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Regional wages and market potential in the enlarged EU: An empirical investigation

  • Thomas Y. Mathä

    ()

  • Allison Shwachman

This paper empirically analyses the link between market potential and regional wages in the enlarged EU. We extend previous studies of EU regions in several ways. 1) we analyze the link between market potential and wages for the EU27, 2) correct for spatial autocorrelation present in the data, showing that by neglecting spatial autocorrelation the strength of the relationship between market potential and wages may be underestimated, 3) decompose total market potential into several geographical components and analyze their respective contributions to explaining the geographical wage structure, and 4) explore which regions have gained the most from European integration by calculating counterfactual market potential if they could only trade with other regions within the same country.

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File URL: http://www.bcl.lu/fr/publications/cahiers_etudes/37/BCLWP037.pdf
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Paper provided by Central Bank of Luxembourg in its series BCL working papers with number 37.

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Length: 48 pages
Date of creation: Apr 2009
Date of revision:
Handle: RePEc:bcl:bclwop:bclwp037
Contact details of provider: Web page: http://www.bcl.lu/

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  1. Joao Santos Silva & Silvana Tenreyro, 2005. "The Log of Gravity," CEP Discussion Papers dp0701, Centre for Economic Performance, LSE.
  2. Michael Roos, . "Wages and Market Potential in Germany," Discussion Papers in Economics 00_09, University of Dortmund, Department of Economics.
  3. Head, Keith & Mayer, Thierry, 2002. "Market Potential and the Location of Japanese Investment in the European Union," CEPR Discussion Papers 3455, C.E.P.R. Discussion Papers.
  4. Gordon H. Hanson, 1998. "Market Potential, Increasing Returns, and Geographic Concentration," NBER Working Papers 6429, National Bureau of Economic Research, Inc.
  5. Knaap, Thijs, 2006. "Trade, location, and wages in the United States," Regional Science and Urban Economics, Elsevier, vol. 36(5), pages 595-612, September.
  6. Head, Keith & Mayer, Thierry, 2006. "Regional wage and employment responses to market potential in the EU," Regional Science and Urban Economics, Elsevier, vol. 36(5), pages 573-594, September.
  7. Annekatrin Niebuhr, 2006. "Market access and regional disparities," The Annals of Regional Science, Springer, vol. 40(2), pages 313-334, June.
  8. Stephen Redding & Anthony J. Venables, 2001. "Economic Geography and International Inequality," International Trade 0103003, EconWPA.
  9. Giordano Mion, 2004. "Spatial externalities and empirical analysis: the case of Italy," LSE Research Online Documents on Economics 42663, London School of Economics and Political Science, LSE Library.
  10. Steven Brakman & Harry Garretsen & Marc Schramm, 2004. "The Spatial Distribution of Wages: Estimating the Helpman-Hanson Model for Germany," Journal of Regional Science, Wiley Blackwell, vol. 44(3), pages 437-466.
  11. Laura Hering & Sandra Poncet, 2007. "Economic Geography, Spatial Dependence and Income Inequality in China," Working Papers 2007-22, CEPII research center.
  12. Schürmann, Carsten & Talaat, Ahmed, 2002. "The European peripherality index," ERSA conference papers ersa02p224, European Regional Science Association.
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