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The Annals of Regional Science

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01.06.2006 | Original Paper

Market access and regional disparities

New economic geography in Europe

verfasst von: Annekatrin Niebuhr

Erschienen in: The Annals of Regional Science | Ausgabe 2/2006

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Abstract

New economic geography (NEG) has reached a theoretical consolidation while related empirical tests are still scarce. The present paper aims at providing some evidence on the validity of forces emphasized by NEG. The analysis starts from the nominal wage equation derived from the Krugman “core–periphery model” and focuses on one of the main propositions of NEG that access advantages raise factor prices. The paper investigates the significance of market access for regional wages and the geographic extent of demand linkages for a cross section of European regions, also taking into account the effects of national borders. The regression analysis covers the period between 1985 and 2000. The results are consistent with the implication of NEG that demand linkages affect the geographic distribution of economic activities, confirming the basic findings of previous analyses. However, regarding the spatial extent of demand linkages, our results differ significantly from previous findings that point to highly localised effects.

Vorheriger Artikel Spatial autoregressively distributed lag models: equivalent forms, estimation, and an illustrative commuting model

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All prices and wages are measured in terms of the agricultural good.

For a detailed description of the derivation of Eq. 8, see Krugman (1992). However, as emphasized by a referee, the equation also holds under less restrictive assumptions (CES demand and zero profit condition) than those in the Krugman model.

See e.g. Roos (2001), Davis and Weinstein (2003).

Head and Mayer (2004) discuss some alternative explanations of agglomeration such as natural advantages, human capital externalities and knowledge spillovers.

See Section 5 for a detailed description of data on border impediments and data sources.

See Bundesamt für Bauwesen und Raumordnung (2001).

See Head and Mayer (2000), Nitsch (2000) and Crozet (2004).

We identified outliers as those regions the standardised residuals of which exceed the critical value ∣2.5∣.

A binary contiguity matrix was applied as spatial weights matrix.

We may question whether the signs of all control variables are consistent with the theoretical framework. For instance, in case amenities such as cultural sites increase utility of workers, then their influence on wages should be negative. Moreover, when population density acts as a proxy for the regional price level, we would expect a positive coefficient estimate. However, if the variable captures the competition effect (agglomeration of firms), theory will predict a negative sign.

Estimates of σ range between 4.9 and 13.0 for the market potential equation which is roughly in accordance with recent estimates in the empirical literature. See also Head and Mayer (2004) as well as Hanson (2000) for a comparison.

In the present analysis, half-life distance ranges between 190 km and 270 km for the market potential function (150 to 200 min of travel time).

However, the study by Schürmann and Talaat (2000) also comprises Central and Eastern European countries. Corresponding potential measures are also presented in the latest report on economic and social cohesion by the European Commission. See European Commission (2004).

In order to ensure comparability of results for different years, we had to exclude human capital from the regression model because corresponding data is not available for 1985 and 1990.

In contrast, the results of Hanson (2000) suggest, counterintuitively, that transport costs have risen slightly over time in the US. Test on spatial autocorrelation in Table 3 point to ignored spatial effects. However, unreported results for linear spatial error models indicate that controlling for autocorrelation does not affect the findings with respect to the significance of the market potential.

The poor performance of the difference specification might be caused by a violation of the underlying assumption that controls are time-invariant or vary in a way that is uncorrelated with the change in market access.

The additional regression results are available from the author upon request.

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Titel: Market access and regional disparities
New economic geography in Europe
verfasst von: Annekatrin Niebuhr
Publikationsdatum: 01.06.2006
Verlag: Springer-Verlag
Erschienen in: The Annals of Regional Science / Ausgabe 2/2006
Print ISSN: 0570-1864
Elektronische ISSN: 1432-0592
DOI: https://doi.org/10.1007/s00168-005-0047-1

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