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Market Access, Regional Price Level and Wage Disparities: The German Case

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Author Info

  • Reinhold Kosfeld

    ()
    (University of Kassel)

  • Hans-Friedrich Eckey

    ()
    (University of Kassel)

Abstract

In this paper we use the NEG framework of the Helpman model to investigate the spatial distribution of wages across German labour market regions under different assumptions. As the assumptions of equal regional price level and equal real wages are strongly rejected for the German economy, standard approaches may fail to reveal the role of market access in explaining regional wage disparities. In part substantial changes occur when market potential is measured with the aid of regional price levels. With the so-called price index approach, the importance of market access in explaining regional wage differentials is clearly revealed. When controlling for heterogeneity of labour force and spatial dependence, the relationship still remains highly significant. From the price index approach, limited demand linkages of reasonable reach are inferred.

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File URL: http://www.uni-marburg.de/fb02/makro/forschung/magkspapers/14-2008_kosfeld.pdf
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Bibliographic Info

Paper provided by Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung) in its series MAGKS Papers on Economics with number 200814.

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Length: 29 pages
Date of creation: 2008
Date of revision:
Publication status: Forthcoming in
Handle: RePEc:mar:magkse:200814

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Keywords: New Economic Geography; market access; wage disparities; regional price levels;

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References

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  1. H. Hanson, Gordon, 2005. "Market potential, increasing returns and geographic concentration," Journal of International Economics, Elsevier, vol. 67(1), pages 1-24, September.
  2. A. Porojan, 2001. "Trade Flows and Spatial Effects: The Gravity Model Revisited," Open Economies Review, Springer, vol. 12(3), pages 265-280, July.
  3. 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.
  4. MION, Giordano, 2003. "Spatial externalities and empirical analysis: the case of Italy," CORE Discussion Papers 2003015, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  5. Steven Brakman & Harry Garretsen & Marc Schramm, 2004. "The Spatial Distribution of Wages: Estimating the Helpman-Hanson Model for Germany," Journal of Regional Science, Wiley Blackwell, vol. 44(3), pages 437-466.
  6. repec:hal:cesptp:hal-00633816 is not listed on IDEAS
  7. Laura Hering & Sandra Poncet, 2006. "Market Access Impact on Individual Wage: Evidence from China," Working Papers 2006-23, CEPII research center.
  8. Michael W.M. Roos, 2003. "Regional price levels in Germany," ERSA conference papers ersa03p511, European Regional Science Association.
  9. Annekatrin Niebuhr, 2006. "Market access and regional disparities," The Annals of Regional Science, Springer, vol. 40(2), pages 313-334, June.
  10. Armando Pires, 2006. "Estimating Krugman’s Economic Geography Model for the Spanish Regions," Spanish Economic Review, Springer, vol. 8(2), pages 83-112, June.
  11. Redding, Stephen J & Venables, Anthony J., 2000. "Economic Geography and International Inequality," CEPR Discussion Papers 2568, C.E.P.R. Discussion Papers.
  12. Krugman, Paul, 1991. "Increasing Returns and Economic Geography," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 483-99, June.
  13. López-Rodríguez , Jesús & Faíña, Andrés, 2007. "Regional Wage Disparities in Europe: What role for Market Access?," Investigaciones Regionales, Asociación Española de Ciencia Regional, issue 11, pages 5-23.
  14. Laura Hering & Sandra Poncet, 2008. "The Impact of Economic Geography on Wages: Disentangling the Channels of Influence," Working Papers 2008-20, CEPII research center.
  15. Hans-Friedrich Eckey & Reinhold Kosfeld & Nina Muraro, 2009. "Auswirkungen der Bevölkerungsentwicklung auf das wirtschaftliche Niveau der Regionen in Deutschland," MAGKS Papers on Economics 200901, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
  16. Laura Hering & Sandra Poncet, 2007. "Economic Geography, Spatial Dependence and Income Inequality in China," Working Papers 2007-22, CEPII research center.
  17. Reinhold Kosfeld & Hans-Friedrich Eckey & Jorgen Lauridsen, 2008. "Disparities in Prices and Income across German NUTS 3 Regions," Applied Economics Quarterly (formerly: Konjunkturpolitik), Duncker & Humblot, Berlin, vol. 54(2), pages 123-141.
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Citations

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Cited by:
  1. Zierahn, Ulrich, 2012. "The effect of market access on the labor market: Evidence from German reunification," HWWI Research Papers 131, Hamburg Institute of International Economics (HWWI).
  2. Riccardo Massari & M. Grazia Pittau & Roberto Zelli, 2010. "Does regional cost-of-living reshuffle Italian income distribution?," Working Papers 166, ECINEQ, Society for the Study of Economic Inequality.
  3. Enrique López-Bazo & Burhan Can Karahasan, 2011. "The Spatial Distribution of Human Capital: Can It Really Be Explained by Regional Differences in Market Access?," ERSA conference papers ersa11p1122, European Regional Science Association.

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