OUP - Abstract

Simultaneous Equations Model of Metropolitan Area Development and Spatial Interaction

Dissertation School: George Washington University

Pages: 85

Publication Date: January 1997

Availability:
Available from the HUD USER Helpdesk P.O. Box 23268 Washington, DC 20026-3268 Toll Free: 1-800-245-2691 Fax: 1-202-708-9981 Email: oup@oup.org

Access Number: 9957

Descriptors:
Metropolitan areas. Regional planning. Employment. Cities. Labor market.

Abstract:
Over the past twenty years economists have tried to identify what causes regional employment and wage growth. Labor supply has been studied at the metropolitan area level, but on the demand side estimates have been made only for individual industries in metropolitan areas. No one has studied a simultaneous model of aggregate demand and supply. The reason for this absence is that is no data available on the price of output from local industry. The newly constructed tradeable goods price index, called the Export Price Index (EPI), solves this dilemma. It is available for 196 metropolitan area growth combines city-specific export prices with national price indexes such as the producer price index to identify terms of trade shocks to individual cities. As the terms of trade (i.e., relative export-import prices) for each city improve (deteriorate) the city experiences positive (negative) shocks. With the integrated model, a series of hypotheses can be tested about how labor markets adjust to export price and terms of trade shocks. Results show that a city's adjustment to external shocks is significantly affected by the export prices of cities with similar industrial complexes and cities in close proximity. Using Hatanakas two step estimator, there is a modest degree of persistence in city employment patterns. [AUTHOR ABSTRACT]

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