Adding geography to the new economic geography: Bridging the gap between theory and empirics

E.M. Bosker*, S. Brakman, J.H. Garretsen, M. Schramm

*Corresponding author for this work

Research output: Contribution to journalArticleAcademicpeer-review

47 Citations (Scopus)

Abstract

For reasons of analytical tractability, new economic geography (NEG) models treat geography in a very simple way, focusing on stylized 'unidimensional' geography structures (e.g. an equidistant or line economy). All the well-known NEG results are based on these simple geography structures. When doing empirical work, these simplifying assumptions become problematic: it may very well be that the main NEG results do not carry over to the heterogeneous geographical setting faced by the empirical researcher, making it inherently difficult to relate empirical results back to NEG theory. This article tries to bridge this gap by proposing an empirical strategy that combines estimation and simulation. First, we show by extensive simulation that many, but not all, conclusions from the simple unidimensional NEG models carry over when using more realistic geography structures. Second, we illustrate our proposed empirical strategy using a sample of European regions, combining estimation of structural NEG parameters with simulation of the underlying NEG model.

Original languageEnglish
Pages (from-to)793-823
Number of pages31
JournalJournal of Economic Geography
Volume10
Issue number6
DOIs
Publication statusPublished - Nov-2010

Keywords

  • new economic geography
  • multi-region simulations
  • empirics
  • F15
  • O18
  • R12
  • R11
  • INDUSTRIAL-LOCATION
  • INCREASING RETURNS
  • TRADE
  • AGGLOMERATION
  • EUROPE
  • POLICY
  • SPECIALIZATION
  • INTEGRATION
  • INEQUALITY
  • CITIES

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