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The skilled U-shaped Europe: is it really and on which side does it stand?

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Author Info
Helena Marques () (Loughborough University)

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Abstract

This paper derives from a New Economic Geography model, and estimates, a quadratic sectoral real wage equation for the member countries of the enlarged EU. When significant, the real wages U-shaped curve is increasing and concave with respect to market access, but decreasing and convex with respect to access to skilled labour. Real wages in Chemicals, Wood Products, Leather Products and Textiles do not react to market access, and only those sectors with low degree of scale economies and low-skill intensity are U-shaped with respect to access to skilled labour. At the present GDP levels, EU geography is still in the divergence-inducing side of the U-curve. In addition, EU real wages are significantly determined by country-specific characteristics other than geography that push Northern real wages upward and pull Eastern real wages downward.

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Paper provided by Department of Economics, Loughborough University in its series Discussion Paper Series with number 2004_06.

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Date of creation: Mar 2004
Date of revision: Mar 2004
Handle: RePEc:lbo:lbowps:2004_06

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Related research
Keywords: wage equation; labour demand; human capital; EU enlargement; market potential;

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Find related papers by JEL classification:
F15 - International Economics - - Trade - - - Economic Integration
F22 - International Economics - - International Factor Movements and International Business - - - International Migration
J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
L6 - Industrial Organization - - Industry Studies: Manufacturing

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  2. Overman, Henry G. & Redding, Stephen J & Venables, Anthony J., 2001. "The Economic Geography of Trade Production and Income: A Survey of Empirics," CEPR Discussion Papers 2978, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  3. Venables, Anthony J., 1998. "The International Division of Industries: Clustering and Comparative Advantage in a Multi-Industry Model," CEPR Discussion Papers 1961, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  4. 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. [Downloadable!] (restricted)
  5. Forslid, Rikard, 1999. "Agglomeration with Human and Physical Capital: an Analytically Solvable Case," CEPR Discussion Papers 2102, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  6. Monastiriotis, Vassilis, 2002. "Human Capital and Wages: Evidence for External Effects from the UK Regions," Applied Economics Letters, Taylor and Francis Journals, vol. 9(13), pages 843-46, October. [Downloadable!] (restricted)
  7. Baldwin, R.E. & Forslid, R. & Haaland, J.I. & Knarvik, K.H.M., 2000. "EU Integration and Outsiders. A Simulation Study of industrial Location," Papers 2/2000, Norwegian School of Economics and Business Administration-.
  8. Redding, Stephen & Venables, Anthony J., 2004. "Economic geography and international inequality," Journal of International Economics, Elsevier, vol. 62(1), pages 53-82, January. [Downloadable!] (restricted)
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  9. Choi, E Kwan & Harrigan, James, 2004. "Handbook of International Trade," Staff General Research Papers 11375, Iowa State University, Department of Economics.
  10. Helena Marques & Hugh Metcalf, 2003. "Wage Gradients in an Enlarged EU," Discussion Paper Series 2003_13, Department of Economics, Loughborough University, revised Dec 2003. [Downloadable!]
  11. Dixit, Avinash K & Stiglitz, Joseph E, 1977. "Monopolistic Competition and Optimum Product Diversity," American Economic Review, American Economic Association, vol. 67(3), pages 297-308, June. [Downloadable!] (restricted)
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  12. Masahisa Fujita & Paul Krugman & Anthony J. Venables, 2001. "The Spatial Economy: Cities, Regions, and International Trade," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262561476.
  13. Krugman, Paul, 1991. "Increasing Returns and Economic Geography," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 483-99, June. [Downloadable!] (restricted)
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  14. H. Hanson, Gordon, 2005. "Market potential, increasing returns and geographic concentration," Journal of International Economics, Elsevier, vol. 67(1), pages 1-24, September. [Downloadable!] (restricted)
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