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Market Access, Regional Price Level and Wage Disparities: The German Case

  • Reinhold Kosfeld

    ()

    (University of Kassel)

  • Hans-Friedrich Eckey

    ()

    (University of Kassel)

In this paper we use the NEG framework of the Helpman model to investigate the spatial distribution of wages across German labour market regions under different assumptions. As the assumptions of equal regional price level and equal real wages are strongly rejected for the German economy, standard approaches may fail to reveal the role of market access in explaining regional wage disparities. In part substantial changes occur when market potential is measured with the aid of regional price levels. With the so-called price index approach, the importance of market access in explaining regional wage differentials is clearly revealed. When controlling for heterogeneity of labour force and spatial dependence, the relationship still remains highly significant. From the price index approach, limited demand linkages of reasonable reach are inferred.

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File URL: http://www.uni-marburg.de/fb02/makro/forschung/magkspapers/14-2008_kosfeld.pdf
File Function: First version, 2008
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Paper provided by Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung) in its series MAGKS Papers on Economics with number 200814.

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Length: 29 pages
Date of creation: 2008
Date of revision:
Publication status: Forthcoming in
Handle: RePEc:mar:magkse:200814
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  1. Laura Hering & Sandra Poncet, 2008. "The Impact of Economic Geography on Wages: Disentangling the Channels of Influence," Working Papers 2008-20, CEPII research center.
  2. A. Porojan, 2001. "Trade Flows and Spatial Effects: The Gravity Model Revisited," Open Economies Review, Springer, vol. 12(3), pages 265-280, July.
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  7. Laura Hering & Sandra Poncet, 2007. "Economic Geography, Spatial Dependence and Income Inequality in China," Working Papers 2007-22, CEPII research center.
  8. Gordon H. Hanson, 1998. "Market Potential, Increasing Returns, and Geographic Concentration," NBER Working Papers 6429, National Bureau of Economic Research, Inc.
  9. López-Rodríguez , Jesús & Faíña, Andrés, 2007. "Regional Wage Disparities in Europe: What role for Market Access?," Investigaciones Regionales, Asociación Española de Ciencia Regional, issue 11, pages 5-23.
  10. Laura Hering & Sandra Poncet, 2010. "Market access and individual wages: evidence from China," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) hal-00633785, HAL.
  11. Reinhold Kosfeld & Hans-Friedrich Eckey & Jorgen Lauridsen, 2008. "Disparities in Prices and Income across German NUTS 3 Regions," Applied Economics Quarterly (formerly: Konjunkturpolitik), Duncker & Humblot, Berlin, vol. 54(2), pages 123-141.
  12. 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.
  13. Paul Krugman, 1990. "Increasing Returns and Economic Geography," NBER Working Papers 3275, National Bureau of Economic Research, Inc.
  14. Annekatrin Niebuhr, 2006. "Market access and regional disparities," The Annals of Regional Science, Springer, vol. 40(2), pages 313-334, June.
  15. Michael Roos, 2006. "Regional price levels in Germany," Applied Economics, Taylor & Francis Journals, vol. 38(13), pages 1553-1566.
  16. Armando Pires, 2006. "Estimating Krugman’s Economic Geography Model for the Spanish Regions," Spanish Economic Review, Springer, vol. 8(2), pages 83-112, June.
  17. Krugman, Paul R & Venables, Anthony J, 1995. "Globalization and the Inequality of Nations," The Quarterly Journal of Economics, MIT Press, vol. 110(4), pages 857-80, November.
  18. Michael Roos, . "Wages and Market Potential in Germany," Discussion Papers in Economics 00_09, University of Dortmund, Department of Economics.
  19. Hans-Friedrich Eckey & Reinhold Kosfeld & Nina Muraro, 2009. "Auswirkungen der Bevölkerungsentwicklung auf das wirtschaftliche Niveau der Regionen in Deutschland," MAGKS Papers on Economics 200901, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
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