Testing the new economic geography’s wage equation: a case study of Japan using a spatial panel model

Chian-Yue Wang () and Robert Haining ()
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Chian-Yue Wang: National Taipei University
Robert Haining: University of Cambridge

The Annals of Regional Science, 2017, vol. 58, issue 3, No 2, 417-440

Abstract: Abstract This paper estimates the parameters of the wage equation of the new economic geography (NEG) using a newly developed spatial panel model. The results show that wage rate variation across different prefectures in Japan can be explained by market potential, which is a key variable in NEG theory, while controlling for variation in labour efficiency. Spatial heterogeneity is particularly important in the context of Japan in part because of its complex physical geography and the spatial distribution of its principal urban centres. The paper considers the challenges associated with representing the spatial relationships between prefectures describing and implementing different approaches to measuring transport costs.

JEL-codes: C23 C26 J30 R12 R41 (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (3)

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DOI: 10.1007/s00168-016-0804-3

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