IDEAS home Printed from https://ideas.repec.org/p/ags/hwwadp/26233.html
   My bibliography  Save this paper

The Final Frontier? Border Effects and German Regional Wages

Author

Listed:
  • Brakman, Steven
  • Garretsen, Harry
  • Schramm, Marc

Abstract

Recent studies of border effects have focused on the intra-country and inter-country comparison of trade flows. It is found that borders have a negative impact on the size of cross-border trade. In order to estimate border effects on a regional level one needs not only data on inter-country but also on intra-country trade. For many countries (regional) data on intra-country trade are simply lacking, which makes an analysis of border effects and border regions cumbersome. In this paper we take a different approach to measure the impact of borders. We estimate a market potential function for German regional wages and by analysing whether German border regions can be distinguished from the other regions in terms of their wages. We use a market potential function because its basic idea (regional wages fall the further one moves away from economic centers) can be grounded on different trade theories and also because the resulting wage equation is related to border effect studies based on trade flows. We use a data set for 441 German districts for the years 1992 and 1995. In general, we find some evidence that is consistent with the existence of border effects but this evidence is probably better looked upon as an indication of a strong localisation of demand spillovers on regional wages in general. Even though border effects can not be ruled out, the overriding outcome is that of a strong localization of demand spill-overs for all German regions.

Suggested Citation

  • Brakman, Steven & Garretsen, Harry & Schramm, Marc, 2002. "The Final Frontier? Border Effects and German Regional Wages," Discussion Paper Series 26233, Hamburg Institute of International Economics.
    • Handle: RePEc:ags:hwwadp:26233
    DOI: 10.22004/ag.econ.26233
    as

    Download full text from publisher

    File URL: https://ageconsearch.umn.edu/record/26233/files/dp020197.pdf
    Download Restriction: no
    File URL: https://libkey.io/10.22004/ag.econ.26233?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Keith Head & Thierry Mayer, 2000. "Non-Europe: The magnitude and causes of market fragmentation in the EU," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 136(2), pages 284-314, June.
    2. repec:fth:michin:439 is not listed on IDEAS
    3. H. Hanson, Gordon, 2005. "Market potential, increasing returns and geographic concentration," Journal of International Economics, Elsevier, vol. 67(1), pages 1-24, September.
    4. Ciccone, Antonio, 2002. "Agglomeration effects in Europe," European Economic Review, Elsevier, vol. 46(2), pages 213-227, February.
    5. Engel, Charles & Rogers, John H, 1996. "How Wide Is the Border?," American Economic Review, American Economic Association, vol. 86(5), pages 1112-1125, December.
    6. van Houtum, H.J., 1998. "The development of cross-border economic relations," Other publications TiSEM 9f9d10bf-9df7-43f8-a3e5-f, Tilburg University, School of Economics and Management.
    7. James Harrigan, 2001. "Specialization and the Volume of Trade: Do the Data Obey the Laws?," NBER Working Papers 8675, National Bureau of Economic Research, Inc.
    8. Chen, Natalie, 2004. "Intra-national versus international trade in the European Union: why do national borders matter?," Journal of International Economics, Elsevier, vol. 63(1), pages 93-118, May.
    9. Krugman, Paul, 1991. "Increasing Returns and Economic Geography," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 483-499, June.
    10. Keith Head & John Ries, 2001. "Increasing Returns versus National Product Differentiation as an Explanation for the Pattern of U.S.-Canada Trade," American Economic Review, American Economic Association, vol. 91(4), pages 858-876, September.
    11. Brakman, Steven & Garretsen, Harry & Schramm, Marc, 2002. "New Economic Geography in Germany: Testing the Helpman-Hanson Model," Discussion Paper Series 26183, Hamburg Institute of International Economics.
    12. Nitsch, Volker, 2002. "Border effects and border regions: Lessons from the German unification," HWWA Discussion Papers 203, Hamburg Institute of International Economics (HWWA).
    13. McCallum, John, 1995. "National Borders Matter: Canada-U.S. Regional Trade Patterns," American Economic Review, American Economic Association, vol. 85(3), pages 615-623, June.
    14. Paul Krugman, 1998. "Space: The Final Frontier," Journal of Economic Perspectives, American Economic Association, vol. 12(2), pages 161-174, Spring.
    15. Brakman, Steven & Garretsen, Harry & Schramm, Marc, 2001. "New economic geography in Germany: testing the Helpman-Hanson model," Research Report 01D46, University of Groningen, Research Institute SOM (Systems, Organisations and Management).
    16. Pines,David & Sadka,Efraim & Zilcha,Itzhak (ed.), 1998. "Topics in Public Economics," Cambridge Books, Cambridge University Press, number 9780521561365, September.
    17. Niebuhr, Annekatrin & Stiller, Silvia, 2002. "Integration effects in border regions: A survey of economic theory and empirical studies," HWWA Discussion Papers 179, Hamburg Institute of International Economics (HWWA).
    18. J.Peter Neary, 2001. "Of Hype and Hyperbolas: Introducing the New Economic Geography," Journal of Economic Literature, American Economic Association, vol. 39(2), pages 536-561, June.
    19. Henk Van Houtum, 1998. "The development of cross-border economic relationships between firms in border regions," ERSA conference papers ersa98p201, European Regional Science Association.
    20. Holger C. Wolf, 2000. "Intranational Home Bias In Trade," The Review of Economics and Statistics, MIT Press, vol. 82(4), pages 555-563, November.
    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. Elisenda Paluzie & Jordi Pons & Daniel Tirado, 2009. "A test of the market potential equation in Spain," Applied Economics, Taylor & Francis Journals, vol. 41(12), pages 1487-1493.
    2. Peter Huber & Michael Pfaffermayr & Yvonne Wolfmayr, 2011. "Are There Border Effects in the EU Wage Function?," DANUBE: Law and Economics Review, European Association Comenius - EACO, issue 2, pages 23-41, June.
    3. Paul Verstraten & Gerard Verweij & Peter Zwaneveld, 2018. "Complexities in the spatial scope of agglomeration economies," CPB Discussion Paper 376.rdf, CPB Netherlands Bureau for Economic Policy Analysis.
    4. Suedekum, Jens & Blien, Uwe, 2004. "Wages and Employment Growth: Disaggregated Evidence for West Germany," IZA Discussion Papers 1128, Institute of Labor Economics (IZA).
    5. Miren Lafourcade & Elisenda Paluzie Hernandez, 2005. "European Integration, FDI and the Internal Geography of Trade: Evidence from Western European Border Regions," Working Papers in Economics 145, Universitat de Barcelona. Espai de Recerca en Economia.
    6. repec:use:tkiwps:088 is not listed on IDEAS
    7. Paul Verstraten & Gerard Verweij & Peter Zwaneveld, 2018. "Complexities in the spatial scope of agglomeration economies," CPB Discussion Paper 376, CPB Netherlands Bureau for Economic Policy Analysis.
    8. Paul Verstraten & Gerard Verweij & Peter Zwaneveld, 2017. "Understanding employment decentralization by estimating the spatial scope of agglomeration economies," CPB Discussion Paper 342.rdf, CPB Netherlands Bureau for Economic Policy Analysis.
    9. Natalya Petrovna Ryzhova, 2012. "Spatial Effects of International Economic Integration (in the case of Russian Regions)," Spatial Economics=Prostranstvennaya Ekonomika, Economic Research Institute, Far Eastern Branch, Russian Academy of Sciences (Khabarovsk, Russia), issue 4, pages 28-48.
    10. Paul Verstraten & Gerard Verweij & Peter Zwaneveld, 2018. "Why do wages grow faster in urban areas? Sorting of high potentials matters," CPB Discussion Paper 377, CPB Netherlands Bureau for Economic Policy Analysis.
    11. Paul Verstraten & Gerard Verweij & Peter Zwaneveld, 2018. "Why do wages grow faster in urban areas? Sorting of high potentials matters," CPB Discussion Paper 377.rdf, CPB Netherlands Bureau for Economic Policy Analysis.
    12. Steven Brakman & Harry Garretsen, 2003. "Rethinking the "New' Geographical Economics," Regional Studies, Taylor & Francis Journals, vol. 37(6-7), pages 637-648.
    13. Paul Verstraten & Gerard Verweij & Peter Zwaneveld, 2017. "Understanding employment decentralization by estimating the spatial scope of agglomeration economies," CPB Discussion Paper 342, CPB Netherlands Bureau for Economic Policy Analysis.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Brakman, Steven & Garretsen, Harry & Schramm, Marc, 2002. "The final frontier? Border effects and German regional wages," HWWA Discussion Papers 197, Hamburg Institute of International Economics (HWWA).
    2. S. Brakman & H Garretsen & M. Schramm, 2003. "The Strategic Bombing of German Cities during World War II and its Impact for Germany," Working Papers 03-09, Utrecht School of Economics.
    3. Brakman, Steven & Garretsen, Harry & Schramm, Marc, 2006. "Putting new economic geography to the test: Free-ness of trade and agglomeration in the EU regions," Regional Science and Urban Economics, Elsevier, vol. 36(5), pages 613-635, September.
    4. Niebuhr, Annekatrin, 2004. "Market Access and Regional Disparities: New Economic Geography in Europe," Discussion Paper Series 26148, Hamburg Institute of International Economics.
    5. Niebuhr, Annekatrin & Stiller, Silvia, 2002. "Integration effects in border regions: A survey of economic theory and empirical studies," HWWA Discussion Papers 179, Hamburg Institute of International Economics (HWWA).
    6. repec:use:tkiwps:088 is not listed on IDEAS
    7. Head, Keith & Mayer, Thierry, 2006. "Regional wage and employment responses to market potential in the EU," Regional Science and Urban Economics, Elsevier, vol. 36(5), pages 573-594, September.
    8. James E. Anderson & Eric van Wincoop, 2004. "Trade Costs," Journal of Economic Literature, American Economic Association, vol. 42(3), pages 691-751, September.
    9. repec:lic:licosd:11802 is not listed on IDEAS
    10. Henry Overman & Stephen Redding & Anthony J. Venables, 2001. "The Economic Geography of Trade, Production, and Income: A Survey of Empirics," CEP Discussion Papers dp0508, Centre for Economic Performance, LSE.
    11. Ulrich Zierahn, 2012. "The effect of market access on the labor market: Evidence from German reunification," MAGKS Papers on Economics 201239, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
    12. Ho Yeon KIM & Petra de Jong & Jan Rouwendal & Aleid Brouwer, 2012. "Shrinking population and the urban hierarchy [Housing preferences and attribute importance among Dutch older adults: a conjoint choice experiment]," ERSA conference papers ersa12p350, European Regional Science Association.
    13. Redding, Stephen J., 2016. "Goods trade, factor mobility and welfare," Journal of International Economics, Elsevier, vol. 101(C), pages 148-167.
    14. 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.
    15. Agnosteva, Delina E. & Anderson, James E. & Yotov, Yoto V., 2019. "Intra-national trade costs: Assaying regional frictions," European Economic Review, Elsevier, vol. 112(C), pages 32-50.
    16. Fabien Candau & Elisa Dienesch, 2015. "Spatial distribution of skills and regional trade integration," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 54(2), pages 451-488, March.
    17. Marie Daumal & Soledad Zignago, 2010. "Measure and determinants of border effects of Brazilian states," Papers in Regional Science, Wiley Blackwell, vol. 89(4), pages 735-758, November.
    18. Chen, Natalie & Novy, Dennis, 2008. "International Trade Integration: A Disaggregated Approach," CEPR Discussion Papers 7103, C.E.P.R. Discussion Papers.
    19. repec:esx:essedp:729 is not listed on IDEAS
    20. Head, Keith & Mayer, Thierry, 2004. "The empirics of agglomeration and trade," Handbook of Regional and Urban Economics, in: J. V. Henderson & J. F. Thisse (ed.), Handbook of Regional and Urban Economics, edition 1, volume 4, chapter 59, pages 2609-2669, Elsevier.
    21. Gabriel M. Ahlfeldt & Arne Feddersen, 2010. "From periphery to core: economic adjustments to high speed rail," Working Papers 2010/38, Institut d'Economia de Barcelona (IEB).
    22. Michael Roos, 2003. "Internationale Integration und die Neue Ökonomische Geographie," Perspektiven der Wirtschaftspolitik, Verein für Socialpolitik, vol. 4(1), pages 107-121, February.
    23. Breinlich, Holger & Ottaviano, Gianmarco I.P. & Temple, Jonathan R.W., 2014. "Regional Growth and Regional Decline," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 2, chapter 4, pages 683-779, Elsevier.

    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:ags:hwwadp:26233. See general information about how to correct material in RePEc.

    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 bibliographic 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.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: AgEcon Search (email available below). General contact details of provider: https://edirc.repec.org/data/hwwaade.html .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.