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Why do empirical tests tend to accept the NEG? An alternative approach to the 'wage equation' in European regions

Author

Listed:
  • Fernando Bruna

    (University of A Coruña, Economics and Business Department)

Abstract

This paper posits a new approach to the ‘wage equation’ of the New Economic Geography (NEG) stressing the uncertain interpretation of its empirical results. It emphasizes the generality of the variable to be explained, marginal costs. Then, two artificial (noNEG) tests are proposed in order to identify the statistical features explaining why wagetype equations tend to be accepted in tests for European data. The estimation results are shown to be similar not only when Market Potential is built for variables that do not measure market size but also when the focus of attention changes from global to local spatial patterns.

Suggested Citation

  • 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.
    • Handle: RePEc:aee:wpaper:1511
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    Cited by:

    1. Fichet de Clairfontaine, Aurélien & Hammer, Christoph, 2016. "Trade Costs and Income in European Regions: Evidence from a regional bilateral trade dataset," Department of Economics Working Paper Series 220, WU Vienna University of Economics and Business.

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    Keywords

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    JEL classification:

    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)

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