IDEAS home Printed from https://ideas.repec.org/p/ipt/termod/201903.html
   My bibliography  Save this paper

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

Author

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 the RHOMOLO 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.

Suggested Citation

  • Patrizio Lecca & Martin Christensen & Andrea Conte & Giovanni Mandras & Simone Salotti, 2019. "Upward pressure on wages and the interregional trade spillover effects under demand-side shocks," JRC Working Papers on Territorial Modelling and Analysis 2019-03, Joint Research Centre (Seville site).
  • Handle: RePEc:ipt:termod:201903
    as

    Download full text from publisher

    File URL: https://ec.europa.eu/jrc/sites/jrcsh/files/jrc116050.pdf
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    as
    1. Michelle Gilmartin & David Learmouth & J Kim Swales & Peter McGregor & Karen Turner, 2013. "Regional Policy Spillovers: The National Impact of Demand-Side Policy in an Interregional Model of the UK Economy," Environment and Planning A, , vol. 45(4), pages 814-834, April.
    2. Andr�s Rodr�guez-Pose & Enrique Garcilazo, 2015. "Quality of Government and the Returns of Investment: Examining the Impact of Cohesion Expenditure in European Regions," Regional Studies, Taylor & Francis Journals, vol. 49(8), pages 1274-1290, August.
    3. Hertel, Thomas & Hummels, David & Ivanic, Maros & Keeney, Roman, 2007. "How confident can we be of CGE-based assessments of Free Trade Agreements?," Economic Modelling, Elsevier, vol. 24(4), pages 611-635, July.
    4. Fabrizio Barca & Philip McCann & Andrés Rodríguez‐Pose, 2012. "The Case For Regional Development Intervention: Place‐Based Versus Place‐Neutral Approaches," Journal of Regional Science, Wiley Blackwell, vol. 52(1), pages 134-152, February.
    5. Becker, Sascha O. & Egger, Peter H. & von Ehrlich, Maximilian, 2010. "Going NUTS: The effect of EU Structural Funds on regional performance," Journal of Public Economics, Elsevier, vol. 94(9-10), pages 578-590, October.
    6. Krugman, Paul, 1991. "Increasing Returns and Economic Geography," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 483-499, June.
    7. Guido Pellegrini & Flavia Terribile & Ornella Tarola & Teo Muccigrosso & Federica Busillo, 2013. "Measuring the effects of European Regional Policy on economic growth: A regression discontinuity approach," Papers in Regional Science, Wiley Blackwell, vol. 92(1), pages 217-233, March.
    8. Jan in 't Veld & Janos Varga, 2010. "The Potential Impact of EU Cohesion Policy Spending in the 2007-13 Programming Period: A Model-Based," European Economy - Economic Papers 2008 - 2015 422, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
    9. Enrico Moretti, 2014. "Local Economic Development, Agglomeration Economies, and the Big Push: 100 Years of Evidence from the Tennessee Valley Authority," The Quarterly Journal of Economics, Oxford University Press, vol. 129(1), pages 275-331.
    10. Patrick Kline & Enrico Moretti, 2013. "Place Based Policies with Unemployment," American Economic Review, American Economic Association, vol. 103(3), pages 238-243, May.
    11. Peter McGregor & Mark Partridge & Dan Rickman, 2010. "Innovations in Regional Computable General Equilibrium (CGE) Modelling," Regional Studies, Taylor & Francis Journals, vol. 44(10), pages 1307-1310.
    12. Michele Boldrin & Fabio Canova, 2001. "Inequality and convergence in Europe's regions: reconsidering European regional policies," Economic Policy, CEPR;CES;MSH, vol. 16(32), pages 205-253, April.
    13. Patrizio Lecca & Peter G. McGregor & J. Kim Swales & Ya Ping Yin, 2014. "Balanced Budget Multipliers For Small Open Regions Within A Federal System: Evidence From The Scottish Variable Rate Of Income Tax," Journal of Regional Science, Wiley Blackwell, vol. 54(3), pages 402-421, June.
    14. Matias Busso & Jesse Gregory & Patrick Kline, 2013. "Assessing the Incidence and Efficiency of a Prominent Place Based Policy," American Economic Review, American Economic Association, vol. 103(2), pages 897-947, April.
    15. Riccardo Crescenzi & Marco Di Cataldo & Andrés Rodríguez-Pose, 2016. "Government Quality And The Economic Returns Of Transport Infrastructure Investment In European Regions," Journal of Regional Science, Wiley Blackwell, vol. 56(4), pages 555-582, September.
    16. Sapir, Andre & Aghion, Philippe & Bertola, Giuseppe & Hellwig, Martin & Pisani-Ferry, Jean & Rosati, Dariusz & Vinals, Jose & Wallace, Helen, 2004. "An Agenda for a Growing Europe: The Sapir Report," OUP Catalogue, Oxford University Press, number 9780199271498.
    17. Damiaan Persyn & Jorge Diaz-Lanchas & Javier Barbero, 2019. "Estimating road transport costs between EU regions," JRC Working Papers on Territorial Modelling and Analysis 2019-04, Joint Research Centre (Seville site).
    18. Uzawa, H, 1969. "Time Preference and the Penrose Effect in a Two-Class Model of Economic Growth," Journal of Political Economy, University of Chicago Press, vol. 77(4), pages 628-652, Part II, .
    19. Riccardo regstdcenzi, 2009. "Undermining the Principle of Concentration? European Union Regional Policy and the Socio-economic Disadvantage of European Regions," Regional Studies, Taylor & Francis Journals, vol. 43(1), pages 111-133.
    20. Robert C. Feenstra & Philip Luck & Maurice Obstfeld & Katheryn N. Russ, 2018. "In Search of the Armington Elasticity," The Review of Economics and Statistics, MIT Press, vol. 100(1), pages 135-150, March.
    21. Oliver Picek & Enno Schröder, 2018. "Spillover effects of Germany's final demand on Southern Europe," The World Economy, Wiley Blackwell, vol. 41(8), pages 2216-2242, August.
    22. Patrizio Lecca & Javier Barbero Jimenez & Martin Aaroe Christensen & Andrea Conte & Francesco Di Comite & Jorge Diaz-Lanchas & Olga Diukanova & Giovanni Mandras & Damiaan Persyn & Stylianos Sakkas, 2018. "RHOMOLO V3:A Spatial Modelling Framework," JRC Working Papers JRC111861, Joint Research Centre (Seville site).
    23. Andres RodrIguez-Pose & Ugo Fratesi†, 2004. "Between Development and Social Policies: The Impact of European Structural Funds in Objective 1 Regions," Regional Studies, Taylor & Francis Journals, vol. 38(1), pages 97-113.
    24. Alonso-Carrera, Jaime & Freire-Serén, María Jesús & Manzano, Baltasar, 2009. "Macroeconomic effects of the regional allocation of public capital formation," Regional Science and Urban Economics, Elsevier, vol. 39(5), pages 563-574, September.
    25. Sandy Dall'Erba & Fang Fang, 2017. "Meta-analysis of the impact of European Union Structural Funds on regional growth," Regional Studies, Taylor & Francis Journals, vol. 51(6), pages 822-832, June.
    26. Mark Thissen & Olga Ivanova & Giovanni Mandras & Trond Husby, 2019. "European NUTS 2 regions: construction of interregional trade-linked Supply and Use tables with consistent transport flows," JRC Working Papers on Territorial Modelling and Analysis 2019-01, Joint Research Centre (Seville site).
    27. Edward J. Balistreri & Ayed Al-Qahtani & Carol A. Dahl, 2010. "Oil and Petroleum Product Armington Elasticities: A New-Geography-of-Trade Approach to Estimation," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3), pages 167-180.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. 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.
    2. 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).
    3. Javier Barbero & Olga Diukanova & Carlo Gianelle & Simone Salotti & Artur Santoalha, 2020. "Economic modelling to evaluate Smart Specialisation: an analysis on research and innovation targets in Southern Europe," JRC Working Papers on Territorial Modelling and Analysis 2020-01, Joint Research Centre (Seville site).
    4. 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.

    More about this item

    Keywords

    rhomolo; region; growth; regional development policies; Regional policy spillovers; spatial general equilibrium;

    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

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ipt:termod:201903. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Publication Officer). General contact details of provider: http://edirc.repec.org/data/ipjrces.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.