There is no doubt that differential increases in energy prices have contributed to interregional shifts in population, income, and economic activity. There is a good chance, however, that their influence on the relocation of manufacturing establishments has been exaggerated. The principal effect has been on rates of change in per capita income that reflect shifts in terms of trade between energy-surplus and energy-deficit states.37. Those shifts have been on the whole orderly, and they represent, essentially, a modest acceleration of long-term trends. The resultant effects on older industrial areas have been less disruptive, for example, than the large-scale, rapid migration of the textile and related industries from the North to the South after World War II. The most reasonable prognosis that can be made at present is that the regions adversely affected by rising energy prices will adjust to new conditions in the future as they adjusted earlier to other changes. They will do so, however, at lower levels of real per capita income than they enjoyed in the past.
The paper by William Miernyk is a well-documented exposition of the thesis that the principal effect of rising energy prices on regional development is through shifts in the terms of trade between energy- surplus and energy-deficit regions (hypothesis 1) rather than through the price effects that influence industrial location (hypothesis 2).
The structure of the analysis provides a simple yet effective preliminary procedure for analyzing regional effects of factor price changes that could be extended to other variables, including regulations and the availability of transportation service. The initial empirical evidence presented in support of the author's thesis could be strengthened by an examination of the null hypothesis that industries have not relocated in significant numbers because of energy prices. Use of time-series data would also have strengthened the empirical analysis.____________________
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Publication information: Book title: Energy Costs, Urban Development, and Housing. Contributors: Anthony Downs - Editor, Katharine L. Bradbury - Editor. Publisher: The Brookings Institution. Place of publication: Washington, DC. Publication year: 1984. Page number: 283.