The purpose of this study is to investigate the factors affecting the manufacturing industry wage among selected developing countries based on new economic geography theory. More specifically, we use a panel data model to study the spatial structure of wages in 136 countries for the period 1998-2007. The results indicate that this theory provides a good description of the spatial structure of wages. We find that the market size and the distance-weighted have positive relationships with wage. However, the price of non-tradable goods has a negative effect on the spatial structure of wages. The result shows that the conditions governing the labor market is more important in explaining wage inequalities than the characteristics of labor or labor productivity.
Amiti, M. & Cameron, L. (2004). Economic geography and wages. CEPR Discussion Papers, No.4234.
Ashrafzadeh, H. & Mehregan, N. (2008). Econometrics of panel data. Tehran University, Tehran.
Betts, C. M. (2008). Real exchange rate movements and the relative price of non-traded goods. Staff papers, Federal Reserve Bank of Minneapolis Research Department, No. 1.
Bosker, M. (2008). The empirical relevance of geographical economics. Utrecht University.
Bosker, M., Brakman, S., Garretsen, H., & Schramm, M. (2010). The new economic geography of prefecture cities in China: The relevance of market access and labor mobility for agglomeration. Seminar participants at the Spatial Economics Research Centre, London.
Brakman, S., Garretsen, H., & Schramm, M. (2004). The spatial distribution of wages estimating the Helpman-Hanson model for Germany. Journal of Regional Science, 44(3): 437-466.
Brakman, S., Garretsen, H., & Schramm, M. (2006). Putting new economicgeography to the test: Freeness of trade and agglomeration in the EUregions. Cesifo Working Paper, No. 1566.
Brakman, S., Garretsen, H., Gorter, J., Horst, A., & Schramm, M. (2005). New economic geography; Empirics and regional policy. Netherlands Bureau for Economic Policy Analysis, CPB Special Publications, No. 56.