A SEARCH FOR MULTIPLE EQUILIBRIA IN URBAN INDUSTRIAL STRUCTURE*

2008/01/08 by Donald R. Davis, David E. Weinstein · 5 citations
Economics, Econometrics and Finance · #Regional Economics and Spatial Analysis #Fiscal Policy and Economic Growth #Spatial and Panel Data Analysis

paper · doi:10.1111/j.1467-9787.2008.00545.x

Abstract

ABSTRACT Theories featuring multiple equilibria are widespread across economics. Yet little empirical work has asked if multiple equilibria are features of real economies. We examine this in the context of the Allied bombing of Japanese cities and industries in World War II. We develop a new empirical test for multiple equilibria and apply it to data for 114 Japanese cities in eight manufacturing industries. The data provide no support for the existence of multiple equilibria. In the aftermath even of immense shocks, a city typically recovers not only its population and its share of aggregate manufacturing, but even the industries it had before.

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