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Market access, regional price level and wage disparities: the German case

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  • Reinhold Kosfeld
  • Hans-Friedrich Eckey

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 based on 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. Copyright Springer-Verlag 2010

Suggested Citation

  • Reinhold Kosfeld & Hans-Friedrich Eckey, 2010. "Market access, regional price level and wage disparities: the German case," Review of Regional Research: Jahrbuch für Regionalwissenschaft, Springer;Gesellschaft für Regionalforschung (GfR), vol. 30(2), pages 105-128, September.
    • Handle: RePEc:spr:jahrfr:v:30:y:2010:i:2:p:105-128
    DOI: 10.1007/s10037-010-0047-1
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    Cited by:

    1. Burhan Can Karahasan & Fırat Bilgel, 2020. "Market access and regional dispersion of human capital accumulation in Turkey," Review of Development Economics, Wiley Blackwell, vol. 24(3), pages 1073-1101, August.
    2. Andrzej Cieślik & Bartłomiej Rokicki, 2016. "European Integration and Spatial Wage Structure in Poland," Tijdschrift voor Economische en Sociale Geografie, Royal Dutch Geographical Society KNAG, vol. 107(4), pages 435-453, September.
    3. Bartłomiej Rokicki, 2013. "Ewolucja regionalnego zróżnicowania płac realnych w Polsce," Gospodarka Narodowa. The Polish Journal of Economics, Warsaw School of Economics, issue 9, pages 53-67.
    4. 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.
    5. Sanduku Mulumba & Lawrence Edwards & David Fadiran, 2024. "Economic geography determinants of spatial wage disparities in South Africa: Evidence from a firm‐level panel," WIDER Working Paper Series wp-2024-52, World Institute for Development Economic Research (UNU-WIDER).
    6. Burhan Can Karahasan, 2014. "The Spatial Distribution Of New Firms:Can Peripheral Areas Escape From The Curse Of Remoteness?," Romanian Journal of Regional Science, Romanian Regional Science Association, vol. 8(2), pages 1-28, DECEMBER.
    7. Gabrielle Gambuli, 2023. "Navigating the Geography of Regional Disparities: Market Access and the Core-Periphery Divide," THEMA Working Papers 2023-05, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
    8. Fernando Bruna, 2015. "Why do empirical tests tend to accept the NEG? An alternative approach to the 'wage equation' in European regions," Working Papers 15-11, Asociación Española de Economía y Finanzas Internacionales.
    9. Petr Janský & Dominika Kolcunová, 2017. "Regional differences in price levels across the European Union and their implications for its regional policy," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 58(3), pages 641-660, May.
    10. Burhan Can Karahasan & Firat Bilgel, 2018. "Economic Geography, Growth Dynamics and Human Capital Accumulation in Turkey: Evidence from Regional and Micro Data," Working Papers 1233, Economic Research Forum, revised 10 Oct 2018.
    11. Aurélien Fichet de Clairfontaine & Christoph Hammer, 2018. "Is the wage equation spatial enough? Evidence from a novel regional trade dataset," Review of International Economics, Wiley Blackwell, vol. 26(3), pages 610-633, August.
    12. B. Can Karahasan & Enrique López-Bazo, 2013. "The Spatial Distribution of Human Capital," International Regional Science Review, , vol. 36(4), pages 451-480, October.
    13. Ouyang, Puman & Zhang, Teng & Dong, Yan, 2015. "Market potential, firm exports and profit: Which market do the Chinese firms profit from?," China Economic Review, Elsevier, vol. 34(C), pages 94-108.
    14. Burhan Can Karahasan & Fatma Dogruel & Ali Suut Dogruel, 2016. "Can Market Potential Explain Regional Disparities in Developing Countries? Evidence from Turkey," The Developing Economies, Institute of Developing Economies, vol. 54(2), pages 162-197, June.
    15. Philipp Ehrl, 2014. "A breakdown of residual wage inequality in Germany," Working Papers 150, Bavarian Graduate Program in Economics (BGPE).
    16. Ulrich Zierahn, 2012. "The effect of market access on the labor market: Evidence from German reunification," MAGKS Papers on Economics 201239, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
    17. Zahra Dehghan Shabani & Ali Hussein Samadi & Amene Zare, 2017. "Does Market Potential Matter? Evidence on the Impact of Market Potential on Economic Growth in Iranian Provinces," Iranian Economic Review (IER), Faculty of Economics,University of Tehran.Tehran,Iran, vol. 21(4), pages 847-863, Autumn.
    18. 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.

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    More about this item

    Keywords

    New economic geography; Market access; Wage disparities; Regional price levels; R11; R12; R15;
    All these keywords.

    JEL classification:

    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)
    • R15 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Econometric and Input-Output Models; Other Methods

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