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Testing the NEG Model: Further Evidence from Panel Data

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  • Bernard Fingleton

Abstract

Local wage variations in the UK are explained by two non-nested rival hypotheses. The first derives from new economic geography theory, in which wages depend on market potential. The second come from urban economics theory, giving a reduced form with wage rates dependent on employment density. The paper examines whether one of these rivals is encompassed by the other by fitting an artificial nesting model using three alternative panel data estimators. The estimates indicate that neither hypothesis is encompassed by its rival, suggesting a need for new, more comprehensive, theory.

Suggested Citation

  • Bernard Fingleton, 2008. "Testing the NEG Model: Further Evidence from Panel Data," SERC Discussion Papers 0005, Centre for Economic Performance, LSE.
    • Handle: RePEc:cep:sercdp:0005
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    Cited by:

    1. is not listed on IDEAS
    2. Fernando Bruna, 2015. "Why do empirical tests tend to accept the NEG? An alternative approach to the 'wage equation' in European regions," Working Papers 15-11, Asociación Española de Economía y Finanzas Internacionales.
    3. Bruna, Fernando, 2024. "Market Potential, panel data, and aggregate fluctuations: All that glitters is not gold," MPRA Paper 121949, University Library of Munich, Germany.

    More about this item

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • O18 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Urban, Rural, Regional, and Transportation Analysis; Housing; Infrastructure
    • R15 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Econometric and Input-Output Models; Other Methods

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