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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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Phone: 06421/28-1722
Fax: 06421/28-4858
Web page: http://www.uni-marburg.de/fb02/
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  1. Laura Hering & Sandra Poncet, 2010. "Market Access and Individual Wages: Evidence from China," The Review of Economics and Statistics, MIT Press, vol. 92(1), pages 145-159, February.
  2. 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.
  3. Stephen Redding & Anthony J. Venables, 2001. "Economic geography and international inequality," LSE Research Online Documents on Economics 3714, London School of Economics and Political Science, LSE Library.
  4. De Bruyne, Karolien, 2009. "Explaining the Location of Economic Activity. Is there a Spatial Employment Structure in Belgium?," Working Papers 2009/28, Hogeschool-Universiteit Brussel, Faculteit Economie en Management.
  5. Krugman, Paul & Venables, Anthony J, 1994. "Globalization and the Inequality of Nations," CEPR Discussion Papers 1015, C.E.P.R. Discussion Papers.
  6. 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.
  7. 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).
  8. López-Rodríguez , Jesús & Faíña, Andrés, 2007. "Regional Wage Disparities in Europe: What role for Market Access?," INVESTIGACIONES REGIONALES - Journal of REGIONAL RESEARCH, Asociación Española de Ciencia Regional, issue 11, pages 5-23.
  9. Mion, Giordano, 2004. "Spatial externalities and empirical analysis: the case of Italy," Journal of Urban Economics, Elsevier, vol. 56(1), pages 97-118, July.
  10. Michael Roos, . "Wages and Market Potential in Germany," Discussion Papers in Economics 00_09, University of Dortmund, Department of Economics.
  11. Niebuhr, Annekatrin, 2004. "Market Access and Regional Disparities : New Economic Geography in Europe," HWWA Discussion Papers 269, Hamburg Institute of International Economics (HWWA).
  12. Armando Pires, 2006. "Estimating Krugman’s Economic Geography Model for the Spanish Regions," Spanish Economic Review, Springer, vol. 8(2), pages 83-112, June.
  13. Laura Hering & Sandra Poncet, 2007. "Economic Geography, Spatial Dependence and Income Inequality in China," Working Papers 2007-22, CEPII research center.
  14. Michael Roos, 2006. "Regional price levels in Germany," Applied Economics, Taylor & Francis Journals, vol. 38(13), pages 1553-1566.
  15. Laura Hering & Sandra Poncet, 2008. "The Impact of Economic Geography on Wages: Disentangling the Channels of Influence," Working Papers 2008-20, CEPII research center.
  16. Krugman, Paul, 1991. "Increasing Returns and Economic Geography," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 483-99, June.
  17. A. Porojan, 2001. "Trade Flows and Spatial Effects: The Gravity Model Revisited," Open Economies Review, Springer, vol. 12(3), pages 265-280, July.
  18. H. Hanson, Gordon, 2005. "Market potential, increasing returns and geographic concentration," Journal of International Economics, Elsevier, vol. 67(1), pages 1-24, September.
  19. Annekatrin Niebuhr, 2006. "Market access and regional disparities," The Annals of Regional Science, Springer, vol. 40(2), pages 313-334, June.
  20. Laura Hering & Sandra Poncet, 2006. "Market Access Impact on Individual Wage: Evidence from China," Working Papers 2006-23, CEPII research center.
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