Spatial Concentration Of Economic Activity Research Articles

Environmental Policy, Spatial Spillovers and the Emergence of Economic Agglomerations

We explain the spatial concentration of economic activity, in a model of economic geography, when the cost of environmental policy - which is increasing in the concentration of emissions - and an immobile production factor act as centrifugal forces, while positive knowledge spillovers and iceberg transportation costs act as centripetal forces. We study the agglomeration effects caused by trade-offs between centripetal and centrifugal forces. The above effects govern firms’ location decisions and as a result, they define the distribution of economic activity across space. We derive the rational expectations equilibrium and the social optimum, compare the outcomes and characterize the optimal spatial policies.

Why an economic core: domestic transport costs

What determines the spatial distribution of economic activity? And why is economic activity sometimes lumpy, distributed in a core-periphery pattern in some countries? This paper uses new sub regional data on the spatial distribution of economic activity for a large cross section of countries, as well as information on roads, rails and surface topography to help understand the role of domestic transport costs in shaping economic geography. The evidence suggests a significant role for physical geography and transport costs in determining the location of economic activity. Countries with rougher surfaces have less developed road and rail transport networks, and greater spatial concentration of economic activity.

Agglomeration and growth: Cross-country evidence

We investigate the impact of within-country spatial concentration of economic activity on country-level growth, using cross-section OLS and dynamic panel GMM estimation. Agglomeration is measured alternatively through urbanization shares and through indices of spatial concentration based on data for sub-national regions. Across estimation techniques, data sets and variable definitions, we find evidence that supports the “Williamson hypothesis”: agglomeration boosts GDP growth only up to a certain level of economic development. The critical level is estimated at some USD 10,000, corresponding roughly to the current per-capita income level of Brazil or Bulgaria. Hence, the tradeoff between national growth and inter-regional equality may gradually lose its relevance. Our results also imply that, in terms of foregone growth, the cost of policies that inhibit economic agglomeration is highest in the poorest countries.

International convergence and local divergence

This paper presents an East–West endogenous-growth model that reproduces recent stylized facts applicable to the trade liberalization process of many developing countries: convergence with the rest of the world, higher internal divergence, increasing spatial concentration of economic activity and higher growth rates. We claim that the ongoing reduction of manufacturing trade costs may generate a net inflow of global demand towards the industrialized cores of developing countries. This will induce a reallocation of labor from traditional to modern sectors. In turn, such a sectoral shift may enlarge the catch-up (imitation) potential of developing countries and raise global growth rates, due to Grossman and Helpman’s complementarity between imitative and innovative activities. Although advanced economies may become relatively worse off, the effect on growth rates may allow them to gain in absolute terms.

Die räumliche Konzentration von Industrie und Dienstleistungen in Deutschland

In diesem Beitrag wird die raumliche Konzentration der Wirtschaftszweige in Deutschland im Jahr 1998 untersucht. Unsere Untersuchung schliest im Unterschied zu allen bisherigen Analysen neben den Wirtschaftszweigen des Produzierenden Gewerbes sowohl Branchen des landwirtschaftlichen Bereichs als auch Dienstleistungssektoren ein. Zur Messung der Konzentration kommen die von Ellison und Glaeser (1997) entwickelten Konzentrationsmase zur Anwendung. Die Ergebnisse zeigen, dass nahezu samtliche Wirtschaftszweige in Deutschland eine signifikant hohere geografische Konzentration aufweisen als man es bei einer rein zufalligen Standortwahl erwarten wurde. Insgesamt ist das Ausmas der regionalen Konzentration aber gering. Unabhangig von den verschiedenen regionalen und sektoralen Aggregationsebenen bleibt das Konzentrationsmuster stabil: Die an naturliche Standortvorteile gebundenen Wirtschaftszweige sind am starksten raumlich konzentriert, wahrend handels- und versorgungsorientierte Dienstleistungen eine hohe raumliche Dispersion besitzen. Nicht technologie- und F&E-intensive sondern die eher traditionellen Industriezweige weisen den hochsten Grad an raumlicher Konzentration im Verarbeitenden Gewerbe auf. Zur Erklarung unterschiedlicher Ausmase an Konzentration wird auf einen qualitativen Dummy-Variablenansatz zuruckgegriffen. Die Klassifizierung der Wirtschaftszweige aus dem Industrie- und Dienstleistungsbereich orientiert sich dabei an ihrem Einsatz von Technologie und Wissen sowie von Humankapital in der Produktion bzw. bei der Erbringung der Dienstleistung. Auch hier zeigt sich, dass die an naturliche oder infrastrukturelle Standortgegebenheiten gebundenen Wirtschaftszweige die hochsten raumlichen Konzentrationen aufweisen. Die tendenziell von einem hohen Arbeitseinsatz mit geringen Qualifikationserfordernissen gepragten Industriezweige weisen signifikant hohere Konzentrationsraten auf als sachkapital- und technologieintensive Industriezweige.

Spatial knowledge diffusion through collaborative networks

The theory of endogenous growth and the geography and growth synthesis both consider that local growth and spatial concentration of economic activities emanate from localised knowledge spillovers (Lucas 1988; Martin and Ottaviano 1999). Since the end of the 1980's, the spatial dimension of knowledge diffusion has been investigated from an empirical point of view, and the existence and role of local spillovers has been generally confirmed (see among others Jaffe 1989; Audretsch and Feldman 1996). The concern that now arises is to unravel the mechanisms underlying and explaining the geographical knowledge spillovers. The aim of this special issue is to present the latest new findings on such questions and to identify some new lines of research for future work. Before presenting the content of this special issue, we very briefly review the main results of the empirical literature on the geography of innovation. We also explain the context of this special issue by pointing out some of the limitations faced by this literature and, by stressing the complex dynamic and network dimensions of the observed processes of production and diffusion of knowledge.

The new economic geography versus urban economics: an evaluation using local wage rates in Great Britain

This paper tests two major competing theories explaining the spatial concentration of economic activity, namely new economic geography theory (NEG) which emphasizes varying market potential, and urban economics theory (UE) in which the main emphasis is on producer service linkages. Using wage rate variations across small regions of Great Britain, the paper finds that it is UE theory rather than NEG theory that has most explanatory power. Evidence for this comes from encompassing both models within an artificial nesting model. Despite the popularity of NEG theory, this paper shows that although NEG works well using regional data, there is evidence that it does not necessarily provide the best explanation of local wage variations, since producer services inputs associated with UE theory and labour efficiency variations are important effects at a local level, and these are excluded from the formal NEG model.

Infrastructure, Productivity and Urban Dynamic in Cote D'Ivoire

Recent contributions in economic geography reflect renewed interest in issues of location and spatial concentration of economic activities, yet there are still few empirical studies of developing countries, particularly in Africa.This paper aims to contribute to this body of knowledge by (i) documenting wide regional disparities in economic activity and infrastructure (especially between the north and the south), which were partly determined by regional development policy, and (ii) examining empirically to what extent spatial factors such as agglomeration economies contribute to labor productivity – and therefore to urban dynamics – using recent panel data from Cote d’Ivoire for the period from 1980 to 1996.The analysis indicates significant urbanization economies, notably those related to infrastructure, but the size of these economies varies across sectors and activities. In addition to providing linkages between markets, roads are critical in fostering dynamic growth of the urban areas in the hinterland, resulting in the concentration of economic activities. Localization economies also stimulate industrial productivity. And yet, as the poor growth record of Cote d’Ivoire in this period shows, the country failed to take advantage of these economies, and its declining capital stock, including infrastructure, may have contributed to the economic decline. The paper shows, for example, that inadequate road infrastructure clearly constrained the productivity of primary (agriculture and resource extraction) and tertiary (services) industries that take up the bulk of the total economic activity.

Trade Liberalization and the Geography of Production: Agglomeration, Concentration, and Dispersal in Indonesia’s Manufacturing Industry

The effect of the liberalization of trade on the spatial concentration of economic activities is not straightforward. It has been widely argued that protectionism increases spatial concentration as firms locate close to the main domestic markets. However, it has also been argued that an expansion of international trade primarily favors existing industrial centers and therefore leads to increased regional inequalities. Against the background of ongoing debates in both mainstream economics and in geography, we examine the spatial concentration of manufacturing in Indonesia between 1980 and 1996, a period when Indonesia substantially liberalized its trade regime. The high concentration did not decrease during this period, and establishments that engaged in international trade were actually comparably concentrated. We discuss some possible explanations for the spatial concentration in Indonesia and conclude that a host of factors may affect the outcome of trade liberalizations. In particular, the spatial configuration of the national settlement system is a potentially important factor in this regard.

Vers la construction d'un cadre d'analyse de la croissance endogène localisée

Résumé L’économie géographique et les nouvelles théories de l’agglomération bâtissent un cadre d’analyse théorique original en économie spatiale compatible avec un environnement caractérisé par les rendements croissants et la concurrence imparfaite. Dans ce courant d’analyses, deux programmes essentiels de recherche apparaissent : le premier cherche à déterminer les raisons qui rendent un équilibre spatial symétrique instable. Il s’agit d’identifier d’une part les facteurs qui suscitent l’apparition de processus de polarisation et de concentration des ressources au sein d’un espace global initialement homogène et de comprendre d’autre part les mécanismes qui favorisent le renforcement (ou l’affaiblissement) de ces processus. Le deuxième s’interroge sur les facteurs qui permettent à une concentration spatiale de perdurer dans le temps. Ce programme dépasse le cadre statique de l’allocation spatiale des ressources pour formuler un projet plus ambitieux : celui de lier, en dynamique, croissance industrielle et processus d’agglomération, en transposant ainsi les préoccupations formulées par les auteurs de la croissance endogène dans le domaine de l’économie spatiale. L’objectif de ce papier est de revisiter dans une perspective historique et analytique et à travers une revue sélective de littérature, la progression des modèles d’économie géographique et des nouvelles théories d’agglomération en montrant leur glissement continu de la première vers la seconde question. Ils rejoignent ainsi définitivement le cadre résolument marshallien des nouvelles théories de croissance endogène.

The role of spatial effects in the empirical analysis of regional concentration

Economists have recently devoted an increasing attention to the issue of spatial concentration of economic activities. However, surprisingly enough, most of the empirical work is still based on the computation of very basic statistical measures in which the geographical characteristics of data play no role. By making use of a series of empirical examples we show that spatial concentration consists of two different features that are rarely kept as separate in the statistical analysis: an a-spatial concept of variability which is invariant to permutations, and the concept of polarization that refers to the geographical position of observations.

Clustering of Economic Activities in Polycentric Urban Regions: The Case of the Randstad

Local contexts are becoming more important as the impact of the process of globalisation on the spatial distribution of economic activities seems to generate not so much processes of homogenisation as of heterogenisation between regions in advanced economies. The combination of specialisation and spatial concentration of economic activity in advanced economies has attracted much attention from economists and geographers. Here, we explore at what level of spatial aggregation contemporary tendencies of clustering of economic activities articulate themselves within the archetypal polycentric urban region of the Dutch Randstad. To examine this question, we look at profiles of business start-ups in the individual cities of the Randstad. Our focus is on business start-ups as they respond most directly to the changes taking place in the economic environment and especially those regarding the supply of labour. Our findings point to the direction of cluster formation at a supraurban level. The profiles of business start-ups are clearly converging. A process of intraregional-i.e. at the level of the polycentric urban region-homogenisation with respect to new economic activities is taking place. Within the Randstad, notably a decreasing divide between a north wing and a south wing is revealed.

Clustering of Economic Activities in Polycentric Urban Regions: The Case of the Randstad

Local contexts are becoming more important as the impact of the process of globalisation on the spatial distribution of economic activities seems to generate not so much processes of homogenisation as of heterogenisation between regions in advanced economies. The combination of specialisation and spatial concentration of economic activity in advanced economies has attracted much attention from economists and geographers. Here, we explore at what level of spatial aggregation contemporary tendencies of clustering of economic activities articulate themselves within the archetypal polycentric urban region of the Dutch Randstad. To examine this question, we look at profiles of business start-ups in the individual cities of the Randstad. Our focus is on business start-ups as they respond most directly to the changes taking place in the economic environment and especially those regarding the supply of labour. Our findings point to the direction of cluster formation at a supraurban level. The profiles of business start-ups are clearly converging. A process of intraregional-i.e. at the level of the polycentric urban region-homogenisation with respect to new economic activities is taking place. Within the Randstad, notably a decreasing divide between a north wing and a south wing is revealed.

Agglomeration and taste heterogeneity: Equilibria, stability, welfare and dynamics

The spatial concentration of economic activity is modeled as a tag-of-war between consumer taste heterogeneity for location and external production benefits from the agglomeration of firms at the same location. The existence, number, stability and welfare of general equilibria are fully examined for a simple system of two regions which are identical a priori. When agglomeration effects are negligible at small sizes, the two locations grow equally until a critical bifurcation results in the accelerated growth of one location which ultimately attracts all activity. The supercritical bifurcation characterizes the case of agglomeration effects which are initially strong but become fully exhausted with size. In this case concentration occurs at the final phases of a decline process which exhibits a hysteresis effect relative to the opposite growth process. Both growth and decline involve middle cycles of non-equilibrium and stochastically sparked adjustment.

Urbanization and Spatial Development in the Asian and Pacific Region: Trends and Issues

The spatial dimension of development became a major concern in developing countries in the mid-1960s. A combination of factors brought this about, including the acceleration of both population growth and rural-urban migration, growing employment and income distribution problems, the tendency of growth in some regions to lag behind that in others, and the phenomenon known as core-periphery polarization. Further, there has been an increasing realization that urbanization and the spatial concentration of economic activity are directly related to the distribution of the benefits of development and the satisfaction of human needs, since both people and resources have specific locations. Because of such constraints as friction of space, market segmentation, inadequate information and imperfect mobility, the access to resources and services or to the benefits of development in general continues to be patently uneven. The development experience of countries in the Asian and Pacific region and elsewhere indicates that there is no spontaneous smoothing mechanism built in the economic growth process or that if such a mechanism exists, it operates at a painfully slow pace…