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Testing the NEG model: further evidence from panel data

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  • Fingleton, Bernard

Abstract

Local wage variations in the UK are explained by two non-nested rival hypotheses. The first derives from new economic geography theory, in which wages depend on market potential. The second come from urban economics theory, giving a reduced form with wage rates dependent on employment density. The paper examines whether one of these rivals is encompassed by the other by fitting an artificial nesting model using three alternative panel data estimators. The estimates indicate that neither hypothesis is encompassed by its rival, suggesting a need for new, more comprehensive, theory.

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  • Fingleton, Bernard, 2008. "Testing the NEG model: further evidence from panel data," LSE Research Online Documents on Economics 33147, London School of Economics and Political Science, LSE Library.
    • Handle: RePEc:ehl:lserod:33147
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    File URL: http://eprints.lse.ac.uk/33147/
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    References listed on IDEAS

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    1. Davis, Donald R. & Weinstein, David E., 2003. "Market access, economic geography and comparative advantage: an empirical test," Journal of International Economics, Elsevier, vol. 59(1), pages 1-23, January.
    2. Mion, Giordano, 2004. "Spatial externalities and empirical analysis: the case of Italy," Journal of Urban Economics, Elsevier, vol. 56(1), pages 97-118, July.
    3. Geoffrey J. D. Hewings & Michael Sonis & David Boyce (ed.), 2002. "Trade, Networks and Hierarchies," Advances in Spatial Science, Springer, number 978-3-662-04786-6, december.
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    Cited by:

    1. Fernando Bruna, 2015. "Why do empirical tests tend to accept the NEG? An alternative approach to the 'wage equation' in European regions," Working Papers 15-11, Asociación Española de Economía y Finanzas Internacionales.
    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:

    • C1 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General
    • F3 - International Economics - - International Finance
    • G3 - Financial Economics - - Corporate Finance and Governance

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