This article provides an overview of empirical and theoretical research on dual labor markets. It revisits the labor-market effects of dual employment protection legislation as well as the main factors behind its resilience. Characterized by a high incidence of temporary contracts, which may lead to stepping-stone or dead-end jobs, dual labor markets exhibit specific features regarding the determination of employment, unemployment, churn, training, productivity growth, wages, and labor market flows. Relying on the contrasting experiences of several OECD countries with different degrees of duality and, in particular, on the very poor employment performance of some EU countries during the Great Recession, lessons are drawn about policy-reform strategies aiming to correct the inefficiencies of dual labor markets.
61-80 of 314 Results
Article
Thilo R. Huning and Fabian Wahl
The study of the Holy Roman Empire, a medieval state on the territory of modern-day Germany and Central Europe, has attracted generations of qualitative economic historians and quantitative scholars from various fields. Its bordering position between Roman and Germanic legacies, its Carolingian inheritance, and the numerous small states emerging from 1150 onward, on the one hand, are suspected to have hindered market integration, and on the other, allowed states to compete. This has inspired many research questions around differences and communalities in culture, the origin of the state, the integration of good and financial markets, and technology inventions, such the printing press. While little is still known about the economy of the rural population, cities and their economic conditions have been extensively studied from the angles of economic geography, institutionalism, and for their influence on early human capital accumulation. The literature has stressed that Germany at this time cannot be seen as a closed economy, but only in the context of Europe and the wider world. Global events, such as the Black Death, and European particularities, such as the Catholic Church, never stopped at countries’ borders. As such, the literature provides an understanding for the prelude to radical changes, such as the Lutheran Reformation, religious wars, and the coming of the modern age with its economic innovations.
Article
Jennifer L. Castle and David F. Hendry
Shared features of economic and climate time series imply that tools for empirically modeling nonstationary economic outcomes are also appropriate for studying many aspects of observational climate-change data. Greenhouse gas emissions, such as carbon dioxide, nitrous oxide, and methane, are a major cause of climate change as they cumulate in the atmosphere and reradiate the sun’s energy. As these emissions are currently mainly due to economic activity, economic and climate time series have commonalities, including considerable inertia, stochastic trends, and distributional shifts, and hence the same econometric modeling approaches can be applied to analyze both phenomena. Moreover, both disciplines lack complete knowledge of their respective data-generating processes (DGPs), so model search retaining viable theory but allowing for shifting distributions is important. Reliable modeling of both climate and economic-related time series requires finding an unknown DGP (or close approximation thereto) to represent multivariate evolving processes subject to abrupt shifts. Consequently, to ensure that DGP is nested within a much larger set of candidate determinants, model formulations to search over should comprise all potentially relevant variables, their dynamics, indicators for perturbing outliers, shifts, trend breaks, and nonlinear functions, while retaining well-established theoretical insights. Econometric modeling of climate-change data requires a sufficiently general model selection approach to handle all these aspects. Machine learning with multipath block searches commencing from very general specifications, usually with more candidate explanatory variables than observations, to discover well-specified and undominated models of the nonstationary processes under analysis, offers a rigorous route to analyzing such complex data. To do so requires applying appropriate indicator saturation estimators (ISEs), a class that includes impulse indicators for outliers, step indicators for location shifts, multiplicative indicators for parameter changes, and trend indicators for trend breaks. All ISEs entail more candidate variables than observations, often by a large margin when implementing combinations, yet can detect the impacts of shifts and policy interventions to avoid nonconstant parameters in models, as well as improve forecasts. To characterize nonstationary observational data, one must handle all substantively relevant features jointly: A failure to do so leads to nonconstant and mis-specified models and hence incorrect theory evaluation and policy analyses.
Article
Denzil G. Fiebig and Hong Il Yoo
Stated preference methods are used to collect individual-level data on what respondents say they would do when faced with a hypothetical but realistic situation. The hypothetical nature of the data has long been a source of concern among researchers as such data stand in contrast to revealed preference data, which record the choices made by individuals in actual market situations. But there is considerable support for stated preference methods as they are a cost-effective means of generating data that can be specifically tailored to a research question and, in some cases, such as gauging preferences for a new product or non-market good, there may be no practical alternative source of data. While stated preference data come in many forms, the primary focus in this article is data generated by discrete choice experiments, and thus the econometric methods will be those associated with modeling binary and multinomial choices with panel data.
Article
Leandro Prados de la Escosura and Blanca Sánchez-Alonso
In assessments of modern-day Spain’s economic progress and living standards, inadequate natural resources, inefficient institutions, lack of education and entrepreneurship, and foreign dependency are frequently blamed on poor performance up to the mid-20th century, but no persuasive arguments were provided to explain why such adverse circumstances reversed, giving way to the fast transformation that started in the 1950s. Hence, it is necessary to first inquire how much economic progress has been achieved in Spain and what impact it had on living standards and income distribution since the end of the Peninsular War to the present day, and second to provide an interpretation.
Research published in the 2010s supports the view that income per person has improved remarkably, driven by increases in labor productivity, which derived, in turn, from a more intense and efficient use of physical and human capital per worker. Exposure to international competition represented a decisive element behind growth performance. From an European perspective, Spain underperformed until 1950. Thereafter, Spain’s economy managed to catch up with more advanced countries until 2007. Although the distribution of the fruits of growth did not follow a linear trend, but a Kuznetsian inverted U pattern, higher levels of income per capita are matched by lower inequality, suggesting that Spaniards’ material wellbeing improved substantially during the modern era.
Article
Shaun M. Dougherty and Walter G. Ecton
As long as formal education has existed, there has been a clear connection between education and preparation for employment. In much of the world, formal educational systems have come to include vocational education and training (VET) as part of secondary education. In these spaces, individuals can receive continued training in general skills related to reading, writing, and mathematics while also pursuing specific skills in prescribed vocational or technical programs (e.g., skilled trades, culinary arts, information technology, health services). Across all countries and associated educational systems, a tension exists between whether to invest educational dollars in general versus specific skill development. On the one hand, general skills allow for transferability and likely support adaptability across workplace settings and in response to changes in employment conditions. On the other hand, secondary school completion is not universal, even in rich countries, and there are often large penalties or social costs to not completing secondary education. Furthermore, across countries of varying GDP levels, the question about how to best prepare individuals for entry into and success in the workforce is a persistent one. Evidence suggests that the payoff to investments in VET vary considerably, and that context and the characteristics of participants likely inform the expected returns to such investments. For instance, there is strong evidence across contexts that male participants in VET are likely to benefit in the short- to medium-term with respect to employment and earnings, and possibly also engage in less crime. Unresolved, however, is whether these payoffs persist in the longer term. In contrast, for women the estimated returns appear to be more context dependent. Some research shows reduced fertility and greater financial independence of women participating in VET programs in less-developed countries, but evidence is mixed in other settings. All evidence underscores that the payoff to VET is likely tied to the extent to which it adapts to contemporary economic needs, including extending the amount of total formal education that participants might otherwise receive.
Article
Michael Drummond, Rosanna Tarricone, and Aleksandra Torbica
There are a number of challenges in the economic evaluation of medical devices (MDs). They are typically less regulated than pharmaceuticals, and the clinical evidence requirements for market authorization are generally lower. There are also specific characteristics of MDs, such as the device–user interaction (learning curve), the incremental nature of innovation, the dynamic nature of pricing, and the broader organizational impact. Therefore, a number of initiatives need to be taken in order to facilitate the economic evaluation of MDs. First, the regulatory processes for MDs need to be strengthened and more closely aligned to the needs of economic evaluation. Second, the methods of economic evaluation need to be enhanced by improving the analysis of the available clinical data, establishing high-quality clinical registries, and better recognizing MDs’ specific characteristics. Third, the market entry and diffusion of MDs need to be better managed by understanding the key influences on MD diffusion and linking diffusion with cost-effectiveness evidence through the use of performance-based risk-sharing arrangements.
Article
Eline Aas, Emily Burger, and Kine Pedersen
The objective of medical screening is to prevent future disease (secondary prevention) or to improve prognosis by detecting the disease at an earlier stage (early detection). This involves examination of individuals with no symptoms of disease. Introducing a screening program is resource demanding, therefore stakeholders emphasize the need for comprehensive evaluation, where costs and health outcomes are reasonably balanced, prior to population-based implementation.
Economic evaluation of population-based screening programs involves quantifying health benefits (e.g., life-years gained) and monetary costs of all relevant screening strategies. The alternative strategies can vary by starting- and stopping-age, frequency of the screening and follow-up regimens after a positive test result. Following evaluation of all strategies, the efficiency frontier displays the efficient strategies and the country-specific cost-effectiveness threshold is used to determine the optimal, i.e., most cost-effective, screening strategy.
Similar to other preventive interventions, the costs of screening are immediate, while the health benefits accumulate after several years. Hence, the effect of discounting can be substantial when estimating the net present value (NPV) of each strategy. Reporting both discounting and undiscounted results is recommended. In addition, intermediate outcome measures, such as number of positive tests, cases detected, and events prevented, can be valuable supplemental outcomes to report.
Estimating the cost-effectiveness of alternative screening strategies is often based on decision-analytic models, synthesizing evidence from clinical trials, literature, guidelines, and registries. Decision-analytic modeling can include evidence from trials with intermediate or surrogate endpoints and extrapolate to long-term endpoints, such as incidence and mortality, by means of sophisticated calibration methods. Furthermore, decision-analytic models are unique, as a large number of screening alternatives can be evaluated simultaneously, which is not feasible in a randomized controlled trial (RCT). Still, evaluation of screening based on RCT data are valuable as both costs and health benefits are measured for the same individual, enabling more advanced analysis of the interaction of costs and health benefits.
Evaluation of screening involves multiple stakeholders and other considerations besides cost-effectiveness, such as distributional concerns, severity of the disease, and capacity influence decision-making. Analysis of harm-benefit trade-offs is a useful tool to supplement cost-effectiveness analyses. Decision-analytic models are often based on 100% participation, which is rarely the case in practice. If those participating are different from those not choosing to participate, with regard to, for instance, risk of the disease or condition, this would result in selection bias, and the result in practice could deviate from the results based on 100% participation. The development of new diagnostics or preventive interventions requires re-evaluation of the cost-effectiveness of screening. For example, if treatment of a disease becomes more efficient, screening becomes less cost-effective. Similarly, the introduction of vaccines (e.g., HPV-vaccination for cervical cancer) may influence the cost-effectiveness of screening. With access to individual level data from registries, there is an opportunity to better represent heterogeneity and long-term consequences of screening on health behavior in the analysis.
Article
Anthony J. Venables
Economic activity is unevenly distributed across space, both internationally and within countries. What determines this spatial distribution, and how is it shaped by trade? Classical trade theory gives the insights of comparative advantage and gains from trade but is firmly aspatial, modeling countries as points and trade (in goods and factors of production) as either perfectly frictionless or impossible. Modern theory places this in a spatial context in which geographical considerations influence the volume of trade between places. Gravity models tell us that distance is important, with each doubling of distance between places halving the volume of trade. Modeling the location decisions of firms gives a theory of location of activity based on factor costs (as in classical theory) and also on proximity to markets, proximity to suppliers, and the extent of competition in each market. It follows from this that—if there is a high degree of mobility—firms and economic activity as a whole may tend to cluster, providing an explanation of observed spatial unevenness. In some circumstances falling trade barriers may trigger the deindustrialization of some areas as activity clusters in fewer places. In other circumstances falling barriers may enable activity to spread out, reducing inequalities within and between countries. Research over the past several decades has established the mechanisms that cause these changes and placed them in full general equilibrium models of the economy. Empirical work has quantified many of the important relationships. However, geography and trade remains an area where progress is needed to develop robust tools that can be used to inform place-based policies (concerning trade, transport, infrastructure, and local economic development), particularly in view of the huge expenditures that such policies incur.
Article
Thomas Weiss
In the early 21st century, the U.S. economy stood at or very near the top of any ranking of the world’s economies, more obviously so in terms of gross domestic product (GDP), but also when measured by GDP per capita. The current standing of any country reflects three things: how well off it was when it began modern economic growth, how long it has been growing, and how rapidly productivity increased each year. Americans are inclined to think that it was the last of these items that accounted for their country’s success. And there is some truth to the notion that America’s lofty status was due to the continual increases in the efficiency of its factors of production—but that is not the whole story.
The rate at which the U.S. economy has grown over its long history—roughly 1.5% per year measured by output per capita—has been modest in comparison with most other advanced nations. The high value of GDP per capita in the United States is due in no small part to the fact that it was already among the world’s highest back in the early 19th century, when the new nation was poised to begin modern economic growth. The United States was also an early starter, so has experienced growth for a very long time—longer than almost every other nation in the world.
The sustained growth in real GDP per capita began sometime in the period 1790 to 1860, although the exact timing of the transition, and even its nature, are still uncertain. Continual efforts to improve the statistical record have narrowed down the time frame in which the transition took place and improved our understanding of the forces that facilitated the transition, but questions remain. In order to understand how the United States made the transition from a slow-growing British colony to a more rapidly advancing, free-standing economy, it is necessary to know more precisely when it made that transition.
Article
Martin Shanahan
A new world for Europeans and an ancient land for its Indigenous populations, Australia has provided resources that have sustained its inhabitants for millennia. For the past century the nation’s standard of living has been among the world’s highest. This has accompanied the transformation from an economic frontier to a staples-based economy and to a modern, industrial economy over 150 years. Although a fundamentally urban society, it has been the continued use of the country’s natural assets, especially its land, that has underpinned these changes. While reliant on protective barriers in the first half of the 20th century, the country’s ongoing development has always depended on the inflow of overseas capital, an openness to international trade, and an eagerness to receive new people. When these elements have fluctuated so too has Australia’s economy. The sources of capital, trade, and people have changed over time, but a willingness to follow ideas from overseas has persisted. Not every member of society has benefited from development, and long-term inequality has followed the rise, fall, and rise evident in many Organisation for Economic Co-operation and Development (OECD) nations. Although still a leading nation when measured on the Human Development Index, environmental constraints, increased global tensions, and climate change pose challenges for Australian’s living standards that will again require them to transform their economy.
Article
Sumner La Croix
Hawai‘i became one of the last two major land areas on the planet to be settled when Polynesians from Tahiti and the Marquesas Islands navigated voyaging canoes to Hawai‘i in the 11th or 12th century. Settlers brought plants and animals needed to start taro farms modeled on those in their homelands and established chiefdoms using traditional norms of behavior and governance institutions from their home societies. Sometime round 1400, Hawaiians lost contact with the outside world and remained isolated for the next 350–400 years. During this period, competing states emerged, ruled by a sharply differentiated elite (ali‘i) and supported by agricultural surpluses sufficient to support religious and artisan specialists and construction of hundreds of monumental temples. Contact with the outside world was reestablished in 1778 and led to major demographic, economic, and political change: Exposure to outside diseases led to a massive decline in the Native Hawaiian population over the next 125 years; integration with global product markets transformed Hawai‘i’s economy; and warfare among competing states led to the emergence of a centralized monarchy after 1795 that incorporated and adapted some Western political institutions. In 1820, Protestant missionaries brought a foreign religion to Hawai‘i, helped develop a Hawaiian alphabet, and established mission schools that brought literacy to much of the population. A two-decade boom (1812–1833) in harvesting and trading sandalwood with American ships overlapped with a 50-year period in which hundreds of Pacific whaling ships visited Hawai‘i annually to hire Hawaiian sailors and purchase provisions and services. Sugar plantations spread from 1835, expanded rapidly during the U.S. Civil War, and fell back with peace in 1865. An 1876 trade treaty with the United States exempted Hawai‘i sugar firms from the high U.S. tariff on sugar, and they responded by expanding production tenfold by 1883, using immigrant labor from China, Portugal, and Japan. Problems with renegotiating the treaty led to a rebellion by a mostly Caucasian militia group in 1886 that culminated in the overthrow of Queen Lili‘uokalani in 1893. The United States annexed Hawai‘i in 1898 and established a colonial “territorial” government that persisted until Hawai‘i was admitted to the U.S. economic and political union in 1959 as its 50th state. Pineapple and sugar industries expanded under protection of U.S. tariffs and with employment of migrant labor from Japan, Europe, Korea, the Philippines, and Puerto Rico. Japan’s attack on Pearl Harbor in 1941 was followed by imposition of martial law and the buildup of a large U.S. military presence. The economy struggled after the war until the introduction of jet plane passenger service in 1958 prompted millions of tourists from the United States, Japan, and other countries to visit Hawai‘i each year. The tourism boom, institutional reforms of statehood, and population growth ignited an economic boom that would continue thru 1990 and modernize the economy. The 1990s saw economic contraction as Hawai‘i adjusted to changes in U.S. tourism and Japanese foreign investment. From 1990, periodic disruptions to tourism caused by recessions, security crises, and global pandemics punctuated otherwise moderate economic growth.
Article
The Ming Dynasty (1368–1644) marked in the long history of China a period of cultural, political, demographic, and economic renaissance, after less than a century (1271–1368) of rule by the alien Mongol conquerors from the steppes. The wealth of the Ming Empire attracted European traders and missionaries with whom foreign silver, crops, and knowledge flowed into the country at unprecedented speed. Meanwhile, the Ming Empire reached out to the Indian Ocean with the largest armada in the world at the time.
The Ming rule was ended by a military takeover by Manchu mercenaries who did not return to Manchuria after helping the Ming authorities crack down on a rebellion, an important factor that ultimately dictated the behavior of the Qing state (1644–1911). The main institutions and policies of the Ming remained intact, and in 1712 the Qing state voluntarily capped its total tax revenue, a Confucian gesture to gain legitimacy, which marked a major step toward a withering state whereby the tax burden became lighter and consequently state control over the population and territory became weaker. At the beginning, the waning state produced some positive outcomes: both farmland and population multiplied, and domestic and foreign trade were prosperous. The Qing economy outperformed that of the Ming and became one of the largest in the world by 1800, with a decent standard of living.
Even so, a withering state was a time bomb. The unintended consequences of the weakening state loomed large. Externally, the empire did not have the ability to prevent the invasion of foreign bullies. From 1840 to 1900, China lost all five wars it fought with foreign forces. Internally, unrest swept the empire from 1860 to 1880. Imperial order and tranquility was replaced by anarchy, a rather logical outcome of a withering state. To a great extent the benefits of growth during the Qing rule had been lost by the second half of the 19th century.
Meanwhile, fully aware of the root cause of the problem, the Qing elite sought solutions to save the empire from within. This led to a more open approach to foreign aid, loans, and technology, known as the “Westernization Movement” (c. 1860–1880). This movement marked the beginning of state-led modernization in China.
The path of modernization in China was, however, rugged. It began with the ideal of “Chinese knowledge as the foundation and Western learning for utility” (until 1949), then proceeded to “Russian (Soviet) ideology as the foundation and Russian (Soviet) learning for utility” (1949–1976), and then to “Russian (Soviet) ideology as the foundation and Western learning for utility” in the post-Mao era (1977–present day). With such a swing, the performance of China’s growth and development fluctuated, sometimes violently.
Article
The economy of territory that became the United States evolved dramatically from ca. 1000 ce to 1776. Before Europeans arrived, the spread of maize agriculture shifted economic practices in Indigenous communities. The arrival of Europeans, starting with the Spanish in the West Indies in 1492, brought wide-ranging change, including the spread of Old World infectious disease and the arrival of land- and resource-hungry migrants. Europeans, eager to extract material wealth, came to rely on the trade in enslaved Africans to produce profitable crops such as tobacco, rice, and sugar, and they maintained connections with Indigenous communities to sustain the fur trade. The declining number of Indigenous peoples, combined with growing numbers of those of European or African origin, altered the demographic profile of North America, particularly in the territory east of the Mississippi River. Over time, Europeans’ consumer choices expanded, though the wealth gap between white colonists grew, as did the economic gap between free colonists, on the one hand, and unfree Black and Native peoples on the other.
Article
Sandra G. Sosa-Rubí and Omar Galárraga
Conditional economic incentives are a theoretically grounded approach for eliciting behavior change. The rationale stems from present-biased preferences, by which individuals attach greater value to benefits in the present and heavily discount long-term health. A growing literature documents the use of economic incentives in the HIV field. Small and frequent conditional economic incentives offered to vulnerable populations can contribute to behavior change. Economic incentives accompanied with other strategies can help overcome obstacles to access health services and in general seem to improve linkage to HIV care, prevention interventions, and adherence to HIV treatment. Future identification of promising combinations of intervention components, modalities, and strategies may yield maximum impact.
Article
Hilario Casado Alonso and Teofilo F. Ruiz
The period between 1085 to 1815 witnessed important transformations in Spain’s economic history. The transition from a frontier society to one of the largest empires in the world was soon followed by its subsequent decline. During Spain’s Middle Ages two kinds of economies, societies and political structures, existed side by side: One represented by the various Muslim kingdoms and another by the Christians. Their frontiers shifted constantly between 1035 and 1212 to the detriment of Al-Andalus (Muslim Spain), concluding with the conquest of Granada in 1492. Economic dynamism resulted in Christian expansion, reflected in demographic, agricultural, livestock, and commercial growth during the 11th, 12th, and 13th centuries and comparable to that of other medieval kingdoms. Under the stress of the mid-14th-century crisis (plagues, wars, and civil conflicts), economic growth came to a partial halt in the second half of the century. Yet, unlike other areas in Europe, the late medieval crisis had less of an impact in Spain, differently affecting some of the Iberian realms.
After the second third of the 15th century, as it was the case in Portugal, the economy in the Crown of Castile began to grow once more. Castile became the demographic and economic hub of Spain to the detriment of other areas, such as Catalonia, Navarra, or Aragón, which had been more developed in earlier times. The Catholic Monarchs’ rule and their reforms made Spain one of the most prosperous economies in Europe and the center of a sprawling empire. The colonisation of the Americas and the Philippines with their untold wealth further bolstered Spain’s economy. As a result, most researchers agree that Spain reached the height of its economic growth in the mid-16th century, although in a number of regions growth extended into the 1580s. Based mostly in agriculture, the economy also benefitted from the development of crafts and, above all, trade, generating vast tax revenue for the Habsburg monarchy’s expansive policy of war.
After the late 16th century, however, the Spanish economy began to show signs of fatigue, leading to severe crisis that lasted until at least the mid-17th century. This recession heralded a major shift in Spain’s history. Whereas it was the inland areas of Spain that were the most populated and wealthy during the 12th and 13th centuries, these areas were also most affected by the crisis, while the coastal regions would be the first to emerge from the recession. Although Spain failed to reach the heights attained in other countries such as Britain, France, or the Netherlands, an economic revival occurred during the 18th century, moving the Spanish economy beyond what it had been during the final third of the 16th century. Nonetheless, as had occurred in the 17th century, coastal areas developed more intensely than inland, leading to the economic geography of modern-day Spain.
Article
Antony W. Dnes
Economists increasingly connect legal changes to behavioral responses that many family law experts fail to see. Incentives matter in families, which respond to changes in legal regulation. Changing incentive structures linked to family law have largely affected marriage, cohabitation, and divorce. Economic analysis has been applied to assess the causes of falling marriage rates and delays in marriage. Much analysis has focused on increases in divorce rates, which appear to respond to legal changes making divorce easier, and to different settlement regimes. Less work has been done in relation to children but some research does exist showing how children are impacted by changes in incentives affecting adults.
Article
Ling Cen and Sudipto Dasgupta
The interrelationships between upstream supplier firms and downstream customer firms—popularly referred to as supply-chain relationships—constitute one of the most important linkages in the economy. Suppliers not only provide production inputs for their customers but, increasingly, also engage in R&D and innovation activity that is beneficial to the customers. Yet, the high degree of relationship specificity that such activities involve, and the difficulty of writing complete contracts, expose suppliers to potential hold-up problems. Mechanisms that mitigate opportunism have implications for the origins of such relationships, firm boundary, and organizational structure. Smaller supplier firms benefit from relationships with large customer firms in many ways, such as knowledge sharing, operational efficiency, insulation from competition, and reputation in capital markets. However, customer bargaining power, undiversified customer base, and innovation strategy also expose suppliers to disruption risk. Relationship specificity of investment, customer bargaining power, and customer concentration associated with a less diversified customer base have important consequences for financing decisions of suppliers and customers, such as capital structure choice and the provision and role of trade credit. Changes in the risk of disruption (e.g., bankruptcy filings, takeover activity, and credit market shocks) have spillover effects along the supply chain. The correlation of economic fundamentals of suppliers and customers and the co-attention that they receive from market participants translate to return predictability (with implications for trading strategies), information diffusion along the supply chain, and stock-price informativeness of supply-chain partners.
Article
Jason M. Fletcher
Two interrelated advances in genetics have occurred which have ushered in the growing field of genoeconomics. The first is a rapid expansion of so-called big data featuring genetic information collected from large population–based samples. The second is enhancements to computational and predictive power to aggregate small genetic effects across the genome into single summary measures called polygenic scores (PGSs). Together, these advances will be incorporated broadly with economic research, with strong possibilities for new insights and methodological techniques.
Article
Jacques-François Thisse
Despite the drop in transport and commuting costs since the mid-19th century, sizable and lasting differences across locations at very different spatial scales remain the most striking feature of the space-economy. The main challenges of the economics of agglomeration are therefore (a) to explain why people and economic activities are agglomerated in a few places and (b) to understand why some places fare better than others.
To meet these challenges, the usual route is to appeal to the fundamental trade-off between (internal and external) increasing returns and various mobility costs. This trade-off has a major implication for the organization of the space-economy: High transport and commuting costs foster the dispersion of economic activities, while strong increasing returns act as a strong agglomeration force.
The first issue is to explain the existence of large and persistent regional disparities within nations or continents. At that spatial scale, the mobility of commodities and production factors is critical. By combining new trade theories with the mobility of firms and workers, economic geography shows that a core periphery structure can emerge as a stable market outcome.
Second, at the urban scale, cities stem from the interplay between agglomeration and dispersion forces: The former explain why firms and consumers want to be close to each other whereas the latter put an upper limit on city sizes. Housing and commuting costs, which increase with population size, are the most natural candidates for the dispersion force. What generates agglomeration forces is less obvious. The literature on urban economics has highlighted the fact that urban size is the source of various benefits, which increase firm productivity and consumer welfare.
Within cities, agglomeration also occurs in the form of shopping districts where firms selling differentiated products congregate. Strategic location considerations and product differentiation play a central role in the emergence of commercial districts because firms compete with a small number of close retailers.
