Growth,Agglomeration and Convergence: a Space-time Analysis for European Regions

Abstract

This paper sheds empirical light on the relationship between agglomeration and economic growth and its impact on the convergence hypothesis. Using a sample of 208 European regions over 25 years, ‘standard’ growth regressions are estimated using panel data techniques. Both the effect of agglomeration within one's own region and the interregional aspect of agglomeration are looked at. The estimation results show that, on average, denser regions grow slower than other regions, indicating a net negative effect of agglomeration. However, being located close to other growing regions is found to stimulate growth in one's own region. The implied convergence rate is also affected when the inter- and intraregional aspects of agglomeration are taken into account, where the former (latter) results in lower (slightly higher) convergence estimates.     

Trade Openness and Spatial Inequality in Emerging Countries

Abstract

Emerging world countries have experienced over the last two decades a significant change in their trade patterns. Bold trade reforms have been followed by rapid rises in international trade levels. However, despite these radical changes, we know remarkably little about how changes in trade patterns are affecting the evolution of regional inequality in the developing world. This paper addresses the link between trade openness and spatial inequality across 22 emerging countries over the period between 1990 and 2006. Our findings show that changes in international trade bring about a significant rise in within-country inequality across the developing world and that this impact is greatest in the poorest countries. This result is robust to the inclusion of a number of control variables, and to changes in the specification of the sample and in the measure used to quantify the level of regional disparities. Consequently, the increase in trade exposure across the emerging world, while possibly benefiting the countries involved in the process in aggregate terms, is generating winning and losing regions.     

CONVERGENCE AND ECONOMIC PERFORMANCE IN GREECE: EVIDENCE AT REGIONAL AND PREFECTURE LEVEL

The purpose of this paper is to test regional convergence and to investigate interregional disparities in terms of per capita income in Greece. The novelty of our study lies in the use of a disaggregated dataset for an extended time period (1971–2003) at two regional levels (NUTS II & NUTS III). Our results indicate that there is β convergence between prefectures but not among regions, while no evidence of σ convergence is found at both regional levels. Also, the GDP geographic concentration and population density have a negative impact on growth, which outweighs the positive growth effect of population geographic concentration and GDP spatial inequality. Thus, policies aiming at the decentralization of economic activity in Greece might enhance growth and regional equality simultaneously. Finally, we do not find economic dualism across geographic areas; however, rich prefectures seem to converge faster than poor ones.     

Spatial Inequalities and Economic Growth

Abstract

In this editorial, we summarise and comment on the five articles published in issue 9.2. The five articles are a selection of papers presented at the ‘Workshop on Inequality and Regional Growth and Cohesion’ organised by the Regional Quantitative Analysis research group (AQR-IREA) of the University of Barcelona in November 2011. The first two articles, by De Dominicis and by Monastiriotis, focus on the analysis of regional growth and examine the influence of agglomeration and national development, respectively. The article by Ezcurra and Rodríguez-Pose looks instead at how trade openness impacts on within-country regional disparities, while the article by Kyriacou and Roca-Sagalés examines in turn how regional disparities impact on the quality of government at the national level. The final article by Sacchi and Salotti examines the impact of different forms of decentralisation on income inequalities at the household level. From our perspective, these articles contribute to a better understanding of the complex link between inequality and economic growth, while they also leave open several questions that could clearly stimulate future research on the topic.     

The spatial dynamics of new firm births during an economic crisis: the case of Great Britain, 2004–2012

Abstract

Spatial variations in entrepreneurial activity have been shown to be a time persistent phenomenon in many countries. This paper analyses how these spatial variations have been affected by the recent financial crisis within the context of theories of regional resilience and adaptability. The analysis applies Exploratory Spatial Data Analysis techniques to data on firm births across Local Authority Districts of Great Britain during the period 2004–2012. The results demonstrate that, whilst the overall shape of the spatial distribution of firm births remained persistent, there is evidence of an increase in regional inequality. This is primarily associated with a divergence between London and the rest of the distribution. London, together with part of its surrounding area, appears to constitute a resilient entrepreneurial regime that has generated a dynamic, adaptive response to the crisis with high rates of new firm formation in contrast to other regions which have remained locked into lower rates of entrepreneurship. This supports the view that regional entrepreneurship is a path dependent process: entrepreneurial regions are more adaptable to the effects of an exogenous shock than less entrepreneurial regions. Accordingly, entrepreneurship is a critical factor influencing the resilience of regions in responding to an economic crisis.     

Industrial clusters,flagship enterprises and regional innovation

ABSTRACT

For a sample of all 88 counties in the State of Ohio over a 5-year period, this study documents the effect of flagship enterprises and concentrated industrial clusters on regional innovation. Consistent with the agglomeration arguments and the knowledge spillover theory of entrepreneurship, both appear to affect regional innovation positively. Additionally, regional educational attainment positively moderates the effect of industrial clusters on innovation. At the same time, flagship enterprises primarily affect regional innovation in regions with low education levels. Results are obtained with the help of conservative econometric techniques and are robust to the choice of alternative dependent variables and estimators. The findings have major policy implications and provide insights into alternative routes to encouraging regional innovation.     

Intra-regional Wage Inequality in Portugal

Abstract

Studies on intra-regional inequality are scarce, particularly for European countries. This paper aims at further investigating inequality by focusing on wage differences within regions. We consider the case of Portugal, which is considered one of the countries with the highest level of economic inequality. In particular, we analyse the evolution of intra-regional wage inequality between 1995 and 2005, employing a quantile-based decomposition method. Our results show that wage inequality evolution has been different across the various regions, increasing in some regions and decreasing in others. Different changes in the workforce composition explain these diverse developments.     

How do interregional spillovers influence the distribution of technology? The case of Chinese manufacturing

The Chinese economy displays considerable inequality across regions. In this paper, we analyzed the distribution of intermediate input shares in China. We use regional input–output tables from 2007 and find that regions with higher GDP per capita generally had higher input shares, regardless of sector. Then, using intermediate input shares as a proxy of technology, we analyzed the pattern of regional technology distributions across manufacturing sectors as well as the extent of interregional technology spillovers. Our results indicate that interregional backward spillovers have significantly positive impacts on the shape of the technology distributions in eastern (coastal) regions. By contrast, the vertical spillovers of the central and western regions are largely dominated by intra-regional forward effects. Our results suggest that the shift of Chinese manufacturing from coastal to inland regions with lower production costs cannot reduce the imbalance among regions unless the technology gap is narrowed.     

Agglomeration elasticities and firm heterogeneity

This paper examines three key issues encountered when estimating the relationship between agglomeration and multi factor productivity (‘agglomeration elasticities’): the sorting of heterogeneous firms, the convexity of agglomeration effects, and the challenges of identifying the impact of persistent spatial differences in effective density. We use a firm-level panel containing production data together with detailed information on the geographic location of employment, covering a high proportion of the New Zealand economy. We are able to control for heterogeneity along firm, region, and industry dimensions, and to estimate separate agglomeration elasticities across industries and regions. Sorting leads to upward biased elasticity estimates but using firm fixed effects can lead to downward bias due to the highly persistent nature of agglomeration variables. Our preferred estimates control for sorting across regions and industries. Overall, we find a positive agglomeration elasticity of 0.066. Within industries and, to a lesser extent within regions, there is pronounced variation in the strength of agglomeration effects, and evidence of decreasing returns to agglomeration. High density areas attract firms that benefit most from agglomeration.     

Spatial Dispersion of Interconnection Clusters in the European Internet

Abstract

This paper studies the effects of geographical distance on the interconnection agreements between providers participating at Internet Exchange Points (IXPs) in Europe. We assess separately two main issues: the extent of existing clustering, as well as the role of proximity in bilateral interconnection decisions. Our results show the dominance of spatial random patterns in the interconnection agreement distributions. On the other hand, we find that proximity positively affects the probability of establishing interconnection for all the IXPs studied but one. Interesting, the latter is the only one showing an initially clustered morphology. This indicates a prevalence of centripetal forces—local spillovers and mutual knowledge—over geographical differentiation for any pre-existing interconnection pattern morphology except the clustered ones.     

Is agglomeration really good for growth? Global efficiency,interregional equity and uneven growth

According to NEG literature, spatial concentration of industrial activities increases growth at the regional and aggregate level without generating regional growth differentials. This view is not supported by the data. We extend the canonical model with an additional sector producing non-tradable goods which benefits from localized knowledge spillovers coming from the R&D performing industrial sector. This view, motivated by the evidence, generates both an anti-growth and a pro-growth effect of agglomeration for both the deindustrializing and the industrializing regions and leads to two novel results: (1) when agglomeration takes place, growth is lower in the periphery; (2) agglomeration may have a negative effect on the growth rate of real income, both at the regional and at the aggregate level. Our conclusions have relevant policy implications: contrary to the standard view, current EU and US regional policies favouring industrial dispersion might be welfare-improving both at the regional and the aggregate level and may reduce regional income disparities.     

A Dynamic Panel Data Approach to the Forecasting of the GDP of German Länder

Abstract

In this paper, we make multi-step forecasts of the annual growth rates of the real GDP for each of the 16 German Länder simultaneously. We apply dynamic panel models accounting for spatial dependence between regional GDP. We find that both pooling and accounting for spatial effects help to improve the forecast performance substantially. We demonstrate that the effect of accounting for spatial dependence is more pronounced for longer forecasting horizons (the forecast accuracy gain is about 9% for a 1-year horizon and exceeds 40% for a 5-year horizon). We recommend incorporating a spatial dependence structure into regional forecasting models, especially when long-term forecasts are made.     

Public cluster policy and firm performance: evaluating spillover effects across industries

ABSTRACT

While the direct positive effects of public cluster policy on subsidized industries are beyond controversy, the impact of such policy interventions on non-subsidized industries within the same region, that is, the indirect effect of public cluster policy, remains vague and unexplored. This study examines the impact of a prominent public cluster policy in Germany, the so-called Leading-Edge Cluster Competition. Based on a unique dataset, we analyse the spillover effects of this cluster policy initiative on those firms and industries, which have not been the primary target of the cluster policy. Our results suggest that public cluster policy seems to have an indirect negative effect on firms that have not primarily been related to the targeted industries; therefore, the concept of ‘agglomeration shadows’ might also apply to industries and related firms. Despite the existence of knowledge flows induced by additional governmental funding within a region, non-subsidized industries, that is, non-targeted firms, seem to be unable to compete against targeted industries and, therefore, suffer from a lack of human, financial and social capital. Based on our findings, we propose policy recommendations on how to best identify policy instruments aimed at augmenting innovation-driven growth across a broad spectrum of industries and regions.     

Strategic Location Behaviour: The Case of Japanese Investments in Europe

SUMMARY

We address the question of competition within the location choices of firms. In a framework of agglomeration effects, both spatial and temporal dimensions of the firms' decisions are studied. We show that the competition consequences of preemptive move and optimal time of entry can interfere with the geographical decisions. Our results contrast with those of agglomeration economics models which generally provide extreme results of mono-location. The equilibria described here tend to demonstrate that the relation between competition strength and spatial differentiation remains pertinent in a context of agglomeration economies. A conditional logit empirical study analyses the geographical choice of Japanese firms in Europe. Agglomeration variables, public policies and labour market determinants are tested, highlighting the existence of temporal and spatial proximity in the behaviour of firms. The competition conditions experienced by firms of each specific sector also appear to be important in the location decision of Japanese investors.     

Balancing dual missions for social venture growth: a comparative case study

ABSTRACT

Balancing social and economic missions in the pursuit of growth is one of the greatest challenges faced by social ventures. Although social ventures strive for growth to scale their social impact, pursuing growth often results in mission drift and the sacrifice of social objectives, which in turn eventually undermine the ventures’ raison d’être. In this study, we investigate how and with what outcomes social ventures that pursue growth can manage the balance of social and economic missions. Through a comparative case study of six for-profit social ventures, we find significant differences in how dual missions are selected, connected, and intertwined, leading to varying degrees of mission spillover effects between social and economic missions. Our findings show that two-sided mission spillover effects are a central mechanism in dual mission management, enabling social ventures to pursue balanced growth, avoid mission drift, and achieve social impact. With these findings, this study adds to the emergent literature on social entrepreneurship, dual mission management, and social venture growth.     

转移支付能提升产业集聚水平吗?

本文应用Riou(2006)的研究框架,分析转移支付对产业集聚水平的影响,发现转移支付有利于提高产业集聚水平,但地区间竞争会降低转移支付效率;同时转移支付存在一个最优规模。利用1995～2008年中国省级面板数据进行实证检验,研究表明,中国的转移支付水平与产业集聚之间呈现"倒U形"关系,转移支付和地区竞争对产业集聚的影响存在地区性差异,东部地区的转移支付效率相对较高。因此,需要综合利用政策手段,提高中西部地区的产业集聚水平。     

Regional Growth and National Development: Transition in Central and Eastern Europe and the Regional Kuznets Curve in the East and the West

Abstract

Regional disparities in Central and Eastern Europe rose substantially since 1990. Still, prima facie evidence of beta-convergence is often found in the CEE data. To reconcile this seeming paradox, we sketch out and test empirically a hybrid model of regional growth that draws on the regional Kuznets curve and incorporates aspects of cumulative causation and neoclassical convergence. In both CEE and the ‘old’ EU15, regional convergence is strongly linked to the level of national development, non-linearly. But while in the EU15 convergence speeds-up at intermediate/high levels of development, in CEE we find divergence at intermediate levels of national development and no significant return to convergence thereafter. Although this may show that overall development levels are not sufficient yet to mobilise regional convergence, it is also possible that non-convergence is attributable to centripetal forces instigated by the process of transition.     

A regional model of endogenous growth without scale assumptions

In this paper we model growth using a scale-neutral approach to innovation allowing differences between regions to emerge due to regional mechanisms. In this model, agglomeration is growth enhancing as the scale effect for innovation arises from greater access to knowledge rather than any assumed scale effects in growth-modelling techniques. Furthermore, entrepreneurs are assumed to choose the location of firms endogenously so as to minimize the costs of innovation, transport and living. The effects of such mechanisms are such that any policies that increase knowledge spillovers between locations will enhance growth and equality, but may be destabilizing for agglomeration.     

Industry localization,distance decay,and knowledge spillovers: Following the patent paper trail

This paper investigates Alfred Marshall’s hypothesis that knowledge spillovers increase where industries are localized. At the same time, we take a fresh look at the role of distance in the diffusion of knowledge spillovers. Relying on a cited-citing gravity-like equation with high-dimensional fixed effects that control for multiple sources of observed and non-observed heterogeneity, we implement a Poisson pseudo-maximum-likelihood (PPML) estimator. We find that knowledge spillovers correlate positively with industry localization and that the agglomeration of an industry can offset the adverse effect of distance. The results also corroborate the distance decay effect uncovered in earlier research. Our new approach to estimate the PPML with two high-dimensional fixed effects should prove valuable in applications to a variety of other problems in economics, such as the estimation of gravity equations widely used in modeling migration, trade and other flows among countries and regions.