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The Impact of Agglomeration Economies on Estimated Demand Thresholds: An Extension of Wensley and Stabler

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  • James W. Henderson
  • Thomas M. Kelly
  • Beck A. Taylor

Abstract

Central place theory predicts that geographic markets located in rural areas have lower demand thresholds, and, therefore, a higher frequency of business establishments relative to areas that are more proximate to urban centers, other things equal. Wensley and Stabler (1998) confirm this prediction using data on the location and frequency of business activities in rural Saskatchewan. We demonstrate that this relationship may not always hold true depending on the existence and magnitude of agglomeration economies. If average cost differences associated with being located in an urbanized area are sufficiently large, then the relationship between urban proximity and number of establishments may be reversed. We provide evidence of this reversal using 1996 cross‐sectional data on hospital services in Texas.

Suggested Citation

  • James W. Henderson & Thomas M. Kelly & Beck A. Taylor, 2000. "The Impact of Agglomeration Economies on Estimated Demand Thresholds: An Extension of Wensley and Stabler," Journal of Regional Science, Wiley Blackwell, vol. 40(4), pages 719-733, November.
    • Handle: RePEc:bla:jregsc:v:40:y:2000:i:4:p:719-733
    DOI: 10.1111/0022-4146.00195
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    Cited by:

    1. Craig W. Carpenter & Anders Van Sandt & Rebekka Dudensing & Scott Loveridge, 2022. "Profit Pools and Determinants of Potential County-Level Manufacturing Growth," International Regional Science Review, , vol. 45(2), pages 188-224, March.
    2. Anders Van Sandt & Craig Wesley Carpenter & Rebekka Dudensing & Scott Loveridge, 2021. "Estimating determinants of healthcare establishment locations with restricted federal administrative data," Health Economics, John Wiley & Sons, Ltd., vol. 30(6), pages 1328-1346, June.
    3. Maureen Kilkenny, 2010. "Urban/Regional Economics And Rural Development," Journal of Regional Science, Wiley Blackwell, vol. 50(1), pages 449-470, February.
    4. Nagy, Cecil N. & Olfert, M. Rose & Skotheim, J., 2004. "Targeting Business Investment in Rural Communities," Journal of Regional Analysis and Policy, Mid-Continent Regional Science Association, vol. 34(4), pages 1-21.
    5. David Mushinski & Stephan Weiler & Benjamin Widner, 2014. "The impact of retail establishments in hinterlands on the export role of retail establishments in rural places," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 52(2), pages 469-487, March.
    6. Steven Deller & Reka Sundaram-Stukel, 2012. "Spatial patterns in the location decisions of US credit unions," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 49(2), pages 417-445, October.
    7. Paul Lewin & Bruce Weber & David Holland, 2013. "Core–periphery dynamics in the Portland, Oregon, region: 1982–2006," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 51(2), pages 411-433, October.
    8. Carpenter, Craig Wesley & Fannin, J. Matthew, 2021. "Back to the Future: Re-Incorporation of `Metropolitan Character' in U.S. Core-Based Statistical Area Delineations," Journal of Regional Analysis and Policy, Mid-Continent Regional Science Association, vol. 51(2), August.
    9. Hong, Junpyo & Fannin, James Matthew, 2007. "New Estimation Strategies for Demand Threshold Models in the Southern United States," 2007 Annual Meeting, February 4-7, 2007, Mobile, Alabama 34869, Southern Agricultural Economics Association.
    10. Van Sandt, Anders & Carpenter, Craig Wesley, "undated". "A Note on the Locational Determinants of the Agricultural Supply Chain," 2020 Annual Meeting, February 1-4, 2020, Louisville, Kentucky 302306, Southern Agricultural Economics Association.
    11. John Cromartie & David Nulph & Gary Hart & Elizabeth Dobis, 2013. "Defining frontier areas in the United States," Journal of Maps, Taylor & Francis Journals, vol. 9(2), pages 149-153, June.

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