A new look at an Old Formula: Reilly´s Law

Statesboro

Otro; Southern Economic Developer (semiannual publication); 2002

Georgia Southern University

The study looks at how a simple adjustment to the traditional formula of Reilly´s Law of Retail Gravitation can enhance the usefulness of this rule of thumb for determining the market boundary between cities in an urban hierarchy. The paper proposes to adjust the relative population variable by weighting each city´s population by its respective per capita income. The second section of the paper describes Reilly´s Law and discusses the theoretical relationship it attempts to proxy. The reasoning behind the proposed modification to the formula is explained in the second section. To illustrate the impact of the proposed change to the formula, the paper analyzes the growth of the Atlanta market area relative to southern cities of comparable size in 1940. Section three contains the calculations for the market area of Atlanta relative to six other cities in the southeast using both the standard formulation of Reilly´s Law and the modified one. Section four discuses the findings. The example shows that the breakpoint between cities is definitely influenced by the inclusion of a variable measuring the relative purchasing power of the population.