The shrinking advantage of market potential

Marius Brülhart, Klaus Desmet and Gian-Paolo Klinke

Journal of Development Economics, 2020, vol. 147, issue C

Abstract: How does a country's economic geography evolve along the development path? This paper documents recent employment growth in 18,961 regions in eight of the world's main economies. Overall, market potential is losing importance as a correlate of local growth, while local employment density is gaining importance. In mature economies, growth is strongest in low-market-potential areas. In emerging economies, the opposite is true, though the association with market potential is also weakening there. Structural transformation away from agriculture can account for some of the observed changes. The part left unexplained by structural transformation is consistent with a standard economic geography model that yields a bell-shaped relation between trade costs and the growth of centrally located regions.

Keywords: Regional growth; Market potential; Structural transformation; Economic development (search for similar items in EconPapers)
JEL-codes: O18 R11 R12 (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (7)

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Related works:
Working Paper: The Shrinking Advantage of Market Potential (2019)
Working Paper: The Shrinking Advantage of Market Potential (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:deveco:v:147:y:2020:i:c:s0304387820301048

DOI: 10.1016/j.jdeveco.2020.102529

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