Estimating Market Access Effects With Regional Wages: An Application Of The Gravity Equation And The Structural Wage Equation In A Non-Linear Dynamic Specification

This thesis analyzes the political-economic determinants of market access - an important theoretical indicator of spatial inequality - in the Asia-Pacific region. Political-economic controls such as dyadic hostility and sanction costs are specified in a gravity model of trade that is applied to 13 countries with respect to their neighboring trade partners. The effects that are yielded from the gravity model are used to construct a set of "market access" indices. The theoretical association between market access and wages is tested using a full information maximum likelihood estimation and is found to be nearly one to one across all but two countries under investigation. The inclusion of dyadic political-economic variables thus improves the explanatory power of market access in determining regional wages. The analytic framework presented thus offers practitioners a robust econometric and partial equilibrium method to measure the effects of bilateral economic policies on national income differentials