Distance and Decline: The Case of Petersburg, Virginia

Posted: 22 Oct 2018 Last revised: 21 Feb 2019

See all articles by Raymond E. Owens

Raymond E. Owens

Federal Reserve Banks - Federal Reserve Bank of Richmond

Santiago Pinto

Federal Reserve Banks - Federal Reserve Bank of Richmond

Date Written: 2018-10-16

Abstract

Petersburg, Virginia, prospered over two centuries as a center of production and trade. However, the city experienced economic difficulties beginning in the 1980s as a large number of layoffs at production plants in the area coincided with an erosion of retail trade in the city. Prolonged economic decline followed. In contrast, somewhat similar shocks in other moderate-sized cities in Virginia were followed by gradual economic recovery. We examine these differing outcomes and offer an explanation that hinges on the proximity of Petersburg to its larger neighbor, the greater Richmond area. We find evidence suggesting that after the job declines, higher-skilled residents in Petersburg initially commuted to jobs nearer to Richmond, later relocating from Petersburg toward Richmond--an option not readily available in the other Virginia cities considered. We suggest that, as a result, Petersburg suffered a sharp decline in tax revenues and that municipal costs could not be proportionately scaled down, leading to severe fiscal stress.

Keywords: spatial equilibrium, urban decline

JEL Classification: R23, R40, R51

Suggested Citation

Owens, Raymond E. and Pinto, Santiago, Distance and Decline: The Case of Petersburg, Virginia (2018-10-16). FRB Richmond Working Paper No. 18-16. Available at SSRN: https://ssrn.com/abstract=3270132

Raymond E. Owens (Contact Author)

Federal Reserve Banks - Federal Reserve Bank of Richmond

P.O. Box 27622
Richmond, VA 23261
United States

Santiago Pinto

Federal Reserve Banks - Federal Reserve Bank of Richmond ( email )

P.O. Box 27622
Richmond, VA 23261
United States

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