A micro-simulation model of firms: Applications of concepts of the demography of the firm

Recently, there is an increasing demand in spatial planning for models based on the demographic concepts of birth and death of firms. This article describes the structure of a spatial demographic simulation model of firms, and its application within The Netherlands. The model structure is essentially of the familiar demographic cohort component type, where an initial cohort of firms ages in a number of discrete steps, and where in each step additions and subtractions to and from the population are modelled using birth, death and migration components. Apart from the central processes of birth, death and migration, the type of economic activity and firm size are highly important for understanding firm behaviour over time. The article describes the transition functions for each of the demographic components and for firm growth. In addition, some empirical results are presented of a number of model simulations in The Netherlands. The results were partly validated using observed economic demographic data. It is concluded that a substantial amount of work remains to be done in this new field. The model presented here has direct implications for the research agenda of the study of the demography of the firm. Received 28 April 1999 / Accepted 6 December 1999     

Determinants of new firm success

The differences between new firms, even the differences present right at the start, may affect their life course and success over time. This article addresses the determinants of success of Dutch start-ups from a longitudinal perspective. After an overview of the literature on both the definition of success and the success factors of new firms we test how new firm characteristics relate to firm growth in number of employees using a panel of nearly 2,000 firms. In addition to a large firm size right from the start, good preparation, having a business partner, and some years in salaried employment also enhance firm growth. Based on these success determinants we construct a typology of starters that may be used to predict future growth chances. Received 25 February 1999 / Accepted 10 December 1999     

Public policy,locational choice and the innovation capability of high-tech firms: A comparison between Israel and Ireland

Using survey data from Irish and Israeli firms we examine the influence of public policy on the characteristics, location and innovation capability of high-tech firms. The innovation activities of Israeli firms in Israel are found to be much more locationally sensitive than that of Irish companies. Regional policy incentives, involving the dispersal of high-tech firms to peripheral areas of Ireland are therefore likely to have had little negative effect on firms' innovation capabilities. In Israel, however, inducing highly R&D intensive firms to locate away from the main metropolitan areas may be counter-productive. Received: 28 November 2000 / Accepted: 26 September 2002     

General equilibrium spatial models

This paper confirms the so called perverse effect of L?schian entry on wages regardless of the form of the labor supply curves. The form of our labor supply after firm entry is not only different from the one before entry, but also sharply different from that found by Kohlhase and Ohta [8]. However, we show that while the Kohlase-Ohta model has a convex labor supply, the Ohta-Asami-Kohlhase model has a concave labor supply as does the extended model presented here. Moreover, we find that the same perverse result is derived from either one of the two contrasting forms of the labor curve assumed, i.e., regardless of the convexity vs. concavity of the labor supply. Received: May 1999/Accepted: June 2000     

Hotelling's “Ice cream dealers” with elastic demand

This article reconsiders the Hotelling duopoly model of 1929, but under elastic demand, more precisely a linear demand function. The equilibrium state for identical firms is fully described, and the intervals of different regimes: independent monopolies, genuine duopoly competition, and price cutting wars, are specified in terms of one single compound parameter (maximum price, minus marginal production cost, divided by transportation cost). Received: October 2000/Accepted: August 2001     

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.     

The insufficiency of Pigouvian taxes in a spatial general equilibrium model

The paper considers, in a spatial general equilibrium setting, the pollution externality problem caused by a competitive industry. It is shown that the pollution control instrument supporting the optimum is a two-part Pigouvian tax–emission rights scheme in which the polluter pays only for the emissions which exceed its initial emission rights. The optimal level of the emission rights depends on the nature of pollution. In the global pollution case they are zero, whereas in the local pollution case they are equal to the firm's emissions at the optimum. In general, the optimal initial emission rights are between these values, but they may also be negative. In the latter case the firm pays for a greater amount of emissions than it emits. The emission tax proceeds, if there are any, must be distributed to the victims (households) as compensation. Received: December 1998/Accepted: May 2000     

Agroindustry location under uncertainty: The effects of business taxes

This note employs a unifying approach to examine the impacts of various forms of business taxes on an agroindustrial firm's choice of plant location under uncertainty. It shows that, if the production function is homogeneous of degree one, then the lump-sum and proportional profit taxes are spatially neutral for any risk-averse agroindustrial firm operating with a random raw material price. For cases where the taxes are spatially non-neutral, unambiguous effects regarding an agroindustrial firm's locational response to the imposition of business taxes have also been provided. In addition, we demonstrate that the spatial effects of business taxes on agroindustrial firms differ sharply from their non-agroindustrial counterparts. Received: 5 December 2000 / Accepted: 11 January 2002 RID="*" ID="*" I would like to thank the Pacific editor and two anonymous referees for valuable comments and suggestions on an earlier draft.     

Entrepreneurship and spatial externalities: Theory and measurement

The paper presents an empirical analysis on the role played by urbanisation and localisation economies on factor productivity of firms. A vast literature exists on this issue, conceptually presenting reasons supporting either industry size or city size as sources of external advantages. In general, the empirical analyses are based on the estimates of aggregate city or industry production functions; the limited hypotheses characterising these studies have suggested to test another methodology, based on the estimate of a production function at the firm level, and calculate how factor productivity changes according to different degrees of urbanisation and localisation economies. The methodology is applied to firms chosen in the high-tech sector, which demonstrates a high spatial concentration in particular areas of the Metropolitan Area of Milan. The result is that factor productivity is influenced by both urbanisation and localisation economies, but the latter show an increasing positive effect on factor productivity. Moreover, the size of firms plays an important role in defining the impact of urbanisation and localisation economies on firms' outcome.     

Long-run development of a multi-regional economy

This article analyses models of a multi-regional economy with n regions and m factors, with a Cobb-Douglas or CES production function, and with or without economies of scale and Hicks-neutral technological progress, in which factors are imperfectly mobile as described by a revised gravity model. The article clarifies the incidence of interregional factor mobility, conditions of convergence of interregional per-capita income, the long-run equilibrium regional shares of factors and of income, and the convergence speed. The results are further generalised by explicitly introducing interregional distances. Received: 18 August 1997 / Accepted: 29 January 1999     

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.     

The effect of unemployment, aggregate wages, and spatial contiguity on local wages: An investigation with German district level data

Despite spatial rigidity of collectively negotiated wages the local unemployment rate is found to have a significant negative impact on wages. This impact is shown to be consistent with both the wage-curve hypothesis and modern Phillips-curve modelling. Spatial contiguity effects are found in wages and unemployment and their neglect leads to an underestimation of the effect of local unemployment. Yet, the impact of local unemployment on wages turns out to be quite low as compared to studies for other countries. Some support for the hypothesis that negotiated wages suppress spatial wage flexibility comes from the finding that the impact of local unemployment on local wages decreases with its extent. Received: 13 December 1996 / Accepted: 8 June 1998     

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.     

Urban agglomeration: Knowledge spillovers and product diversity

There is no doubt that people like to migrate to large cities because they can acquire a wider range of products and jobs, but also because they can more easily exchange information and ideas. In this respect, we attempt to explain the formation of metropolitan areas by using a general equilibrium model, in which concentration emerges not only from interaction between increasing returns to scale at firm level, transport costs and labor mobility, but also from human capital externalities. This paper shows that there is new scope for government activity. Received: August 2000/Accepted: January 2002 I am indebted to J.L. Ferreira for valuable comments on an earlier draft. I also wish to thank T. Smith, participants at the ERWIT Workshop and EEA Congress, and two anonymous referees for helpful suggestions. Financial support from the Spanish Ministry of Science and Technology through DGICYT grant PB98-0613-C02-01, and from the Regional Government of Galicia via PGIDT00PXI30001PN is gratefully acknowledged.     

Regional convergence in the European Union: From hypothesis to the actual trends

Economic convergence or non-convergence between countries and regions continues to attract analytical attention in Europe. To converge in real terms and not only in terms of nominal variables is one of the basic aims of the European Union Treaty. A first objective of this paper is to offer an overview on what is actually happening in the European Union in contrast to some generally accepted hypotheses and models predicting regional convergence. Empirical evidence shows that after a period of (relative) regional convergence in GDP per capita as well in terms of labour productivity, this process has almost completely ended. Possible explanations go from the most pro-convergence theories (optimists) to those that outweigh real obstacles to theoretical assumptions (pessimists). As a second objective the paper examines two important facts that can contribute to explaining the actual trends. The first is named the `national effect', where regions of each country have economic behaviour strongly linked to the national economy as a whole. The second is the `differential' behaviour of many European regions in terms of economic outcomes.  Some suggestions and conclusions are drawn from the facts and the trends observed in the European integration process. Received: May 2000/Accepted: December 2000     

Production-location decision under duopoly with managerial incentives

The validity of the profit-maximizing assumption has long been doubted by many economists. One reason for the deviation from profit maximization that has been emphasized is the separation of ownership and management. This paper attempts to examine the spatial consequences of this separation under duopoly where managers compete in quantities, as in the Cournot model, and owners choose their managers' incentives and plant locations. A complete analysis, including the exclusion theorem, comparisons of optimal locations under the incentive equilibrium with those under profit-maximization, and comparative statics, is provided. It is demonstrated that the separation of ownership and management has significant implications for firms in relation to their location decisions. Received: October 2000/Accepted: August 2001     

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     

Firm relocation decisions in The Netherlands: An ordered logit approach

This article explores the determinants of firm migration in The Netherlands. First, based on the existing literature a theoretical framework is developed. Second, based on aggregate data firm relocation processes in The Netherlands are discussed in terms of numbers, sectoral composition, origins and destinations (regions), distance moved and employments effects. In the third part a formal model will be tested using individual data of firms. The relocation decisions of individual firms will be related to firm and location characteristics by means of an ordered logit model. The results indicate that the decision to relocate is mainly determined by firm internal factors and to a lesser extent by site related factors. Received 1 July 1999 / Accepted 28 November 1999     

Regional density functions and growth patterns in major plains of China, 1982–1990

This research analyzes the spatial patterns of regional development in China through the change of population density functions from 1982 to 1990, using several online digital data sets. To minimize the influence of physical environment on population densities, the study areas are limited to four major plains of China: the Northeast (Dongbei), North China (Huabei) and Hubei-Hunan (Lianghu) Plains, and the Sichuan Basin. A gravity-based delineation approach is used to delineate the influen ce regions of 17 cities. Regional densities in China decline with distance from a city, similar to western countries. In addition, areas close to central cities grew faster than remote areas, described as a trend of centralization. However, regions with strong core growth are generally associated with stagnant hinterlands (‘core growth-hinterland stagnation’); and regions with moderate core growth are usually matched by similar growth rates in the hinterlands (‘spread through growth’ ). Received: 8 March, 2000 / Accepted: 5 September 2000     

Demand for information and communication technology-based services and regional economic development

The relationship between the uptake of Information and Communication Technology-based services (ICT) and regional economic development is examined here; we address in particular the idea that ICT will promote regional economic convergence. We argue that ICT can generate contradictory trends of regional convergence and divergence and that, under conditions of non-regulated market supply, the effects leading to divergence can be dominant. The approach is based on the development of a regional demand model, which is the combination of two sub models, one dealing with the effects of network externalities and the other based on the concept of potential demand for ICT. The main conclusion is that less populous, more peripheral and poorer regions with weaker existing social and economic networking will encounter problems of insufficient demand. This in turn will delay the launch of new services and slow the rate of uptake. Negative dynamic effects of low ICT use on economic performance will generate a vicious circle of cumulative disadvantage. Received: 2 October 2000 / Accepted: 6 December 2001 RID="*" ID="*" Thanks are due to Miguel Jardim and Jo?o Marques for technical assistance with the graphics.