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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. Edward L. Glaeser & Joseph Gyourko, 2001. "Urban Decline and Durable Housing," Harvard Institute of Economic Research Working Papers 1931, Harvard - Institute of Economic Research.
  2. OTTAVIANO, Gianmarco & THISSE, Jacques-François, 1999. "Agglomeration and trade revisited," CORE Discussion Papers 1999041, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  3. 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.
  4. David E. Weinstein & Donald R. Davis, 2004. "Search for Multiple Equilibria in Urban Industrial Structure," Econometric Society 2004 North American Winter Meetings 639, Econometric Society.
  5. J.V. Henderson, 1972. "The Sizes and Types of Cities," Working Papers 75, Queen's University, Department of Economics.
  6. Head, Keith & Mayer, Thierry, 2004. "The empirics of agglomeration and trade," Handbook of Regional and Urban Economics, in: J. V. Henderson & J. F. Thisse (ed.), Handbook of Regional and Urban Economics, edition 1, volume 4, chapter 59, pages 2609-2669 Elsevier.
  7. 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.
  8. 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.
  9. Jonathan Eaton & Zvi Eckstein, 1994. "Cities and Growth: Theory and Evidence from france and Japan," Boston University - Institute for Economic Development 36, Boston University, Institute for Economic Development.
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