History versus Expectations: an Empirical Investigation
AbstractThis paper provides the first empirical test of the role of history versus expectations in U.S. urban development. Starting from Paul Krugman's theoretical work in new economic geography, we test whether or not a modern city develops because of either advantageous initial conditions or by way of a self-fulfilling prophecy based on expectations of development. Using the methology developed by Granger to establish causality between two variables, but adapted to a cross-section with four time lags, we test whether asset values, that is, farmland values and housing values, anticipate urban development or vice versa. In the case of the former, we would conclude that expectations drive urban development in the U.S., and in the case of the latter we would conclude that history does. The results indicate very strongly that initial conditions, that is history, dominate the process by which one city becomes a metropolis and another languishes in the periphery.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Department of Economics, Tufts University in its series Discussion Papers Series, Department of Economics, Tufts University with number 0014.
Date of creation: 2000
Date of revision:
Contact details of provider:
Postal: Medford, MA 02155, USA
Phone: (617) 627-3560
Fax: (617) 627-3917
Web page: http://ase.tufts.edu/econ
History vs. expectations; urban growth; Granger causality; economics geography;
Find related papers by JEL classification:
- R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes
- F00 - International Economics - - General - - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2000-06-12 (All new papers)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Matsuyama, Kiminori, 1991.
"Increasing Returns, Industrialization, and Indeterminacy of Equilibrium,"
The Quarterly Journal of Economics,
MIT Press, vol. 106(2), pages 617-50, May.
- Kiminori Matsuyama, 1990. "Increasing Returns, Industrialization and Indeterminacy of Equilibrium," Discussion Papers 878, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- 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.
- Hanson, G.H., 1999.
"`Market Potential, Increasing Returns, and Geographic Concentration,"
439, Research Seminar in International Economics, University of Michigan.
- H. Hanson, Gordon, 2005. "Market potential, increasing returns and geographic concentration," Journal of International Economics, Elsevier, vol. 67(1), pages 1-24, September.
- Gordon H. Hanson, 1998. "Market Potential, Increasing Returns, and Geographic Concentration," NBER Working Papers 6429, National Bureau of Economic Research, Inc.
- Jordi Galí, 1994.
"Expectations-driven spatial fluctuations,"
Economics Working Papers
60, Department of Economics and Business, Universitat Pompeu Fabra.
- Sims, Christopher A, 1972. "Money, Income, and Causality," American Economic Review, American Economic Association, vol. 62(4), pages 540-52, September.
- Timothy F. Harris & Yannnis M. Ioannides, 2000. "Productivity and Metropolitan Density," Discussion Papers Series, Department of Economics, Tufts University 0016, Department of Economics, Tufts University.
- Krugman, Paul, 1991. "History versus Expectations," The Quarterly Journal of Economics, MIT Press, vol. 106(2), pages 651-67, May.
- Fukao, Kyoji & Benabou, Roland, 1993. "History versus Expectations: A Comment," The Quarterly Journal of Economics, MIT Press, vol. 108(2), pages 535-42, May.
- Baldwin, Richard & Forslid, Rikard, 1997. "The Core-Periphery Model and Endogenous Growth," CEPR Discussion Papers 1749, C.E.P.R. Discussion Papers.
- M. Scarlato & M. Cenci, 2004. "Innovazione tecnologica e offerta di skills:una simulazione," Computational Economics 0401003, EconWPA.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Caroline Kalogeropoulos).
If references are entirely missing, you can add them using this form.