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Adding Geography to the New Economic Geography

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  • Maarten Bosker
  • Steven Brakman
  • Harry Garretsen
  • Marc Schramm

Abstract

For reasons of analytical tractability, new economic geography (NEG) models treat geography in a very simple way: attention is either confined to a simple 2-region or to an equidistant multi-region world. As a result, the main predictions regarding the impact of e.g. diminishing trade costs are based on these simple models. When doing empirical or policy work these simplifying assumptions become problematic and it may very well be that the conclusions from the simple models do not carry over to the heterogeneous geographical setting faced by the empirical researcher or policy maker. This paper tries to fill this gap by adding more realistic geography structures to the Puga (1999) model that encompasses several benchmark NEG models. By using extensive simulations we show that many, although not all, conclusions from the simple models do carry over to our multi-region setting with more realistic geography structures. Given these results, we then simulate the impact of increased EU integration on the spatial distribution of regional economic activity for a sample of 194-NUTSII regions and find that further integration will most likely be accompanied by higher levels of agglomeration.

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File URL: http://www.cesifo-group.de/portal/page/portal/DocBase_Content/WP/WP-CESifo_Working_Papers/wp-cesifo-2007/wp-cesifo-2007-06/cesifo1_wp2038.pdf
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Bibliographic Info

Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 2038.

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Date of creation: 2007
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Handle: RePEc:ces:ceswps:_2038

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  1. Steven Brakman & Harry Garretsen & Marc Schramm, 2005. "Putting New Economic Geography to the Test: Free-ness of Trade and Agglomeration in the EU Regions," CESifo Working Paper Series, CESifo Group Munich 1566, CESifo Group Munich.
  2. J.Peter Neary, 2001. "Of Hype and Hyperbolas: Introducing the New Economic Geography," Journal of Economic Literature, American Economic Association, American Economic Association, vol. 39(2), pages 536-561, June.
  3. BEHRENS, Kristian & THISSE, Jacques-François, . "Regional economics: a new economic geography perspective," CORE Discussion Papers RP, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) -1946, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  4. Raul Livas Elizondo & Paul Krugman, 1992. "Trade Policy and the Third World Metropolis," NBER Working Papers 4238, National Bureau of Economic Research, Inc.
  5. Fujita, Masahisa & Mori, Tomoya, 2005. "Frontiers of the New Economic Geography," IDE Discussion Papers, Institute of Developing Economies, Japan External Trade Organization(JETRO) 27, Institute of Developing Economies, Japan External Trade Organization(JETRO).
  6. Masahisa Fujita & Paul Krugman & Anthony J. Venables, 2001. "The Spatial Economy: Cities, Regions, and International Trade," MIT Press Books, The MIT Press, The MIT Press, edition 1, volume 1, number 0262561476, December.
  7. Stephen Redding & Anthony J. Venables, 2001. "Economic Geography and International Inequality," CEP Discussion Papers, Centre for Economic Performance, LSE dp0495, Centre for Economic Performance, LSE.
  8. Fujita, Masahisa & Krugman, Paul & Mori, Tomoya, 1999. "On the evolution of hierarchical urban systems1," European Economic Review, Elsevier, Elsevier, vol. 43(2), pages 209-251, February.
  9. Diego Puga, 1996. "The rise and fall of regional inequalities," LSE Research Online Documents on Economics, London School of Economics and Political Science, LSE Library 20643, London School of Economics and Political Science, LSE Library.
  10. Krugman, Paul, 1991. "Increasing Returns and Economic Geography," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 99(3), pages 483-99, June.
  11. Forslid, Rikard & Haaland, Jan I. & Midelfart Knarvik, Karen Helene, 2002. "A U-shaped Europe?: A simulation study of industrial location," Journal of International Economics, Elsevier, Elsevier, vol. 57(2), pages 273-297, August.
  12. Matthieu Crozet, 2004. "Do migrants follow market potentials? An estimation of a new economic geography model," Journal of Economic Geography, Oxford University Press, Oxford University Press, vol. 4(4), pages 439-458, August.
  13. Robert-Nicoud, Frédéric, 2004. "The Structure of Simple 'New Economic Geography' Models," CEPR Discussion Papers, C.E.P.R. Discussion Papers 4326, C.E.P.R. Discussion Papers.
  14. Krugman, Paul R & Venables, Anthony J, 1995. "Globalization and the Inequality of Nations," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 110(4), pages 857-80, November.
  15. Monfort, Philippe & Nicolini, Rosella, 2000. "Regional Convergence and International Integration," Journal of Urban Economics, Elsevier, vol. 48(2), pages 286-306, September.
  16. James E. Anderson & Eric van Wincoop, 2004. "Trade Costs," NBER Working Papers 10480, National Bureau of Economic Research, Inc.
  17. Rikard Forslid & Jan I. Haaland & Karen Helene M. Knarvik & Ottar Maestad, 2002. "Integration and transition: Scenarios for the location of production and trade in Europe," The Economics of Transition, The European Bank for Reconstruction and Development, The European Bank for Reconstruction and Development, vol. 10(1), pages 93-117, March.
  18. Kristian Behrens & Andrea R. Lamorgese & Gianmarco I.P. Ottaviano & Takatoshi Tabuchi, 2007. "Changes in transport and non transport costs: local vs. global impacts in a spatial network," Temi di discussione (Economic working papers), Bank of Italy, Economic Research and International Relations Area 628, Bank of Italy, Economic Research and International Relations Area.
  19. Krugman, Paul, 1998. "What's New about the New Economic Geography?," Oxford Review of Economic Policy, Oxford University Press, Oxford University Press, vol. 14(2), pages 7-17, Summer.
  20. repec:fth:iniesr:430 is not listed on IDEAS
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Citations

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Cited by:
  1. Berliant, Marcus & Tabuchi, Takatoshi, 2012. "Local politics and economic geography," MPRA Paper 43086, University Library of Munich, Germany.
  2. Maarten Bosker & Steven Brakman & Harry Garretsen & Marc Schramm, 2010. "Relaxing Hukou - Increased Labor Mobility and China’s Economic Geography," CESifo Working Paper Series, CESifo Group Munich 3271, CESifo Group Munich.
  3. Bas, Maria & Ledezma, Ivan, 2007. "Market Access and the Evolution of within Plant Productivity in Chile," Economics Papers from University Paris Dauphine, Paris Dauphine University 123456789/6913, Paris Dauphine University.
  4. Michele Fratianni & Francesco Marchionne, 2011. "Trade Costs and Economic Development," Working Papers, Indiana University, Kelley School of Business, Department of Business Economics and Public Policy 2011-01, Indiana University, Kelley School of Business, Department of Business Economics and Public Policy.
  5. Steven Brakman & Harry Garretsen, 2009. "Trade and Geography: Paul Krugman and the 2008 Nobel Prize in Economics," CESifo Working Paper Series, CESifo Group Munich 2528, CESifo Group Munich.
  6. Stoyan Totev, 2010. "Economic Integration and Conversion in the EU Member States," Economic Thought journal, Bulgarian Academy of Sciences - Economic Research Institute, Bulgarian Academy of Sciences - Economic Research Institute, issue 5, pages 3-23.
  7. Stoyan Totev, 2010. "Economic Integration and Convergence of EU Member States," Economic Thought journal, Bulgarian Academy of Sciences - Economic Research Institute, Bulgarian Academy of Sciences - Economic Research Institute, issue 7, pages 68-86.
  8. Maria Florencia Granato, 2011. "REGIONAL NEW ECONOMIC GEOGRAPHY (refereed paper)," ERSA conference papers ersa10p747, European Regional Science Association.

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