New economic geography, empirics, and regional policy

There are doubts about the effectiveness of regional policy. Well known are the fruitless attempts of Italy to bridge the gap between the Mezzogiorno and the North, of Germany to bridge the gap between the Neue Länder and the West, and of the European Commission to reduce regional disparities in general. We validate one explanation: agglomeration advantages lock business activity in relatively prosperous core regions, even though wages – and thus production costs – tend to be higher there. We set off from the ‘New Economic Geography’, a set of general equilibrium models that focus on location choice. Theory, descriptive statistics, and econometric analysis support the conclusion that the European economic geography is characterized by a network of local and stable core periphery systems. This implies that disparities between core regions and their peripheries at a (sub) provincial level of regional aggregation are with us to stay, as regional policy targeted on peripheries tends to be insufficient to counter centripetal market forces. Moreover, even if such policy has an impact, it may be adverse, as core regions may benefit disproportionately in the long run. A focus of regional policy on local agglomerations, which have a realistic chance to hold on to economic activity, is therefore desirable.

Megalopolis of mezzogiorno: lokatie en handel in de wereldeconomie

Een van de problemen waar de economische wetenschap al geruime tijd mee worstelt is het gelijktijdig bestaan van economisch ontwikkelde regio’s en minder ontwikkelde regio’s. Waarom is het ene land verder ontwikkeld dan het andere? Het vakgebied van de ontwikkelingseconomie heeft deze vraag als hoofdthema van onderzoek. Nog steeds is er geen afdoende verklaring voor dergelijke verschillen in ontwikkelingsniveau.2 Niet alleen is er geen onomstreden theorievorming om de allerarmste landen door overheidsbeleid op te stuwen in de vaart der volken, maar ook als de economische ontwikkelingen voorspoedig zijn, zoals bij een aantal landen in zuidoost Azië, is een goede verklaring niet voorhanden. Dit komt de reputatie van de economische wetenschap in het algemeen, en van de ontwikkelingseconomie in het bijzonder, niet ten goede

New economic geography in Germany: testing the Helpman-Hanson model

In this paper we find evidence that the new economic geography approach is able to describe and explain the spatial characteristics of an economy, in our case the German economy. Using German district data we estimate the structural parameters of a new economic geography model as developed by Helpman (1998) and Hanson (1998) and we find confirmation for a spatial wage structure. The advantage of the Helpman-Hanson model is that it incorporates the fact that agglomeration of economic activity increases the prices of local (non-tradable) services, like housing. This model thereby provides an intuitively appealing spreading force that allows for less extreme agglomeration patterns than predicted by the bulk of new economic geography models. Based on different estimation strategies and taking a number of features of the re-unified German economy into account, we do not only test for the spatial distribution of wages but also for the spatial structure w.r.t. German unemployment, employment and land prices.

Overheidspolitiek en economische groei

De 'endogene groei'-revolutie in de economische wetenschap heeft ons meer inzicht gegeven in de factoren die bepalend zijn voor langdurige economische groei. Deze theorie stelt dat groei in hoge mate bepaald wordt door factoren als investeringen (zowel in fysiek als menselijk kapitaal), de openheid van een economie en de mate van scholing, gezondheidszorg, stabiliteit, rechtszekerheid en infrastructuur. Het overheidsbeleid is dan ook van grote betekenis voor de (endogene) groei van een economie

It's a big world after all: on the economic impact of location and distance

Thomas Friedman, a very influential and widely read journalist (author of the world is flat), argues that distance is no longer a dominant characteristic of the world economy. Competition is thought to be a race to the bottom, with the lowest-wage countries as the big winners. In contrast, using various methods and data sets, we show that many threats of global competition for the position of the traditionally developed (OECD) countries are unwarranted, that distance still dominates all aspects of international trade, and that there is little evidence of income convergence

De geloofwaardigheid van muntzones

Nederland bevindt zich in een muntzone met Duitsland. Dit is een afspraak tussen de Duitse en Nederlandse centrale banken om de onderlinge wisselkoers binnen een nauwe band te laten fluctueren. Wat betekent deze afspraak voor wisselkoersveranderingen in de praktijk? Is het zo dat beide centrale banken elke dag met grote moeite de wisselkoers binnen de toegestane bandbreedte moeten houden, of is de afspraak als zodanig ook van invloed

The economics of international transfers

International transfers have attracted the attention of economists ever since the famous debate between Keynes and Ohlin on German reparation payments after World War I. Today the subject is of even greater importance with billions of dollars flowing between nations as unilateral transfers. However the emphasis has shifted from balance-of-payments issues to the welfare consequences following a transfer, and in particular the welfare issues arising from aid to developing countries. In The Economics of International Transfers Professors Brakman and van Marrewijk present a complete overview of transfers (including the history of transfers and current transfer flows), and their own unified framework in which they present important and original research. Subjects considered include welfare effects, distortions, third parties, rent-seeking, the ‘trade or aid’ discussion, multi-lateral agencies, tied aid and imperfect competition