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City officials are continuously working to attract airlines willing to fly to new destinations. The inherent expectation is that a more extensive aviation network stimulates economic growth. This paper investigates empirically the causal implication of this hypothesis. Using data on nonstop flights by origin and destination over the period 1984–2013, we propose a new measure for a metropolitan area's connectivity to the national aviation network. We then use this measure to investigate its contribution to local economic development, as captured by the growth in population, in total employment, in per‐capita income, and new firm entry. To ensure causality, we use instrumental variable methods that exploit geography and destination airports growth as a way to capture the exogenous variation in the likelihood to add new travel routes. Our results suggest that a metropolitan area's air connectivity, resulting from an expansive local aviation network, has a positive effect on population, on employment and on the number of businesses established in that location. [ABSTRACT FROM AUTHOR]

This paper examines the impact of economic and development zones (EDZs) on the productivity of incumbent firms in China. To deal with the selection issue, I first take into account potentially different selection mechanisms across two popular types of EDZs—economic and technological development zones (ETDZs) and high‐tech development zones (HTDZs)—by relying on multiple treatment propensity scores matching techniques. Next, I apply the difference‐in‐differences estimator to the matched sample and conduct an event study analysis. The results show that the respective effects of ETDZs and HTDZs on firm productivity are positive, but subject to a nonlinear trend over time. The size of the productivity gains depends critically on the type of EDZ, however. A new HTDZ (ETDZ) leads to an average productivity gain of up to 30.2% (18.4%) for incumbent firms in the 5 years after the zone was created. These findings suggest that the size of productivity spillovers for spatially targeted firms differ quite significantly depending on the strategic development and policy goals of the EDZ: HTDZs that focus on promoting indigenous‐based factors of learning lead to higher productivity spillovers compared with ETDZs that focus on promoting extra‐local linkages. [ABSTRACT FROM AUTHOR]

ABSTRACT Low rates of internal migration in many European countries contribute to the persistence of significant regional labor market differences. I use the Mikrozensus, a large annual sample of households living in Germany, to further our understanding of the underlying reasons. This paper makes two main contributions: first, the paper quantifies the disutility of migrating. To this end, I estimate conditional logit models of the migration decision across the German federal states. Second, I then focus on the differences between immigrants and natives. I find significantly higher responsiveness to labor market differentials in the immigrant population than in the native population. Unobserved moving costs for immigrants are estimated to be only about 31 percent of this same cost for natives. The findings bear on the assessment of the economic impact of immigration, and the paper contributes to the current immigration-related policy debates that feature prominently in many European countries, and that likely will continue to be important in light of the ongoing EU expansion and the resulting east-west migration. [ABSTRACT FROM AUTHOR]

This paper identifies the extent to which cultural diversity induced by internal migration affects urban innovation in China. We measure cultural diversity by an index of "plurality" of provinces of origin. Using the 2000 and 2005 population census data, we find that innovative activities are higher in cities with a higher degree of cultural diversity. Further heterogeneity analysis shows that cultural diversity, not only of the highly skilled, but also of the low skilled, has a positive effect on innovation. Our study contributes to the scarce evidence on the effect of cultural diversity on innovation in developing countries. [ABSTRACT FROM AUTHOR]

This paper evaluates the economic impact of the $14 billion preparatory infrastructure investments for the 2010 FIFA World Cup in South Africa. We use satellite data on night light luminosity at municipality and electoral district level as a proxy for economic activity, applying synthetic control methods for estimation. For the average World Cup municipality, we find significantly positive, short‐run effects before the tournament, corresponding to a reduction of unemployment by 1.3 percentage points. At the electoral district level, we reveal distinct effect heterogeneity, where especially investments in transport infrastructure are shown to have long‐lasting, positive effects, particularly in rural areas. [ABSTRACT FROM AUTHOR]

This paper utilizes a novel dynamic propensity score matching approach for multiple cohorts of U.S. counties between 1989 and 1999 to examine local economy resilience to rare natural disasters. Affected counties are sorted based on disaster intensity and are carefully matched to similar counties that did not experience a disaster. A difference-in-difference estimator compares trends of affected counties' postdisaster business establishments, employment, and payroll to counterfactual trends in the matched counties. All affected counties experienced short-run drops in economic activity that was particularly noticeable in higher-intensity disasters. In the longer run, less distressed counties returned to their estimated counterfactual trends, but countieswith lower predisaster socioeconomic conditions still lagged in growth, particularly in cases of lowerintensity disasters. Policymakers can use this information to better prepare responses to future disasters. [ABSTRACT FROM AUTHOR]

This paper starts with a “primer” on what we know about the conceptual and empirical links between development and urbanization. While historical experience of developed countries is reviewed, today's rapid urbanization in developing countries offers an intense set of challenges. Rapid urbanization requires massive population movements and enormous local and inter-city infrastructure investments in a modern context of heavy government interventions in economies. This context raises under-researched issues, discussed in the second part of the paper. First concerns the spatial form of development. How much development should be focused in mega-cities, or huge urban clusters, as opposed to being more spatially dispersed, a critical question facing China and India today? How do we conceptualize and measure both the benefits and costs of increased urban concentration; and how are they linked to a country's evolving national industrial composition? Second, what is the evolution of spatial income inequality under massive rural-urban migration? Is inequality heightened today relative to the past by national government policies which “favor” certain cities and regions and by local government policies in those cities that may try to deflect migrants by offering them poor living conditions? [ABSTRACT FROM AUTHOR]

This paper models externalities of production across regional economies. Under the assumption that knowledge diffuses without political or administrative barriers, we derive externalities that affect the steady state and the process of growth of each economy. The empirical counterpart of the reduced form equation summarizing the process of growth allows us to test for the presence of regional spillovers and to measure their magnitude. Our results for a sample of European regions show that spillovers are far from negligible, are robust to the consideration of variables within each region, and may cause nondecreasing returns at the spatial aggregate level. The paper also relates previous empirical evidence on spatial dependence in growth studies to the externalities modeled here. [ABSTRACT FROM AUTHOR]

ABSTRACT This paper studies the link between knowledge, innovation, and growth in European regions using nonparametric methods. Our findings suggest that knowledge inputs and the share of innovative firms have a heterogeneous and nonlinear relationship with growth. This evidence has been exploited to examine the consequences of alternative policies using a counterfactual estimation setup, the results of which imply that increasing the formal knowledge base may be optimal in most regions. Less knowledge and innovation intensive regions will also benefit from a higher innovation potential and from a trustworthy and entrepreneurial economic environment. [ABSTRACT FROM AUTHOR]

ABSTRACT This paper investigates the role of the business size distribution on income and employment growth in U.S. counties from 1990 to 2000. We measure the business size distribution as the share of employees across nine establishment size categories that range from microfirms (one to four employees) to large firms (1,000+ employees) and using three indices similar to a Gini coefficient. Results show that the business size distribution has a significant impact on county-level growth patterns. Employment shares in small firms increase employment growth, but decrease income growth. One possible conclusion suggests policies emphasizing small firms and entrepreneurship during times of high unemployment. [ABSTRACT FROM AUTHOR]

ABSTRACT This paper studies the recent spatial development of India. Services, and to a lesser extent manufacturing, are increasingly concentrating in high-density clusters. This stands in contrast with the United States, where in the last decades services have tended to grow fastest in medium-density locations, such as Silicon Valley. India's experience is not common to all fast-growing developing economies. The spatial growth pattern of China looks more similar to that in the United States than to that of India. Our findings suggest that certain frictions are keeping medium-density places in India from growing faster. [ABSTRACT FROM AUTHOR]

ABSTRACT By drawing on the Schumpeterian distinction between invention (i.e., new ideas and knowledge creation) and commercialization of new ideas (i.e., innovation), this paper shows that knowledge and innovation are both important drivers of economic growth, but have heterogeneous spatial impacts. In particular, the growth benefits accruing from knowledge seem rather selective and concentrated across space whereas the growth benefits generated by innovation seem more diffusive, and regions innovating in the absence of a strong local knowledge base can be as successful as more knowledge-intensive regions in turning innovation into a higher growth rate, possibly by exploiting local informal knowledge and/or knowledge spillovers. These results are of great importance for the design of research and innovation policies within the frame of the Europe 2020 strategy. [ABSTRACT FROM AUTHOR]

ABSTRACT This paper empirically examines whether human capital defines the association between foreign direct investment (FDI) and income inequality. Rather than focusing on one country or region, we investigate with a broad cross section of countries to address parameter heterogeneity across countries. Using the instrumental variable threshold regressions approach, we find a significant threshold level of human capital, below which FDI exerts a disproportionately positive (negative) impact on the relatively poor (rich) and hence improves income distribution. Beyond this critical level, however, FDI benefits (harms) the nonpoor (nonrich) most and thus exacerbates income inequality. [ABSTRACT FROM AUTHOR]

ABSTRACT The paper investigates what are the most important factors in fostering growth in rural, remote regions with historically low growth rates. In particular, we focus on the lagging Appalachian region and compare it to both nearby counties and other similarly lagging U.S. counties. Factors such as self-employment, human capital, creativity, university spillovers and high-technology clusters are considered. Our results suggest that entrepreneurship and creativity factors are key to increasing growth in the Appalachian region and in similar lagging regions nationally. However, there is little evidence that other knowledge-based factors are conducive to growth in these regions. [ABSTRACT FROM AUTHOR]

Few studies empirically estimate the effects of metropolitan growth on nonmetropolitan communities at a national scale. This paper estimates the growth effects of 276 MSAs on population in 1,988 nonmetropolitan communities in the United States from 2000 to 2007. We estimate the distance for growth spillovers from MSAs to nonmetropolitan communities and test the assumption that a single MSA influences growth. We compare three methods of weighting cities' influence: nearest city only, inverse-distance, and relative commuting flow to multiple cities. We find the inverse-distance approach provides slightly more reliable and theoretically supportable results than the traditional nearest city approach. [ABSTRACT FROM AUTHOR]

High growth and progressive regions possess a culture that promotes innovation. In-novation depends on a region's ability to use its own existing knowledge and knowledge generated elsewhere. This paper demonstrates the importance of the ability to absorb external knowledge in ex-plaining innovation productivity for 106 U.S. metropolitan areas. Using a spatial interaction model of patent citation flows with origin and destination dependence, the destination fixed-effects coefficients provides a measure of a region's absorptive capacity. We identify local conditions that shape a region's absorptive capacity and demonstrate it has a positive and significant impact on innovation productivity. [ABSTRACT FROM AUTHOR]

ABSTRACT The paper uses a computable general equilibrium (CGE) model for a small city to examine how expansions in export and local sectors, changes in total factor productivity (TFP), and growth in population impact an economy. We examine the effects of each source of growth and find that the level and distribution of economic activity vary considerably. We also evaluate each source of growth in the context of a variety of policy metrics, which provide guidelines to policy makers, including the types of firms to be recruited in specific regions. [ABSTRACT FROM AUTHOR]

ABSTRACT This paper examines the continued strong population growth in U.S. nonmetropolitan areas possessing high levels of natural amenities during the 1990s and the reasons for near convergence of growth across the top tiers of the amenity hierarchy. Based on estimated parsimonious spatial hedonic growth regressions, strong demand for high-amenity areas continued in the 1990s, but the converging of population growth across the top tiers appeared related to capitalization of amenity differences among the tiers into factor prices. Yet, evidence obtained from controlling for spatial effects suggests that the relative quality of life in the top two tiers had deteriorated. [ABSTRACT FROM AUTHOR]

ABSTRACT This paper first investigates a relationship between economic growth and income inequality using U.S. states data, a state cost-of-living deflator, and nonlinearity. It then explores the distribution of income gains among different income groups. We find that the impact of inequality on growth is nonlinear. Lowering inequality or increasing it substantially reduces growth; thus stable inequality may be good for growth. Economic growth affects incomes of the poor, the middle-income group, and the rich similarly with the elasticity of one. Education and labor market policies become important in promoting growth and improving income gains of the poor. [ABSTRACT FROM AUTHOR]

ABSTRACT The paper implements a methodology for assessing the regional impact of investment grants on foreign direct investment (FDI) location, taking data for U.K. regional policy over the period 1985-2005. Using a Generalized Methods of Moments estimator it finds that each £25 million of grant changes the regional location of about six inward FDI projects. On average, projects have 150 jobs and each job diverted costs £27,500 (1995 prices). It also finds that the size of the area designated for grants has a positive location effect. The effect is small in relation to the overall scale of FDI, which may explain the weak grant effect found in recent plant-based location studies. [ABSTRACT FROM AUTHOR]

In this paper, we investigate the relationship between economic growth and industrial pollution emissions in China using data for 112 major cities between 2001 and 2004. Using disaggregated data, we separate foreign direct investment inflows from Hong Kong, Macao, and Taiwan from those of other foreign economies. We examine two industrial water pollution indicators (wastewater and petroleum-like matter) and four industrial air pollution indicators (waste gas, sulfur dioxide, soot, and dust). Our results suggest that most air and water emissions rise with increases in economic growth at current income levels. The share of output of domestic- and foreign-owned firms increases several pollutants in a statistically significant manner while output of firms from Hong Kong, Macao, and Taiwan either reduces pollution or is statistically insignificant. [ABSTRACT FROM AUTHOR]

How does the research about rural economies in developed countries compare to urban/regional economics? What can the new generation contribute? This paper briefly reviews modern research concerning rural development in one country, the U.S., and reports indicators of U.S. rural distress. It examines the market forces and market failures that cause rural distress and that may limit the applicability of existing urban/regional theories to rural problems. A feast of uniquely rural issues that require—and should inspire—theoretical innovations in rural, urban, regional, and spatial economics are identified and discussed. [ABSTRACT FROM AUTHOR]

This paper uses recent advances in dynamic panel econometrics to examine the impact of highway infrastructure on aggregate county-level employment using data for all 100 North Carolina counties from 1985 through 1997. Results are compared to models that do not take endogeneity of highway investment and dynamics of employment adjustment into account. Fully specified dynamic models are found to give insignificant results compared to these other models. Thus, when these issues are properly modeled, the results show that improvements in highways have no discernible impact on employment. [ABSTRACT FROM AUTHOR]

In this paper, we analyze the optimal structure of a monocentric city that has multiple jurisdictions. The cost of providing a public good depends on both the area of the jurisdiction and the quality of the service, both of which are endogenous variables. We show that the optimal quality of the public good decreases as distance from the central business district (CBD) increases if the public good and the housing lot are substitutes, and may increase if they are complements. The optimal population density always decreases as distance from the CBD increases. [ABSTRACT FROM AUTHOR]

South Africa is one of the wealthiest countries on the African continent. The high national level (and growth) of GDP per capita, however, masks significant differences in economic performance across South Africa's regions. This paper uses (spatial) Markov chain techniques to describe the evolution of the entire cross-section regional income distribution in terms of its intra-distributional characteristics during the post-Apartheid period. The results indicate a heavily diverging regional income distribution. Relatively poor regions are likely to remain poor or become even poorer and the richest regions will maintain their lead in terms of income levels. Explicitly taking account of space furthermore shows that these high-income regions are acting as local growth poles, absorbing economic activity from their immediate surroundings. Location, trade, education, and the variable fortune of the gold mining industry seem to be important determinants of the observed evolution. [ABSTRACT FROM AUTHOR]

It is common in empirical regional economics to use total employment as an explanatory variable while investigating issues such as the level and distribution of income and migration. This paper argues that sector-specific changes in employment and labor market performance can have different effects on economic growth, the collection of tax revenue, migration, and the level and distribution of household income. As such, it is important to model sectors separately. We find that expansions in employment opportunities for a high-wage sector such as computer manufacturing or bioengineering, a medium-wage sector manufacturing, and the lower-wage sector of retailing have differing economic consequences for a small city. We use a data intensive computable general equilibrium model to obtain these results. [ABSTRACT FROM AUTHOR]

The index proposed by Ellison and Glaeser (1997) is now well established as the preferred method for measuring the localization of economic activity. In this paper we develop an alternative localization measure that is consistent with the theoretical framework originally proposed by Ellison and Glaeser. Our measure follows directly from the Random Utility (Profit) Maximization (RUM) location decision model. Because the distributional assumptions in our model are fully compatible with RUM, we are able to offer a more efficient measure of industry clustering. [ABSTRACT FROM AUTHOR]

This paper presents a descriptive analysis of spatial trends in six U.S. metropolitan areas. The results show that generalized job dispersion was a more common spatial process than subcentering during the 1980s and 1990s when jobs continued to decentralize from the metropolitan core to the suburbs. Three distinctive patterns of spatial development were found. Job dispersion was predominant in Portland and Philadelphia, whereas the polycentricity of Los Angeles and San Francisco was further reinforced. New York and Boston with large and long-established CBDs were less prone to decentralization. Each metro seems to have developed a unique pattern of decentralization in light of their histories and circumstances, which has limited the growth of commuting times. [ABSTRACT FROM AUTHOR]

It has long been an article of faith amongst regional economists that increasing returns to scale are necessary to explain the punctiform location of economic activity and population. However, there is no consensus in the empirical literature over whether returns to scale are constant or increasing. A notable example of this lack of agreement is provided by the static-dynamic Verdoorn law paradox. While the dynamic Verdoorn law (specified using growth rates) yields estimates of substantial increasing returns to scale, the static Verdoorn law (specified using log-levels) indicates only the presence of constant returns to scale. In this paper, we explain the static-dynamic Verdoorn law paradox by showing that estimates of returns to scale obtained using the static law are subject to a spatial aggregation bias, which biases the estimates towards constant returns to scale. We illustrate our arguments by means of simulation exercises. The results obtained hold general lessons for applied economic analysis using spatial data. [ABSTRACT FROM AUTHOR]

Private markets constantly assess project investment opportunities across a spectrum of such possibilities. The market's perspective on the boundary of viable projects, however, may be more limited than socially optimal due to informational constraints. In the case of economic development projects in particular, this boundary could be extended by public researchers. This paper constructs a method to estimate the private and social value-added of such research, providing a new means to understand and assess the public/private sector interface. The framework uses agents’ evolving subjective perceptions through Bayesian updating to value research information, along with methods to estimate functional forms and relative optima. Two case studies of regional development research on value-added agriculture in Colorado highlight the utility of the approach. [ABSTRACT FROM AUTHOR]

Capital subsidies form a major instrument of industrial and regional policy for economically developed countries all over the world, including many European Union and Organisation for Economic Cooperation and Development countries. Research findings have challenged the effectiveness of capital subsidies in assisting productivity growth. This paper treats capital subsidies as a new input and estimates a stochastic production frontier that is not bound by the restrictions imposed by approaches used in previous research works. It is shown that capital subsidies affect total factor productivity growth through technical change and not through scale efficiency, while the disadvantaged location of firms affects technical efficiency. [ABSTRACT FROM AUTHOR]

This paper estimates the effects of knowledge spillovers on patent growth rates across 335 European regions over the 1989–1999 period. We propose a dynamic model based on an innovation production function. A Bayesian approach is used to take into account area-specific innovation and spatial spillovers. The estimation of the model proceeds via Markov Chain Monte Carlo simulation. The results show significant positive and negative spatial effects on innovative activity. The model allows for a rich spatial specification, which we illustrate by incorporating transport proximity measured by transportation time between regions to augment the typical spatial proximity measure of connectivity between regions. Doing this produces more pronounced spatial spillovers that exhibit a more polarized spatial pattern than a model relying on spatial proximity alone. [ABSTRACT FROM AUTHOR]

This paper reexamines the issue of output convergence among the 48 states in the continental United States. Implementing multiple panel data techniques to state per capita output during the period 1929–2001 reveals little evidence of stochastic convergence in all 48 states, but some evidence among collections of states at the regional level. This observation may suggest that output convergence in the United States has proceeded among geographically neighboring states rather than among distant states, notwithstanding the nearly complete integration of product and factor markets. Our findings appear to be robust to a subsample analysis, although the intensity of convergence varies with the choice of output measure and deflator. Industrial structures and geographic proximity are considered as potential explanations for the regional pattern of output growth dynamics. [ABSTRACT FROM AUTHOR]

The paper analyzes the role of central cities as engines of economic growth in their metropolitan area. We wonder if there are increasing returns to central city growth at the metropolitan level arising from the positive externalities associated with the unique features of central cities. To answer this question we analyze the causality between the economic growth of Spanish central cities and the growth of the other jurisdictions belonging to their metropolitan area (i.e., the suburbs). The analysis uses population and economic activity data for a sample of 28 Spanish metropolitan areas during 35 years. We use a Vector Error Correction Model (VECM) framework to estimate long-run equilibrium relationships between the growth of central cities and their suburbs. The combination of panel data and a VECM is an innovative approach that is still being developed in econometrics. The results suggest that central city growth has a long-run positive effect on the growth of the suburbs. We also inquire as to whether or not this positive effect depends on the size of the central city. The results suggest that the effect is much higher in the case of the largest cities, but that it is also important in the case of the smaller ones. [ABSTRACT FROM AUTHOR]

Clustering of economic performance across jurisdictions has generated considerable research on the spillovers and linkages among geographical neighbors. Much of this work, however, has been aspatial, implying that the influence of location attributes on growth has been largely ignored. In this paper, we examine the contribution of location to regional economic growth using municipio-level data for the Brazilian Northeast—a historically lagging region of the country. We test if productivity among northeastern municipios is converging to a steady state and whether spatial externalities are linked to productivity growth in individual municipios. We find that, conditional on structural characteristics, productivity among municipios is converging at about 3 percent per year. Further, productivity in individual municipios is positively associated with own-structural characteristics but negatively associated with productivity growth in neighboring municipios. This means that there are negative spatial externalities coming from productivity improvements in neighboring regions. [ABSTRACT FROM AUTHOR]

This paper examines the effects of state economic development incentives on the growth of 366 Ohio manufacturing and nonmanufacturing establishments that launched major expansions between 1993 and 1995. Growth is measured as the actual employment change that occurred in these establishments and as the employment growth announced when expansions were launched. Empirical findings indicate that incentives have very little (or even a negative) effect on actual growth and they have a substantial positive effect on announced growth. Findings also suggest that establishments that received incentives overestimated their announced employment targets more than establishments that did not receive incentives. [ABSTRACT FROM AUTHOR]

The paper quantifies regional welfare effects arising from the increasing trade flows between Austria and its Eastern neighbors after the opening up of Eastern Europe. We calibrate a static multiregional Computable General Equilibrium (CGE) model with benchmark data from 1994 for Austria, subdivided into nine Federal Provinces. The regions are linked by trade flows with the four Eastern neighboring countries and with the rest of the world. We simulate the effects of the increase of trade interpenetration as observed between 1989 and 1999 in a comparative static analysis. Regional welfare effects under fixed and flexible wages are presented. We also compare national CGE results with estimates obtained in a simple partial equilibrium approach. [ABSTRACT FROM AUTHOR]

Neoclassical theory assumes diminishing returns to capital and spatially constant exogenously-determined technological progress, although it is questionable whether these are realistic assumptions for modeling manufacturing productivity growth variations across European Union (E.U.) regions. In contrast, the model developed in this paper assumes increasing returns and spatially varying technical progress, and is linked to endogenous growth theory and particularly to 'new economic geography' theory. Simulations, involving 178 E.U.regions, show that productivity levels and growth rates are higher in all E.U. regions when the financially assisted (Objective 1) regions have faster output growth. This also reduces inequalities in levels of technology. Allowing the core regions to grow faster has a similar effect of raising productivity growth rates across the E.U., although inequality increases. Thus, the simulations are seen as an attempt to develop a type of 'computable geographical equilibrium' model which, as suggested by Fujita, Krugman, and Venables (1999), is the way theoretical economic geography needs to evolve in order to become a predictive discipline. [ABSTRACT FROM AUTHOR]