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Is the wage equation spatial enough? Evidence from a novel regional trade dataset
Author(s) -
Fichet de Clairfontaine Aurélien,
Hammer Christoph
Publication year - 2018
Publication title -
review of international economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.513
H-Index - 58
eISSN - 1467-9396
pISSN - 0965-7576
DOI - 10.1111/roie.12315
Subject(s) - wage , economics , per capita , per capita income , order (exchange) , distribution (mathematics) , construct (python library) , econometrics , gravity equation , market access , economic geography , demographic economics , international trade , geography , labour economics , bilateral trade , mathematical analysis , population , agriculture , demography , mathematics , archaeology , finance , sociology , computer science , china , programming language
This study focuses on the market accessibility of European regions and its relationship to income per capita, summarized in the new economic geography (NEG) “wage equation”. In a first step, we make use of a novel dataset of bilateral trade flows for 254 European nomenclature of territorial units for statistics (NUTS‐2) regions (for 26 European countries excluding Bulgaria and Romania) in order to estimate trade costs and ultimately construct a regional measure of access to markets. In a second step, we test the hypothesis that access to domestic as well as to foreign markets increases income per capita. We find that, in spite of its spatial formulation, the wage equation is not able to capture local spatial patterns of the distribution of European regional income per capita.