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Economic Geography: a Review of the Theoretical and Empirical Literature

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Redding, Stephen J

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Abstract

This paper reviews the new economic geography literature, which accounts for the uneven distribution of economic activity across space in terms of a combination of love of variety preferences, increasing returns to scale and transport costs. After outlining the canonical core and periphery model, the paper examines the empirical evidence on three of its central predictions: the role of market access in determining factor prices, the related home market effect in which demand has a more than proportionate effect on production, and the potential existence of multiple equilibria. In reviewing the evidence, we highlight issues of measurement and identification, alternative potential explanations, and remaining areas for further research.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 7126.

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Date of creation: Jan 2009
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Handle: RePEc:cpr:ceprdp:7126

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Related research
Keywords: Home Market Effect; Market Access; Multiple Equilibria; New Economic Geography;

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Find related papers by JEL classification:
F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies
F14 - International Economics - - Trade - - - Country and Industry Studies of Trade
O10 - Economic Development, Technological Change, and Growth - - Economic Development - - - General

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