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New Economic Geography meets Comecon: Regional Wages and Industry Location in Central Europe

  • Marius Brülhart
  • Pamina Koenig

We analyze the internal spatial wage and employment structures of the Czech Republic, Hungary, Poland, Slovenia and Slovakia, using regional data for 1996-2000. A new economic geography model predicts wage gradients and specialization patterns that are smoothly related to regions' relative market access. As an alternative, we formulate a "Comecon hypothesis", according to which wages and sectoral location are not systematically related to market access except for discrete concentrations in capital regions. Our estimations confirm the ongoing relevance of the Comecon hypothesis: compared to pre-2004 EU members, Central European countries' average wages and service employment were still discretely higher in capital regions. Our results point towards an increase in relative wages and employment shares of Central Europe's provincial regions, favoring particularly those that are proximate to the large markets of incumbent EU members.

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Paper provided by Université de Lausanne, Faculté des HEC, DEEP in its series Cahiers de Recherches Economiques du Département d'Econométrie et d'Economie politique (DEEP) with number 05.01.

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Length: 24 pages
Date of creation: Jan 2005
Date of revision:
Publication status: Published in Economics of Transition, vol. 14 (2), April 2006, pp.245-267
Handle: RePEc:lau:crdeep:05.01
Contact details of provider: Postal: Université de Lausanne, Faculté des HEC, DEEP, Internef, CH-1015 Lausanne
Phone: ++41 21 692.33.64
Web page: http://www.hec.unil.ch/deep/publications/cahiers/series
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  1. Monfort, Philippe & Nicolini, Rosella, 2000. "Regional Convergence and International Integration," Journal of Urban Economics, Elsevier, vol. 48(2), pages 286-306, September.
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  9. Olga Alonso-Villar, 2001. "Large Metropolises in the Third World: An Explanation," Urban Studies, Urban Studies Journal Limited, vol. 38(8), pages 1359-1371, July.
  10. Crozet, Matthieu & Koenig Soubeyran, Pamina, 2004. "EU enlargement and the internal geography of countries," Journal of Comparative Economics, Elsevier, vol. 32(2), pages 265-279, June.
  11. Resmini, Laura, 2003. "Economic integration, industry location and frontier economies in transition countries," Economic Systems, Elsevier, vol. 27(2), pages 205-221, June.
  12. Marius Brülhart & Matthieu Crozet & Pamina Koenig, 2004. "Enlargement and the EU Periphery: The Impact of Changing Market Potential," The World Economy, Wiley Blackwell, vol. 27(6), pages 853-875, 06.
  13. Elisenda Paluzie Hernandez, 1999. "Trade policy and regional inequalities," Working Papers in Economics 48, Universitat de Barcelona. Espai de Recerca en Economia.
  14. Simonetta Longhi & Peter Nijkamp & Iulia Traistaru, 2003. "Determinants of Manufacturing Location in EU Accession Countries," ERSA conference papers ersa03p310, European Regional Science Association.
  15. Hanson, Gordon H, 1997. "Increasing Returns, Trade and the Regional Structure of Wages," Economic Journal, Royal Economic Society, vol. 107(440), pages 113-33, January.
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