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Are There Border Effects in the EU Wage Function?

Author

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  • Peter Huber

    (Austrian Institute of Economic Research)

  • Michael Pfaffermayr

    (Austrian Institute of Economic Research)

  • Yvonne Wolfmayr

    (Austrian Institute of Economic Research)

Abstract

We estimate a linear approximation of the market potential function for Europe as derived in geography and trade models. Using a spatial econometric estimation approach, border effects are identified by a differential impact of other regions’ purchasing power, depending on whether two regions are located within the EU15 or outside the EU15. We find that intra-EU15 borders have an insignificant but EU15 external borders a significant effect on regional wage structures. We also illustrate the magnitude of EU external border effects. Our results imply that border effects are most pronounced for border regions of new member states, but relatively small for most regions of the EU15.

Suggested Citation

  • Peter Huber & Michael Pfaffermayr & Yvonne Wolfmayr, 2011. "Are There Border Effects in the EU Wage Function?," DANUBE: Law and Economics Review, European Association Comenius - EACO, issue 2, pages 23-41, June.
    • Handle: RePEc:cmn:journl:y:2011:i:2:p:23-41
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    Cited by:

    1. Michael Moritz, 2011. "Spatial effects of open borders on the Czech labour market," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 19(2), pages 305-331, April.
    2. Sona Schovankova, 2013. "Determinants of the Spatial Distribution of Foreign Empolyees on Different Skilled Positions: The Case of the Czech Republic," DANUBE: Law and Economics Review, European Association Comenius - EACO, issue 2, pages 115-139, June.

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