This is the first paper in the social sciences to study the so-called temporal change of support problem (COSP). A temporal COSP occurs when data defined for short-run time intervals is used to infer conclusions about theories referring to long-run equilibrium relationships. The case is illustrated using the New Economic Geography (NEG), which provides a historical explanation for the spatial agglomeration of economic activity. One of its predictions, the ‘wage equation’, relates regional income to market accessibility. Although NEG is a long-term theory, empirical literature has tested it using panel data methods, which capture short-term relationships between temporal changes in variables. For a sample of European regions, I show that panel data estimations of the wage equation identify only potential spillover effects of the European business cycle on the synchronic evolution of regional per capita income. That is, the panel data results are not due to the mechanisms proposed by the NEG. The paper concludes with a cautionary note about the misinterpretation of panel data estimations in the presence of temporal COSP.

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