Putting new economic geography to the test: free-ness of trade and agglomeration in the EU regions
Based on a new economic geography model by Puga (1999), we use the equilibrium wage equation to estimate two key structural model parameters for the NUTS II EU regions. The estimation of these parameters enables us to come up with an empirically based free-ness of trade parameter. We then confront the empirically grounded free-ness of trade parameter with the theoretical relationship between this parameter and the degree of agglomeration. This is done for two versions of our model: one in which labor is immobile between regions, and one in which labor is mobile between regions. Overall, and in line with related studies, our main finding is that agglomeration forces still have only a limited geographical reach in the EU. Agglomeration forces appear to be rather localized
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- Marius BRÜLHART & Matthieu CROZET & Pamina KOENIG, 2004.
"Enlargement and the EU Periphery: The Impact of Changing Market Potential,"
Cahiers de Recherches Economiques du Département d'Econométrie et d'Economie politique (DEEP)
04.02, Université de Lausanne, Faculté des HEC, DEEP.
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- Karen-Helene Midelfart & Henry G. Overman & Anthony J. Venables, 2003.
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Journal of Common Market Studies,
Wiley Blackwell, vol. 41(5), pages 847-868, December.
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- Robert-Nicoud, Frédéric, 2004. "The Structure of Simple 'New Economic Geography' Models," CEPR Discussion Papers 4326, C.E.P.R. Discussion Papers.
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