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Testing Nonlinear New Economic Geography Models

  • Bode, Eckhardt

    (Kiel Institute for the World Economy, Kiel, Germany)

  • Mutl, Jan

    (Department of Economics and Finance, Institute for Advanced Studies, Vienna, Austria)

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.

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File URL: http://www.ihs.ac.at/publications/eco/es-253.pdf
File Function: First version, 2010
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Paper provided by Institute for Advanced Studies in its series Economics Series with number 253.

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Length: 41 pages
Date of creation: Jul 2010
Date of revision:
Handle: RePEc:ihs:ihsesp:253
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  1. Brakman,Steven & Garretsen,Harry & van Marrewijk,Charles, 2009. "The New Introduction to Geographical Economics," Cambridge Books, Cambridge University Press, number 9780521875325, June.
  2. Donald R. Davis & David E. Weinstein, 1997. "Economic Geography and Reginal Production Structure: An Empirical Investigation," NBER Working Papers 6093, National Bureau of Economic Research, Inc.
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  5. J. Peter Neary, 2000. "Of hype and hyperbolas : introducing the new economic geography," Working Papers 200019, School of Economics, University College Dublin.
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  8. Tabuchi, Takatoshi & Thisse, Jacques-Francois, 2002. "Taste heterogeneity, labor mobility and economic geography," Journal of Development Economics, Elsevier, vol. 69(1), pages 155-177, October.
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  13. Gordon H. Hanson, 1998. "Market Potential, Increasing Returns, and Geographic Concentration," NBER Working Papers 6429, National Bureau of Economic Research, Inc.
  14. Krugman, Paul, 1991. "Increasing Returns and Economic Geography," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 483-99, June.
  15. Richard Baldwin & Rikard Forslid & Philippe Martin & Gianmarco Ottaviano & Frederic Robert Nicoud, 2003. "Economic Geography and Public Policy," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00179815, HAL.
  16. Elisenda Paluzie & Jordi Pons & Javier Silvestre & Daniel Tirado, 2009. "Migrants and market potential in Spain over the twentieth century: a test of the new economic geography," Spanish Economic Review, Springer;Spanish Economic Association, vol. 11(4), pages 243-265, December.
  17. repec:hal:journl:halshs-00096277 is not listed on IDEAS
  18. 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, 05.
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