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Putting New Economic Geography to the Test: Free-ness of Trade and Agglomeration in the EU Regions

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Author Info
Steven Brakman ()
Harry Garretsen ()
Marc Schramm
Abstract

Based on a new economic geography (NEG) model by Puga (1999), we use the equilibrium wage equation to estimate two key structural model parameters for the NUTS II EU regions. These estimations enable us to come up with an empirically grounded free-ness of trade parameter. In line with NEG theory, the estimation results show that a spatial wage structure exists for the EU regions. By going back to the theoretical model we then analyze the implications of the free-ness of trade parameter for the degree of agglomeration. Our main findings suggest that agglomeration forces still have only a limited spatial reach in the EU. Agglomeration forces appear to be rather localized. At the same time, confronting our empirical results with the underlying new economic geography model also brings out the limitations of empirical research in new economic geography.

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Publisher Info
Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number CESifo Working Paper No. 1566.

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Date of creation: 2005
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Handle: RePEc:ces:ceswps:_1566

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Find related papers by JEL classification:
F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies
J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
R12 - Urban, Rural, and Regional Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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  3. Steven Brakman & Harry Garretsen & Marc Schramm, 2004. "The Spatial Distribution of Wages: Estimating the Helpman-Hanson Model for Germany," Journal of Regional Science, Blackwell Publishing, vol. 44(3), pages 437-466. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Harry Garretsen & Jolanda Peeters, 2006. "Capital Mobility, Agglomeration and Corporate Tax Rates: Is the Race to the Bottom for Real?," DNB Working Papers 113, Netherlands Central Bank, Research Department. [Downloadable!]
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