Where It All Goes Down
Anytown, USA
Okay, it's not actually called that, but Viorst never actually labels the setting of the book. The only thing we know for sure is that it is definitely not Australia. Viorst gives us just enough detail to make it seem "normal" from the point of view of an American audience: skateboards, Hershey bars, and cereal box toys. You know, good ole' fashioned Americana. But there's nothing that tells us just where in the U.S. this is.
Even the illustrator, Ray Cruz, is careful to be generic in his depictions of the setting and the people in it. The mostly Caucasian population of the town reflects a typical—though seriously skewed—mid-20th-century view of "Middle America"; and the closest he comes to an identifying piece of signage in the business district of the town is the hilariously plain "Business Machines" store across the street from the dentist.
Why actually put effort into removing any identifying information about setting? Viorst and Cruz want the book to feel like it could happen anywhere, and as a result, to anyone.
This is a key tactic in writing for children especially. Like Alexander himself, their audience doesn't yet have a concept of the world beyond their immediate experience. New York would be just as foreign as Australia to any child who hadn't purchased the book at that cute store on the Upper West Side next to the pickle shop that also sells used DVD players and gives pedicures (and a quaint brunch on Saturdays).
In other words, by completely removing the idea of a specific setting, each child who reads the book can picture it happening in their own home town. That makes it easier for them to ground the book in their own experience using their own background knowledge. The story becomes more "real" for children because it is easier to fit it into their concept of real life.