Journal
JOURNAL OF INTERNATIONAL ECONOMICS
Volume 78, Issue 1, Pages 126-140Publisher
ELSEVIER
DOI: 10.1016/j.jinteco.2009.02.004
Keywords
New Economic Geography; Urban hierarchy; Market potential; Agglomeration
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The tyranny of distance in terms of its effect on median earnings and housing costs is examined for rural and urban U.S. counties. First, we develop a series of distance metrics for an area's remoteness from multiple tiers of the urban hierarchy. Second, we consider geographical access of buyers and sellers through market potential measures typical of those used in empirical studies of the New Economic Geography. We estimate penalties of about 5 to 9% for median earnings and 12 to 17% for housing costs for area remoteness from the combined tiers of the urban hierarchy. Differences in market potential also influence factor prices, but these effects generally are smaller than those produced by urban hierarchy distances. Thus, it appears that empirical tests of New Economic Geography models need to consider sources of agglomeration spillovers beyond aggregate market potential. (C) 2009 Elsevier B.V. All rights reserved
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