Clark University

ECONOMIC GEOGRAPHY ISSUE: Vol. 90 No. 2 April 2014

 

 

 

Design of new Economic Geography JournalEconomic Geography is an internationally peer-reviewed journal, committed to publishing cutting-edge research that makes theoretical advances to the discipline. Our long-standing specialization is to publish the best theoretically-based empirical articles that deepen the understanding of significant economic geography issues around the world. Owned by Clark University since 1925, Economic Geography actively supports scholarly activities of economic geographers. Economic Geography is published quarterly in January, April, July, and October.

CONTENTS

 

 

Editorial

Journal Articl

 

The Effects of Industrial Clusters on the Poverty Rate

Christopher S. Fowler and Rachel Garshick Kleit, Pages 129–154
Abstract | Complete Article

 

Geographies of Securitized Catastrophe Risk and the Implications of Climate Change

Leigh Johnson, Pages 155–185
Abstract |Complete Article

 

Local Externalities and Ownership Choices in Foreign Acquisitions by Multinational Enterprises

Sergio Mariotti, Lucia Piscitello, and Stefano Elia, Pages 187–211
Abstract | Complete Article

 

A Fetish and Fiction of Finance: Unraveling the Subprime Crisis

Erica Pani and Nancy Holman, Pages 213–235
Abstract | Complete Article

 

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BOOK REVIE

 

A World in Emergence; Cities and Regions in the Twenty-First Century, by Allen J. Scott

Robert C. Kloosterman, pages 237–239
Read Book Review

 

The Future of South-South Economic Relations, edited by Adil Najam and Rachel Thrasher

Rory Horner, pages 241–242
Read Book Review

 

The Connected City: How Networks Are Shaping the Modern Metropolis, by Zachary P. Neal

Michiel van Meeteren and Frank Witlox, pages 243–244
Read Book Review

 

Technologies of Choice? ICTs, Development, and the Capabilities Approach, by Dorothea Kleine

Aharon Kellerman, pages 245–246
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ABSTRACTS

The Effects of Industrial Clusters on the Poverty Rate by Christopher S. Fowler and Rachel Garshick Kleit

Abstract: Industrial clusters are widely understood as a worthwhile target of local economic development resources. Nevertheless, most of the work on cluster development has asserted benefits that accrue to a regional economy as a whole, with little or no focus on specific links between clusters and poverty alleviation. This article seeks to understand the degree to which economic clusters are associated with lower poverty rates. Specifically, using spatial regression analysis techniques, we examine patterns that link clusters to poverty rates while controlling for the presence of other factors that shape the distribution of poverty in the United States. When controlling for other economic and demographic factors in a multivariate framework, the presence of industrial clusters is associated with lower poverty rates. Moreover, regions with a higher share of employment in clusters, and with that employment dispersed across many industries within the same cluster, fare even better than those where employment is concentrated in a single industry. Furthermore, while there is evidence that particular clusters are associated with significantly altered poverty rates, not all of these associations are beneficial.



Key words: industrial clusters, poverty, regional economies

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Geographies of Securitized Catastrophe Risk and the Implications of Climate Change                by Leigh Johnson

Abstract: This article analyzes the drivers and implications of catastrophe bonds’ growing popularity as an alternative asset class. As investor demand for bonds outpaces their supply from reinsurers, the study asks how the place-based physical vulnerabilities of fixed capital have been rendered into assets deemed increasingly desirable by growing blocks of financial capital. Combining data from extended interviews with industry datasets and market reports, the study demonstrates how this securitization pathway allows mobile capital on a search for yield to reframe spatial liabilities as tradable assets, thus accessing new “returns on place.” By aggregating and analyzing data on approximately $37 billion in catastrophe bond transactions since 1997, the study reveals both the ongoing concentration of capital in so-called “peak perils” such as U.S. hurricane and earthquake risks, and the fragmentation and recombination of peak perils to create new risk/return profiles. These purposive, scalable, and selective financial engagements with catastrophic risks depend upon the avoidance of the fixed costs and relational entanglements borne by (re)insurers. This ambivalent relationship with geographical liabilities is reaching its logical apogee in recent proposals to expand the catastrophe bond market to capitalize on growing climate change risks. This movement to “underwrite to securitize” intentionally emulates the “originate to securitize” model pioneered in mortgage-backed securities. This study argues that such developments could ultimately yield a built environment that is both more dependent on the state as an insurer of last resort and less adapted to climate extremes.

Key words: risk transfer, insurance, climate change, securitization, catastrophe, adaptation

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Local Externalities and Ownership Choices in Foreign Acquisitions by Multinational Enterprises by Sergio Mariotti, Lucia Piscitello, and Stefano Elia

Abstract:
This article analyzes the drivers and implications of catastrophe bonds’ growing popularity as an alternative asset class. As investor demand for bonds outpaces their supply from reinsurers, the study asks how the place-based physical vulnerabilities of fixed capital have been rendered into assets deemed increasingly desirable by growing blocks of financial capital. Combining data from extended interviews with industry datasets and market reports, the study demonstrates how this securitization pathway allows mobile capital on a search for yield to reframe spatial liabilities as tradable assets, thus accessing new “returns on place.” By aggregating and analyzing data on approximately $37 billion in catastrophe bond transactions since 1997, the study reveals both the ongoing concentration of capital in so-called “peak perils” such as U.S. hurricane and earthquake risks, and the fragmentation and recombination of peak perils to create new risk/return profiles. These purposive, scalable, and selective financial engagements with catastrophic risks depend upon the avoidance of the fixed costs and relational entanglements borne by (re)insurers. This ambivalent relationship with geographical liabilities is reaching its logical apogee in recent proposals to expand the catastrophe bond market to capitalize on growing climate change risks. This movement to “underwrite to securitize” intentionally emulates the “originate to securitize” model pioneered in mortgage-backed securities. This study argues that such developments could ultimately yield a built environment that is both more dependent on the state as an insurer of last resort and less adapted to climate extremes.


Key words: risk transfer, insurance, climate change, securitization, catastrophe, adaptation


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A Fetish and Fiction of Finance: Unraveling the Subprime Crisis, by Erica Pani and Nancy Holman

Abstract:As the moderately strengthened financial regulation of Basel III comes into effect over the next seven years, this article sets out a cautionary reminder as to why regulation needs to move beyond a focus on the mitigation and distribution of risk. To do so, the article unravels the much-misunderstood experiences of eight Norwegian municipalities whose investments plummeted as the subprime crisis unfolded: investments that had no immediate ties to subprime mortgage lending or mortgage-backed securities. Focusing on the processes, practices, and instruments of financialization, the article puts forward two new analytical concepts—“the fetishization of the knowledge of risk” and “fictitious distance”—to help explain how the crisis spread so quickly and extensively that it threatened not only the municipalities' investments but also the functioning of global finance as a whole. In so doing, it becomes clear that financialization has set a far more risky form of capitalism that is manifest through concrete economic geographies, from towns and cities in the United States to “distant” Norwegian municipalities. In the highly interconnected entanglement of geographies and finance that make up the global financial system, the fetishes and fictions of finance cannot be ignored.

Key words: financialization, securitization, risk, subprime crisis, fictions of finance, financial regulation


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Published by Clark University since 1925.

UPCOMING ARTICLES

July 2014

 

Merger and Acquisition Activity as Driver of Spatial Clustering: The Spatial Evolution of the Dutch Banking Industry, 1850–1993
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White Knights from the Gulf: Sovereign Wealth Fund Investment and the Evolution of German Industrial Finance
Daniel Haberly

The Topological Multiplicities of Power: The Limits of Governing the Olympics
Martin Müller

 

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Juggling with Proximity and Distance. Collaborative Innovation Projects in the Danish Cleantech Industry
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