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

Reinhold Kosfeld () and Hans-Friedrich Eckey ()
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Hans-Friedrich Eckey: University of Kassel

No 200814, MAGKS Papers on Economics from Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung)

Abstract: 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.

Keywords: New Economic Geography; market access; wage disparities; regional price levels (search for similar items in EconPapers)
JEL-codes: R11 R12 R15 (search for similar items in EconPapers)
Pages: 29 pages
Date: 2008
New Economics Papers: this item is included in nep-geo, nep-lab and nep-ure
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Citations: View citations in EconPapers (5)

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https://www.uni-marburg.de/en/fb02/research-groups ... /14-2008_kosfeld.pdf First version, 2008 (application/pdf)

Related works:
Journal Article: Market access, regional price level and wage disparities: the German case (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:mar:magkse:200814

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