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

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  • 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

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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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