New Economic Geography meets Comecon: Regional Wages and Industry Location in Central Europe

Marius Brülhart and Pamina Koenig

Cahiers de Recherches Economiques du Département d'Econométrie et d'Economie politique (DEEP) from Université de Lausanne, Faculté des HEC, DEEP

Abstract: We analyze the internal spatial wage and employment structures of the Czech Republic, Hungary, Poland, Slovenia and Slovakia, using regional data for 1996-2000. A new economic geography model predicts wage gradients and specialization patterns that are smoothly related to regions' relative market access. As an alternative, we formulate a "Comecon hypothesis", according to which wages and sectoral location are not systematically related to market access except for discrete concentrations in capital regions. Our estimations confirm the ongoing relevance of the Comecon hypothesis: compared to pre-2004 EU members, Central European countries' average wages and service employment were still discretely higher in capital regions. Our results point towards an increase in relative wages and employment shares of Central Europe's provincial regions, favoring particularly those that are proximate to the large markets of incumbent EU members.

Keywords: regional wages; industry location; transition economies; Central Europe; new economic geography (search for similar items in EconPapers)
JEL-codes: P25 R12 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-eec, nep-geo, nep-tra and nep-ure
Date: 2005-01
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Published in Economics of Transition, vol. 14 (2), April 2006, pp.245-267

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