The final frontier? Border effects and German regional wages

Arbeitspapier

Recent studies of border effects have focused on the intra-country and inter-country comparison of trade flows. It is found that borders have a negative impact on the size of cross-border trade. In order to estimate border effects on a regional level one needs not only data on inter-country but also on intra-country trade. For many countries (regional) data on intra-country trade are simply lacking, which makes an analysis of border effects and border regions cumbersome. In this paper we take a different approach to measure the impact of borders. We estimate a market potential function for German regional wages and by analysing whether German border regions can be distinguished from the other regions in terms of their wages. We use a market potential function because its basic idea (regional wages fall the further one moves away from economic centers) can be grounded on different trade theories and also because the resulting wage equation is related to border effect studies based on trade flows. We use a data set for 441 German districts for the years 1992 and 1995. In general, we find some evidence that is consistent with the existence of border effects but this evidence is probably better looked upon as an indication of a strong localisation of demand spillovers on regional wages in general. Even though border effects can not be ruled out, the overriding outcome is that of a strong localization of demand spill-overs for all German regions.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: HWWA Discussion Paper ; No. 197

Classification and Topics

• Classification: Wirtschaft ; Urban, Rural, Regional, Real Estate, and Transportation Economics: Regional Migration; Regional Labor Markets; Population; Neighborhood Characteristics ; Size and Spatial Distributions of Regional Economic Activity ; General Regional Economics (includes Regional Data)
• Subject: economic geography ; empirical estimation ; Germany ; Grenzgebiet ; Regionale Lohnstruktur ; Interregionaler Handel ; Gesamtwirtschaftliche Nachfrage ; Spillover-Effekt ; Schätzung ; Deutschland

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Brakman, Steven ; Garretsen, Harry ; Schramm, Marc
• Event: Veröffentlichung
• (who): Hamburg Institute of International Economics (HWWA)
• (where): Hamburg
• (when): 2002

Further information

• Handle: http://hdl.handle.net/10419/19358
• Last update: 10.03.2025, 11:44 AM CET