A note on Australia's inward and outward direct foreign investment

This research note investigates the determinants of Australia's inward and outward direct foreign investment (DFI) using annual and quarterly data. It is found from pooled annual data for Australia and seven developed countries that DFI has been influenced by labor disputes, current account balances, Australia's real GDP and real exchange rates. The application of an econometric model using quarterly data shows that the long run elasticities of DFI with respect to real exchange rates and labor disputes are significant for selected cases. Received: 30 April 1997 / Accepted: 1 September 1997     

The pattern,pull, and potential of Baltic Sea trade

This paper describes the current conditions of trade in the Baltic Sea region and considers the strength of trade affinities between countries and country groups within that region. The evidence supports a strong affinity between Estonia, Latvia, and Lithuania to the Baltic Nordic countries. The paper also considers how sensitive Swedish exports are to per capita GDP of importing countries and how that varies across industries. Some of the evidence supports a positive relation between product differentiation and the per-capita GDP sensitivity. Among this evidence is the finding that for Swedish exports, distance sensitivity and per-capita GDP sensitivity are negatively related. Received: January 2001/Accepted: April 2002 The authors are thankful for funding from the EU's INTERREG IIC Programme through SEBTrans. They also appreciate the helpful comments provided by B?rje Johansson.?An earlier draft of this paper was presented at the Udevalla, Sweden Conference 2000 entitled “Entrepreneurship, Firm Growth and Regional Development in the New Economic Geography”.     

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.     

North American economic integration and industrial pollution in the Great Lakes region

This paper provides an assessment of the impact of increased economic integration within North America on industrial pollution intensities within the Great Lake states of the United States. It utilizes a three-country, applied general equilibrium model of the North American economy, data from the World Bank's Industrial Pollution Projection System, and employment data from the US Bureau of Economic Analysis to simulate the industrial pollution impacts of North American trade liberalization within the Great Lakes region. The results reflect the liberalization of tariff and non-tariff barriers, their trade and production impacts, state-level shares in the production changes, and the resulting industrial effluent changes. Two trade liberalization experiments show that, in many cases, the Great Lake states account for a substantial portion of the total emission changes caused by North American economic integration. Of particular concern to the Great Lake states are the emissions of the base metals, transportation equipment, and petroleum sectors. Received: October 2001/Accepted: December 2001 This research was supported by the Office of the Great Lakes through the Michigan Great Lakes Protection Fund. We would like to thank Roger Stough and three referees for very helpful comments.     

Impact of trade liberalization on the location of firms: NAFTA and the automobile industry

This study investigates the short-term impact of NAFTA on automobile production patterns by constructing a multiregional monopolistic-competition model, which accommodates three types of vehicle assembler and two classes of vertically linked parts supplier. By revealing the changes in potential profits of the firms in each region, the partial equilibrium model allows us to identify the types of automobile that will most likely be produced in Mexico as a result of reductions in tariffs and non-tariff barriers. The simulation results indicate that as trade barriers fall, ceteris paribus, producers of small cars will find it more desirable than large-car manufacturers to operate in Mexico. Recent developments seem to support the results of this model. Received: August 2000/Accepted: May 2002 An earlier version of this paper was presented at the Uddevalla Symposium in June 2000. The author is grateful to Masahisa Fujita for providing inspiration and thoughtful guidance during the initial phase of this work.     

A note on the equilibrium and optimum of a transitional urban economy: The case of China

This research note presents a simple urban model of the Chinese two-tier plan/market economy, and investigates the equilibrium and optimum by comparison with a standard urban model of the market economy. We show that the Chinese urban economy has a possibility of being out of equilibrium and becoming unstable when the amount of land assigned by the government to firms is too much relative to the labor assigned to them. Furthermore, the model indicates that, while the Chinese urban economy would have a greater total differential land rent than the market economy, the Chinese urban residents would be worse off in terms of their earned wage income. Received: 2 April 2001 / Accepted: 2 March 2002 RID="*" ID="*" The author is grateful to Eric J. Heikkila, Koichi Mera, John M. Quigley, and Komei Sasaki for their valuable comments. Special thanks are also due to Jacques Poot, Pacific Editor of this journal, and three anonymous referees, who gave very useful suggestions to improve this note. The author alone is responsible for any remaining errors.     

Foreign direct investment,industrial location and capital taxation

This paper demonstrates from a theoretical point of view that governments can affect the location decision of firms using tax rate on capital income as a policy instrument. We find that, in general, countries with a lower tax burden are net receivers of foreign direct investment. Furthermore, fiscal pressure interacts with the quality of infrastructures to exert a combined influence on the equilibrium location of the firms. Financial support from FEDER and project BEC2003-02271 is gratefully acknowledged.     

Has the increase in world-wide openness to trade worsened global income inequality?

This article contributes to our understanding of the relationship between globalization and world income inequality by analyzing the trend in global inequality for the period 1960–1989. Using Penn World Tables data and time-series econometric techniques, it analyzes how the increase in worldwide openness to trade has been related to global income inequality during this period. When differential population growth rates among the countries are taken into account, the results indicate that (i) global income inequality exhibited a downward trend between 1960 and 1989, and (ii) while there is a positive relationship between inequality and openness, the relationship is not statistically significant. Received: 22 December 2000 / Accepted: 29 May 2001     

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     

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.     

Spent nuclear fuel and residential property values: the influence of proximity, visual cues and public information

This article examines whether public knowledge of spent fuel storage at nuclear power plants, and any local adverse risk perceptions that may have occurred, affect the sale price of single-family residential properties. We present evidence from the Rancho Seco, California, plant on residential property values using an hedonic modeling framework. We include a large number of control variables, data with a high level of spatial detail and a number of public information variables in order to model property market effects within a fifteen mile radius of the plant. Our findings indicate that proximity and visual reminders of the plant have some influence on local property markets, and that there is a small media coverage effect on single-family home sale prices. Received: 6 May 1998 / Accepted: 26 May 1999     

Amenities and urban residential structure: An amenity-embedded model of residential choice

The basic model of residential choice, which has been established by generalizing Von Thünen's concept to an urban context, states that the equilibrium structure of residential land use is determined by the trade-off between accessibility and space. The willingness to sacrifice space for accessibility differs between households and depends on household income. The equilibrium land use is the outcome of the interplay between the income elasticity of space consumption and the income elasticity of commuting outlays. The primary purpose of this article is to extend the basic model by incorporating a location-dependent quality of the environment. The proposed model examines the locational consequences of household choice as influenced by a complicated interplay among three factors: the income elasticity of housing demand, the income elasticity of commuting costs, and the location-dependent amenity schedule. The equilibrium land use is contrasted for two types of cities: the case 1 city in which the level of amenities increases toward the urban fringe, and the case 2 city in which the level of amenities is assumed to decrease as one moves toward the urban fringe. Received: 2 August 1999 / Accepted: 18 September 2000     

Urban rent and urban dynamics: The determinants of urban development in Italy

Many empirical analyses have proved the existence of an optimal city size through the measurement of economies or diseconomies of scale, generally applied either to the costs of urban services or to elegant econometric estimates of urban and sectoral production functions. But, unfortunately these studies have never produced a common result, and have often been subject to criticism for their restrictive hypotheses. The aim of the present paper is twofold. First of all, urban dynamics in Italy is described through an indicator of urban costs and advantages, i.e. urban rent. House prices are in fact a good indicator of the attraction of an urban area, as they are synthetic and avoid a time lag between the occurrence of phenomena such as demographic change, and the availability of data to capture these phenomena. This study is based on the idea that the difference in house prices between large and small cities is a measure of their relative attraction (and thus their relative location advantage). The second aim is to highlight the determinants of urban dynamics, and especially to understand whether urban development patterns are similar in cities of different size. For this second issue, the paper enters the debate on the existence of an optimal city size for all cities and draws attention to other possible determinanats of urban development. Received: May 2000/Accepted: January 2002     

On the optimal production and location of a labor-managed firm

This paper endeavors to introduce space into the theory of the Labor-Managed firm (LMF) and to investigate its optimal production and location decisions. It is shown that the degree of returns to scale plays a key role in the determination of optimal production and location for an LMF, in particular, that the optimal location of an LMF is farther away from (closer to) the market as compared to a profit-maximizing firm (PMF) if the production function is of increasing (decreasing) returns to scale. We also demonstrate that the optimum location of an LMF moves closer towards the market as demand increases, regardless of whether the production function is of increasing or decreasing returns to scale. This finding is in sharp contrast with that in a capitalist economy. Received: February 2000/August 2000     

Multiple equilibria, stability, and asymmetries in Krugman's core-periphery model

Paul Krugman developed a general equilibrium model with two sectors and two regions in 1991, from which two patterns of industrial localization could be endogenously deduced, dispersion at 50% and total concentration. The introduction of transport costs, which depend on the size of the population, are meant to capture effects produced by the trade-off between congestion costs and advantages derived from the possession of infrastructure, thus generates stable asymmetric multiple equilibria. The outcome of asymmetric stable multiple equilibria demonstrates the fruitfulness of this extension of the original model. Received: 23 June 1998 / Accepted: 5 October 1999     

A model of urban growth with endogenous suburban production centers

This paper presents a theoretical model of the spatial growth of an urban area. Its primary contribution is that suburban production centers arise as small, independent landowners respond to market forces. Other models impose subcenters exogenously and require action by large developers or government agencies. The model predicts almost no undeveloped land is present in struggling cities, but urban sprawl is the hallmark of a growing metropolitan area. There is also anticipatory sprawl: even while all industrial development is concentrated in the central city, a leapfrog zone may sprout between two residential zones in the suburbs. Received: July 2000/Accepted: December 2000     

The contribution of academic-industry interaction to product innovation: The case of New York State's medical devices sector

This note examines the role of academic-industry linkages in the innovation performance of New York State manufacturers of medical devices. Evidence from a pilot survey of 63 specialised producers suggests that innovation rates are higher among firms that exploit university resources. The contribution of the academic sector to industrial innovation is quantified via a series of OLS regressions. These models suggest that geographic proximity to academic resources is less important to the innovation process than the extent of academic-industry interaction (though the two are positively correlated). While the empirical results confirm that close proximity to academic research units is a helpful factor in product development, the data reveal that non-geographic factors play a stronger role overall. Factors of notable significance include in-house R&D effort, investment in academic interaction and the extent of collaborative research with other manufacturing firms. Received: 14 March 2001 / Accepted: 15 June 2001     

Trade policy and regional inequalities

This article aims to analyze the effects of trade policies on the pattern of regional inequalities within a country. It is inspired, firstly, by the debate concerning the role of protectionist policies in the development of a pattern of striking regional inequalities during the Spanish industrialization process and, secondly, by current evidence of an increase in these inequalities following Spain's entry in the EU, in 1986. We employ an economic geography model comprising three regions: two domestic and one external. Labor mobility is permitted between the domestic regions but not with the external region. The model shows that trade liberalization increases regional inequalities. Received: 4 March 1999 / Accepted: 17 February 2000     

Distance,time since foreign entry,and productivity spillovers from foreign direct investment

This paper investigates the effect of foreign direct investment on the productivity of local manufacturing firms in Romania. We decompose traditional country‐wide spillover measures in different components according to both proximity between foreign and domestic firms and time‐since‐foreign‐entry. We find larger and faster spillover effects for local suppliers of foreign firms at shorter distance, driven mainly by recent foreign entrants. Irrespective of distance, foreign firms of medium maturity generate backward spillover effects that fade away with longer presence. A positive effect on local competitors is not significantly affected by distance, but requires the presence of mature foreign firms.     

The evolution of the U.S. industrial landscape, 1969–1995

The industrial landscape of the U.S. has undergone major changes in the last three decades, which have affected the location of the work-force as much as sector location. This paper adopts a dynamic approach in order to analyse the principal characteristics of this process in the time-period 1969–1995 among the twenty two-digit SIC industries. Two main conclusions have emerged. First, we find that, in general, industries are tending to reduce their degree of concentration. Secondly, the classification of industries according to different economic criteria allows us to test the degree of compliance with various theoretical propositions and to detect relevant empirical regularities. Received: July 2001/Accepted: August 2002 The authors would like to express their thanks to two anonymous referees for their valuable comments and observations on an earlier version of this work. Similarly, they are grateful for the financial support provided by the University of Zaragoza under Project UZ2001-SOC-09.