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Economic Geography: a Review of the Theoretical and Empirical Literature

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  • Redding, Stephen J.

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

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Cited by:
  1. Irina Hotz, 2012. "Energy endowments, barriers to trade and industry location in Chinese provinces," IRENE Working Papers 12-02, IRENE Institute of Economic Research.
  2. Maria Florencia Granato, 2011. "REGIONAL NEW ECONOMIC GEOGRAPHY (refereed paper)," ERSA conference papers ersa10p747, European Regional Science Association.
  3. Michael Pflüger & Uwe Blien & Joachim Möller & Michael Moritz, 2013. "Literature Overview - Labor Market Effects of Trade and FDI – Recent Advances and Research Gaps," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), Justus-Liebig University Giessen, Department of Statistics and Economics, vol. 233(1), pages 86-116, January.
  4. Viego, Valentina, 2010. "Rendimientos crecientes, costos de transporte, eslabonamientos verticales y asimetrías regionales persistentes
    [Increasing returns, transport costs, vertical linkages and persistent regional inequ
    ," MPRA Paper 26881, University Library of Munich, Germany, revised 04 Aug 2010.

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