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Towards applied geographical economics: modelling relative wage rates, incomes and prices for the regions of Great Britain

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  • Bernard Fingleton

Abstract

One of the key issues surrounding geographical economics is whether the theory can be made operational, so that proper investigations can be made of the basic theoretical assumptions and practical use can be made of the model's predictions at a detailed spatial level. In this paper the model formalized by Fujita et al. (1999) is developed in the context of 36 regions of Great Britain, enabling direct comparisons with observed wage rate data that are used to calibrate the model. Iceberg transport costs are in the form of an exponential function and a power function. For the range of parameters considered, the power function gives a better fit between model and data, suggesting scale economies in transportation. The paper shows that, in spite of the assumptions that have to be made, quite realistic distributions of relative wages, income and prices are attainable. However, caution is required in the interpretation of these simulations, which in no way provide proof of New Economic Geography theory, which clearly has limitations. Nonetheless it is hoped that the work reported in this paper does help to advance the progress of geographical economics theory towards empirical verification.

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Bibliographic Info

Article provided by Taylor & Francis Journals in its journal Applied Economics.

Volume (Year): 37 (2005)
Issue (Month): 21 ()
Pages: 2417-2428

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Handle: RePEc:taf:applec:v:37:y:2005:i:21:p:2417-2428

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References

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  1. Philip McCann & Daniel Shefer, 2003. "Location, agglomeration and infrastructure," Economics of Governance, Springer, vol. 83(1), pages 177-196, October.
  2. Ciccone, Antonio & Hall, Robert E, 1996. "Productivity and the Density of Economic Activity," American Economic Review, American Economic Association, vol. 86(1), pages 54-70, March.
  3. Gianmarco Ottaviano & Takatoshi Tabuchi & Jacques-Francois Tissse, 1999. "Agglomeration and Trade Revisited," CIRJE F-Series CIRJE-F-65, CIRJE, Faculty of Economics, University of Tokyo.
  4. 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.
  5. Philip McCann, 2005. "Transport costs and new economic geography," Journal of Economic Geography, Oxford University Press, vol. 5(3), pages 305-318, June.
  6. Gianmarco I. P. Ottaviano & Diego Puga, 1998. "Agglomeration in the Global Economy: A Survey of the 'New Economic Geography'," The World Economy, Wiley Blackwell, vol. 21(6), pages 707-731, 08.
  7. Rivera-Batiz, Francisco L., 1988. "Increasing returns, monopolistic competition, and agglomeration economies in consumption and production," Regional Science and Urban Economics, Elsevier, vol. 18(1), pages 125-153, February.
  8. Bernard Fingleton, 2003. "Increasing returns: evidence from local wage rates in Great Britain," Oxford Economic Papers, Oxford University Press, vol. 55(4), pages 716-739, October.
  9. Bernard Fingleton, 2004. "The new economic geography versus urban economics : an evaluation using local wage rates in Great Britain," ERSA conference papers ersa04p638, European Regional Science Association.
  10. Patricia Rice & Anthony Venables, 2003. "Equilibrium Regional Disparities: Theory and British Evidence," Regional Studies, Taylor & Francis Journals, vol. 37(6-7), pages 675-686.
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Citations

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Cited by:
  1. Roberts, Mark & Deichmann, Uwe & Fingleton, Bernard & Shi, Tuo, 2012. "Evaluating China's road to prosperity: A new economic geography approach," Regional Science and Urban Economics, Elsevier, vol. 42(4), pages 580-594.
  2. Bernard Fingleton, 2010. "Predicting the geography of house prices," LSE Research Online Documents on Economics 33507, London School of Economics and Political Science, LSE Library.
  3. Fingleton, Bernard & Longhi, Simonetta, 2011. "The effects of agglomeration on wages: evidence from the micro-level," SIRE Discussion Papers 2011-35, Scottish Institute for Research in Economics (SIRE).
  4. Rafael Alvarado & Miguel Atienza, 2014. "The role of market access and human capital in regional wage disparities: Empirical evidence for Ecuador," Documentos de Trabajo en Economia y Ciencia Regional 53, Universidad Catolica del Norte, Chile, Department of Economics, revised Mar 2014.
  5. Rhydian James & Peter Midmore & Dennis Thomas, 2012. "Public Sector Size and Peripherality," Spatial Economic Analysis, Taylor & Francis Journals, vol. 7(4), pages 447-460, December.
  6. Roberts, Mark & Deichmann, Uwe & Fingleton, Bernard & Shi, Tuo, 2010. "On the road to prosperity ? The economic geography of China's national expressway network," Policy Research Working Paper Series 5479, The World Bank.

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