Econometric connectedness as a measure of urban influence: evidence from Maine

Thomas Wiesen, Todd Gabe and Lakshya Bharadwaj ()
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Lakshya Bharadwaj: University of Maine School of Economics

Letters in Spatial and Resource Sciences, 2023, vol. 16, issue 1, No 33, 16 pages

Abstract: Abstract We propose a new indicator of urban influence, which builds from the concept of econometric connectedness that is commonly used to measure market integration in finance and macroeconomics. This metric, based upon a vector autoregression model, quantifies the fraction of the forecast error variance of a non-urban area’s economic activity that can be explained by the economic shocks of urban regions. As an illustration, we apply this metric to data on monthly total taxable sales for regions in the US state of Maine, with urban influence scores calculated relative to the state’s three largest cities. Additionally, we investigate how this measure of urban influence is related to a non-urban area’s population size, its distance to one of the state’s three largest cities, whether the region is coastal, and the importance of visitors to the area.

Keywords: Connectedness; Market integration; Rurality; Variance decomposition; Urban influence (search for similar items in EconPapers)
JEL-codes: C32 C4 R12 (search for similar items in EconPapers)
Date: 2023
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DOI: 10.1007/s12076-023-00353-9

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