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Agglomeration and economic geography

Author

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  • OTTAVIANO, Gianmarco
  • THISSE, Jacques-François

Abstract

Peaks and troughs in the spatial distributions of population, employment and wealth are a universal phenomenon in search of a general theory. Such spatial imbalances have two possible explanations. In the first one, uneven economic development can be seen as the result of the uneven distribution of natural resources. This is sometimes called "first nature" and refers to exogenously given characteristics of different sites. However, it falls short of providing a reasonable explanation ofmany other clusters of activities, which are much less dependent on natural advantage. The aim of geographical economics is precisely to understand what are the economic forces that, after controlling for first nature, account for "second nature", which emerges as the outcome of human beings' actions to improve upon the first one. Specifically, geographicaleconomics asks what are the economic forces that can sustain a large permanent imbalance in the distributions of economic activities. In this paper, we focus on the so-called "new economic geography" approach. After having described some of the main results developed in standard location theory, we use a unified framework to survey the home market effect as well as core-periphery models. These models have been criticized by geographers because they accounts for some spatial costs while putting others aside without saying why. Furthermore, core-periphery models also exhibit some extreme features thatare reffected in their bang-bang outcomes. We thus move on by investigating what the outcomes of core-periphery models become when we account for a more complete and richer description of the spatial aspects that these models aim at describing. We conclude by suggesting new lines of research.
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Suggested Citation

  • OTTAVIANO, Gianmarco & THISSE, Jacques-François, 2004. "Agglomeration and economic geography," LIDAM Reprints CORE 1725, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  • Handle: RePEc:cor:louvrp:1725
    Note: In : V. Henderson and J.-F. Thisse (eds.), Handbook of Regional and Urban Economics. Volume 4: Cities and Geography. Amsterdam, Elsevier North Holland, 2563-2608, 2004
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    More about this item

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)

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