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The Impact of Agglomeration Economies on Estimated Demand Thresholds: An Extension of Wensley and Stabler


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  • James W. Henderson
  • Thomas M. Kelly
  • Beck A. Taylor


Central place theory predicts that geographic markets located in rural areas have lower demand thresholds, and, therefore, a higher frequency of business establishments relative to areas that are more proximate to urban centers, other things equal. Wensley and Stabler (1998) confirm this prediction using data on the location and frequency of business activities in rural Saskatchewan. We demonstrate that this relationship may not always hold true depending on the existence and magnitude of agglomeration economies. If average cost differences associated with being located in an urbanized area are sufficiently large, then the relationship between urban proximity and number of establishments may be reversed. We provide evidence of this reversal using 1996 cross-sectional data on hospital services in Texas. Copyright 2000 Blackwell Publishers

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Bibliographic Info

Article provided by Wiley Blackwell in its journal Journal of Regional Science.

Volume (Year): 40 (2000)
Issue (Month): 4 ()
Pages: 719-733

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Handle: RePEc:bla:jregsc:v:40:y:2000:i:4:p:719-733

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Cited by:
  1. Hong, Junpyo & Fannin, James Matthew, 2007. "New Estimation Strategies for Demand Threshold Models in the Southern United States," 2007 Annual Meeting, February 4-7, 2007, Mobile, Alabama 34869, Southern Agricultural Economics Association.
  2. Maureen Kilkenny, 2010. "Urban/Regional Economics And Rural Development," Journal of Regional Science, Wiley Blackwell, vol. 50(1), pages 449-470.
  3. Nagy, Cecil N. & Olfert, M. Rose & Skotheim, J., 2004. "Targeting Business Investment in Rural Communities," Journal of Regional Analysis and Policy, Mid-Continent Regional Science Association, vol. 34(2).


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