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Market Potential and Border Effects in Europe

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Author Info
Peter Huber ()
Michael Paffermayr ()
Yvonne Wolfmayr ()

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Abstract

We 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 nearby regions' purchasing power, depending on whether two regions are located within the EU15 or outside the EU15. Our results reveal substantial market potential effects on nominal wage rates. We also find significant border effects between EU15 and non-EU15 countries. Our estimation results suggest that the enlargement of the EU in May 2004 may lead to pronounced wage effects in the new member states, but to relatively small ones for the existing members and that regional disparities within new member states will increase.

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Paper provided by European Regional Science Association in its series ERSA conference papers with number ersa06p469.

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Date of creation: Aug 2006
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Handle: RePEc:wiw:wiwrsa:ersa06p469

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Steven Brakman & Harry Garretsen & Marc Schramm, 2004. "The Spatial Distribution of Wages: Estimating the Helpman-Hanson Model for Germany," Journal of Regional Science, Blackwell Publishing, vol. 44(3), pages 437-466. [Downloadable!] (restricted)
  2. Marius Brülhart & Matthieu Crozet & Pamina Koenig, 2004. "Enlargement and the EU Periphery: The Impact of Changing Market Potential," The World Economy, Blackwell Publishing, vol. 27(6), pages 853-875, 06. [Downloadable!] (restricted)
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  3. Annekatrin Niebuhr, 2005. "The Impact of EU Enlargement on European Border Regions," ERSA conference papers ersa05p114, European Regional Science Association. [Downloadable!]
  4. Decressin, Jörg & Fatás, Antonio, 1994. "Regional Labour Market Dynamics in Europe," CEPR Discussion Papers 1085, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  5. Michael Roos, . "Wages and Market Potential in Germany," Discussion Papers in Economics 00_09, University of Dortmund, Department of Economics. [Downloadable!]
  6. Krugman, Paul & Elizondo, Raul Livas, 1996. "Trade policy and the Third World metropolis," Journal of Development Economics, Elsevier, vol. 49(1), pages 137-150, April. [Downloadable!] (restricted)
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  7. Brakman, Steven & Garretsen, Harry & Schramm, Marc, 2002. "New Economic Geography in Germany: Testing the Helpman-Hanson Model," Discussion Paper Series 26183, Hamburg Institute of International Economics. [Downloadable!]
  8. Combes, Pierre-Philippe & Lafourcade, Miren, 2001. "Transport Cost Decline and Regional Inequalities: Evidence from France," CEPR Discussion Papers 2894, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  9. Patrick A. Puhani, 2001. "Labour Mobility: An Adjustment Mechanism in Euroland? Empirical Evidence for Western Germany, France and Italy," German Economic Review, Blackwell Publishing, vol. 2(2), pages 127-140, 05. [Downloadable!] (restricted)
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  10. Mion, Giordano, 2003. "Spatial Externalities and Empirical Analysis: The Case of Italy," ZEW Discussion Papers 03-38, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research. [Downloadable!]
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  11. 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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  12. Niebuhr, Annekatrin, 2005. "The Impact of EU Enlargement on European Border Regions," Discussion Paper Series 26384, Hamburg Institute of International Economics. [Downloadable!]
  13. H. Kelejian, Harry & Prucha, Ingmar R., 2001. "On the asymptotic distribution of the Moran I test statistic with applications," Journal of Econometrics, Elsevier, vol. 104(2), pages 219-257, September. [Downloadable!] (restricted)
  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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(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Niebuhr, Annekatrin, 2005. "The Impact of EU Enlargement on European Border Regions," Discussion Paper Series 26384, Hamburg Institute of International Economics. [Downloadable!]
  2. Annekatrin Niebuhr, 2005. "The Impact of EU Enlargement on European Border Regions," ERSA conference papers ersa05p114, European Regional Science Association. [Downloadable!]
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