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

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  • 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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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. Venables, Anthony J., 1993. "Equilibrium Locations of Vertically Linked Industries," CEPR Discussion Papers 802, C.E.P.R. Discussion Papers.
  2. Diego Puga, 1996. "The rise and fall of regional inequalities," LSE Research Online Documents on Economics 20643, London School of Economics and Political Science, LSE Library.
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    • Blanchflower, D. & Oswald, A., 1989. "The Wage Curve," Papers 340, London School of Economics - Centre for Labour Economics.
  5. J.Peter Neary, 2001. "Of Hype and Hyperbolas: Introducing the New Economic Geography," Journal of Economic Literature, American Economic Association, vol. 39(2), pages 536-561, June.
  6. Sinn, Hans-Werner, 2002. "Germany’s Economic Unification: An Assessment after Ten Years," Munich Reprints in Economics 19643, University of Munich, Department of Economics.
  7. Paul Krugman, 1998. "Space: The Final Frontier," Journal of Economic Perspectives, American Economic Association, vol. 12(2), pages 161-174, Spring.
  8. Michael Roos, . "Wages and Market Potential in Germany," Discussion Papers in Economics 00_09, University of Dortmund, Department of Economics.
  9. Faini, Riccardo, 1999. "Trade unions and regional development," European Economic Review, Elsevier, vol. 43(2), pages 457-474, February.
  10. Hanson, G.H., 1999. "`Market Potential, Increasing Returns, and Geographic Concentration," Working Papers 439, Research Seminar in International Economics, University of Michigan.
  11. Krugman, Paul & Venables, Anthony J., 1996. "Integration, specialization, and adjustment," European Economic Review, Elsevier, vol. 40(3-5), pages 959-967, April.
  12. Paul Krugman, 1990. "Increasing Returns and Economic Geography," NBER Working Papers 3275, National Bureau of Economic Research, Inc.
  13. 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.
  14. 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.
  15. Gordon H. Hanson, 2000. "Scale Economies and the Geographic Concentration of Industry," NBER Working Papers 8013, National Bureau of Economic Research, Inc.
  16. repec:fth:iniesr:430 is not listed on IDEAS
  17. Brakman, Steven & Garretsen, Harry, 1993. "The Relevance of Initial Conditions for the German Unification," Kyklos, Wiley Blackwell, vol. 46(2), pages 163-81.
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Cited by:
  1. Niebuhr, Annekatrin, 2005. "The Impact of EU Enlargement on European Border Regions," HWWA Discussion Papers 330, Hamburg Institute of International Economics (HWWA).
  2. Niebuhr, Annekatrin & Schlitte, Friso, 2008. "EU enlargement and convergence: Does market access matter?," HWWI Research Papers 1-16, Hamburg Institute of International Economics (HWWI).
  3. Lammers, Konrad, 2002. "Die Osterweiterung aus raumwirtschaftlicher Perspektive : Prognosen regionalökonomischer Erfahrungen aus der bisherigen Integration in Europa," HWWA Discussion Papers 195, Hamburg Institute of International Economics (HWWA).
  4. Michael Pfaffermayr & Peter Huber & Yvonne Wolfmayr, 2004. "Market Potential and Border Effects in Europe," WIFO Working Papers 235, WIFO.
  5. Annekatrin Niebuhr, 2003. "Market Potential and Regional Disparities in Europe," ERSA conference papers ersa03p178, European Regional Science Association.
  6. Niebuhr, Annekatrin & Stiller, Silvia, 2002. "Integration effects in border regions : a survey of economic theory and empirical studies," HWWA Discussion Papers 179, Hamburg Institute of International Economics (HWWA).
  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. Seravalli, Gilberto, 2011. "Neither easy nor impossible: Local development economics and policy," MPRA Paper 32743, University Library of Munich, Germany.
  9. 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.
  10. 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.

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