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Abstract:
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This study examines the causal relationship between inner city and regional economic health for the 83 largest metropolitan statistical areas (MSA's) for the period of 1995-2003. The study addresses endogeneity by employing a measure of inner city business growth exogenous to business growth in the rest of the region/MSA. Through instrumental variables analysis, this study finds that inner city wages, a measure of economic health, may causally affect wages in the rest of the MSA (RMSA) positively. In contrast, increasing the number of inner city jobs may decrease the number of jobs in the RMSA, but there may be a positive net gain for the entire MSA. Overall, the research findings may support the hypothesis that strengthening inner city economies leads to respectively stronger regional economies, implying that central cities and suburbs may have an economic stake in their inner cities and may want to implement policies to arrest urban decline. |