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Why do empirical tests tend to accept the NEG? An alternative approach to the 'wage equation' in European regions

Fernando Bruna ()

No 15-11, Working Papers from Asociación Española de Economía y Finanzas Internacionales

Abstract: This paper posits a new approach to the ‘wage equation’ of the New Economic Geography (NEG) stressing the uncertain interpretation of its empirical results. It emphasizes the generality of the variable to be explained, marginal costs. Then, two artificial (noNEG) tests are proposed in order to identify the statistical features explaining why wagetype equations tend to be accepted in tests for European data. The estimation results are shown to be similar not only when Market Potential is built for variables that do not measure market size but also when the focus of attention changes from global to local spatial patterns.

Keywords: New Economic Geography; wage equation; Market Potential; spillovers; global trend; spatial autocorrelation (search for similar items in EconPapers)
JEL-codes: C21 F12 R12 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-eur, nep-geo and nep-ure
Date: 2015-11
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