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The Spatial Distribution of Wages: Estimating the Helpman‐Hanson Model for Germany
Author(s) -
Brakman Steven,
Garretsen Harry,
Schramm Marc
Publication year - 2004
Publication title -
journal of regional science
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.171
H-Index - 79
eISSN - 1467-9787
pISSN - 0022-4146
DOI - 10.1111/j.0022-4146.2004.00344.x
Subject(s) - economies of agglomeration , economics , wage , distribution (mathematics) , econometrics , german , economic geography , microeconomics , labour economics , mathematics , geography , mathematical analysis , archaeology
. Using German district data we estimate the structural parameters of a new economic geography model as developed by Helpman (1998) and Hanson (1998, 2001a). The advantage of the Helpman‐Hanson model is that it incorporates the fact that agglomeration of economic activity increases the prices of local (nontradable) services, like housing. This model thereby provides an intuitively appealing spreading force that allows for less extreme agglomeration patterns than predicted by the bulk of new economic geography models. Generalizing the Helpman‐Hanson model, we also analyze the implications for the spatial distribution of wages once the assumption of real wage equalization is dropped. If we no longer assume real wage equalization we find support for a spatial wage structure as well as for the relevance of the structural parameters of the theoretical model.