Economic Geography: A Review of the Theoretical and Empirical Literature

Stephen James Redding

CEP Discussion Papers from Centre for Economic Performance, LSE

Abstract: This paper reviews the new economic geography literature, which accounts for the unevendistribution of economic activity across space in terms of a combination of love of varietypreferences, increasing returns to scale and transport costs. After outlining the canonical coreand periphery model, the paper examines the empirical evidence on three of its centralpredictions: the role of market access in deter- mining factor prices, the related home marketeffect in which demand has a more than proportionate effect on production, and the potentialexistence of multiple equilibria. In reviewing the evidence, we highlight issues ofmeasurement and identification, alternative potential explanations, and remaining areas forfurther research.

Keywords: New economic geography; market access; home market effect; multiple equilibria (search for similar items in EconPapers)
JEL-codes: F12 F14 O10 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-geo and nep-ure
Date: 2009-01
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Related works:
Working Paper: Economic Geography: a Review of the Theoretical and Empirical Literature (2009)
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Persistent link: http://EconPapers.repec.org/RePEc:cep:cepdps:dp0904

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