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New economic geography in Germany: testing the Helpman-Hanson model

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Author Info

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

    (Groningen University)

Abstract

In this paper we find evidence that the new economic geography approach is able to describe and explain the spatial characteristics of an economy, in our case the German economy. Using German district data we estimate the structural parameters of a new economic geography model as developed by Helpman (1998) and Hanson (1998) and we find confirmation for a spatial wage structure. The advantage of the Helpman-Hanson model is that it incorporates the fact that agglomeration of economic activity increases the prices of local (non-tradable) services, like housing. This model thereby provides an intuitively appealing spreading force that allows for less extreme agglomeration patterns than predicted by the bulk of new economic geography models. Based on different estimation strategies and taking a number of features of the re-unified German economy into account, we do not only test for the spatial distribution of wages but also for the spatial structure w.r.t. German unemployment, employment and land prices.

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Bibliographic Info

Paper provided by University of Groningen, Research Institute SOM (Systems, Organisations and Management) in its series Research Report with number 01D46.

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Date of creation: 2001
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Handle: RePEc:dgr:rugsom:01d46

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  1. Hans-Werner Sinn, 2000. "Germany's Economic Unification: An Assessment after Ten Years," NBER Working Papers 7586, National Bureau of Economic Research, Inc.
  2. Hanson, Gordon H, 1997. "Increasing Returns, Trade and the Regional Structure of Wages," Economic Journal, Royal Economic Society, vol. 107(440), pages 113-33, January.
  3. J. Peter Neary, 2000. "Of Hype and Hyperbolas - Introducing the new Economic Geography," Working Papers 200019, School Of Economics, University College Dublin.
  4. Krugman, Paul & Venables, Anthony J., 1995. "Globalization and the Inequality of Nations," Working Paper Series 430, Research Institute of Industrial Economics.
  5. Krugman, Paul, 1991. "Increasing Returns and Economic Geography," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 483-99, June.
  6. Alex Anas & Richard Arnott & Kenneth A. Small, 1998. "Urban Spatial Structure," Journal of Economic Literature, American Economic Association, vol. 36(3), pages 1426-1464, September.
  7. Venables, Anthony J., 1993. "Equilibrium Locations of Vertically Linked Industries," CEPR Discussion Papers 802, C.E.P.R. Discussion Papers.
  8. repec:fth:iniesr:430 is not listed on IDEAS
  9. Gordon H. Hanson, 2000. "Scale Economies and the Geographic Concentration of Industry," NBER Working Papers 8013, National Bureau of Economic Research, Inc.
  10. Blanchflower, David G & Oswald, Andrew J, 1990. " The Wage Curve," Scandinavian Journal of Economics, Wiley Blackwell, vol. 92(2), pages 215-35.
    • David G. Blanchflower & Andrew J. Oswald, 1995. "The Wage Curve," MIT Press Books, The MIT Press, edition 1, volume 1, number 026202375x, December.
  11. Diego Puga, 1996. "The Rise and Fall of Regional Inequalities," CEP Discussion Papers dp0314, Centre for Economic Performance, LSE.
  12. Krugman, Paul & Venables, Anthony J., 1996. "Integration, specialization, and adjustment," European Economic Review, Elsevier, vol. 40(3-5), pages 959-967, April.
  13. Brakman, Steven & Garretsen, Harry, 1993. "The Relevance of Initial Conditions for the German Unification," Kyklos, Wiley Blackwell, vol. 46(2), pages 163-81.
  14. Gordon H. Hanson, 1998. "Market Potential, Increasing Returns, and Geographic Concentration," NBER Working Papers 6429, National Bureau of Economic Research, Inc.
  15. Michael Roos, . "Wages and Market Potential in Germany," Discussion Papers in Economics 00_09, University of Dortmund, Department of Economics.
  16. Paul Krugman, 1998. "Space: The Final Frontier," Journal of Economic Perspectives, American Economic Association, vol. 12(2), pages 161-174, Spring.
  17. Faini, Riccardo, 1999. "Trade unions and regional development," European Economic Review, Elsevier, vol. 43(2), pages 457-474, February.
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Cited by:
  1. Peter Huber & Michael Paffermayr & Yvonne Wolfmayr, 2006. "Market Potential and Border Effects in Europe," ERSA conference papers ersa06p469, European Regional Science Association.
  2. Annekatrin Niebuhr, 2003. "Market Potential and Regional Disparities in Europe," ERSA conference papers ersa03p178, European Regional Science Association.
  3. Annekatrin Niebuhr, 2005. "The Impact of EU Enlargement on European Border Regions," ERSA conference papers ersa05p114, European Regional Science Association.
  4. Walker, Sarah, 2012. "The (Rail)road to Structural Change: Transportation Costs, Integration, and Production Specialization," 2012 Annual Meeting, August 12-14, 2012, Seattle, Washington 124614, Agricultural and Applied Economics Association.
  5. Niebuhr, Annekatrin & Stiller, Silvia, 2002. "Integration effects in border regions - a survey of economic theory and empirical studies," ERSA conference papers ersa02p066, European Regional Science Association.
  6. Niebuhr, Annekatrin & Schlitte, Friso, 2008. "EU enlargement and convergence: Does market access matter?," HWWI Research Papers 1-16, Hamburg Institute of International Economics (HWWI).
  7. H Garretsen & M. Schramm & S. Brakman, 2003. "The Strategic Bombing of German Cities during World War II and its Impact for Germany," Working Papers 03-08, Utrecht School of Economics.
  8. De Bruyne, Karolien, 2009. "Explaining the Location of Economic Activity. Is there a Spatial Employment Structure in Belgium?," Working Papers 2009/28, Hogeschool-Universiteit Brussel, Faculteit Economie en Management.
  9. Seravalli, Gilberto, 2011. "Neither easy nor impossible: Local development economics and policy," MPRA Paper 32743, University Library of Munich, Germany.

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