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The New Economic Geography: Clustering and Dispersion by Gilles Duranton The new economic geography is trying to carve out its own distinct field of study at the cross-roads of international trade, urban economics and geographical microeconomics. This article reviews the issues raised by the clustering and dispersion of activities and people to assess the progress made in the new field of study. The solutions put forward can be organised using different perspectives. The existing theories focus on one or more of the three main dimensions of clusters that are analysed, which are size, function and location. Another division can be made based on local factors vs. remote forces. Yet, the focus of analysis in this article is historical. The influence of the various origins of clustering and dispersion depends on the level of economic development.

Geographical Concentration of French Industries by Françoise Maurel and Béatrice Sédillot This article uses a model of production location choices suggested by Ellison Glaeser (1994) to produce an empirical assessment of the geographical concentration of French industries. The geographical concentration indicator used measures the correlation between the location choices of two businesses in the same sector, thus enabling the specific externalities of location choices for a given industry to be identified. Like mining and traditional industries, some high-tech industries seem to be densely clustered in certain areas. The advantages of clustering for some industries reach beyond local administrative boundaries and extend to entire regions.

Measuring the Influence of Taxation on Business Location Choices by Michel Houdebine and Jean-Luc Schneider The paper attempts to model business location choices and the choice of tax rates by local authorities. Methods for estimating the sensitivity of business location choices to taxation are derived and then applied to the 36,000 local business tax rates observed in French communes and the actual location of businesses. The various estimators of sensitivity to taxation derived all provide the same relatively small order of magnitude. The results may be used to assess the cost effectiveness of local tax incentives.

Segmentation of Local Labour Markets by Jacques-François Thisse and Yves Zenou The segmentation and geographical compartmentalisation of the labour market are clearly and empirically established facts. This article presents and assesses the main explanations put forward, which all assume that the work force is heterogeneous. This means that workers are differentiated either by their specialisation or by their location.

Local Changes in Industry 1982-1992 and Regional Convergence: Some Empirical Findings from French Data by Françoise Maurel This article uses sectoral and regional data to examine the influence of the past and present characteristics of industry and, more generally, the business environment, on the growth of local employment in various industrial sectors between 1982 and 1992. The analysis first uses a classical conditional convergence model to show the weak convergence of employment levels between different geographical areas. Then, it identifies the factors that explain the persistence of local disparities. Of the geographical concentration factors brought to light, both the level of local human capital and the factors specific to the industrial structures turn out to be significant, in relation to their initial levels, in explaining the growth of employment in the sectors. The empirical findings also validate the important role of external economies in location choices, showing that local competition is a growth factor for industrial sectors and a convergence factor.

The Production Function and Degrees of Capital and Labour Utilisation: An Econometric Analysis by Simon Cueva and Éric Heyer This article clarifies the role that the degrees of utilisation of factors of production play in estimating the production function for the French manufacturing industry. In contrast to earlier work on this subject, we have integrated the degree and time of utilisation for both capital and labour. This approach is validated by the findings, since degrees of utilisation of the factors production as a whole seem to be necessary to obtain realistic, consistent and significant estimates for describing the production mix.

Assessing the Effects of Job Training and Hiring Subsidies Using a Survey of Belgian Employers by Bruno Van der Linden This article uses a survey of employers to estimate the outright loss effects and substitution effects stemming from hiring subsidies and job training for the unemployed. It then looks at the influence of these policies on job tenure. The frequency of the outright loss effect reaches 53% for hiring subsidies and 35% for job training. Hiring subsidies give rise to substitution in 35% of the cases. The effect of policies on job tenure is sensitive to the distribution chosen for the unobserved heterogeneity. Participation in employment policy measures promotes longer job tenure, but the effect of subsidised workplace training is the only one that is significantly different from zero.

Sources and Long-Term Impact of Shocks in the Manufacturing Industry: A Disaggregation Analysis by Jean-Pierre Rouy This article proposes a measurement of the persistence of shocks on output in the eighteen branches of France's manufacturing industry. The analysis uses the multiple-sector vector autoregression system proposed by Pesaran, Pierse and Lee (1993). The effects of shocks do not seem to fade over time in all branches and the series display a pattern that is similar to a random walk. Macroeconomic shocks involving interest rates, export demand, energy prices and money supply only play a small part in the actual persistence of shocks.

Productivity and Externalities of Public Expenditure: An Econometric Study of Time Series for India and Pakistan by Rémy Herrera This article uses time series data to propose an econometric estimation of output contributions and effects of relative factor productivity levels and externalities in the public infrastructure, health and education and consumption sectors. The estimation is carried out in the framework of an enhanced Feder-Ram supply model using fully reconstituted budget data from India (1960-1993) and Pakistan ( 1 972- 1 993). The results find: 1) a contribution to growth and a positive productivity differential (compared to the private sector) for public capital in both countries; 2) positive productivity effects and, under certain specifications, positive human capital externalities in India alone; 3) public consumption has no effect on growth in the long run.

Wage Equations and Subjective Perceptions of Working Conditions: a Cross-Sectional Approach Using French Data by Jaun A. Canada Vicinay With the poor results of cross-sectional estimates of hedonic wage equations in mind, this paper develops a two-way model. It distinguishes job characteristics according to workers' objective and subjective perceptions of their working conditions and then introduces the market segmentation that limits the possibilities for the differences to be compensated through mobility. By modelling these two aspects, we can formulate and correct the biases arising from subjectivity and mismatches. The first bias stems from the workers' state of mind. Indeed, the more one dislikes one's job, the more one finds its disagreeable and unhealthy aspects oppressive and difficult to bear. The second bias stems from workers being segregated into jobs where harsh working conditions are not compensated for by higher pay. The new findings are in full agreement with the theoretical proposals put forward.

Unit Root Tests and ARCH Models: Unemployment Rate Applications by Jamel Trabelsi We propose to test for the effects of hysteresis, or the persistence of the unemployment rate in the leading industrialised countries. We use a procedure based on Phillips curves that incorporates imperfections in labour market information to justify the possible emergence of such phenomena. We have developed an econometric approach based on Dickey and Fuller Tests with GARCH disturbances on the basis of the conclusions put forward by Kim and Schmidt, which state that the null hypothesis for the unit root is rejected when there are ARCH effects under certain conditions, such as an integrated and degenerated process. We show that the unemployment rate is persistent in the leading European countries. This effect may be explained by the persistence of volatility shocks.