Market Potential and the curse of distance in European regions

Fernando Bruna, Andrés Faíña and Jesus Lopez-Rodriguez

MPRA Paper from University Library of Munich, Germany

Abstract: In the context of the New Economic Geography (NEG) wage equation, the ‘curse of distance’ is the tendency of peripheral regions to have lower income because of being far from the main markets, as captured by a variable Market Potential. This pattern is consistent with the core-periphery spatial distribution of the European regional economic activity. Nevertheless, during the last decades, the European Union has been implemented active transport and regional policies, which should mitigate the consequences of peripherality. This paper analyzes the changes of the cross-sectional effects of Market Potential on the European regional income per capita during the sample period 1995-2008. The paper finds evidence that the cross-sectional elasticity of per capita income to Market Po-tential has been decreasing over the sample period. However, some results are sensitive to changes in the specification of the wage equation or the estimation method.

Keywords: NEG; wage equation; distance; core-periphery; regional policy; European regions (search for similar items in EconPapers)
JEL-codes: C21 F12 R11 R12 (search for similar items in EconPapers)
Date: 2014-06
New Economics Papers: this item is included in nep-eur, nep-geo and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:56747

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