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Testing Nonlinear New Economic Geography Models

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Author Info

  • Bode, Eckhardt

    (Kiel Institute for the World Economy, Kiel, Germany)

  • Mutl, Jan

    (Department of Economics and Finance, Institute for Advanced Studies, Vienna, Austria)

Abstract

We test a New Economic Geography (NEG) model for U.S. counties, employing a new strategy that allows us to bring the full NEG model to the data, and to assess selected elements of this model separately. We find no empirical support for the full NEG model. Regional wages in the U.S. do not respond to local wage shocks in the way predicted by the model. We show that the main reason for this is that the model does not predict either the migration patterns induced by local wage shocks or the repercussions of this migration for regional wages correctly.

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File URL: http://www.ihs.ac.at/publications/eco/es-253.pdf
File Function: First version, 2010
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Bibliographic Info

Paper provided by Institute for Advanced Studies in its series Economics Series with number 253.

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Length: 41 pages
Date of creation: Jul 2010
Date of revision:
Handle: RePEc:ihs:ihsesp:253

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Related research

Keywords: New economic geography; spatial econometrics;

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Blog mentions

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  1. Are New Economic Geography models any good?
    by Economic Logician in Economic Logic on 2010-08-30 14:59:00

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