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Spatial Economics

  • Teacher(s)
    Henri de Groot, Steven Poelhekke, Erik Verhoef
  • Research field
    Spatial Economics
  • Dates
    Period 5 - Apr 24, 2023 to Jul 14, 2023
  • Course type
  • Program year
  • Credits

Course description

The aim of this course is to provide an advanced introduction into the extensive academic literature on spatial, transport and environmental economics. This literature has a long tradition, both theoretically and empirically, and is central in many policy discussions at the moment. All three areas have in common that they deal with externalities and their implications. More specifically, this course focuses on the economic analysis of urban, regional, transport and environmental phenomena, including topics such as agglomeration, sorting and spatial interaction (lectures 1 and 2); equilibrium, competition and optima in physical transport network markets (lectures 3 and 4) environmental economics including exhaustible resources and global warming (lectures 5 and 6). It covers advanced topics in theoretical and empirical research on spatial, transport and environmental economics.

Key issues in the “spatial block” are location and potential reasons for clustering of economic activity, the role of geographic factors in explaining regional economic growth performance, urban size and growth, and the functioning of regional labour markets. The “transport block” addresses the topics of market failures stemming from external effects, market power in dynamic network markets, and first-best and second-best regulation of such market failures. Finally, the “environmental block” deals with issues related to sustainability and the so-called Green Paradox. In this block, we will start with an analysis of the feasibility of sustainable growth in the neoclassical growth model extended with the dependence on non-renewable natural resources. We will find out that technical progress is crucial for sustainable growth and hence move on to discuss different frameworks in which technical progress is explained endogenously, from economic incentives. We will then continue to examine under which conditions different suboptimal climate policies may lead to a Green Paradox, in the sense that they increase current carbon emissions and hence accelerate global warming.

The course seeks a balance between theory and empirics, between analytical methodologies and policy analysis, and aims to integrate applied microeconomics and spatial, transport and environmental science.

Course literature

Abreu, M., H.L.F. de Groot and R.J.G.M. Florax (2005): ‘Space and Growth: A Survey of Empirical Evidence and Methods’, Région et Développement, 21, pp. 13-44.

Barbier, E.B. Endogenous Growth and Natural Resource Scarcity. Environmental and Resource Economics 14: 51–74.

Brakman, S., J.H. Garretsen and C. van Marrewijk (2009): The New Introduction to Geographical Economics, Cambridge University Press, Cambridge.

Combes, P.P., G. Duranton and L. Gobillon (2008): Spatial wage disparities: Sorting matters! Journal of Urban Economics, 63(2), pp. 723-742.

Dell, M., B.F. Jones and B.A. Olken (2012): ‘Temperature shocks and economic growth: Evidence from the last half century’, American Economic Journal: Macroeconomics, 4(3), pp. 66-95.

Dixit, A.K. and J.E. Stiglitz (1977): ‘Monopolistic Competition and Optimum Product Diversity’, American Economic Review, 67, pp. 297-308.

Gallup, J.L., J.D. Sachs and A.D. Mellinger (1999): ‘Geography and Economic Development’, International Regional Science Review, 22, pp. 179-232.

Groot, H.L.F. de, G.M. Linders, P. Rietveld and U. Subramanian (2004): ‘The Institutional Determinants of Bilateral Trade Patterns’, Kyklos, 57, pp. 103-123.

Guiso, L., P. Sapienza and L. Zingales (2006): Cultural Biases in Economic Exchange, CEPR Discussion Paper no. 4837.

Krugman, P. (1991): ‘History and Industry Location: The Case of the US Manufacturing Belt’, American Economic Review, 81, pp. 80-83.

Lankhuizen, M.B.M., H.L.F. de. Groot and G.M. Linders (2011): ‘The Trade-Off between Foreign Direct Investment and Exports: The role of multiple dimensions of distance’, World Economy, 34 (8), pp. 1395-1416.

Magrini, S. (2004): ‘Regional (Di)Convergence’, in: V. Henderson and J.-F. Thisse (eds), Handbook of Urban and Regional Economics, Elsevier Science Publishers, Amsterdam.

McCallum, J. (1995): ‘National Borders Matter: Canada-U.S. Regional Trade Patterns’, American Economic Review, 85, pp. 615-623.

Peretto, Pietro (2021). “Through scarcity to prosperity: Toward a theory of sustainable growth.” Journal of Monetary Economics, 117: 243-257.

Ploeg, F. van der (2013). “Cumulative carbon emissions and the green paradox”. Annual Review of Resource Economics, 5:281-300.

Small, K.A. and E.T. Verhoef (2007): The Economics of Urban Transportation, Routledge, London.

Smulders, J. A. (2005). “Endogenous technological change, natural resources and growth”. In R. D. Simpson, M. A. Toman, & R. U. Ayres (Eds.), Scarcity and growth revisited: Natural resources and the environment in the new millennium. RFF Press.

Stiglitz, Joseph (1974). “Growth with Exhaustible Natural Resources: Efficient and Optimal Growth Paths.” The Review of Economic Studies, 41:123–137.