One of the key issues surrounding geographical economics is whether the theory can be made operational, so that proper investigations can be made of the basic theoretical assumptions and practical use can be made of the model's predictions at a detailed spatial level. In this paper the model formalized by Fujita et al . (1999) is developed in the context of 36 regions of Great Britain, enabling direct comparisons with observed wage rate data that are used to calibrate the model. Iceberg transport costs are in the form of an exponential function and a power function. For the range of parameters considered, the power function gives a better fit between model and data, suggesting scale economies in transportation. The paper shows that, in spite of the assumptions that have to be made, quite realistic distributions of relative wages, income and prices are attainable. However, caution is required in the interpretation of these simulations, which in no way provide proof of New Economic Geography theory, which clearly has limitations. Nonetheless it is hoped that the work reported in this paper does help to advance the progress of geographical economics theory towards empirical verification.
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Article provided by Taylor and Francis Journals in its journal Applied Economics.
Volume (Year): 37 (2005) Issue (Month): 21 (December) Pages: 2417-2428 Download reference. The following formats are available: HTML
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OTTAVIANO, Gianmarco & TABUCHI, Takatoshi & THISSE, Jacques-Franois, 1999.
"Agglomeration and trade revisited,"
CORE Discussion Papers
1999041, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
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Gianmarco Ottaviano & Takatoshi Tabuchi & Jacques-Francois Tissse, 1999.
"Agglomeration and Trade Revisited,"
CIRJE F-Series
CIRJE-F-65, CIRJE, Faculty of Economics, University of Tokyo.
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Gianmarco Ottaviano & Takatoshi Tabuchi & Jacques-FranÁois Thisse, 2002.
"Agglomeration and Trade Revisited,"
International Economic Review,
Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 43(2), pages 409-436, May.
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