Market Potential, panel data, and aggregate fluctuations: All that glitters is not gold

Fernando Bruna

MPRA Paper from University Library of Munich, Germany

Abstract: The New Economic Geography (NEG) provides a historical explanation for the spatial agglomeration of economic activity. One of its predictions, the ‘wage equation’, relates regional income to market accessibility. Although the NEG is a long-term theory, empirical literature has tested it using panel data methods, which capture short-term relation-ships between temporal changes in variables. For a sample of European regions, I show that panel data estimations of the wage equation identify only potential spillover effects of the European business cycle on the synchronic evolution of regional per capita income. That is, the panel data results are not due to the mechanisms proposed by the NEG. The paper concludes with a cautionary note about misinterpretation of panel data estimations.

Keywords: NEG; agglomeration; wage equation; fixed effects; first differences; European cycle (search for similar items in EconPapers)
JEL-codes: C18 C23 E32 F12 R12 (search for similar items in EconPapers)
Date: 2024-08-29
New Economics Papers: this item is included in nep-geo and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://mpra.ub.uni-muenchen.de/121949/1/MPRA_paper_121949.pdf original version (application/pdf)
https://mpra.ub.uni-muenchen.de/122026/1/MPRA_paper_121949.pdf revised version (application/pdf)
https://mpra.ub.uni-muenchen.de/122038/1/MPRA_paper_121949.pdf revised version (application/pdf)
https://mpra.ub.uni-muenchen.de/122938/1/MPRA_paper_121949.pdf revised version (application/pdf)
https://mpra.ub.uni-muenchen.de/122939/1/MPRA_paper_122939.pdf revised version (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:121949

Access Statistics for this paper

More papers in MPRA Paper from University Library of Munich, Germany Ludwigstraße 33, D-80539 Munich, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Joachim Winter (winter@lmu.de).