This paper derives from a New Economic Geography model, and estimates, a quadratic sectoral
real wage equation for the member countries of the enlarged EU. When significant, the real wages
U-shaped curve is increasing and concave with respect to market access, but decreasing and
convex with respect to access to skilled labour. Real wages in Chemicals, Wood Products, Leather
Products and Textiles do not react to market access, and only those sectors with low degree of
scale economies and low-skill intensity are U-shaped with respect to access to skilled labour. At the
present GDP levels, EU geography is still in the divergence-inducing side of the U-curve. In
addition, EU real wages are significantly determined by country-specific characteristics other than
geography that push Northern real wages upward and pull Eastern real wages downward