Are there Border Effects in the EU Wage Function?
AbstractWe estimate a linear approximation of the market potential function for Europe as derived in geography and trade models. Using a spatial econometric estimation approach, border effects are identified by a differential impact of other regions purchasing power, depending on whether two regions are located within the EU15 or outside the EU15. We find that intra EU15-borders have an insignificant but external borders a significant effect on regional wage structures. We illustrate the magnitude of EU external border effects by simulating the enlargement of the EU in May 2004. Our results suggest a large impact of the border for new member states, but a relatively small one for old members.
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Bibliographic InfoPaper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 1880.
Date of creation: 2006
Date of revision:
market potential; border effects; spatial econometrics;
Other versions of this item:
- NEP-ALL-2007-01-02 (All new papers)
- NEP-EEC-2007-01-02 (European Economics)
- NEP-GEO-2007-01-02 (Economic Geography)
- NEP-INT-2007-01-02 (International Trade)
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