Rising Trade Costs? Agglomeration and Trade with Endogenous Transaction Costs

While transport costs have fallen, the empirical evidence also points at rising total trade costs. In a model of industry location with endogenous transaction costs, we show how and under which conditions a decline in transport costs can lead to an increase in the total cost of trade.Transaction costs, trade costs, transport costs, agglomeration, vertically linkedindustries

Buzz: Face-to-Face Contact and the Urban Economy

This paper argues that existing models of urban concentrations are incomplete unless grounded in the most fundamental aspect of proximity; face-to-face contact. Face-to-face contact has four main features; it is an efficient communication technology; it can help solve incentive problems; it can facilitate socialization and learning; and it provides psychological motivation. We discuss each of these features in turn, and develop formal economic models of two of them. Face-to-face is particularly important in environments where information is imperfect, rapidly changing, and not easily codified, key features of many creative activities.Agglomeration, clustering, urban economics, face-to-face

Shaping the formation of university-industry research collaborations: what type of proximity does really matter?

Research collaborations between universities and industry (U-I) are considered to be one important channel of potential localized knowledge spillovers (LKS). These collaborations favour both intended and unintended flows of knowledge and facilitate learning processes between partners from different organizations. Despite the copious literature on LKS, still little is known about the factors driving the formation of U-I research collaborations and, in particular, about the role that geographical proximity plays in the establishment of such relationships. Using collaborative research grants between universities and business firms awarded by the UK Engineering and Physical Sciences Research Council (EPSRC), in this article we disentangle some of the conditions under which different kinds of proximity contribute to the formation of U-I research collaborations, focusing in particular on clustering and technological complementarity among the firms participating in such partnerships

My neighbourhood: the 13 November Paris massacres

Most of the Paris attacks were carried out in the heart of the French capital. However, as LSE’s Michael Storper writes, the chosen areas were not those most noted for tourism, but rather included previously run-down neighbourhoods that had gradually become more gentrified without losing their charm, and which today appeal chiefly to a young crowd. As a resident of the 10th arrondissement, he kept a diary of the events during the attacks and in the days after that we reproduce below

Social capital, rules, and institutions: A cross-country investigation

Research on the institutional foundations of economic development emphasizes either rulebound systems of exchange or informal bonds between individuals and within small groups. This corresponds to a classical division in social science, between the forces of society and those of community. This cleavage largely ignores their interactions, which are likely to shape the institutions that underpin economic development in decisive ways. This paper operationalises and tests how the interaction of the forces of community (or social capital) and society (or rules) impact three types of institutions: those involved in problem solving, those that shape microeconomic efficiency and those that influence social policy, across fiftyeight countries. We find that both community and society are important determinants across all institutional domains, and are in many cases mutually reinforcing, but that different specific aspects of community and society are most relevant to different institutional domains. Instrumental associationalism, whether formal or informal, and a robust rules environment are the most important determinants of positive institutional outcomes.

Cohesion policy in the European Union: Growth, geography, institutions

Since the reform of the Structural Funds in 1989, the EU has made the principle of cohesion one of its key policies. Much of the language of European cohesion policy eschews the idea of tradeoffs between efficiency and equity, suggesting it is possible to maximise overall growth whilst also achieving continuous convergence in outcomes and productivity across Europe’s regions. Yet, given the rise in inter-regional disparities, it is unclear that cohesion policy has altered the pathway of development from what would have occurred in the absence of intervention. This paper draws on geographical economics, institutionalist social science, and endogenous growth theory, with the aim of providing a fresh look at cohesion policy. By highlighting a complex set of potential tradeoffs and inter-relations – overall growth and efficiency; inter-territorial equity; territorial democracy and governance capacities; and social equity within places – it revisits the rationale of cohesion policy, with particular attention to the geographical dynamics of economic development.

The geographical processes behind innovation: a Europe-United States comparative analysis

The United States and European Union differ significantly in terms of their innovative capacity: the former have been able to gain and maintain world leadership in innovation and technology while the latter continues to lag. Notwithstanding the magnitude of this innovation gap and the political emphasis placed upon it on both sides of the Atlantic, very little systematic comparative analysis has been carried out on its causes. The empirical literature has emphasised the structural differences between the two continents in the quantity and quality of the major ‘inputs’ to innovation: R&D investments and human capital. The very different spatial organisation of innovative activities in the EU and the US – as suggested by a variety of contributions in the field of economic geography – could also influence innovative output. This paper analyses and compares a wide set of territorial processes that influence innovation in Europe and the United States. The higher mobility of capital, population, and knowledge in the US not only promotes the agglomeration of research activity in specific areas of the country but also enables a variety of territorial mechanisms to fully exploit local innovative activities and (informational) synergies. In the European Union, in contrast, imperfect market integration, and institutional and cultural barriers across the continent prevent innovative agents from maximising the benefits from external economies and localised interactions, but compensatory forms of geographical process may be emerging in concert with further European integration.Innovation, Research and development, Regions, Spillovers, Agglomeration, Systems of innovation, European Union, United States

The geographical processes behind innovation: A Europe-United States comparative analysis

The United States and European Union differ significantly in terms of their innovative capacity: the former have been able to gain and maintain world leadership in innovation and technology while the latter continues to lag. Notwithstanding the magnitude of this innovation gap and the political emphasis placed upon it on both sides of the Atlantic, very little systematic comparative analysis has been carried out on its causes. The empirical literature has emphasised the structural differences between the two continents in the quantity and quality of the major 'inputs' to innovation: R&D investments and human capital. The very different spatial organisation of innovative activities in the EU and the US – as suggested by a variety of contributions in the field of economic geography – could also influence innovative output. This paper analyses and compares a wide set of territorial processes that influence innovation in Europe and the United States. The higher mobility of capital, population, and knowledge in the US not only promotes the agglomeration of research activity in specific areas of the country but also enables a variety of territorial mechanisms to fully exploit local innovative activities and (informational) synergies. In the European Union, in contrast, imperfect market integration, and institutional and cultural barriers across the continent prevent innovative agents from maximising the benefits from external economies and localised interactions, but compensatory forms of geographical process may be emerging in concert with further European integration.

The Effects of Globalization on the Location of Industries in the OECD and European Union

Most international trade theory, whether classical or "new," predictst that increased globalization will be associated with increased locational concentration of particular economic activities, and hence increased specialization of national and regional economies, due to the greater freedom for industries to locate according to comparative advantage and economies of scale, and to integrate production systems based on an internationalization of intermediate goods sourcing. Relatively little empirical evidence exists on whether these predictions are correct. This paper presents the results of a statistical investigation of the trade-location relationship, using the OECD-STAN database, from 1970 to 1995. This investigation shows that in spite of rapidly rising trade, only in a very few industries has the spatial distribution changed substantially over the period studied. While intra-industry trade has risen across-the-board, locational concentration and specialization have increased little, if at all, in the European Union countries, and European economies remain much less specialized than equivalent regions of the USA. The paper then tries to speculate as to why this might be the case. Much of the intra-industry trade observed in Europe is probably not intermediate divisions of labor (production sharing), but head-to-head competition of largely national industries competing around similar products, through cross-market penetration. The question is how they manage to survive as such in an age of globalization. One hypothesis is that there are evolutionary dynamics involved: mature national firms and production clusters have capacities to adapt to changing circumstances which permit them to survive in more open markets. One major technique for adaptation is product differentiation, both horizontal (making the same products as competitors, through uptake of global state-ofthe- art knowledge) and vertical (quality differentiation, based on superior local knowledge). In this sense, the response of the European economies to globalization may reflect fundamentally different evolutionary dynamics from their American counterpart, whose regions integrated early on before they had mature industrial complexes, and where new industries tend to assume highly localized patterns, that serve as locational cores for the entire national industry. Most importantly, all of this implies that we need to develop non-deterministic theories of the relationship between trade and location, which take into account much more than the standard factors of comparative advantage and scale and integrate a dynamic evolutionary perspective.Globalization, locational specialization, product differentiation