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Testing Nonlinear New Economic Geography Models

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  • 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.

Suggested Citation

  • Bode, Eckhardt & Mutl, Jan, 2010. "Testing Nonlinear New Economic Geography Models," Economics Series 253, Institute for Advanced Studies.
  • Handle: RePEc:ihs:ihsesp:253
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    File URL: http://www.ihs.ac.at/publications/eco/es-253.pdf
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    References listed on IDEAS

    as
    1. Matthieu Crozet, 2004. "Do migrants follow market potentials? An estimation of a new economic geography model," Journal of Economic Geography, Oxford University Press, vol. 4(4), pages 439-458, August.
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    5. Davis, Donald R. & Weinstein, David E., 1999. "Economic geography and regional production structure: An empirical investigation," European Economic Review, Elsevier, vol. 43(2), pages 379-407, February.
    6. Jordi Pons & Elisenda Paluzie & Javier Silvestre & Daniel A. Tirado, 2007. "Testing The New Economic Geography: Migrations And Industrial Agglomerations In Spain," Journal of Regional Science, Wiley Blackwell, vol. 47(2), pages 289-313, May.
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    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Are New Economic Geography models any good?
      by Economic Logician in Economic Logic on 2010-08-30 19:59:00

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    Cited by:

    1. Mark Andrew, 2012. "Regional market size and the housing market: insights from a new economic geography model," Journal of Property Research, Taylor & Francis Journals, vol. 29(4), pages 298-323, July.

    More about this item

    Keywords

    New economic geography; spatial econometrics;

    JEL classification:

    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)

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