Distance and Decline: The Case of Petersburg, Virginia

Raymond Owens and Santiago Pinto ()

No 18-16, Working Paper from Federal Reserve Bank of Richmond

Abstract: Petersburg, Virginia, prospered over two centuries as a center of production and trade. However, the city experienced economic difficulties beginning in the 1980s as a large number of layoffs at production plants in the area coincided with an erosion of retail trade in the city. Prolonged economic decline followed. In contrast, somewhat similar shocks in other moderate-sized cities in Virginia were followed by gradual economic recovery. We examine these differing outcomes and offer an explanation that hinges on the proximity of Petersburg to its larger neighbor, the greater Richmond area. We find evidence suggesting that after the job declines, higher-skilled residents in Petersburg initially commuted to jobs nearer to Richmond, later relocating from Petersburg toward Richmond--an option not readily available in the other Virginia cities considered. We suggest that, as a result, Petersburg suffered a sharp decline in tax revenues and that municipal costs could not be proportionately scaled down, leading to severe fiscal stress.

Keywords: spatial equilibrium; urban decline (search for similar items in EconPapers)
JEL-codes: R23 R40 R51 (search for similar items in EconPapers)
Pages: 31 pages
Date: 2018-10-16
New Economics Papers: this item is included in nep-geo and nep-ure
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