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

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  • Chian-Yue Wang

    (National Taipei University)

  • Robert Haining

    (University of Cambridge)

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.

Suggested Citation

  • Chian-Yue Wang & Robert Haining, 2017. "Testing the new economic geography’s wage equation: a case study of Japan using a spatial panel model," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 58(3), pages 417-440, May.
    • Handle: RePEc:spr:anresc:v:58:y:2017:i:3:d:10.1007_s00168-016-0804-3
    DOI: 10.1007/s00168-016-0804-3
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    Cited by:

    1. José M. Gaspar, 2018. "A prospective review on New Economic Geography," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 61(2), pages 237-272, September.
    2. Bruna, Fernando, 2024. "Market Potential, panel data, and aggregate fluctuations: All that glitters is not gold," MPRA Paper 121949, University Library of Munich, Germany.

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    More about this item

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • C26 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Instrumental Variables (IV) Estimation
    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)
    • R41 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Transportation: Demand, Supply, and Congestion; Travel Time; Safety and Accidents; Transportation Noise

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