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From the Regional Economy to the Macroeconomy

Santiago Pinto () and Pierre Daniel Sarte ()

No GRU_2020_014, GRU Working Paper Series from City University of Hong Kong, Department of Economics and Finance, Global Research Unit

Abstract: This chapter describes how two fields that traditionally evolved mostly separately, regional economics and macroeconomics, have increasingly come together over the past decade and a half to yield new insights into the relevance of regional forces for the macroeconomy. This chapter gives an overview to the basic question: why should macroeconomists care about the spatial allocation of economic activity or spatial models? There are no simple spatial aggregation theorems that give rise to an aggregate production function, and this chapter describes the variety of ways in which granular considerations and shocks that are regional in nature shape aggregate outcomes and motivate a need for policy. The macroeconomics literature is increasingly heading in the direction of unpacking the exact nature of granular forces in a way that leaves the representative agent and firm framework with aggregate shocks as an early and poor approximation to how actual economies work.

Keywords: Agglomeration; Externalities; Aggregation; Region; Nation (search for similar items in EconPapers)
JEL-codes: E13 R12 R30 R38 R5 (search for similar items in EconPapers)
Pages: 22 pages
Date: 2020-06-23
New Economics Papers: this item is included in nep-geo, nep-mac and nep-ure
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