Regional employment and wages. The effects of transport costs and market potential. An application for Argentina

Economic activity in Argentina shows a high degree of concentration, in 1993 almost 46% of GDP was generated in an area representing just 0.14% of the country. When looking at the manufacturing sector the concentration is still higher. The new economic geography models developed since the early nineties explain the location of economic activity across regions as the result of two opposite forces, centripetal and centrifugal. As trade costs are reduced, the relative strength of these two forces changes, such that we might also expect changes in the regional structure of production and wages. How trade liberalising policies might have affected the structure of production and wages across regions is the topic we try to make a contribution. The evidence points out that the further reduction of trade barriers during the nineties might have had a small effect on the regional structure of employment and wages across counties, at least in the short-run.