The evidence on how industry-level agglomeration affects government taxation is mixed. This column argues that local governments offer subsidies to favour pre-existing employment in locally agglomerated industries. This finding is in line with theories of policy capture rather than government taxation of agglomeration benefits.
Marius Brülhart, Helen Simpson, Friday, June 12, 2015
Trevon D. Logan, John M. Parman, Monday, March 9, 2015
Racial disparities in socioeconomic conditions remain a major policy issue throughout the world. This column applies a new neighbour-based measure of residential segregation to US census data from 1880 and 1940. The authors find that existing measures understate the extent of segregation, and that segregation increased in rural as well as urban areas. The dramatic decline in opposite-race neighbours during the 20th century may help to explain the persistence of racial inequality in the US.
Neil Lee, Andrés Rodríguez-Pose, Tuesday, February 17, 2015
Creativity is assumed to be the mother of invention, but research testing whether this is the case is surprisingly rare. This column addresses this gap in the literature by assessing whether firms in creative industries in the UK are more innovative than firms outside creative industries. The authors also examine whether the location of creative-industry firms in creative cities – and the size of creative cities – matters for the innovative capacity of these firms.
Hiroyasu Inoue, Kentaro Nakajima, Yukiko Umeno Saito, Wednesday, February 11, 2015
Despite vast improvements in information and communications technology, the tendency of firms in related industries to cluster together hardly changed between 1985 and 2005. This column examines the relationship between geographic clustering and innovation using establishment-level data from Japan. Research establishments – especially those in high-technology industries – are more localised than average. The degree of localisation is greater when establishments are weighted by their creativity, as measured by the number of patents created and the number of citations received.
Masayuki Morikawa, Sunday, November 23, 2014
The appropriate level of public sector wages is debated frequently in every country, and the debate has intensified in the wake of the global financial crisis. This column presents evidence that regional wage differentials in Japan are greater in the private sector than in the public sector. In regions where public sector wages are relatively high, skilled individuals may self-select into public sector jobs. At the same time, public sector employers in metropolitan regions such as Tokyo may have difficulty in hiring high quality employees.
Gabriel M. Ahlfeldt, Stephen Redding, Daniel M. Sturm, Nikolaus Wolf, Wednesday, August 20, 2014
Economic activity is highly unevenly distributed across space. Understanding what drives the agglomeration and dispersion is important for many economic and policy questions. This column describes a theoretical model of internal city structure incorporating agglomeration and dispersion and heterogeneity in local fundamentals. The authors use the division and reunification of Berlin as a natural experiment. Their findings show that both heterogeneity in locational fundamentals and agglomeration forces are important in shaping a city’s internal structure.
Hongyong Zhang, Monday, July 21, 2014
The Chinese government has been actively promoting innovation via policies such as R&D subsidies, tax relief, and location policies. Since 1995, central and local governments have established more than 100 clusters in over 60 cities. This column presents new evidence on the effect of the concentration of firms on product innovation (new products) in the manufacturing industries.
Coen Teulings, Friday, July 11, 2014
The financial crisis and the Great Recession have led to calls for more economic history in economic education. This column argues for a much broader use of history in economics courses, as a device for teaching both the logic and the empirical relevance of economics. A proposed curriculum would include the rise of agriculture, urbanisation, war, the rule of law, and demography.
Chris Forman, Avi Goldfarb, Shane Greenstein, Friday, May 23, 2014
The diffusion of the internet has had varying effects on the location of economic activity, leading to both increases and decreases in geographic concentration. This column presents evidence that the internet worked against increasing concentration in invention. This relationship is particularly strong for inventions with more than one inventor, and when inventors live in different cities.
Shahid Yusuf, Danny Leipziger, Monday, March 3, 2014
Urbanisation and GDP per capita are positively correlated across countries. However, when the sample is restricted to developing countries, urbanisation and growth are more loosely related – particularly in Africa. CEPR Policy Insight 71 argues that the low share of manufacturing in developing-country cities may help to explain this discrepancy. Strengthening urban finances, embracing technology, improving skills, and stimulating the formal sector will help cities to promote growth. Since decisions affecting urban development can have lasting impact, longer-term planning deserves greater attention than it is currently receiving.
Danny Leipziger, Shahid Yusuf, Monday, March 3, 2014
Urbanisation and GDP per capita are positively correlated across countries. However, when the sample is restricted to developing countries, urbanisation and growth are more loosely related – particularly in Africa. This column argues that the low share of manufacturing in developing-country cities may help to explain this discrepancy. Strengthening urban finances, embracing technology, improving skills, and stimulating the formal sector will help cities to promote growth. Since decisions affecting urban development can have lasting impact, longer-term planning deserves greater attention than it is currently receiving.
Takatoshi Tabuchi, Thursday, November 28, 2013
Two important long-run trends in economic geography are steady urbanisation and agglomeration to the big cities. This column presents recent research on population trends focusing on fixed regions over time. In seven of the eight countries studied, the region containing the largest metropolitan area significantly increased in population share at the expense of the rest of the country over the past few centuries. A ‘new economic geography’ model with multiple, asymmetric regions can replicate this new stylised fact.
Nicholas Crafts, Nikolaus Wolf, Tuesday, October 22, 2013
Europeans worry about competition from low-wage economies. This column looks at the basis of the success of the 19th-century Lancashire cotton industry faced with a similar situation. The message is that the productivity benefits of a successful agglomeration can underpin both high wages and competitive advantage in world trade. Policymakers can support such agglomerations by easing land-use restrictions, promoting investments in transport, and providing local public goods.
Clément Bosquet, Pierre-Philippe Combes, Friday, June 21, 2013
Every academic has an opinion about what makes a good department. This column brings evidence from French economics departments. It suggests that larger departments are associated with slightly more but no better publications per academic. And while diversity in terms of researcher quality lowers average publication quality, diversity in research topics increases it.
William Kerr, Oliver Falck, Christina Günther, Stephan Heblich, Monday, February 11, 2013
Governments around the world are fostering industrial ‘clusters’, hoping to create agglomeration economies. Using the political division of Germany in 1949, this column argues that heightened firm density can raise costs for incumbent firms in addition to the often-cited agglomeration benefits. This is important for policymakers contemplating efforts to promote their local areas by targeted cluster initiatives and bidding to attract large firms. Policy efforts that are neutral in orientation – such as physical infrastructure investments or improving the generation and dissemination of knowledge – may be more effective alternatives.
Jose Enrique Garcilazo, Joaquim Oliveira Martins, William Tompson, Saturday, November 20, 2010
The World Bank's Indermit Gill recently argued that economic growth will naturally be spatially unbalanced and that to try to spread it out – too thinly or too soon – would discourage it. This column responds by pointing out that economic concentration is neither necessary nor sufficient for growth.
Sergey Lychagin, John Van Reenen, Margaret E Slade, Joris Pinkse, Monday, October 25, 2010
Why do local policymakers fight so hard to attract research and development labs to their area? This column provides a possible explanation. Using patent data, it finds a strong link between R&D and growth caused by knowledge spillovers between firms.
Laura Alfaro, Maggie Chen, Friday, January 8, 2010
Agglomeration effects are important but difficult to measure. This column uses a new database with precise geographical information to investigate the locational interdependence of multinational firms. Knowledge spillovers and capital- and labour-market externalities exert a significant effect on the co-agglomeration of multinational headquarters, while input-output linkages also play a significant role in the case of subsidiary co-agglomeration.
Peter Debaere, Joon H. Lee , Myungho Paik, Wednesday, June 3, 2009
Gains from agglomeration may explain why investors choose the same location when going abroad, but why do firms from the same country cluster together? This column examines evidence from South Korean firms investing in China and finds that investors of the same nationality benefit from stronger forward and backward linkages with each other.
Marius Brülhart, Wednesday, January 7, 2009
Paul Krugman suggests that his Nobel-prize-winning “core-periphery” model was perhaps more relevant a century ago than today. This appears to be true in terms of overall manufacturing concentrations in Europe and North America, which are unravelling. Large-scale agglomeration forces, however, are alive and well in the developing world, as are localised sectoral clustering phenomena in industrialised countries.