Agglomeration, congestion, and regional unemployment disparities

Regional labor markets are characterized by huge disparities between unemployment rates. Models of the New Economic Geography explain how disparities between regional goods markets endogenously arise but usually assume full employment. This paper discusses regional unemployment disparities by introducing a wage curve based on efficiency wages into the New Economic Geography. The model shows how disparities between regional goods and labor markets endogenously arise through the interplay of increasing returns to scale, transport costs, congestion costs, and migration. The level and stability of regional labor market disparities depends on the extend of labor market frictions.     

Labor market efficiency and the dynamic behavior of regional unemployment differentials

In dynamic complex economies where unemployment is never zero, relative economic opportunities can be greatly effected by how evenly unemployment is distributed throughout the economy. Accordingly, a study of the temporal behavior of geographic differentials in unemployment rates will yield useful information about how well the labor market performs its resource allocation function. Using spectral methods, this paper tests the competitive theory predictions concerning the dynamic behavior of regional unemployment differentials. While there is evidence that unemployment rates tend to equalize, the results of this study indicate that it is a slow process in which competitive forces are relatively weak. As a result, the secular shift in employment growth from the North to the South and West has been the source of long run regional unemployment differences.     

Increasing returns and spatial unemployment disparities

Abstract.  Recent trade and location theories (e.g., the "new economic geography") deal with regional disparities in production and income, but assume full employment and are thus ill equipped to study regional unemployment disparities. The wage curve-approach, which explicitly shows how disparities in real wages and unemployment rates are interrelated, can not endogenously explain the origin of these asymmetries. In the article we derive a theoretical model that combines these two strings in the literature. We show that a core-periphery in real wages is associated with and magnified by regional unemployment disparities. This wage curve relation is stable over time with an increasing returns technology. That is, the wage curve does not vanish as workers move from the periphery to the core, but it is rather reinforced by migration. These theoretical predictions are consistent with stylised empirical facts from the EU.     

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.

The regional labor market adjustment process: Determinants of changes in rates of labor force participation,unemployment, and migration

This paper employs a simultaneous-equations model to examine the regional labor market adjustment process for a sample of United States counties over the 1960–1970 period. The interaction between employment change and migration is well known, but that between employment change and labor force participation has been largely neglected. Labor force participation response, especially among women, is shown to be an important endogenous element in the labor market adjustment process. Important asymmetries are also evident between growing and declining regions, and these asymmetries suggest that the well-established link between employment and migration may have more force in growing than in declining areas.This study was supported by a grant from the Economic Development Administration, U.S. Department of Commerce.     

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.     

Labor force mobility in the United States: migration,unemployment, and remigration

"This study examines the relationships between pre- and post-move unemployment and interstate migration of the United States labor force for the period 1965 to 1970. Multivariate analyses are conducted for several large occupation groups. The results indicate a strong link between unemployment and migration. Unemployment increases migration possibilities for each large occupation group considered. Substantial post-move unemployment exists, but there is a significant link between migration and such unemployment only for blue-collar workers who are repeat migrants."     

Factor prices,non-neutral technical change and regional variations in unemployment rates

This paper provides empirical results which indicate that in the Canadian case regional output and employment sensitivity are not closely associated. The result suggests that causes other than demand variability between regions may explain employment sensitivity differences. A comprehensive theoretical construct based upon regional factor intensity differences in production was developed as an alternative explanation of employment sensitivities to those based simply on regional differences in demand elasticities, efficiencies of technology parameters, or the failure of some regions to efficiently allocate factors of production in accordance with their price ratios.     

On factor specificity,trickle down effects and regional disparities in income

This paper sets up a three commodity, three factor (with one factor both industry and region specific) and two region model to examine the implications of specific and non-specific factor accumulation on regional disparities in income. Factor specificity is a real world phenomenon and may, for example be caused by geographic reasons. For instance oil wells, beaches and so on are geographically immobile inputs—oil wells for production of oil and beaches for production of tourism. This paper analyses the implications of above type of factors on regional income and contrasts it with the case of non-specific factor accumulation. The main results obtained are given below. First, region specific factor accumulationmay raise both the per capita and absolute income in the region endowed with the specific factor. Second, under certain plausible assumptions, region specific factor accumulation has no “trickle down” effects on the other region. Thus specific factor accumulation may lead to increasing regional inequalities under very mild looking restrictions. This is a disturbing result because it shows that a industry booming on account of region specific factor accumulation may have no impact on other regions of the economy. The paper thus highlights the cnditions for the absence of interregional “trickle down” effects. In contrast non-specific factor accumulation has no impact on interregional per capita distribution of income—highlighting yet again the importance of region specificity of a factor of production.     

The components of regional disparities in Europe

The aim of this paper is to analyse the components of development disparities across the EU NUTS 2 regions by means of a new method of decomposition of per capita GDP. Decomposition first provides evidence of a remarkable inconsistency of the per capita GDP indicator at regional NUTS 2 level. This is addressed by proposing an “adjusted” development index. The analysis highlights in general the relatively greater importance of productivity and employment differentials over structural features, such as industry mix and demographic structure, although the picture becomes more complex when the focus shifts to the lagging-behind EU regions.     

Ethnic minority unemployment and local labour market conditions in Great Britain

"The authors use the 2% Individual Sample of Anonymised Records (SAR) in conjunction with area-based census data for pseudo travel-to-work areas, to explore the relative importance of individual characteristics and area characteristics on ethnic minority unemployment rates [in Great Britain].... The most important differences in the propensity to unemployment are shown to be between individuals, and, compared with whites, ethnic minority groups are shown to be disadvantaged wherever they live.... In all, it is argued that at the spatial scale which is identifiable in the Individual SAR, ethnic minority unemployment cannot be attributed to geographical distribution, though data at a finer geographical scale are needed to test this hypothesis more fully."     

Industrial agglomeration and the regional scientific explanation of perceived environmental injustice

This article evaluates the impact on an environmental justice analysis of explicitly controlling for forces of agglomeration. Many environmental justice studies have examined whether polluting facilities are disproportionately concentrated near certain types of people, such as minorities. No studies so far have explicitly included a proxy for agglomeration, and relatively few use appropriate spatial analytic techniques. Our analysis does both, and in doing so demonstrates that agglomeration is an important factor explaining locations of certain environmentally regulated facilities. Not using fundamental regional science concepts and appropriate spatial analytic techniques can lead to flawed analyses and conclusions.     

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.     

Fiscal decentralization and regional disparities: The importance of good governance

In this paper we consider how government quality mediates the relationship between fiscal decentralization and regional disparities. Previous work has argued that fiscal decentralization has the potential to reduce income differences across regions but that this potential may not be realized because of governance problems associated with sub-national authorities. Our empirical evidence based on a sample of 24 OECD countries over the period 1984 to 2006 lends a measure of support to this idea. We find that fiscal decentralization promotes regional convergence in high government quality settings but, worryingly, it leads to wider regional disparities in countries with poor governance.     

Location, agglomeration and infrastructure

Abstract. In this article we discuss the relationships between transportation infrastructure, firm location, agglomeration and regional development. We will argue that the spatial transaction costs faced by modern firms have changed over recent decades, and that this has changed the ways in which transportation infrastructure contributes to form location behaviour and regional economic development. Therefore, in order to analyse these issues, it is necessary to consider the spatial transaction costs faced by modern firms and to investigate the conditions under which reductions in these costs due to infrastructure improvements will allow firms to move. These complex relationships are seen to be mediated via different geography-firm-organisation structures and consideration of these is essential for any realistic evaluation of the role of transportation infrastructure.