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Gravity, market potential and development

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  • Keith Head

    (Sauder School of Business [British Columbia])

  • Thierry Mayer

    (Département d'économie)

Abstract

This article provides evidence on the long-term impact of market potential on economic development. It derives from the New Economic Geography literature a structural estimation where the level of factors' income of a country is related to its proximity to large markets, referred to as ‘market potential’. The empirical part evaluates this market potential for all countries in the world with available trade data over the 1965–2003 period and relates it to income per capita. Overall results show that market potential is a powerful driver of increases in income per capita.

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File URL: http://spire.sciencespo.fr/hdl:/2441/c8dmi8nm4pdjkuc9g8mb6c01j/resources/j-econ-geogr-2011-head-281-94.pdf
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Paper provided by Sciences Po in its series Sciences Po publications with number info:hdl:2441/c8dmi8nm4pdjkuc9g8mb6c01j.

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Date of creation: 2011
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Publication status: Published in Journal of Economic Geography, 2011, vol. 11, pp.281-294
Handle: RePEc:spo:wpmain:info:hdl:2441/c8dmi8nm4pdjkuc9g8mb6c01j

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  1. Maarten Bosker & Harry Garretsen, 2008. "Economic Geography and Economic Development in Sub-Saharan Africa," CESifo Working Paper Series 2490, CESifo Group Munich.
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  4. Keith Head & Thierry Mayer, 2004. "Market Potential and the Location of Japanese Investment in the European Union," The Review of Economics and Statistics, MIT Press, vol. 86(4), pages 959-972, November.
  5. Combes, Pierre-Philippe & Duranton, Gilles & Gobillon, Laurent, 2004. "Spatial Wage Disparities: Sorting Matters!," CEPR Discussion Papers 4240, C.E.P.R. Discussion Papers.
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  8. Paul Krugman, 1992. "A Dynamic Spatial Model," NBER Working Papers 4219, National Bureau of Economic Research, Inc.
  9. Anne-Célia Disdier & Keith Head, 2008. "The Puzzling Persistence of the Distance Effect on Bilateral Trade," The Review of Economics and Statistics, MIT Press, vol. 90(1), pages 37-48, February.
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  15. Stephen Redding & Peter K Schott, 2003. "Distance, skill deepening and development : will peripheral countries ever get rich?," LSE Research Online Documents on Economics 207, London School of Economics and Political Science, LSE Library.
  16. James E. Anderson & Eric van Wincoop, 2001. "Gravity with Gravitas: A Solution to the Border Puzzle," NBER Working Papers 8079, National Bureau of Economic Research, Inc.
  17. James E. Anderson & Eric van Wincoop, 2004. "Trade Costs," Boston College Working Papers in Economics 593, Boston College Department of Economics.
  18. Thomas Chaney, 2008. "Distorted Gravity: The Intensive and Extensive Margins of International Trade," American Economic Review, American Economic Association, vol. 98(4), pages 1707-21, September.
  19. Laura Hering & Sandra Poncet, 2006. "Market Access Impact on Individual Wage: Evidence from China," Working Papers 2006-23, CEPII research center.
  20. Gilles Duranton & Vassilis Monastiriotis, 2002. "Mind the Gaps: The Evolution of Regional Earnings Inequalities in the U.K., 1982-1997," Journal of Regional Science, Wiley Blackwell, Wiley Blackwell, vol. 42(2), pages 219-256.
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Cited by:
  1. Julian Hinz, 2012. "The economic geography of Europe and the role of regional policy," Post-Print dumas-00802143, HAL.
  2. Thomas Barré, 2011. "Price expectations and price dynamics: the case of the rice sector in developing Asia," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) hal-00630711, HAL.
  3. repec:hal:wpaper:hal-00630711 is not listed on IDEAS

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