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New Economic Geography in Germany: Testing the Helpman-Hanson Model

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  • Brakman, Steven
  • Garretsen, Harry
  • Schramm, Marc

Abstract

In this paper we find evidence that the new economic geography approach is able to describe and explain the spatial characteristics of an economy, in our case the German economy. Using German district data we estimate the structural parameters of a new economic geography model as developed by Helpman (1998) and Hanson (1998) and we find confirmation for a spatial wage structure. The advantage of the Helpman- Hanson model is that it incorporates the fact that agglomeration of economic activity increases the prices of local (non-tradable) services, like housing. This model thereby provides an intuitively appealing spreading force that allows for less extreme agglomeration patterns than predicted by the bulk of new economic geography models. Based on different estimation strategies and taking a number of features of the re-unified German economy into account, we do not only test for the spatial distribution of wages but also for the spatial structure with respect to German unemployment, employment and land prices.

Suggested Citation

  • Brakman, Steven & Garretsen, Harry & Schramm, Marc, 2002. "New Economic Geography in Germany: Testing the Helpman-Hanson Model," Discussion Paper Series 26183, Hamburg Institute of International Economics.
    • Handle: RePEc:ags:hwwadp:26183
    DOI: 10.22004/ag.econ.26183
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    References listed on IDEAS

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    3. Annekatrin Niebuhr, 2003. "Market Potential and Regional Disparities in Europe," ERSA conference papers ersa03p178, European Regional Science Association.
    4. S. Brakman & H Garretsen & M. Schramm, 2003. "The Strategic Bombing of German Cities during World War II and its Impact for Germany," Working Papers 03-09, Utrecht School of Economics.
    5. Seravalli, Gilberto, 2011. "Neither easy nor impossible: Local development economics and policy," MPRA Paper 32743, University Library of Munich, Germany.
    6. Annekatrin Niebuhr, 2008. "The impact of EU enlargement on European border regions," International Journal of Public Policy, Inderscience Enterprises Ltd, vol. 3(3/4), pages 163-186.
    7. repec:lic:licosd:11802 is not listed on IDEAS
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    9. Michael Pfaffermayr & Peter Huber & Yvonne Wolfmayr, 2004. "Market Potential and Border Effects in Europe," WIFO Working Papers 235, WIFO.
    10. Brakman, Steven & Garretsen, Harry & Schramm, Marc, 2002. "The final frontier? Border effects and German regional wages," HWWA Discussion Papers 197, Hamburg Institute of International Economics (HWWA).
    11. Niebuhr, Annekatrin, 2004. "Market Access and Regional Disparities: New Economic Geography in Europe," Discussion Paper Series 26148, Hamburg Institute of International Economics.
    12. Xizan Jin & Hongfei Yu & Fangxin Yi & Lili Chen & Song Wang, 2022. "Tolerance for Housing Unaffordability among Highly Skilled Young Migrants: Evidence from the Zhejiang Province of China," IJERPH, MDPI, vol. 20(1), pages 1-18, December.
    13. Niebuhr, Annekatrin & Schlitte, Friso, 2008. "EU enlargement and convergence: Does market access matter?," HWWI Research Papers 1-16, Hamburg Institute of International Economics (HWWI).
    14. Walker, Sarah, 2012. "The (Rail)road to Structural Change: Transportation Costs, Integration, and Production Specialization," 2012 Annual Meeting, August 12-14, 2012, Seattle, Washington 124614, Agricultural and Applied Economics Association.
    15. Ulrich Zierahn, 2012. "The effect of market access on the labor market: Evidence from German reunification," MAGKS Papers on Economics 201239, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
    16. Lammers, Konrad, 2002. "Die Osterweiterung aus raumwirtschaftlicher Perspektive - Prognosen regionalokonomischer Theorien und Erfahrungen aus der bisherigen Integration in Europa," Discussion Paper Series 26126, Hamburg Institute of International Economics.
    17. Brakman, Steven & Garretsen, Harry & Schramm, Marc, 2002. "The Final Frontier? Border Effects and German Regional Wages," Discussion Paper Series 26233, Hamburg Institute of International Economics.

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