Show Summary Details

Page of

Printed from Oxford Research Encyclopedias, Economics and Finance. Under the terms of the licence agreement, an individual user may print out a single article for personal use (for details see Privacy Policy and Legal Notice).

date: 04 December 2020

The Contribution of New Economic Geographylocked

  • Pascal MossayPascal MossaySchool of Economics and Trade, Kyungpook National University; CORE, Université Catholique de Louvain
  •  and Pierre M. PicardPierre M. PicardFaculty of Law Economics and Finance, University of Luxembourg

Summary

New Economic Geography (NEG) provides microeconomic foundations for explaining the spatial concentration of economic activities across regions, cities, and urban areas. The origins of the NEG literature trace back to trade, location, and urbans economics theories. In NEG, agglomeration and dispersion forces explain the existence of spatial agglomerations. A NEG model usually incorporates a combination of such forces. In particular, firm proximity to large markets and the importance of linkages along a supply chain are typical agglomeration forces. Equilibria properties derived from NEG models are very specific to NEG as they involve multiple equilibria and have a very high dependence on changes in parameters. This phenomenon has important implications for the emergence of nations, regions, and cities. In particular, high transport costs imply the dispersion of economic activities, while low transport costs lead to their spatial concentration. The same forces that shape inequalities and disparities between regions also shape the internal structure of cities. Firms concentrate in urban centers to gain greater access to larger demand. The empirical literature has developed several approaches that shed light on spatial agglomeration and estimate the role and impact of transport costs on market access. A key empirical research question is whether observed patterns could be explained by location amenities or agglomeration forces as put forward by NEG. Quasi-experimental methodology is frequently used for such a purpose. NEG theory is supported by empirical evidence, demonstrating the role of market access.

You do not currently have access to this article

Login

Please login to access the full content.

Subscribe

Access to the full content requires a subscription