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Market Potential and Border Effects in Europe

  • Peter Huber

    ()

  • Michael Paffermayr

    ()

  • Yvonne Wolfmayr

    ()

We estimate a linear approximation of the market potential function for Europe as derived in geography and trade models. Using a spatial econometric estimation approach, border effects are identified by a differential impact of nearby regions' purchasing power, depending on whether two regions are located within the EU15 or outside the EU15. Our results reveal substantial market potential effects on nominal wage rates. We also find significant border effects between EU15 and non-EU15 countries. Our estimation results suggest that the enlargement of the EU in May 2004 may lead to pronounced wage effects in the new member states, but to relatively small ones for the existing members and that regional disparities within new member states will increase.

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File URL: http://www-sre.wu-wien.ac.at/ersa/ersaconfs/ersa06/papers/469.pdf
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Paper provided by European Regional Science Association in its series ERSA conference papers with number ersa06p469.

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Date of creation: Aug 2006
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Handle: RePEc:wiw:wiwrsa:ersa06p469
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  1. Mion, Giordano, 2003. "Spatial Externalities and Empirical Analysis: The Case of Italy," ZEW Discussion Papers 03-38, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  2. Annekatrin Niebuhr, 2008. "The impact of EU enlargement on European border regions," International Journal of Public Policy, Inderscience Enterprises Ltd, vol. 3(3/4), pages 163-186.
  3. Paul Krugman, 1990. "Increasing Returns and Economic Geography," NBER Working Papers 3275, National Bureau of Economic Research, Inc.
  4. Marius Brülhart & Matthieu Crozet & Pamina Koenig, 2004. "Enlargement and the EU Periphery: The Impact of Changing Market Potential," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00096285, HAL.
  5. Decressin, Jörg & Fatás, Antonio, 1994. "Regional Labour Market Dynamics in Europe," CEPR Discussion Papers 1085, C.E.P.R. Discussion Papers.
  6. Gordon H. Hanson, 1998. "Market Potential, Increasing Returns, and Geographic Concentration," NBER Working Papers 6429, National Bureau of Economic Research, Inc.
  7. Puhani, Patrick A., 1999. "Labour mobility - an adjustment mechanism in Euroland? Empirical evidence for Western Germany, France and Italy," ZEW Discussion Papers 99-47, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  8. H. Kelejian, Harry & Prucha, Ingmar R., 2001. "On the asymptotic distribution of the Moran I test statistic with applications," Journal of Econometrics, Elsevier, vol. 104(2), pages 219-257, September.
  9. S. Brakman & H Garretsen & M. Schramm, 2004. "The Spatial Distribution of Wages:Estimating the Helpman-Hanson model for Germany," Working Papers 03-09, Utrecht School of Economics.
  10. Raul Livas Elizondo & Paul Krugman, 1992. "Trade Policy and the Third World Metropolis," NBER Working Papers 4238, National Bureau of Economic Research, Inc.
  11. Brakman, Steven & Garretsen, Harry & Schramm, Marc, 2002. "New economic geography in Germany : testing the Helpman-Hanson model," HWWA Discussion Papers 172, Hamburg Institute of International Economics (HWWA).
  12. Combes, Pierre-Philippe & Lafourcade, Miren, 2001. "Transport Cost Decline and Regional Inequalities: Evidence from France," CEPR Discussion Papers 2894, C.E.P.R. Discussion Papers.
  13. Annekatrin Niebuhr, 2006. "Market access and regional disparities," The Annals of Regional Science, Springer, vol. 40(2), pages 313-334, June.
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