Agglomeration decay in rural areas

Abstract

Spatial proximity to other economic activitiesoccasionally labeled as 'market access' and 'economic density'is associated with good economic performance. How the impulses from economic activities diminish over space is known as 'agglomeration decay' or 'distance decay'. Although market access functions and the associated agglomeration decay constitute an important topic within spatial economic research, the phenomenon is seldom studies in a rural setting or addressed by non-linear estimation techniques. In this paper, we estimate the market access function in the relatively rural regions of Southern parts of Norway. We approximate market access in the national road network by alternative market access functions with power and exponential distance decay, applying ordinary non-linear least squares (NLS) and non-linear mixed effects (NLME). We apply labor productivity as the outcome variable, employment and population as alternative measures for potential market connections and traveling time as distance measure. In the regression, we control for capital intensity, industry structure and annual growth trend, as well as mixed effect in case of the NLME model. Compared to previous findings in the literature, we find evidence of relative sharp agglomeration decay in a rural setting, involving power and exponential distance decay parameters of about 2.3 and 0.07 respectively. Comparisons of the log likelihood from the estimation of market access functions suggest that exponential distance decay involve a slightly better fit than power distance decay. In addition, employment involves slightly more explanatory power than population as a measure for potential market connections.

Market access and seaport efficiency: the case of container handling in Norway

“…Consequently, the words can in practice be used to describe the same phenomena in our application, although we aware of the semantic differences. We refer to Graham et al (2010), Sevtsuk and Mekonnen (2012), Redding and Rossi-Hansberg (2017) and Holmen (2022a) for detailed reviews of these concepts.…”

Productivity impulses from regional integration: lessons from road openings

“…To capture the key features of regional integration, we apply two alternative market access measuresone with power distance decay and one with exponential distance decay. For both functions, we apply the distance decay parameter values estimated by non-linear estimation techniques for municipalities in the Southern parts of Norway in Holmen (2022a), controlling for annual growth trend, capital intensity and industry composition.…”

“…In our main estimation, we will make use of market access functions with power distance decay and exponential distance decay, exploiting the parameter estimated estimated by Holmen (2022a). He estimates the market access functions with power distance decay and exponential distance decay for the Southern parts of Norway by nonlinear estimation techniques at municipal level, controlling for capital intensity, annual growth trend and industry composition.…”

Production function in agriculture in the Czech Republic

“…Soil fertility is paramount in determining the type of plant production (El-Ramady et al, 2019). Correct setting of production factors increases labor productivity and thus leads to capital return (Vochozka et al, 2021;Potapov 2020;Holmen, 2022). Technical development and sufficient human capital enable achieving higher profitability and improving the competitiveness of agricultural products (Vochozka et al, 2020, Anand, Husain& Prakash, 2022Ganush & Tsetsiarynets, 2022).…”