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The Final Frontier? Border Effects and German Regional Wages

Author

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  • Brakman, Steven
  • Garretsen, Harry
  • Schramm, Marc

Abstract

Recent studies of border effects have focused on the intra-country and inter-country comparison of trade flows. It is found that borders have a negative impact on the size of cross-border trade. In order to estimate border effects on a regional level one needs not only data on inter-country but also on intra-country trade. For many countries (regional) data on intra-country trade are simply lacking, which makes an analysis of border effects and border regions cumbersome. In this paper we take a different approach to measure the impact of borders. We estimate a market potential function for German regional wages and by analysing whether German border regions can be distinguished from the other regions in terms of their wages. We use a market potential function because its basic idea (regional wages fall the further one moves away from economic centers) can be grounded on different trade theories and also because the resulting wage equation is related to border effect studies based on trade flows. We use a data set for 441 German districts for the years 1992 and 1995. In general, we find some evidence that is consistent with the existence of border effects but this evidence is probably better looked upon as an indication of a strong localisation of demand spillovers on regional wages in general. Even though border effects can not be ruled out, the overriding outcome is that of a strong localization of demand spill-overs for all German regions.

Suggested Citation

  • Brakman, Steven & Garretsen, Harry & Schramm, Marc, 2002. "The Final Frontier? Border Effects and German Regional Wages," Discussion Paper Series 26233, Hamburg Institute of International Economics.
    • Handle: RePEc:ags:hwwadp:26233
    DOI: 10.22004/ag.econ.26233
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Elisenda Paluzie & Jordi Pons & Daniel Tirado, 2009. "A test of the market potential equation in Spain," Applied Economics, Taylor & Francis Journals, vol. 41(12), pages 1487-1493.
    2. Peter Huber & Michael Pfaffermayr & Yvonne Wolfmayr, 2011. "Are There Border Effects in the EU Wage Function?," DANUBE: Law and Economics Review, European Association Comenius - EACO, issue 2, pages 23-41, June.
    3. Paul Verstraten & Gerard Verweij & Peter Zwaneveld, 2018. "Complexities in the spatial scope of agglomeration economies," CPB Discussion Paper 376.rdf, CPB Netherlands Bureau for Economic Policy Analysis.
    4. Suedekum, Jens & Blien, Uwe, 2004. "Wages and Employment Growth: Disaggregated Evidence for West Germany," IZA Discussion Papers 1128, Institute of Labor Economics (IZA).
    5. Miren Lafourcade & Elisenda Paluzie Hernandez, 2005. "European Integration, FDI and the Internal Geography of Trade: Evidence from Western European Border Regions," Working Papers in Economics 145, Universitat de Barcelona. Espai de Recerca en Economia.
    6. repec:use:tkiwps:088 is not listed on IDEAS
    7. Paul Verstraten & Gerard Verweij & Peter Zwaneveld, 2018. "Complexities in the spatial scope of agglomeration economies," CPB Discussion Paper 376, CPB Netherlands Bureau for Economic Policy Analysis.
    8. Paul Verstraten & Gerard Verweij & Peter Zwaneveld, 2017. "Understanding employment decentralization by estimating the spatial scope of agglomeration economies," CPB Discussion Paper 342.rdf, CPB Netherlands Bureau for Economic Policy Analysis.
    9. Natalya Petrovna Ryzhova, 2012. "Spatial Effects of International Economic Integration (in the case of Russian Regions)," Spatial Economics=Prostranstvennaya Ekonomika, Economic Research Institute, Far Eastern Branch, Russian Academy of Sciences (Khabarovsk, Russia), issue 4, pages 28-48.
    10. Paul Verstraten & Gerard Verweij & Peter Zwaneveld, 2018. "Why do wages grow faster in urban areas? Sorting of high potentials matters," CPB Discussion Paper 377, CPB Netherlands Bureau for Economic Policy Analysis.
    11. Paul Verstraten & Gerard Verweij & Peter Zwaneveld, 2018. "Why do wages grow faster in urban areas? Sorting of high potentials matters," CPB Discussion Paper 377.rdf, CPB Netherlands Bureau for Economic Policy Analysis.
    12. Steven Brakman & Harry Garretsen, 2003. "Rethinking the "New' Geographical Economics," Regional Studies, Taylor & Francis Journals, vol. 37(6-7), pages 637-648.
    13. Paul Verstraten & Gerard Verweij & Peter Zwaneveld, 2017. "Understanding employment decentralization by estimating the spatial scope of agglomeration economies," CPB Discussion Paper 342, CPB Netherlands Bureau for Economic Policy Analysis.

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