The Empirical Relevance of the New Economic Geography: Testing for a Spatial Wage Structure in Germany

24 Pages Posted: 26 Feb 2001  

Harry Garretsen

Utrecht University - Utrecht University School of Economics; CESifo (Center for Economic Studies and Ifo Institute); Radboud University Nijmegen - Department of Economics

Steven Brakman

University of Groningen - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute)

Marc Schramm

Utrecht University - Faculty of Law

Date Written: December 2000

Abstract

In this paper we want to shed some light on the empirical relevance of the new economic geography. Using one of the central features of the core new economic geography models, namely that wages have the tendency to fall the further one moves away from centres of economic activity, we investigate the existence of a spatial wage structure for post-unification Germany. We find support for a spatial wage structure for German city-district wages, and hence indirectly for the relevance of a new economic geography model for Germany. We also find that demand linkages in Germany are strongly localised and that the "old" border still matters to the extent that economic interactions between western and eastern Germany are still limited compared to the situation within these two parts of Germany.

Keywords: New Economic Geography, Spatial Wage Structure, Germany

JEL Classification: F12, F15, R12

Suggested Citation

Garretsen, Harry and Brakman, Steven and Schramm, Marc, The Empirical Relevance of the New Economic Geography: Testing for a Spatial Wage Structure in Germany (December 2000). CESifo Working Paper Series No. 395. Available at SSRN: https://ssrn.com/abstract=259780

Harry Garretsen (Contact Author)

Utrecht University - Utrecht University School of Economics ( email )

Kriekenpitplein 21-22
Adam Smith Building
Utrecht, 3584 EC
Netherlands
+31 0 30 253 9810 (Phone)

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

HOME PAGE: http://www.cesifo.de

Radboud University Nijmegen - Department of Economics ( email )

Nijmegen, 6500 HK
Netherlands
+31 24 361 5889 (Phone)
+31 24 361 1846 (Fax)

Steven Brakman

University of Groningen - Department of Economics ( email )

P.O. Box 800
9700 AV Groningen
Netherlands
+31 50 363 3746 (Phone)
+31 50 363 3730 (Fax)

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Marc Schramm

Utrecht University - Faculty of Law ( email )

Janskerkhof 3
Utrecht, 3512 BK
Netherlands

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