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Interregional Wage Transmission in an Urban Hierarchy: Tests Using Vector Autoregressive Models

Author

Listed:
  • James P. Lesage

    (Department of Economics, University of Toledo, Toledo, Ohio 43606 USA)

  • J. David Reed

    (Department of Economics, Bowling Green State University, Bowling Green, Ohio 43404 USA)

Abstract

This study applies vector autoregressive modeling techniques to examine a wage transmission hypothesis. The techniques produce a model that quantifies the magnitude and timing of intercity interdependencies in the determination of wage rates. The Granger-Sims notion of causality is used to establish and test the statistical significance of the intercity wage relations. Impulse response functions provide a graphic depiction of the dynamics of the relations determined by the vector autoregressive model. A Granger-causal structure is found that is consistent with the hypothesis of downward wage diffusion through an urban hierarchy of cities. The approach used here holds great promise in many areas of regional science research.

Suggested Citation

  • James P. Lesage & J. David Reed, 1989. "Interregional Wage Transmission in an Urban Hierarchy: Tests Using Vector Autoregressive Models," International Regional Science Review, , vol. 12(3), pages 305-318, December.
    • Handle: RePEc:sae:inrsre:v:12:y:1989:i:3:p:305-318
    DOI: 10.1177/016001768901200305
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    References listed on IDEAS

    as
    1. Runkle, David E, 1987. "Vector Autoregressions and Reality," Journal of Business & Economic Statistics, American Statistical Association, vol. 5(4), pages 437-442, October.
    2. Paul M. Beaumont, 1983. "Wage Rate Specfication in Regional and Interregional Econometric Models," International Regional Science Review, , vol. 8(1), pages 75-83, June.
    3. Brian J.L. Berry & William L. Garrison, 1958. "Recent Developments Of Central Place Theory," Papers in Regional Science, Wiley Blackwell, vol. 4(1), pages 107-120, January.
    4. David E. Runkle, 1987. "Vector autoregressions and reality," Staff Report 107, Federal Reserve Bank of Minneapolis.
    5. Brechling, Frank, 1973. "Wage Inflation and the Structure of Regional Unemployment," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 5(1), pages 355-379, Part II F.
    6. Granger, C W J, 1969. "Investigating Causal Relations by Econometric Models and Cross-Spectral Methods," Econometrica, Econometric Society, vol. 37(3), pages 424-438, July.
    7. repec:bla:econom:v:44:y:1977:i:175:p:267-81 is not listed on IDEAS
    8. Kaun, David E & Spiro, Michael H, 1970. "The Relation Between Wages And Unemployment In U.S. Cities, 1955-1965," The Manchester School of Economic & Social Studies, University of Manchester, vol. 38(1), pages 1-14, March.
    9. Sims, Christopher A, 1980. "Macroeconomics and Reality," Econometrica, Econometric Society, vol. 48(1), pages 1-48, January.
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    Cited by:

    1. David Gray, 2005. "An examination of regional interaction and super-regions in Britain: An error correction model approach," Regional Studies, Taylor & Francis Journals, vol. 39(5), pages 619-632.
    2. Jeff B. Cromwell & Michael J. Hannan, 1993. "The Utility of Impulse Response Functions in Regional Analysis: Some Critical Issues," International Regional Science Review, , vol. 15(2), pages 199-222, August.

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