The Shrinking Advantage of Market Potential

Marius Brülhart, Klaus Desmet and Gian-Paolo Klinke

No 26526, NBER Working Papers from National Bureau of Economic Research, Inc

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, and local density is gaining importance, as correlates of local growth. 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.

JEL-codes: O18 R11 R12 (search for similar items in EconPapers)
Date: 2019-12
New Economics Papers: this item is included in nep-geo and nep-ure
Note: DEV EFG ITI
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Published as Marius Brülhart & Klaus Desmet & Gian-Paolo Klinke, 2020. "The shrinking advantage of market potential," Journal of Development Economics, .

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Journal Article: The shrinking advantage of market potential (2020)
Working Paper: The Shrinking Advantage of Market Potential (2019)
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