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The Economy as a Complex Spatial System: The Economy as a Complex Spatial System

Parte de: Springer Proceedings in Complexity

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Palabras clave – provistas por la editorial

economic geography; systemic risk; heterogeneous agents; complex networks analysis; multinational enterprises; spatial econometrics; COST Action IS1104

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Información

Tipo de recurso:

libros

ISBN impreso

978-3-319-65626-7

ISBN electrónico

978-3-319-65627-4

Editor responsable

Springer Nature

País de edición

Reino Unido

Fecha de publicación

Tabla de contenidos

Introduction

Pasquale Commendatore; Ingrid Kubin; Spiros Bougheas; Alan Kirman; Michael Kopel; Gian Italo Bischi

This collected volume gives a concise account of the most relevant scientific results of the COST Action IS1104 “The EU in the new complex geography of economic systems: models, tools and policy evaluation”, a four-year project supported by COST (European Cooperation in Science and Technology). It is divided into three parts reflecting the different perspectives under which complex spatial economic systems have been studied: (i) the Macro perspective looks at the interactions among international or regional trading partners; (ii) the Meso perspective considers the functioning of (financial, labour) markets as social network structures; and, finally, (iii) the Micro perspective focuses on the strategic choices of single firms and households. This Volume points also at open issues to be addressed in future research.

Pp. 1-10

Policy Issues in NEG Models: Established Results and Open Questions

Pasquale Commendatore; Christoph Hammer; Ingrid Kubin; Carmelo Petraglia

This paper provides a non-technical overview of NEG models dealing with policy issues. Considered policy measures include alternative categories of public expenditure, international tax competition, unilateral actions of protection/liberalisation, and trade agreements. The implications of public intervention in two-region NEG models are discussed by unfolding the impact of policy measures on agglomeration/dispersion forces. Results are described in contrast with those obtained in standard non-NEG theoretical models. The high degree of abstraction limits the applicability of NEG models to real world policy issues. We discuss in some detail two extensions of NEG models to reduce this applicability gap: the cases of multi-regional frameworks and firm heterogeneity.

- The Macro Perspective – Economic Geography | Pp. 13-37

Emerging Trade Patterns in a 3-Region Linear NEG Model: Three Examples

Pasquale Commendatore; Ingrid Kubin; Iryna Sushko

This chapter draws attention to a specific feature of a NEG model that uses linear (and not iso-elastic) demand functions, namely its ability to account for zero trade. Thus, it represents a suitable framework to study how changes in parameters that are typical for NEG models, such as trade costs and regional market size, not only shape the regional distribution of economic activity, but at the same time determine the emergence of additional trade links between formerly autarkic regions. We survey some related papers and present a three-region framework that potentially nests many possible trade patterns. To focus the analysis, we study in more detail three specific trade patterns frequently found in the EU trade network. We start with three autarkic regions; then we introduce the possibility that two regions trade with each other; and, finally, we allow for one region trading with the other two, but the latter are still not trading with each other. We find a surprising plethora of long-run equilibria each involving a specific regional distribution of economic activity and a specific pattern of trade links. We show how a reduction in trade costs shapes simultaneously industry location and the configuration of the trade network.

- The Macro Perspective – Economic Geography | Pp. 38-80

Advances in Spatial Econometrics: Parametric vs. Semiparametric Spatial Autoregressive Models

Roberto Basile; Román Mínguez

In this Chapter we provide a critical review of parametric and semiparametric spatial econometric approaches. We focus on the capability of each class of models to fit the main features of spatial data (such as strong and weak cross-sectional dependence, spatial heterogeneity, nonlinearities, and time persistence), leaving aside the technicalities related to the estimation methods. We also provide a brief discussion of the existent software developed to estimate most of the econometric models exposed in this Chapter.

- The Macro Perspective – Economic Geography | Pp. 81-106

Looking Ahead: Part I

Pasquale Commendatore; Ingrid Kubin

This Chapter summarises the work carried out during the lifetime of the Action by Working Group I whose main task was to build multiregional NEG models. The main results are briefly presented and some of the questions left open are pointed at. Finally, topics for future research are suggested.

- The Macro Perspective – Economic Geography | Pp. 107-115

Systemic Risk and Macroeconomic Fat Tails

Spiros Bougheas; David Harvey; Alan Kirman

We propose a mechanism for shock amplification that potentially can account for fat tails in the distribution of the growth rate of national output. We argue that extreme macroeconomic events, such as the Great Depression and the Great Recession, were preceded by significant turmoil in the banking system. We have developed a model of bank network formation and presented numerical simulations that show that, for the benchmark case, aggregate credit follows a random walk. When we introduce fire sales the model does not only produce larger variations in the growth of aggregate credit but also shows that there is an asymmetry between booms and busts that is also consistent with empirical evidence.

- The Meso Perspective – Financial Markets | Pp. 119-136

Market Interactions, Endogenous Dynamics and Stabilization Policies

Noemi Schmitt; Jan Tuinstra; Frank Westerhoff

We review a recent literature that shows that interactions between markets, created by the market entry and exit behavior of boundedly rational firms, may cause complex endogenous dynamics. In particular, these models predict that welfare decreases if firms rapidly switch between markets. Against this background, we show that policy makers have the opportunity to stabilize markets and thus to enhance welfare by regulating interacting markets. For instance, imposing profit taxes reduces the markets’ profit differentials and thus slows down the firms’ market entry and exit behavior. However, these stabilization policies may also lead to undesirable side effects, such as coexistence of attractors, hysteresis effects and, in a multi-region setting, failure of policy makers to coordinate on the globally optimal policy. Moreover, regulation may be subject to the lobbying efforts of special interest groups and thus not be optimal.

- The Meso Perspective – Financial Markets | Pp. 137-152

Looking Ahead: Part II

Spiros Bougheas; Alan Kirman

We propose a number of possibilities for future research on issues related to systemic risk in financial markets and its relationship to the macroeconomy. Some of the proposals aim to improve our understanding of the behavior of aggregate credit. Other proposals involve the development or richer agent-based models that potentially can help us understand the time-series properties of national output.

- The Meso Perspective – Financial Markets | Pp. 153-156

A Dynamic Model of Firms’ Strategic Location Choice

Luca Colombo; Herbert Dawid

This paper analyzes the optimal location choice of a firm in a dynamic Cournot framework, in which firms’ absorptive capacities may depend on their knowledge stock. The firm decides whether to locate irreversibly in a cluster or in isolation. In the cluster the firm benefits from inward spillovers from its competitors, but also generates outward spillovers. If the firm chooses to locate in isolation no knowledge flows occur. All firms’ production costs are determined by their knowledge stocks, which evolve over time due to own R&D investments and potentially inward spillovers. It is shown that, if absorptive capacity is constant, the incentive to locate in the cluster decreases with respect to the firm’s knowledge stock. Conversely, if absorptive capacity depends positively on knowledge stock, the firm’s incentive to join the cluster is larger the more knowledge it has. It is also shown that qualitative properties of the equilibrium paths of R&D investments and knowledge stocks differ substantially depending on whether absorptive capacities are constant or knowledge dependent.

- The Micro Perspective – Social and Industrial Interactions | Pp. 159-177

Strategic Corporate Social Responsibility by a Local Firm Against a Multinational Enterprise

Michael Kopel; Constantine Manasakis; Emmanuel Petrakis

The present work considers competition between a local firm and a multinational enterprise (MNE). The MNE has a competitive advantage in terms of lower unit costs and plans to enter the local firm’s market either through exports or through FDI. The local firm may strategically become “socially responsible” and follow a “doing well by doing good” strategy by investing in socially responsible activities along its value chain. Investments in corporate social responsibility (CSR) increase the responsible firm’s equilibrium output and profit as well as consumer surplus and total welfare in its country. The multinational firm’s incentives to serve the foreign country through FDI are mitigated in the average consumer’s valuation for CSR in the responsible firm’s country implying that CSR investments by local firms give space for inward FDI by low-cost multinationals targeting consumers without environmental and social responsibility consciousness. Policy suggestions are also discussed.

- The Micro Perspective – Social and Industrial Interactions | Pp. 178-191