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The Empirics of Agglomeration and Trade

  • Head, Keith
  • Mayer, Thierry

This paper examines empirical strategies that have been or could be used to evaluate the importance of agglomeration and trade models. This theoretical approach, widely known as ‘New Economic Geography’ (NEG), emphasizes the interaction between transport costs and firm-level scale economies as a source of agglomeration. NEG focuses on forward and backward trade linkages as causes of observed spatial concentration of economic activity. We survey the existing literature, organizing the papers we discuss under the rubric of five interesting and testable hypotheses that emerge from NEG theory. We conclude the chapter with an overall assessment of the empirical support for NEG and suggest some directions for future research.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 3985.

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Date of creation: Jul 2003
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Handle: RePEc:cpr:ceprdp:3985
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