Industrial dynamics and economic geography: a survey

We review the literature on clusters and their effects on industrial dynamics as well on various lifecycle dynamics underlying the process of cluster formation and cluster dynamics. The review shows that there is little evidence that clusters enhance firm growth and survival. In the absence of localization economies, the emergence of clusters is best understood as an evolutionary process of capability transmission between parents firms and their spinoffs. We discuss various future research avenues and call for theorising based on firm heterogeneity as well as empirical research based on common methodological standards.entry, exit, cluster, localization economies, lifecycle, firm heterogeneity

Does Endogenous Technical Change Make a Difference in Climate Policy Analysis? A Robustness Exercise with the FEEM-RICE Model

Technical change is generally considered the key to the solution of environmental problems, in particular global phenomena like climate change. Scientists differ in their views on the thaumaturgic virtues of technical change. There are those who are confident that pollution-free technologies will materialize at some time in the future and will prevent humans from suffering the catastrophic consequences of climate change. Others believe that there are inexpensive technologies already available and argue the case for no-regret adoption policies (e.g. subsidies). Others again believe that the process of technological change responds to economic stimuli. These economic incentives to technological innovation are provided not only by forces that are endogenous to the economic system, but also by suitably designed environmental and innovation policies. In this paper, we consider and translate into analytical counterparts these different views of technical change. We then study alternative formulations of technical change and, with the help of a computerized climate-economy model, carry out a number of optimization runs in order to assess what type of technical change plays a role (assuming it does) in the evaluation of the impact of climate change and of the policies designed to cope with it.Climate policy, Environmental modeling, Integrated assessment, Technical change

Regional agreements and trade services - policy issues

Every major regional trade agreement now has a services dimension. Is trade in services so different that there is need to modify the conclusions on preferential agreements pertaining to goods reached so far? The authors first examine the implications of unilateral policy choices in a particular services market. They then explore the economics of international cooperation and identify the circumstances in which a country is more likely to benefit from cooperation in a regional rather than multilateral forum.Health Economics&Finance,Environmental Economics&Policies,Decentralization,Economic Theory&Research,Payment Systems&Infrastructure,Economic Theory&Research,Environmental Economics&Policies,Trade and Services,TF054105-DONOR FUNDED OPERATION ADMINISTRATION FEE INCOME AND EXPENSE ACCOUNT,Trade and Regional Integration

Knowledge Spillovers and Entrepreneurs’ Export Orientation

We draw on knowledge spillover literature to suggest that a country’s level of foreign direct investment (FDI) and international trade may influence the export orientation of its entrepreneurs, which in turn may relate to the country’s total level of entrepreneurial activity. Macro-level data from 34 countries during 2002–2005 indicate that a country’s outward FDI, export, and import positively affect entrepreneurs’ export orientation, but these effects differ in how fast they manifest themselves. Furthermore, the extent to which a country’s entrepreneurs engage in export-oriented activities affects the subsequent emergence of new businesses. These findings have important implications for research and practice.Export orientation;Knowledge spillovers;Country-level entrepreneurship

“What attracts knowledge workers? The role of space, social connections, institutions, jobs and amenities”

The aim of the present paper is to identify the determinants of the geographical mobility of skilled individuals, such as inventors, across European regions. Their mobility contributes to the geographical diffusion of knowledge and reshapes the geography of talent. We test whether geography, amenities, job opportunities and social proximity between inventors’ communities, and the so-called National System of Innovation, drive in- and out-flows of inventors between pairs of regions. We use a control function approach to address the endogenous nature of social proximity, and zero-inflated negative binomial models to accommodate our estimations to the count nature of the dependent variable and the high number of zeros it contains. Our results highlight the importance of physical proximity in driving the mobility patterns of inventors. However, job opportunities, social and institutional relations, and technological and cultural proximity also play key roles in mediating this phenomenon.inventors’ mobility, gravity model, amenities, job opportunities, social and institutional proximities, zero-inflated negative binomial, European regions. JEL classification: C8, J61, O31, O33, R0

Climate Policy under Technology Spillovers

Technological development is likely to play an important role in curbing growth in greenhouse gas emissions. It is therefore important to incorporate factors influencing technological change in climate policy analyses. This paper studies climate policy when there are technology spillovers between countries, and there is no instrument that (directly) corrects for these externalities. The lack of an appropriate instrument reflects that R&D expenditures in a country are difficult to verify by other countries. We show that without an international agreement, the non-cooperative outcome will have too much emissions and too little R&D expenditures compared with the social optimum. While the non-cooperative equilibrium depends on whether countries use tradable quotas or carbon taxes as their domestic instruments for controlling emissions, all countries are better off in the tax case than in the quota case. Next we study two types of international climate agreements with full participation. One is a Kyoto type of agreement where each country is assigned a specific number of internationally tradable quotas. In the second type of agreement a common carbon tax should be used domestically in all countries. We show that none of the cases satisfy the conditions for the social optimum. Even if the total number of quotas is set so that the quota price is equal to the Pigovian level, R&D investments will be lower than what is socially optimal in the Kyoto case, whereas with a harmonized domestic carbon tax R&D expenditures could even be too high. Finally we examine the case in which there is an incomplete agreement, i.e. some countries have not signed the agreement. We demonstrate that there is virtually no difference between this case and the case of full cooperation.Climate policy, international environmental agreements, R&D, technology spillovers

Housing market spillovers: Evidence from an estimated DSGE model

The ability of a two-sector model to quantify the contribution of the housing market to business fluctuations is investigated using U.S. data and Bayesian methods. The estimated model, which contains nominal and real rigidities and collateral constraints, displays the following features: first, a large fraction of the upward trend in real housing prices over the last 40 years can be accounted for by slow technological progress in the housing sector; second, residential investment and housing prices are very sensitive to monetary policy and housing demand shocks; third, the wealth effects from housing on consumption are positive and significant, and have become more important over time. The structural nature of the model allows identifying and quantifying the sources of fluctuations in house prices and residential investment and measuring the contribution of housing booms and busts to business cycles.House prices, Collateral Constraints, Bayesian methods, Two-sector Models

New Ventures' Export Orientation: Outcome and Source of Knowledge Spillovers

In this paper we draw on knowledge spillover literature to suggest that a country’s proportion of exportoriented new ventures, compared to its total number of new ventures, represents an outcome of knowledge spillovers (export spillovers) that stem from foreign direct investment (FDI) and international trade, as well as a source of knowledge spillovers (entrepreneurship spillovers) that positively influence the country’s total level of entrepreneurial activity. We distinguish between higher-income and lower-income countries, because the latter are less integrated into the world economy. To test the hypotheses, we use macro-level data from 34 countries during the period 2002–2005. After controlling for relevant factors such as size of the domestic market and industry structure, we find that the relationship between FDI and international trade on the one hand and a country’s proportion of export-oriented new ventures on the other differs for higherand lower-income countries. In addition, a country’s proportion of export-oriented new ventures affects the subsequent emergence of new businesses. These findings have important implications for research and practice. This is an update of paper H200619.