Market Potential, panel data, and aggregate fluctuations: All that glitters is not gold
Fernando Bruna
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 relationships 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… Show more
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