On the new economic philosophy of crisis management in the European Union

This essay attempts to go beyond presenting the bits and pieces of still ongoing crisis management in the EU. Instead it attempts at finding the ‘red thread’ behind a series of politically improvised decisions. Our fundamental research question asks whether basic economic lessons learned in the 1970s are still valid. Namely, that a crises emanating from either structural or regulatory weaknesses cannot and should not be remedied by demand management. Our second research question is the following: Can lacking internal commitment and conviction in any member state be replaced or substituted by external pressure or formalized procedures and sanctions? Under those angles we analyze the project on establishing a fiscal and banking union in the EU, as approved by the Council in December 2012.

Essays in Economic Geography and Long-Term Development

This dissertation has two main themes: first, the economic impact of tourism on cities and, secondly, the determinants of European long-run development, with a focus on the pre-Industrial era. The common thread is the attempt to develop economic geography models that incorporate spatial frictions and are liable to be given empirical content. Chapter 1, written in conjunction with G. Alfredo Minerva, provides an empirical analysis of the relationship between tourism and economic activity across Italian municipalities, and lays down the basic elements of an urban theory of tourism in an a-spatial setting. Chapter 2 extends these ideas to a quantitative urban framework to study the economic impact and the welfare consequences of tourism into the city of Venice. The model is given empirical content thanks to a large collection of data at the Census tract level for the Municipality of Venice, and then used to perform counterfactual policty analysis. In chapter 3, with Matteo Santacesaria, we consider a setting where agents are continuously distributed over a two-dimensional heterogeneous geography, and are allowed to do business at a finite set of markets. We study the equilibrium partition of the economic space into a collection of mutually-exclusive market areas, and provide condition for this equilibrium partition to exist and to be unique. Finally, chapter 4 "The rise of (urban) Europe: a Quantitative-Spatial analysis", co-authored with Matteo Cervellati and Alex Lehner, sets up a quantitative economic geography model to understand the roots of the Industrial Revolution, in an attempt to match the evolution of the European urban network, and the corresponding city-size distribution, over the period A.D. 1000-1850. It highlights the importance of agricultural trade across cities for the emergence of large manufacturing hubs.

Spatial aspects of trade liberalization in Colombia: A general equilibrium approach

This paper offers some preliminary steps in the marriage of some of the theoretical foundations of new economic geography with spatial computable general equilibrium models. Modelling the spatial economy of Colombia using the traditional assumptions of computable general equilibrium (CGE) models makes little sense when one territorial unit, Bogota, accounts for over one quarter of GDP and where transportation costs are high and accessibility low compared to European or North American standards. Hence, handling market imperfections becomes imperative as does the need to address internal spatial issues from the perspective of Colombia`s increasing involvement with external markets. The paper builds on the Centro de Estudios de Economia Regional (CEER) model, a spatial CGE model of the Colombian economy; non-constant returns and non-iceberg transportation costs are introduced and some simulation exercises carried out. The results confirm the asymmetric impacts that trade liberalization has on a spatial economy in which one region, Bogota, is able to more fully exploit scale economies vis--vis the rest of Colombia. The analysis also reveals the importance of different hypotheses on factor mobility and the role of price effects to better understand the consequences of trade opening in a developing economy.

Aglomeração econômica e disparidade salarial no Espírito Santo : teoria e evidência a partir de um enfoque da Nova Geografia Econômica

O trabalho buscou analisar questões de desigualdade regional no Espírito Santo através da linha de pesquisa denominada Nova Geografia Econômica (NGE). Uma forma de realizar essa análise é através do estudo da relação entre diferenciais de salário e mercado potencial. Mais precisamente, o trabalho procurou verificar o impacto de fatores geográficos de segunda natureza – mercado potencial – nos salário médios municipais. Inicialmente, por meio de uma Análise Exploratória de Dados Espaciais, verificou-se que os salários são maiores próximos às regiões com alto mercado potencial (litoral/RMGV). Por meio da utilização de técnicas de estatística e econometria espacial foi possível observar para os anos de 2000 e 2010 a existência de uma estrutura espacial de salários no Espírito Santo. O coeficiente de erro autorregressivo foi positivo e estatisticamente significativo, indicando o modelo SEM (spatial error model) como o mais apropriado para modelar os efeitos espaciais. Os resultados indicam ainda que não só fatores educacionais afetam os salários, fatores geográficos de segunda natureza possuem um efeito até maior quando comparados aos primeiros. Conclui-se, como demonstra o modelo central da NGE que, forças exclusivamente de mercado nem sempre levam ao equilíbrio equalizador dos rendimentos, pelo contrário, levam à conformação de uma estrutura do tipo centro-periferia com diferença persistente de rendimentos entre as regiões. Adicionalmente, verifica-se que os municípios que apresentam maior salário, maior mercado potencial e melhores indicadores sociais são àqueles localizados no litoral do estado, mais precisamente os municípios próximos à RMGV. Sendo assim, o trabalho reforça a necessidade de que se pense estratégias que fomentem a criação de novas centralidades no Espírito Santo, a fim de atuar na redução das desigualdades regionais. O trabalho se insere num grupo de vários outros estudos que analisaram questões de desigualdade e concentração produtiva no Espírito Santo. A contribuição está na utilização do referencial teórico da NGE, que ainda não havia sido empregada para o estado, e na utilização de técnicas de estatística espacial e econometria espacial.

Analysing the impact of public capital stock using the NEG wage equation: a panel data approach

This paper examines the relationship between the level of public infrastructure and the level of productivity using panel data for the Spanish provinces over the period 1984-2004, a period which is particularly relevant due to the substantial changes occurring in the Spanish economy at that time. The underlying model used for the data analysis is based on the wage equation, which is one of a handful of simultaneous equations which when satisfied correspond to the short-run equilibrium of New Economic Geography theory. This is estimated using a spatial panel model with fixed time and province effects, so that unmodelled space and time constant sources of heterogeneity are eliminated. The model assumes that productivity depends on the level of educational attainment and the public capital stock endowment of each province. The results show that although changes in productivity are positively associated with changes in public investment within the same province, there is a negative relationship between productivity changes and changes in public investment in other regions.

Simulating Wages and House Prices Using the NEG

The paper incorporates house prices within an NEG framework leading to the spatial distributions of wages, prices and income. The model assumes that all expenditure goes to firms under a monopolistic competition market structure, that labour efficiency units are appropriate, and that spatial equilibrium exists. The house price model coefficients are estimated outside the NEG model, allowing an econometric analysis of the significance of relevant covariates. The paper illustrates the methodology by estimating wages, income and prices for small administrative areas in Great Britain, and uses the model to simulate the effects of an exogenous employment shock.

The effects of agglomeration on wages: evidence from the micro-level

This paper estimates individual wage equations in order to test two rival non-nested theories of economic agglomeration, namely New Economic Geography (NEG), as represented by the NEG wage equation and urban economic (UE) theory , in which wages relate to employment density. The paper makes an original contribution by evidently being the first empirical paper to examine the issue of agglomeration processes associated with contemporary theory working with micro-level data, highlighting the role of gender and other individual-level characteristics. For male respondents, there is no significant evidence that wage levels are an outcome of the mechanisms suggested by NEG or UE theory, but this is not the case for female respondents. We speculate on the reasons for the gender difference.

The geographical concentration of industry across Spanish Regions, 1856-1995

New economic geography models show that there may be a strong relationship between economic integration and the geographical concentration of industries. Nevertheless, this relationship is neither unique nor stable, and may follow a ?-shaped pattern in the long term. The aim of the present paper is to analyze the evolution of the geographical concentration of manufacturing across Spanish regions during the period 1856-1995. We construct several geographical concentration indices for different points in time over these 140 years. The analysis is carried out at two levels of aggregation, in regions corresponding to the NUTS-II and NUTS-III classifications. We confirm that the process of economic integration stimulated the geographical concentration of industrial activity. Nevertheless, the localization coefficients only started to fall after the beginning of the integration of the Spanish Economy into the international markets in the mid-70s, and this new path was not interrupted by Spain¿s entry in the European Union some years later

The empirics of spatial competition: evidence from European regions

The New Economic Geography literature allows detailed analysis of the factors that determine the location decisions of firms in integrated markets. However, the competitive process is modelled in a rather rudimentary way, and the empirical evidence has usually been obtained from reduced-form econometric specifications. This study describes a structural model that takes into account strategic interactions between firms. We investigate the relationship between the degree of perceived competition ¿ not only from local firms but from firms in other regions ¿ and geographic concentration. The preliminary results indicate that, in aggregate terms, local firms present stronger competition than firms in other regions. Moreover, it is confirmed that greater geographical concentration of production reduces market power, due to the intensification of local competition; however, its impact on production costs is unclear.

The empirics of spatial competition: evidence from European regions

The New Economic Geography literature allows detailed analysis of the factors that determine the location decisions of firms in integrated markets. However, the competitive process is modelled in a rather rudimentary way, and the empirical evidence has usually been obtained from reduced-form econometric specifications. This study describes a structural model that takes into account strategic interactions between firms. We investigate the relationship between the degree of perceived competition ¿ not only from local firms but from firms in other regions ¿ and geographic concentration. The preliminary results indicate that, in aggregate terms, local firms present stronger competition than firms in other regions. Moreover, it is confirmed that greater geographical concentration of production reduces market power, due to the intensification of local competition; however, its impact on production costs is unclear.

The geographical concentration of industry across Spanish Regions, 1856-1995

New economic geography models show that there may be a strong relationship between economic integration and the geographical concentration of industries. Nevertheless, this relationship is neither unique nor stable, and may follow a ?-shaped pattern in the long term. The aim of the present paper is to analyze the evolution of the geographical concentration of manufacturing across Spanish regions during the period 1856-1995. We construct several geographical concentration indices for different points in time over these 140 years. The analysis is carried out at two levels of aggregation, in regions corresponding to the NUTS-II and NUTS-III classifications. We confirm that the process of economic integration stimulated the geographical concentration of industrial activity. Nevertheless, the localization coefficients only started to fall after the beginning of the integration of the Spanish Economy into the international markets in the mid-70s, and this new path was not interrupted by Spain¿s entry in the European Union some years later

The geographical concentration of industry across Spanish Regions, 1856-1995

New economic geography models show that there may be a strong relationship between economic integration and the geographical concentration of industries. Nevertheless, this relationship is neither unique nor stable, and may follow a ?-shaped pattern in the long term. The aim of the present paper is to analyze the evolution of the geographical concentration of manufacturing across Spanish regions during the period 1856-1995. We construct several geographical concentration indices for different points in time over these 140 years. The analysis is carried out at two levels of aggregation, in regions corresponding to the NUTS-II and NUTS-III classifications. We confirm that the process of economic integration stimulated the geographical concentration of industrial activity. Nevertheless, the localization coefficients only started to fall after the beginning of the integration of the Spanish Economy into the international markets in the mid-70s, and this new path was not interrupted by Spain¿s entry in the European Union some years later

The geographical concentration of industry across Spanish Regions, 1856-1995

New economic geography models show that there may be a strong relationship between economic integration and the geographical concentration of industries. Nevertheless, this relationship is neither unique nor stable, and may follow a ?-shaped pattern in the long term. The aim of the present paper is to analyze the evolution of the geographical concentration of manufacturing across Spanish regions during the period 1856-1995. We construct several geographical concentration indices for different points in time over these 140 years. The analysis is carried out at two levels of aggregation, in regions corresponding to the NUTS-II and NUTS-III classifications. We confirm that the process of economic integration stimulated the geographical concentration of industrial activity. Nevertheless, the localization coefficients only started to fall after the beginning of the integration of the Spanish Economy into the international markets in the mid-70s, and this new path was not interrupted by Spain¿s entry in the European Union some years later

The Spatial Effects of Trade Openness: A Survey

This paper surveys the literature on the implications of trade liberalisation for intra-national economic geographies. Three results stand out. First, neither urban systems models nor new economic geography models imply a robust prediction for the impact of trade openness on spatial concentration. Whether trade promotes concentration or dispersion depends on subtle modelling choices among which it is impossible to adjudicate a priori. Second, empirical evidence mirrors the theoretical indeterminacy: a majority of cross-country studies find no significant effect of openness on urban concentration or regional inequality. Third, the available models predict that, other things equal, regions with inherently less costly access to foreign markets, such as border or port regions, stand to reap the largest gains from trade liberalisation. This prediction is confirmed by the available evidence. Whether trade liberalisation raises or lowers regional inequality therefore depends on each country's specific geography.