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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. Rodrik, Dani & Subramanian, Arvind & Trebbi, Francesco, 2002. "Institutions Rule: The Primacy of Institutions Over Geography and Integration in Economic Development," CEPR Discussion Papers 3643, C.E.P.R. Discussion Papers.
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  17. Thibault Fally & Rodrigo Paillacar & Cristina Terra, 2008. "Economic Geography and Wages in Brazil: Evidence from Micro-Data," THEMA Working Papers 2008-23, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
  18. Head, Charles Keith & Mayer, Thierry, 2002. "Market Potential and the Location of Japanese Investment in the European Union," CEPR Discussion Papers 3455, C.E.P.R. Discussion Papers.
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Cited by:
  1. repec:hal:wpaper:hal-00630711 is not listed on IDEAS
  2. Julian Hinz, 2012. "The economic geography of Europe and the role of regional policy," Post-Print dumas-00802143, HAL.
  3. 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.

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