Trade openness and regional income spillovers in Brazil: A spatial econometric approach*

This paper employs a spatial Durbin growth model to estimate the impact of trade openness on regional per capita income in Brazil using a data set of 469 Brazilian micro‐regions over the period 2004–2007. We calculate the direct, indirect and cumulative impact on per capita income of trade openness and human capital in these micro‐regions. Results indicate that greater trade openness in a region promotes economic development locally, while exerting negative influence on per capita income of the neighbouring regions. Our findings also show that human capital has a positive – direct and indirect – impact on the economic development of Brazilian micro‐regions.     

The two faces of R&D and human capital: Evidence from Western European regions

This paper investigates two channels through which R&D and human capital may affect regional total factor productivity growth in the manufacturing sector. Our model allows for both a direct effect on productivity growth, reflecting own innovation, and an indirect effect, reflecting imitation of frontier technology. The results provide evidence of a positive and significant direct effect of human capital, and a positive and significant indirect effect of R&D. Our estimates also suggest that R&D aids the imitation of technology from geographically close regions, while human capital raises productivity growth in regions that are closer to the frontier than their neighbours.     

WHY HAVE EARNINGS PER WORKER STAGNATED?

ABSTRACT: The US is haunted by the virtual stagnation in the real average earnings per worker. The most common explanation is the combination of slow productivity growth and the smaller returns to productivity going to nonwage items such as health benefits, additional investment in productivity enhancing equipment, and to the increasing number of retirees. This explanation is insufficient to explain why, in many parts of the country, real average earnings have actually been decreasing, not just stagnating. This paper explores additional reasons why the US is experiencing stagnant national and often declining local earnings per worker. It uses a new data set, the ES202 data and focuses on one metropolitan area, Miwaukee, Wisconsin. It was found that the downward pressure on earnings per worker is due to such factors as the loss of high paying manufacturing jobs and the growth of employment in lower paying industries, new firms, growing firms that have decreasing earnings per worker, small businesses, and suburban businesses, which tend to pay less.     

Agglomeration of knowledge intensive business services and urban productivity

While there is considerable empirical evidence on the productivity‐enhancing effects of manufacturing agglomeration, the impacts of knowledge intensive business services (KIBS) agglomeration have rarely been examined. We propose a mechanism‐based framework to study the precise channels through which KIBS agglomeration contributes to urban productivity. By estimating a model of urban productivity that incorporates agglomeration of manufacturing, KIBS and non‐KIBS using city‐level data from China, we find that KIBS agglomeration is an important source of aggregate urban productivity. The importance of KIBS agglomeration in city productivity growth is systematically related to a city's level of economic development.     

Institutional Performance And Social Capital: An Application To The Local Government Level

Abstract: A large and growing body of research is devoted to the effects of social capital on institutional performance. This literature reveals that societies characterized by higher levels of social capital tend to achieve superior performance. Still, enquiries to date predominantly concentrate on country‐level data or large sub‐national units. The primary purpose of this article is to extend the empirical work to the local government level, while retaining the use of objective data to gauge institutional performance. This use of local data has the advantage of increasing the data set available and provides a more stringent test of the effect of social capital because social capital is likely to vary less at lower levels of government. The results—based on an empirical analysis of 305 Flemish municipalities in 2000—support the view that social capital leads to government (out)performance also at the local level of government.     

Housing provision in high growth regions. A comparative study of four European sub‐regions

Best‐practice technique as a concept was developed for the purpose of analysing the structure of manufacturing industries. In my article I argue that the concept may also be applied to the construction industry, though the rationale differs somewhat. Instead of considering the technique embodied in the real capital, one should see it as part of the organization in Marshall's meaning. This would lead to different unit operating costs and different labour productivity among firms competing in the same market. The extent of the variation of the labour productivity during the period 1979–84 is shown in the paper. Productivity functions of different efficiency groups are estimated in order to establish the best‐practice production function. In that process it is also shown that during the period 1979–84 the efficiency of the firms using the best‐practice technique grows faster than the efficiency of all other firms.     

Smart cities and attracting knowledge workers: Which cities attract highly‐educated workers in the 21st century?

Regional policy‐makers have long sought to attract highly‐educated workers with a view to stimulating economic growth and vibrancy. Previous studies over the decades leading up to the new millennium show human capital divergence across cities, where the share of college graduates grew faster in cities that had larger initial shares of college‐educated workers. However, labour markets have changed significantly post‐2000, likely affecting migration decisions of highly‐skilled workers. Additionally, past studies have not controlled for important changes in industry education levels and overall industry composition that may influence city‐level college graduate growth. We use detailed 4‐digit NAICS industry employment data combined with public micro‐data to construct measures of industry skill upgrading and changes in industry composition to control for their effects on human capital growth. We find agglomeration forces, rather than initial graduate share, explains college‐graduate share growth post‐2000. We also decompose graduates into bachelors and postgraduate degree holders to determine whether different forces are at play on growth of graduates at different education levels.     

Exploring the sources of labour productivity growth and convergence in the Italian regions: some evidence from a production frontier approach

This paper investigates labour productivity growth and regional convergence patterns in Italy over the time span 1982–2000. Starting from some evidence of spatial polarisation within Italian economy, the analysis aims at exploring the sources of this tendency. To this end, an approach based on data envelopment analysis (DEA) production frontiers is employed which allows to decompose labour productivity growth into efficiency change, technological progress and capital deepening, looking then at the relative contribution of each component to regional convergence. Moreover, some measures of human capital and public capital are used as augmentation factors of the conventional inputs. The study leads to the conclusion that polarisation is mainly due to regional differences in efficiency change.     

Agglomeration and productivity: evidence from firm-level data

Do agglomerations stimulate productivity? An extensive literature on agglomeration economies, or urban increasing returns, has analyzed this question with aggregated spatial data. This paper estimates the relationship between agglomeration and productivity at the firm level using static and dynamic models. It makes use of a rich dataset comprising register information on all manufacturing firms in Sweden with 10 or more employees over the period 1997–2004. Three things emerge. First, firms located in larger regions are more productive when controlling for size, human capital, physical capital, ownership structure, import and export, industry classification, and time trend. Second, results from dynamic panel estimations suggests a learning effect in that agglomeration enhances firms’ productivity. Third, the role of agglomeration phenomena does not seem to have a clear coupling to firm size.     

FRIENDS AND NEIGHBORS: HOMEOWNERSHIP AND SOCIAL CAPITAL AMONG LOW‐ TO MODERATE‐INCOME FAMILIES

ABSTRACT: This research explores whether homeownership leads to increased individual social capital among low‐ to moderate‐income families. Social capital refers to social resources a person can access through contacts with others in his or her social networks. We theorize that homeownership can motivate interactions with others in one's neighborhood and therefore build social capital. Using a sample of low‐ and moderate‐income homeowners and a matched sample of renters, we collect data on overall social resources and neighborhood‐specific social resources. We find that homeowners have more total social capital resources and more neighborhood social capital resources than renters. Neighborhood group involvement has an indirect effect on social capital, but explains only a small amount of the influence of homeownership. These findings hold when controlling for household‐level and neighborhood‐level sociodemographic variables, as well as when using statistical models that account for endogeneity. Based on this evidence, we conclude that homeownership gives people access to social capital via increased social ties to others. We discuss the implications of this finding for housing policy and suggest new directions for research on social capital.     

RENEWING PEOPLE AND PLACES: INSTITUTIONAL INVESTMENT POLICIES THAT ENHANCE SOCIAL CAPITAL AND IMPROVE THE BUILT ENVIRONMENT OF DISTRESSED COMMUNITIES

ABSTRACT: The challenges confronting distressed communities in the United States are complex and multifaceted. Communities large and small have been significantly affected by a myriad of social, environmental, and economic forces, including a continuing decline in manufacturing employment, uncontrolled sprawl, and the transition to a global economy. The traditional choice between a “place‐based” theory of redevelopment strategy versus a “people‐focused” theory no longer seems feasible or appropriate. This article outlines sustainable development as an alternative strategy that combines a place‐based development strategy, a human development focus, and an environmentally mindful approach. It posits that there exists a direct positive relationship between the creation of social capital, the redevelopment of the built environment utilizing sustainable development practices, and community‐based organizations in distressed communities. Furthermore, the authors suggest that through community investment—a socially responsible investment strategy—institutions of higher education can facilitate the rebuilding of communities by providing financial capital while gaining a moderate yet secure financial return as well as a substantial social return.     

Non‐linearities in regional growth: A non‐parametric approach

This paper analyses the determinants of regional economic growth in the European Union adopting a non‐parametric approach. Although the local‐linear kernel estimator applied does not explicitly take into account the spatial dimension of the data, it is found to be consistent in our context. In addition, the geographically weighted regression turns out to be less efficient. We obtain evidence of a non‐linear relationship between regional growth and its determinants in the form of parameter heterogeneity and threshold effects. These non‐linearities mainly affect the initial productivity of labour, the human capital endowment and, as a novelty, the level of infrastructures.     

Tourism and regional growth in Europe

The paper analyses the impact of domestic and international tourism on the economic growth process for 179 European regions. The econometric analysis is based on a spatial growth regression framework where the rate of GDP per capita growth at the regional level for the period 1999–2009 depends on tourism flows, in addition to the traditional growth variables. Besides controlling for initial conditions, we also include a wide set of covariates to account for the endowment of human and technological capital and for the geographical, social and institutional features of the regions. The results, confirmed by several robustness checks, demonstrate that regional growth is positively affected by domestic and international tourism.     

A dual economic analysis of the benefits of the public road networks

The productivity impact of public infrastructure is assessed by applying duality theory and estimating the savings in private production costs associated with the provision of public capital. The method used is that of a generalized cost function incorporating both physical and monetary measures of the provision of public road infrastructure capital as fixed unpaid factors of production. Estimation is done using a panel data set of 31 German manufacturing industries in the FRG. The resulting estimates form the basis of a motorway toll system using the principle of pay-as-you-benefit.     

Regional determinants of total factor productivity in Japan: stochastic frontier analysis

As Japan’s birthrate declines and its society ages, governmental policies need to improve the productivity of regional economies in order to sustain regional growth. This study examines social overhead capital and population agglomeration as drivers of total factor productivity (TFP) growth in Japan. The use of stochastic frontier analysis demonstrates that social overhead capital contributes to TFP growth and, especially, influences productive efficiency. Furthermore, the findings reveal that population agglomeration underpins TFP growth in regional economies. Empirical results also indicate that productive efficiency is high in regions where manufacturing is concentrated and that productive efficiency improves when internationally competitive manufacturers concentrate in regional economies. This study endorses the development of social overhead capital to spur Japan’s regional TFP growth. As such, it indicates that providing social infrastructure and enhancing regional productivity are important strategies for the government to consider in its efforts to achieve sustainable regional growth.     

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.     

Do localization economies derive from human capital externalities?

One of the most robust findings emerging from studies of industrial agglomeration is the rise in productivity that tends to accompany it. What most studies have not addressed, however, is the potential role played by human capital externalities in driving this relationship. This paper seeks to do so using data from the 1980, 1990, and 2000 US Census covering a collection of 77 (primarily) three-digit manufacturing industries across a sample of more than 200 metropolitan areas. The analysis generates two primary results. First, a variety of education- and experience-based measures of average human capital rise significantly as an industry’s employment in a metropolitan area increases. Hence, clusters of industry do tend to be characterized by larger stocks of human capital. However, second, even after accounting for the level of human capital in a worker’s own industry, the overall size of the industry remains strongly associated with wages. Such results cast some doubt on the notion that localization economies emanate from education- or experience-based knowledge spillovers. The views expressed herein are those of the author and do not represent the official positions of the Federal Reserve Bank of St. Louis or the Federal Reserve System.     

Urban sprawl and municipal budgets in Spain: A dynamic panel data analysis

Urban sprawl has recently become a matter of concern throughout Europe, but it is in southern countries where its environmental and economic impact has been most severe. This low‐density, spatially expansive urban development pattern can have a highly marked impact on municipal budgets. Thus, local governments may see sprawl as a potential source of finance, in terms of building‐associated revenues and increased transfers from upper tiers of government. At the same time, sprawl leads to increased levels of expenditure, as it may raise the provision costs of certain local public goods and requires greater investment in extending basic infrastructure for new urban development. What, therefore, is the net fiscal impact of urban sprawl? Do local governments consider the long‐run net fiscal impact of new urban growth or do they simply focus on its short‐term benefits, ignoring future development costs? This paper addresses these questions by analysing the dynamic relationship between urban sprawl and local budget variables. To do so, we estimate a panel vector autoregressive model using data for 4,000 Spanish municipalities for the period 1994–2005. Computed generalized impulse response functions show: (i) that sprawl considerably increases demand for new infrastructure; (ii) that the capital deficit generated by this new infrastructure is covered in the main by intergovernmental transfers and, to a lesser extent, by revenues linked to the real estate cycle; and (iii) that sprawl leads to a short‐term current surplus, as the increase in current revenues offsets the increase in current expenditures due to public service provision for new developments. Overall, these findings point to a moral hazard problem for local governments in which inordinate intergovernmental transfers and development revenues encourage excessive urban sprawl.     

Decomposing regional productivity growth using an aggregate production frontier

The main contribution of this paper is the implementation of a new model which combines the two parametric approaches most commonly used in the productivity literature: fixed effects and stochastic frontiers. This allows us to discuss whether it is better to use average or frontier functions to estimate regional productivity. The empirical section uses panel data of Spanish regions over the period 1980–1995. Additionally, we calculate and decompose total factor productivity growth for the Spanish regions.     

Interstate spillovers of private capital and public spending

The analysis estimates the economic returns on public spending by transportation and non-transportation functions vs. private capital, using a panel data set for 48 contiguous states from 1989 through 2002. These actual spending dollars are used as a more precise measure compared to apportioned state public capitals used in the existing literature. For each type of capital/spending, the interstate spillovers were constructed in such a way that different states are weighted by commodity flows across the states to reflect different degree of inter-state dependence. We find that when spending data rather than capital stock is used, all of the interstate spillover effects are negative and statistically significant, suggesting that infrastructure investment does not contribute to economic growth (at least not directly). Therefore, crowding out effects exist among states competing for both private and government funds, in particular if states are highly dependent on allocation of federal funds. These results confirm the finding that previously estimated positive coefficients reflect spurious correlation based on capital stocks and output.