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Trade, location, and wages in the United States

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  • Knaap, Thijs

Abstract

This paper estimates a spatial wage structure for the United States. I employ the market-access and supplier-access method of Redding and Venables (2004), where access is determined using interstate trade data. Economic geography models predict that state-level wages are correlated to this measure, owing to higher levels of demand and better availability of intermediate goods in easily accessible regions. After correcting for omitted-variable bias with exogenous (first nature) regressors and using the appropriate instruments, I find that the explanatory power of access-variables is weak in this dataset.

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Bibliographic Info

Article provided by Elsevier in its journal Regional Science and Urban Economics.

Volume (Year): 36 (2006)
Issue (Month): 5 (September)
Pages: 595-612

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Handle: RePEc:eee:regeco:v:36:y:2006:i:5:p:595-612

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  1. Simon J. Evenett & Wolfgang Keller, 1998. "On Theories Explaining the Success of the Gravity Equation," NBER Working Papers 6529, National Bureau of Economic Research, Inc.
  2. Stephen Redding & Anthony J. Venables, 2001. "Economic geography and international inequality," LSE Research Online Documents on Economics 3714, London School of Economics and Political Science, LSE Library.
  3. Venables, Anthony J., 1993. "Equilibrium Locations of Vertically Linked Industries," CEPR Discussion Papers 802, C.E.P.R. Discussion Papers.
  4. Steven Brakman & Harry Garretsen & Marc Schramm, 2004. "The strategic bombing of German cities during World War II and its impact on city growth," Journal of Economic Geography, Oxford University Press, vol. 4(2), pages 201-218, April.
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  7. Henry Overman & Stephen Redding & Anthony J. Venables, 2001. "The Economic Geography of Trade, Production, and Income: A Survey of Empirics," CEP Discussion Papers dp0508, Centre for Economic Performance, LSE.
  8. Alan V. Deardorff, 1995. "Determinants of Bilateral Trade: Does Gravity Work in a Neoclassical World?," NBER Working Papers 5377, National Bureau of Economic Research, Inc.
  9. Annekatrin Niebuhr, 2006. "Market access and regional disparities," The Annals of Regional Science, Springer, vol. 40(2), pages 313-334, June.
  10. Giuseppe De Arcangelis & Giordano Mion, 2002. "Spatial Externalities and Empirical Analysis: The case of Italy," series 0006, Dipartimento di Scienze Economiche e Metodi Matematici - Università di Bari, revised Jan 2002.
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  12. Thierry Mayer & Keith Head, 2002. "Illusory Border Effects: Distance Mismeasurement Inflates Estimates of Home Bias in Trade," Working Papers 2002-01, CEPII research center.
  13. Masahisa Fujita & Paul Krugman & Anthony J. Venables, 2001. "The Spatial Economy: Cities, Regions, and International Trade," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262561476, January.
  14. Keith Head & Thierry Mayer, 2004. "The Empirics of Agglomeration and Trade," Sciences Po publications info:hdl:2441/10191, Sciences Po.
  15. Bernard Fingleton, 2005. "Testing the 'new economic geography': a comparative analysis based on EU regional data," Urban/Regional 0504003, EconWPA.
  16. Edward L. Glaeser & Glenn Ellison, 1999. "The Geographic Concentration of Industry: Does Natural Advantage Explain Agglomeration?," American Economic Review, American Economic Association, vol. 89(2), pages 311-316, May.
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  18. H. Hanson, Gordon, 2005. "Market potential, increasing returns and geographic concentration," Journal of International Economics, Elsevier, vol. 67(1), pages 1-24, September.
  19. McCallum, John, 1995. "National Borders Matter: Canada-U.S. Regional Trade Patterns," American Economic Review, American Economic Association, vol. 85(3), pages 615-23, June.
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  21. Deardoff, A.V., 1995. "Determinants of Bilateral Trade: Does Gravity Work in a Neoclassical World?," Working Papers 382, Research Seminar in International Economics, University of Michigan.
  22. Combes, Pierre-Philippe & Overman, Henry G., 2004. "The spatial distribution of economic activities in the European Union," Handbook of Regional and Urban Economics, in: J. V. Henderson & J. F. Thisse (ed.), Handbook of Regional and Urban Economics, edition 1, volume 4, chapter 64, pages 2845-2909 Elsevier.
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Citations

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Cited by:
  1. Gustavsson, Magnus & Jordahl, Henrik, 2006. "Inequality and Trust in Sweden: Some Inequalities are More Harmful than Others," Ratio Working Papers 106, The Ratio Institute.
  2. Thibault Fally & Rodrigo Paillacar & Cristina Terra, 2008. "Economic Geography and Wages in Brazil: Evidence from Micro-Data," THEMA Working Papers 2008-23, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
  3. Maarten Bosker & Steven Brakman & Harry Garretsen & Marc Schramm, 2010. "Relaxing Hukou - Increased Labor Mobility and China’s Economic Geography," CESifo Working Paper Series 3271, CESifo Group Munich.
  4. Thomas Y. Mathä & Allison Shwachman, 2009. "Regional wages and market potential in the enlarged EU: An empirical investigation," BCL working papers 37, Central Bank of Luxembourg.
  5. Klein, Alexander; Crafts, Nicholas, 2010. "Making Sense of the Manufacturing Belt: Determinants of U.S. Industrial Location, 1880-1920," CAGE Online Working Paper Series 04, Competitive Advantage in the Global Economy (CAGE).
  6. Partridge, Mark D. & Rickman, Dan S. & Ali, Kamar & Olfert, M. Rose, 2010. "Recent spatial growth dynamics in wages and housing costs: Proximity to urban production externalities and consumer amenities," Regional Science and Urban Economics, Elsevier, vol. 40(6), pages 440-452, November.
  7. Maarten Bosker & Harry Garretsen, 2012. "Economic Geography and Economic Development in Sub-Saharan Africa," World Bank Economic Review, World Bank Group, vol. 26(3), pages 443-485.
  8. Partridge, Mark D. & Rickman, Dan S. & Ali, Kamar & Olfert, M. Rose, 2009. "Agglomeration spillovers and wage and housing cost gradients across the urban hierarchy," Journal of International Economics, Elsevier, vol. 78(1), pages 126-140, June.
  9. Ottaviano, Gianmarco I.P. & Pinelli, Dino, 2006. "Market potential and productivity: Evidence from Finnish regions," Regional Science and Urban Economics, Elsevier, vol. 36(5), pages 636-657, September.
  10. Gustavsson, Magnus & Jordahl, Henrik, 2006. "Inequality and Trust: Some Inequalities are More Harmful than Others," Working Paper Series 2006:3, Uppsala University, Department of Economics.
  11. De Bruyne, Karolien, 2009. "Explaining the Location of Economic Activity. Is there a Spatial Employment Structure in Belgium?," Working Papers 2009/28, Hogeschool-Universiteit Brussel, Faculteit Economie en Management.
  12. Maria Florencia Granato, 2011. "REGIONAL NEW ECONOMIC GEOGRAPHY (refereed paper)," ERSA conference papers ersa10p747, European Regional Science Association.
  13. Mardukhi, Jian, 2010. "The General Equilibrium Wage Impact of Trade-Induced Shifts in Industrial Compositions of Employment in Brazilian Cities, 1991-2000," MPRA Paper 25916, University Library of Munich, Germany.
  14. Hayakawa, Kazunobu, 2009. "Market Access and Intermediate Goods Trade," IDE Discussion Papers 208, Institute of Developing Economies, Japan External Trade Organization(JETRO).
  15. Fingleton, Bernard, 2008. "Competing models of global dynamics: Evidence from panel models with spatially correlated error components," Economic Modelling, Elsevier, vol. 25(3), pages 542-558, May.

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