Market access, regional price level and wage disparities: the German case

Reinhold Kosfeld () and Hans-Friedrich Eckey ()

Review of Regional Research: Jahrbuch für Regionalwissenschaft, 2010, vol. 30, issue 2, 105-128

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 based on 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. Copyright Springer-Verlag 2010

Keywords: New economic geography; Market access; Wage disparities; Regional price levels; R11; R12; R15 (search for similar items in EconPapers)
Date: 2010
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Citations: View citations in EconPapers (16)

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Working Paper: Market Access, Regional Price Level and Wage Disparities: The German Case (2008)
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DOI: 10.1007/s10037-010-0047-1

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