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Upward pressure on wages and the interregional trade spillover effects under demand‐side shocks

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  • Patrizio Lecca
  • Martin Christensen
  • Andrea Conte
  • Giovanni Mandras
  • Simone Salotti

Abstract

The paper illustrates the effect of a permanent demand‐side shock in the perturbed regions and the associated spillover effects in the non‐perturbed regions using a spatial‐numerical general equilibrium model of the EU economy. We test to what extent gradual upward pressure on wages generated by a domestic increase in demand alters the magnitude of the economic impacts in the long‐run and the degree to which this could result in changes in trade patterns. We also assess the size and the direction of the effects with varying trade substitution elasticities and under both perfectly and imperfectly competitive product markets. El artículo ilustra el efecto de una perturbación permanente de la demanda en las regiones perturbadas y los efectos de spillover asociados en las regiones no perturbadas mediante un modelo de equilibrio general numérico‐espacial de la economía de la UE. Se comprueba hasta qué punto el aumento gradual de la presión sobre los salarios generada por un aumento de la demanda interna altera la magnitud de los impactos económicos a largo plazo y en que medida podría esto dar lugar a cambios en los patrones de comercio. También se evalúa el tamaño y la dirección de los efectos con diferentes elasticidades de sustitución comercial y bajo mercados de productos perfecta e imperfectamente competitivos. 本稿では、EU経済の空間的数値の一般均衡モデルを用いて、摂動領域における永続的な需要側のショックの作用と、それに関連した、非摂動領域における波及効果を説明する。国内の需要増加による緩やかな賃金上昇圧が、どの程度まで長期的な経済インパクトの規模を変えるのか、そしてこれがどの程度、結果的に取引パターンの変化をもたらすかを検討する。また、完全および不完全競争製品市場の両方の条件下で、貿易の弾力性を変化させて、効果の規模と方向を評価する。

Suggested Citation

  • Patrizio Lecca & Martin Christensen & Andrea Conte & Giovanni Mandras & Simone Salotti, 2020. "Upward pressure on wages and the interregional trade spillover effects under demand‐side shocks," Papers in Regional Science, Wiley Blackwell, vol. 99(1), pages 165-182, February.
  • Handle: RePEc:bla:presci:v:99:y:2020:i:1:p:165-182
    DOI: 10.1111/pirs.12472
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    2. Filippo Di Pietro & Patrizio Lecca & Simone Salotti, 2021. "Regional economic resilience in the European Union: a numerical general equilibrium analysis," Spatial Economic Analysis, Taylor & Francis Journals, vol. 16(3), pages 287-312, July.
    3. Christensen, Martin & Weiers, Georg & Wolski, Marcin, 2019. "The 2019 assessment of the macroeconomic effects of the European Fund for Strategic Investments with the RHOMOLO-EIB model," INVESTIGACIONES REGIONALES - Journal of REGIONAL RESEARCH, Asociación Española de Ciencia Regional, issue 45, pages 5-15.
    4. Crucitti, Francesca & Lazarou, Nicholas-Joseph & Monfort, Philippe & Salotti, Simone, 2023. "Where does the EU cohesion policy produce its benefits? A model analysis of the international spillovers generated by the policy," Economic Systems, Elsevier, vol. 47(3).
    5. Lecca, Patrizio & Persyn, Damiaan & Sakkas, Stelios, 2023. "Capital-skill complementarity and regional inequality: A spatial general equilibrium analysis," Regional Science and Urban Economics, Elsevier, vol. 102(C).
    6. Javier Barberoa & Olga Diukanovaa & Carlo Gianellea & Simone Salottia & Artur Santoalha, 2020. "Economic modelling to evaluate Smart Specialisation: an analysis on research and innovation targets in Southern Europe," Working Papers on Innovation Studies 20200525, Centre for Technology, Innovation and Culture, University of Oslo.
    7. Patrizio Lecca & Simone Salotti & Andrea Conte, 2020. "The importance of studying inter-regional spillover effects of European policies: application of the RHOMOLO model for Poland," JRC Working Papers on Territorial Modelling and Analysis 2020-04, Joint Research Centre (Seville site).
    8. Carlo Gianelle & Fabrizio Guzzo & Javier Barbero & Simone Salotti, 2022. "The economic implications of Smart Specialisation governance: a general equilibrium analysis for Italy 2014-2020," JRC Working Papers on Territorial Modelling and Analysis 2022-05, Joint Research Centre (Seville site).
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    More about this item

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)
    • R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population
    • R58 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Regional Development Planning and Policy

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