs have proliferated throughout the U.S. In 1962, there were fewer than 500 such organizations nationally while today there are an estimated 205,000 CIDs including over 42 million Americans. According to several scholars, the past thirty years have also witnessed declines in civic engagement or “social capital.” This paper investigates links between these trends. In particular, it analyzes the effects of planned developments (PDs) in California on voting behavior in statewide general elections during the 1990s. Results indicate that areas with PDs do not exhibit significantly different voter turnout, registration, and party affiliation once potential selection bias is taken into account. These findings undermine the popular view that private governments crowd out participation in traditional public government. I acknowledge financial support from the National Institute on Aging as well as the Institute for Business and Economic Research and the Institute of Governmental Studies at UC Berkeley. I am grateful to John Quigley, Steven Raphael, Eugene Smolensky, Alan Auerbach, and seminar participants at UC Berkeley for valuable comments. All remaining errors are my own.     

Leisure,amenity, and capital accumulation in a multi-region model

This paper proposes a multi-region growth model with endogenous labor supply, endogenous amenity, and capital accumulation. Although the production side is the same as in the neoclassical growth theory, in order to solve issues related to regional migration with capital accumulation we propose an alternative approach to consumer decisions about time distribution between work and leisure, housing consumption and saving. We show that the dynamics of the J-region national economy can be described by J-dimensional differential equations. We simulate the long-term economic structure of the national economy with three regions. It is demonstrated that with the Cobb–Douglas production functions and specified values of the parameters, the national dynamics has a unique equilibrium. We also carry out comparative statics analysis with regard to productivity levels, amenity parameters, propensity to save, and the population.