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Regional Wage and Employment Responses to Market Potential in the EU. Bruges European Economic Research (BEER) Papers 3/November 2005

Head, Keith and Mayer, Thierry (2005) Regional Wage and Employment Responses to Market Potential in the EU. Bruges European Economic Research (BEER) Papers 3/November 2005. [Policy Paper]

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    Abstract

    Recent theoretical work on economic geography emphasizes the interplay of transport costs and plant-level increasing returns. In these models, the spatial distribution of demand is a key determinant of economic outcomes. In one strand, it is argued that higher demand gives rise to a more than proportionate increase in production, a result known as the home market effect. Another strand emphasizes the effects of market sizes on factor prices. We highlight the theoretical connection between these two strands. Using data on 57 European regions, we show how wages and employment respond to differentials in what we call real market potential, a discounted sum of demands derived from the theory.

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    Item Type: Policy Paper
    Uncontrolled Keywords: home market effects, wage equation, gravity equation, new economic geography.
    Subjects for non-EU documents: EU policies and themes > Policies & related activities > employment/labour market > employment/unemployment
    Subjects for EU documents: UNSPECIFIED
    EU Series and Periodicals: UNSPECIFIED
    EU Annual Reports: UNSPECIFIED
    Series: Series > College of Europe (Brugge) > Bruges European Economic Research Papers (BEER)
    Depositing User: Phil Wilkin
    Official EU Document: No
    Language: English
    Date Deposited: 18 Dec 2014 13:41
    Number of Pages: 29
    Last Modified: 18 Dec 2014 13:41
    URI: http://aei.pitt.edu/id/eprint/58547

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