Applications of Regional Economics to Income Distribution, Migration, and Effects of Internet Commerce on Retailing

This dissertation consists of three essays on regional economics that deal with earnings inequality in cities, interstate migration and spatial competition in the retail market. Chapter 1 provides a theoretical framework to analyze the observation of rising earnings inequality with city size. Many papers have found a positive relation between income inequality and city size in the US and other countries. This literature has assumed that the relation is linear. Tests performed here find that it is concave, resembling the classic Kuznets curve. A theoretical model based on the Income Elasticity Hypothesis (IEH), explains that inequality is a concave function of housing prices that tend to increase with city size. Further tests confirm the concavity of the relation between Gini and housing costs that is predicted by the IEH. Although for most cities, inequality still rises with housing costs, if housing costs continue to grow in large cities, inequality should eventually fall, resembling the Kuznets Curve at the country level. Chapter 2 is an empirical study of the declining internal migration in the United States. Persistent declines in the rates of interstate and intercity migration have been noted in many recent studies. Research has indicated that this trend does not appear due to changes in population composition. This paper retests the population composition hypothesis along with two other theoretical possibilities, falling returns to migration and improved search and matching technology. Empirical tests establish results that are partially consistent with the hypothesis of falling returns to migration. The fact that return migration rates have risen while gross, initial and subsequent rates have fallen, reported for the first time in this study, is particularly difficult to reconcile with existing theories. And results in this paper suggest more studies focusing on inter-regional equilibrium. Chapter 3 develops a theoretical model of the effect of on-line shopping on spatial competition of bricks-and-mortar retail stores. In this paper, a spatial competition model is built with a large multi-product shopping center and numerous local single-product stores in the market. The retailers therefore constitute a spatially inter-dependent retail system. The model suggests that more on-line alternatives to the durable good in the system has complex and counter-intuitive effects on the market size and pricing strategy in the long run