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Spanish Economic Review

, Volume 8, Issue 2, pp 83–112 | Cite as

Estimating Krugman’s Economic Geography Model for the Spanish Regions

  • Armando José Garcia Pires
Regular Article

Abstract

This paper estimates Krugman’s (J Polit Econ 99:413–499, 1991) economic geography model using data from the Spanish NUTS 3 regions. The econometric formalization endogenously determines wages in a region as a function of income and wages in other regions. The specification adopted also allows us to study the relation between the agglomeration of economic activity, increasing returns and market access. The first result obtained is that the Spanish economy exhibits a spatial wage structure: wages in a region are positively determined by income and wages in neighboring regions. In second place it is found support for the structural relations of the underlying theoretical model, indicating the importance of scale economies and transport costs in shaping the Spanish economic geography.

Keywords

“New” economic geography Increasing returns Market structure Transport costs Market potential 

JEL Classification

F12 R12 

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Copyright information

© Springer-Verlag 2006

Authors and Affiliations

  1. 1.Department of EconomicsNorwegian School of Economics and Business AdministrationBergenNorway

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