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The Spatial Distribution of Wages: Estimating the Helpman-Hanson Model for Germany

  • Steven Brakman
  • Harry Garretsen
  • Marc Schramm

Using German district data we estimate the structural parameters of a new economic geography model as developed by Helpman (1998) and Hanson (1998, 2001a). The advantage of the Helpman-Hanson model is that it incorporates the fact that agglomeration of economic activity increases the prices of local (nontradable) 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. Generalizing the Helpman-Hanson model, we also analyze the implications for the spatial distribution of wages once the assumption of real wage equalization is dropped. If we no longer assume real wage equalization we find support for a spatial wage structure as well as for the relevance of the structural parameters of the theoretical model. Copyright Blackwell Publishers, 2004

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Article provided by Wiley Blackwell in its journal Journal of Regional Science.

Volume (Year): 44 (2004)
Issue (Month): 3 ()
Pages: 437-466

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Handle: RePEc:bla:jregsc:v:44:y:2004:i:3:p:437-466
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  1. Vernon Henderson & Duncan Black, 1999. "Spatial Evolution of Population and Industry in the United States," American Economic Review, American Economic Association, vol. 89(2), pages 321-327, May.
  2. Glaeser, Edward L. & Shapiro, Jesse M., 2002. "Cities and Warfare: The Impact of Terrorism on Urban Form," Journal of Urban Economics, Elsevier, vol. 51(2), pages 205-224, March.
  3. Edward L. Glaeser & Joseph Gyourko, 2001. "Urban Decline and Durable Housing," NBER Working Papers 8598, National Bureau of Economic Research, Inc.
  4. Head, Keith & Mayer, Thierry, 2003. "The Empirics of Agglomeration and Trade," CEPR Discussion Papers 3985, C.E.P.R. Discussion Papers.
  5. Donald R. Davis & David E. Weinstein, 2001. "Bones, Bombs and Break Points: The Geography of Economic Activity," NBER Working Papers 8517, National Bureau of Economic Research, Inc.
  6. Ottaviano, Gianmarco & Thisse, Jacques-François, 1998. "Agglomeration and Trade Revisited," CEPR Discussion Papers 1903, C.E.P.R. Discussion Papers.
  7. Jonathan Eaton & Zvi Eckstein, 1994. "Cities and Growth: Theory and Evidence from France and Japan," NBER Working Papers 4612, National Bureau of Economic Research, Inc.
  8. Donald R. Davis & David E. Weinstein, 2008. "A Search For Multiple Equilibria In Urban Industrial Structure," Journal of Regional Science, Wiley Blackwell, vol. 48(1), pages 29-65.
  9. J.V. Henderson, 1972. "The Sizes and Types of Cities," Working Papers 75, Queen's University, Department of Economics.
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