PREFERENCE HETEROGENEITY AND ECONOMIC GEOGRAPHY*

ABSTRACT We investigate the effect of preference heterogeneity between skilled and unskilled workers on agglomeration, and we identify a new source of dependence of equilibrium prices on the demand properties shaped by the inter‐regional distribution of workers. We find a new preference effect, and we show that when the intensity of skilled workers' preference for the modern good and its variety is strong enough, prices charged by firms may even increase when the mass of local firms increases, therefore acting as a new dispersion force when trade costs are low or as a new agglomeration force when trade costs are high.     

Land Use Theory and Factor Intensities

Although Thünen's rent theory has been formalized and extended, his interdependent spatial theory of factor intensities has received little attention. The solution must be developed from a fully specified rent equation that recognizes the dependence of outputs on inputs, and the important distinction between fixed and variable costs. A general solution is found for the one-market, one-productive-factor case, with the limiting restriction that marginal revenue productivity must be rising more slowly than marginal costs. The flexibility and power of Thünen's model is shown by developing, from the general solution, scenarios under various market and production conditions.     

FRAGMENTATION AND CLUSTERING IN VERTICALLY LINKED INDUSTRIES*

ABSTRACT This paper models the location of two vertically related firms in a low labor cost country and in a country with a large market. The upstream industry is more labor intensive than the downstream industry. We find that spatial fragmentation occurs for low values of the input‐output coefficient and intermediate values of the transport rate, particularly if the countries are very asymmetric in size. Otherwise, we obtain agglomeration either in the low cost country (when the transport rate is low) or in the large market (when the transport rate is high). Multiple agglomerated equilibria arise when the transport cost of the intermediate good is significant.     

Population,light, and the size distribution of cities

We provide new insights on the city size distribution of countries around the world. Using more than 10,000 cities delineated via geospatial data and a globally consistent city identification scheme, we investigate distributional shapes in all countries. In terms of population, we find that Zipf's law holds for many, but not all, countries. Contrasting the distribution of population with the distribution of economic activity, measured by nighttime lights, across cities we shed light on the globally variant magnitude of agglomeration economies. Deviations from Zipf's law are to a large extent driven by an undue concentration in the largest cities. They benefit from agglomeration effects which seem to work through area rather than through density. Examining the cross‐country heterogeneity in the city size distribution, our model selection approach suggests that historical factors play an important role, in line with the time of development hypothesis.     

FOREIGN DIRECT INVESTMENT AND URBAN CONCENTRATIONS: UNBUNDLING SPATIAL LAGS*

ABSTRACT Foreign direct investment (FDI) is seen as a way to import technology and catch up with economic leaders. It is therefore important to understand why some countries attract more investments by multinationals than others. We expand the set of common determinants of FDI with urban agglomerations and ask the question whether the accessibility of market potential and the number of potential investment locations, in the shape of urban concentrations, matters, since the importance of urban agglomeration economies for FDI has not been investigated before. We show that countries with several medium‐sized cities attract more foreign investment, especially if they are close to main agglomerations, but too much concentration (primacy) reduces the inflow of FDI. Moreover, we unbundle spatially lagged FDI by including spatial lags of the determinants of FDI. It is important to disentangle such third‐country effects in order to understand how FDI flows depend on the complex ways in which multinationals fragment sales and production across countries. Using a panel of U.S. affiliates’ sales in foreign countries between 1984 and 1998, we find evidence that cities are important drivers of FDI. Furthermore, third‐country effects suggest that horizontal and complex forms of FDI coexist.     

ON THE IMPACT OF LABOR MARKET MATCHING ON REGIONAL DISPARITIES*

ABSTRACT We propose a model where imperfect matching between firms and workers on local labor markets leads to incentives for spatial agglomeration. We show that the occurrence of spatial agglomeration depends on initial size differences in terms of both number of workers and firms. Allowing for dynamics of workers' and firms' location choices, we show that the spatial outcome depends crucially on different dimensions of agents' mobility. The effect of a higher level of human capital on regional disparities depends on whether it makes workers more mobile or more specialized on the labor market.     

IMPACT OF RIGIONAL FACTORS ON PRODUCTIVITY IN CHINA*

ABSTRACT. The regional production environment in China is decomposed into five regional factors: education endowment, foreign direct investment, agglomeration, producer's market accessibility, and consumer's market accessibility. The impacts of these regional factors on the Chinese machinery building industry and food manufacture industry are estimated across 30 regions. The estimates are highly significant and show that these regional factors substantially affect regional productivity. Across regions and over time, the capital return rate is positively related to the ratio of the total regional factor impact to the wage rate.     

Gaussian Process Regression and Bayesian Model Averaging: An Alternative Approach to Modeling Spatial Phenomena

Gaussian Process Regression (GPR) is a nonparametric technique that is capable of yielding reliable out‐of‐sample predictions in the presence of highly nonlinear unknown relationships between dependent and explanatory variables. But in terms of identifying relevant explanatory variables, this method is far less explicit about questions of statistical significance. In contrast, more traditional spatial econometric models, such as spatial autoregressive models or spatial error models, place rather strong prior restrictions on the functional form of relationships, but allow direct inference with respect to explanatory variables. In this article, we attempt to combine the best of both techniques by augmenting GPR with a Bayesian Model Averaging (BMA) component that allows for the identification of statistically relevant explanatory variables while retaining the predictive performance of GPR. In particular, GPR‐BMA yields a posterior probability interpretation of model‐inclusion frequencies that provides a natural measure of the statistical relevance of each variable. Moreover, while such frequencies offer no direct information about the signs of local marginal effects, it is shown that partial derivatives based on the mean GPR predictions do provide such information. We illustrate the additional insights made possible by this approach by applying GPR‐BMA to a benchmark BMA data set involving potential determinants of cross‐country economic growth. It is shown that localized marginal effects based on partial derivatives of mean GPR predictions yield additional insights into comparative growth effects across countries.     

The spatial extent of agglomeration economies across the wage earnings distribution

We investigate the spatial extent of agglomeration economies across the wage earnings distribution using economic mass (total employment) in four distance bands around each individual’s establishment in a quantile regression framework. We control for observable and unobservable individual and establishment characteristics. Remaining endogeneity in the model is assessed with a set of instrumental variables. Results indicate a positive effect of economic mass on wage earnings up to 25 km away from the establishment. The spatial extent of agglomeration economies is similar across the wage earnings distribution. However, increases in economic mass shift the wage earnings distribution in a nonsymmetric way.     

Willingness to Pay for Multifunctional Megaprojects: A Stated Preference Analysis Among Firms in the Amsterdam Zuidas Area

Urban (re-)development projects may generate various positive and negative spatial externalities to employers. The assessment of such benefits is fraught with many methodological and empirical problems. This study aims to assess the order of magnitude of expected net benefits for incumbent employers that may accrue from a large-scale development project in the Zuidas area in the South-Western part of Amsterdam, the Netherlands. This development project is planned to transform the area into a large multifunctional urban agglomeration. We employ a specific stated preference method (namely, a willingness-to-pay method) to gauge the project's net socio-economic benefits for the current firms in the area concerned, paying special attention to the benefits associated with multifunctionality.     

CITIES AND DEVELOPMENT

ABSTRACT 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?     

Some Extensions to Rushton's Spatial Preference Scaling Model

Rushton's spatial preference scaling model is extended and its computing algorithm modified in order to utilize more fully all the information contained in the input data set, and to make it a better predictor of choice behavior. The preference scale that is produced by the model measures the certainty with which generalizations can be made about choices between classes of objects. The model offers two significant advantages over commonly used spatial interaction models: freedom from a priori selection of the function relating choice to attributes of objects, and applicability to studies where the number of origin and destination zones is large relative to the populations involved.     

The Father's Success and the Son's Failure: Explaining the Growth of Lebanon's Resistance to Syria's Invisible Occupation

In the 15‐year period since the Syrian military entry into Lebanon on June 1, 1976, allegedly to put an end to the civil war that broke out there a year earlier, Syria firmly solidified its control of the country, as evidenced by the signing of the “Treaty of Brotherhood, Cooperation and Coordination between Syria and Lebanon,” on May 22, 1991, which granted Syria a special status. Yet, 14 years later, on April 24, 2005, the Syrian forces withdrew from Lebanon. This article seeks to explain this relatively rapid decline in Syria's standing in Lebanon by examining the strategies of the two Syrian rulers who indirectly controlled this country during those years. It examines what was right in Hafiz al‐Asad's strategy in Lebanon, and what did not work in Bashar's policy. In 2000, the year of Hafiz al‐Asad's death, Syria's status in Lebanon seemed unshakable: 1) Lebanon's president (Emile Lahoud) acted as Damascus's puppet; 2) Hezbollah, the Shi‘a militia Hezbollah largely accepted Syria's authority while it simultaneously tightened its control over southern Lebanon and also began gaining popularity in the rest of the country; and 3) finally the politics of the noble families, which had characterized Lebanon since its establishment, began to gradually give way to a politics where a political figure is measured by the level of his connections to the country's power base in Damascus. Yet, merely five years later, Syria was under immense pressure to withdraw its forces from Lebanon. This suggests that we must look at the difference between the strategies of Hafiz al‐Asad and his son Bashar for controlling Lebanon to better understand the rapid deterioration in Syria's standing in the country. We argue that the difference in the degree of anti‐Syrian pressures from Lebanon's society and political elements between the two tenures is largely rooted in the different strategies that the two Syrian presidents adopted for informally ruling Lebanon. We identify three main areas where Bashar al‐Asad made mistakes due to his failure to continue his father's methods. First, Bashar put all his cards on Hezbollah, thus antagonizing all the other groups which resented that Shi‘a dominance. Second, in stark contrast to his father, Bashar distanced himself from the regular management of Lebanon's ethnic politics. Hafiz al‐Asad made sure that all the leaders of the different ethnic groups would visit Damascus and update him on their inter‐ethnic conflicts, and then he would be the one who would either arbitrate between them or, for expediency reasons, exacerbate these feuds. Once the ethnic leaders had to manage without Damascus, they learned to get along, making him far less indispensable for the running of the country. Finally, Bashar, unlike his father, did not make a real effort to gain international and regional legitimacy (or at least de‐facto acceptance) for Syria's continued control over Lebanon. Most conspicuously, while Hafiz participated in the First Gulf War against Iraq, his son supported Sunni rebels who fought against the United States‐led coalition forces there. This foreign acquiescence was significant since the Lebanese felt they had a backing when they demanded Syria's withdrawal in 2005. These different strategic approaches of the two rulers meant that the father's policies wisely laid the ground for some of the most controversial measures which were needed as part of any attempt to monopolize control over another country, such as Lebanon (assassinating popular but too independent‐minded Lebanese presidents/prime ministers or extending tenures of loyalist ones), whereas the son's policies myopically failed to do so properly. Indeed, the article will show that while both the father and the son took these same controversial measures, the responses of the Lebanese were completely different. Admittedly, some historical developments increased the Lebanese propensity to rise up against Syria, and these meant that Bashar did in fact face a harder task than his father in maintaining Syria's informal occupation. The Israeli withdrawal from its so‐called “security zone” in south Lebanon meant that one justification for the Syrian presence was gone. More importantly, the risk of renewed eruption of the civil war (which in turn had meant for many years a greater willingness by the locals to tolerate the Syrian presence which prevented the war's resumption) declined significantly due to a variety of processes that could not have been halted even with better “management” of the interethnic strife from Damascus (i.e., making sure that the ethnic groups remained in deep conflict with each other). Nevertheless, as we will show, Bashar's mistakes played a crucial role in bringing the rival ethnic groups together by making Damascus their joint enemy.     

A Geostatistical Linear Regression Model for Small Area Data. 一种适用于小区域数据的地统计线性回归模型

We present a new linear regression model for use with aggregated, small area data that are spatially autocorrelated. Because these data are aggregates of individual‐level data, we choose to model the spatial autocorrelation using a geostatistical model specified at the scale of the individual. The autocovariance of observed small area data is determined via the natural aggregation over the population. Unlike lattice‐based autoregressive approaches, the geostatistical approach is invariant to the scale of data aggregation. We establish that this geostatistical approach also is a valid autoregressive model; thus, we call this approach the geostatistical autoregressive (GAR) model. An asymptotically consistent and efficient maximum likelihood estimator is derived for the GAR model. Finite sample evidence from simulation experiments demonstrates the relative efficiency properties of the GAR model. Furthermore, while aggregation results in less efficient estimates than disaggregated data, the GAR model provides the most efficient estimates from the data that are available. These results suggest that the GAR model should be considered as part of a spatial analyst's toolbox when aggregated, small area data are analyzed. More important, we believe that the GAR model's attention to the individual‐level scale allows for a more flexible and theory‐informed specification than the existing autoregressive approaches based on an area‐level spatial weights matrix. Because many spatial process models, both in geography and in other disciplines, are specified at the individual level, we hope that the GAR covariance specification will provide a vehicle for a better informed and more interdisciplinary use of spatial regression models with area‐aggregated data.     

Metropolitan Colonisation and the Reinvention of Place: Class Polarisation along the Cessnock‐Pokolbin Fault‐Line

This paper examines the emergence of a sharply delineated socioeconomic and sociocultural fault‐line between Cessnock's former coal towns and the immediately adjacent Hunter Valley Wine Country, centred on Pokolbin. We provide evidence that divergent culturally‐related class identities act as mutually reinforcing constraints on reciprocity between job‐deficit former coal towns and the job‐surplus wine country. We relate this to a consideration of time‐space dimensions in the interdependencies between the class and place identities of Cessnock and Pokolbin. These identities have been influenced by metropolitan colonisation, with the markedly differentiated absorption of these two locales into the enlarged metropolitan population‐work‐welfare‐housing‐leisure agglomeration. Further, we propose that the former coal towns and the wine country can both be seen as place‐specific representations of wider class‐related changes within Australian society. Our interpretations are founded on three current research directions: first, the role of culture as a critical intervening variable in class identities and actions; second, the current flux in class formations, most notably the loss of self‐identity and solidarity in the working class and the emergence of a new middle‐class sector dedicated to self‐realisation and self‐fulfilment; and third, recognition of class formation as a geographical process.     

Harraga and Europe: The emotional geographies of undocumented migrants in Tunisian filmmaking

European concern over undocumented migration is conventionally told as a story of unwitting migrants risking their lives to reach the European shores to escape poverty and/or war. We are interested in further opening up and contributing to a more nuanced discussion of the multiple drivers behind migration though a focus on emotions. We do so by mapping out the emotional geographies of Tunisian harraga captured by five Tunisian filmmakers. Our visual analysis of the Tunisian harraga as transmitted by the documentaries and feature films reveals that the migrant's journey across the Mediterranean is motivated by a set of complex and contradictory emotions. Hopes for a better future in the form of individual and societal dignity are mixed up with fear of the dangers of the crossing and of bringing shame to the family. We find that the migrant's desire to up and leave their home country is propelled by the differential between the emotions tied to our-place and their-place.     

MANAGEMENT OF LARGE CITY REGIONS: DESIGNING EFFICIENT METROPOLITAN FISCAL POLICIES*

ABSTRACT Metropolitan areas (MSAs) are the location of the great majority of economic activity in the United States, and the largest produce a disproportionate share of output. It is thus critical for the economy's long‐term growth that large cities operate efficiently. In this paper, we briefly review the sources of productivity growth in cities. We then discuss the costs and benefits of political decentralization in large MSAs. After documenting the interdependence of the suburbs and central cities in large MSA, we develop a model that embodies many of the empirically verified aspects, including agglomeration economies and public goods. After calibrating the model to actual outcomes in a representative city, we simulate the effects of various kinds of fiscal redistributions. We conclude that, under the model, some kinds of fiscal redistributions can provide benefits in both cities and suburbs.     

Gibrat Revisited: An Urban Growth Model Incorporating Spatial Interaction and Innovation Cycles. 再评吉尔布瑞特：顾及空间相互作用和创新周期的城市增长模型

We designed a geographical model for simulating the distribution of urban growth in systems of cities. The model incorporates the hierarchical and spatial diffusion of innovation cycles through gravitational interactions within a set of cities. Using theoretical simulations, we demonstrate that this model is able to reproduce the observed properties of urban systems for the log‐normal distribution of city sizes as well as the observed distribution of growth rates. Our experimentation was performed on a large harmonized historical database that includes a few hundred French urban agglomerations between 1831 and 1999 (Pumain‐INED database). Both spatial interaction and innovation cycles are necessary ingredients to explain the evolution of urban hierarchies. We suggest that Gibrat's generic stochastic growth model based on independent entities should be replaced by a more relevant model of spatially and temporally interdependent geographical entities.     

Product Differentiation and Location Choice in a Circular City*

Abstract. The paper analyzes spatial competition among firms that sell substitute and/or complementary products. The firms first choose locations on the perimeter of a circular city and then compete in quantities (à la Cournot). Both linear and convex (quadratic) transport costs are considered. In general, multiple location equilibria are encountered. Complete agglomeration, partial agglomeration, and complete dispersion are possible. Convex (quadratic) transport cost substantially shrinks the set of equilibria obtained under linear transport cost. In general, the results obtained for a larger number of firms selling complementary products are strikingly different from those obtained under a duopoly.     

Iran's policy towards the Houthis in Yemen: a limited return on a modest investment

For years, mounting instability had led many to predict the imminent collapse of Yemen. These forecasts became reality in 2014 as the country spiralled into civil war. The conflict pits an alliance of the Houthis, a northern socio‐political movement that had been fighting the central government since 2004, alongside troops loyal to a former president, Ali Abdullah Saleh, against supporters and allies of the government overthrown by the Houthis in early 2015. The war became regionalized in March 2015 when a Saudi Arabia‐led coalition of ten mostly Arab states launched a campaign of air strikes against the Houthis. According to Saudi Arabia, the Houthis are an Iranian proxy; they therefore frame the war as an effort to counter Iranian influence. This article will argue, however, that the Houthis are not Iranian proxies; Tehran's influence in Yemen is marginal. Iran's support for the Houthis has increased in recent years, but it remains low and is far from enough to significantly impact the balance of internal forces in Yemen. Looking ahead, it is unlikely that Iran will emerge as an important player in Yemeni affairs. Iran's interests in Yemen are limited, while the constraints on its ability to project power in the country are unlikely to be lifted. Tehran saw with the rise of the Houthis a low cost opportunity to gain some leverage in Yemen. It is unwilling, however, to invest larger amounts of resources. There is, as a result, only limited potential for Iran to further penetrate Yemen.