National oligopolies and economic geography

We replace monopolistic competition with national oligopolies in a model of “new economic geography”. There are many possible bifurcation diagrams, but unlike in monopolistic competition, the symmetric equilibrium is always stable for low trade costs. The antitrust policy, though identical in both countries, affects the geographical distribution of firms. In turn, migration attenuates the effectiveness of the antitrust policy in eliminating collusive behavior. For high trade costs, a toughening of the antitrust policy is likely to result in more agglomeration and may reduce world welfare. The antitrust policy is more likely to be welfare improving when market integration progresses.     

Search unemployment and new economic geography

This paper develops a general equilibrium geographical economics model, which uses matching frictions on the labor market to generate regional unemployment disparities alongside the usual core-periphery pattern of industrial agglomeration. In the model, regional wage differentials do not only influence migration decisions of mobile workers, but also affect the bargaining process on local labor markets, leading to differences in vacancies and unemployment as well. In a setting with two regions, both higher or lower unemployment rates in the core region are possible equilibrium outcomes, depending on transport costs and the elasticity of substitution. Stylized facts suggest that both patterns are of empirical relevance.     

Voting for highway construction in economic geography

This paper investigates the efficiency of voting for provision of transportation infrastructure such as highways, and discusses the effect on regional structure. The salient conclusions of this study show that voting and political competition engender overprovision of large-scale transportation infrastructure. In addition, consideration of industrial location reveals that the provision of transportation infrastructure exerts a negative effect on development of rural areas.     

Knowledge–capital meets new economic geography

This paper introduces multinational firms in a new economic geography model. There, unskilled labor mobility leads to less concentration of production than skilled labor mobility does. This is in line with empirical evidence that agglomeration of production in Europe is less pronounced than in the United States. The different patterns in (skilled versus unskilled) labor mobility together with the presence of multinational firms form one explanation of the actual differences in the spreading of industries in Europe as compared to the US     

The new economic geography: Past,present and the future

This article presents a summary of our conversation on the past, present and future of the new economic geography, which took place with the help of an interlocutor in San Juan, Puerto Rico in November 2002. Following the introduction, we explain what the new economic geography is, and we describe some basic models. The discussion of its various critical aspects is presented subsequently, and the article concludes with the discussion of future issues and challenges facing the field.JEL Classification: O41, R12We thank Maria Makabenta, the guest-editors of the journal and an anonymous reviewer for valuable comments on earlier drafts. The first author is grateful to Grants in Aid for COE Research 09CE2002 and Scientific Research S 13851002 (Japanese Ministry of Education and Science).     

Offshoring,outsourcing and the economic geography of Europe

Globalization has altered the appeal of each region to host economic activities. As firms are pushed to be more competitive, they develop outsourcing and relocation strategies, displacing some production activities to new emplacements. These changes have important impacts in some regions and are modifying the economic geography of Europe. This paper aims to present the impact that outsourcing and relocation strategies have across European regions and industries as well as to determine some of the characteristics of the more affected regions most affected.     

Modelling the geography of economic activities on a continuous space

In the present article we propose a spatial micro econometric approach for studying the geographical concentration of economic activities. We analyse the incentives to use this approach rather than the traditional one based on regional aggregates. As an example, we present our prototypical theoretic model – to be seen as a continuous space version of Krugman's concentration model – that includes birth, survival and growth components. We present a numerical estimation of the birth model for a set of data referring to the concentration of the manufacturing industries in the San Marino Republic. Received: 18 May 1998 / Accepted: 12 March 2001     

Neoclassical theory versus new economic geography: competing explanations of cross-regional variation in economic development

This paper uses data for 255 NUTS-2 European regions over the period 1995–2003 to test the relative explanatory performance of two important rival theories seeking to explain variations in the level of economic development across regions, namely the neoclassical model originating from the work of Solow (Q J Econ 70:65–94, 1956) and the so-called Wage equation, which is one of a set of simultaneous equations consistent with the short-run equilibrium of new economic geography (NEG) theory, as described by Fujita et al. (The spatial economy. Cities, regions, and international trade. The MIT Press, Cambridge, 1999). The rivals are non-nested, so that testing is accomplished both by fitting the reduced form models individually and by simply combining the two rivals to create a composite model in an attempt to identify the dominant theory. We use different estimators for the resulting panel data model to account variously for interregional heterogeneity, endogeneity, and temporal and spatial dependence, including maximum likelihood with and without fixed effects, two stage least squares and feasible generalised spatial two stage least squares plus GMM; also most of these models embody a spatial autoregressive error process. These show that the estimated NEG model parameters correspond to theoretical expectation, whereas the parameter estimates derived from the neoclassical model reduced form are sometimes insignificant or take on counterintuitive signs. This casts doubt on the appropriateness of neoclassical theory as a basis for explaining cross-regional variation in economic development in Europe, whereas NEG theory seems to hold in the face of competition from its rival.     

A structural multisectoral model with new economic geography linkages for Tuscany

This paper describes the Remi‐Irpet macroeconometric multisectoral model. The Remi‐Irpet, based on an input‐output core structure, has its most distinctive feature in the modelling of vertical pecuniary externalities à la Fujita‐Krugman‐Venables which represents the core dynamization mechanism. Our contribution first presents the theoretical background of the model. Second, we present a simulation exercise performed through the model in which we evaluate the structural impact of incoming FDIs for Tuscany. The impact analysis is defined in terms of (i) change in the overall productive capacity and (ii) medium‐term changes in prices and productivity, driven by the changes in the accessibility to labour and intermediate inputs.     

Modeling knowledge networks in economic geography: a discussion of four methods

The importance of network structures for the transmission of knowledge and the diffusion of technological change has been recently emphasized in economic geography. Since network structures drive the innovative and economic performance of actors in regional contexts, it is crucial to explain how networks form and evolve over time and how they facilitate inter-organizational learning and knowledge transfer. The analysis of relational dependent variables, however, requires specific statistical procedures. In this paper, we discuss four different models that have been used in economic geography to explain the spatial context of network structures and their dynamics. First, we review gravity models and their recent extensions and modifications to deal with the specific characteristics of networked (individual level) relations. Second, we discuss the quadratic assignment procedure that has been developed in mathematical sociology for diminishing the bias induced by network dependencies. Third, we present exponential random graph models that not only allow dependence between observations, but also model such network dependencies explicitly. Finally, we deal with dynamic networks, by introducing stochastic actor-oriented models. Strengths and weaknesses of the different approach are discussed together with domains of applicability the geography of innovation studies.     

Regional costs-of-living with congestion and amenity differences: an economic geography perspective

Standard models of the “new economic geography” predict that costs-of-living are low in the central and high in peripheral region, due to the fact that consumers in the periphery have to bear transportation cost for manufacturing varieties. In reality, however, only some goods are cheaper in economic centres, whereas the overall costs-of-living (including housing costs) tend to be higher. In this paper we use an analytically tractable economic geography model with an immobile housing stock, so that regional agglomeration drives up housing prices. We show that a core-periphery structure can endogenously emerge in which the core is the more expensive area in equilibrium. We also analyse the efficiency of spatial cost-of-living differences and augment the model to include an exogenous regional difference in the form of a consumption amenity.     

Source versus residence: A comparison from a new economic geography perspective

A standard result on international capital income taxation is that applying the residence principle does not affect industrial location and is therefore more efficient than applying the source principle. However, many countries do in fact apply the source principle. We argue that in a new economic geography framework the standard result needs to be qualified: the size of the market is crucial for industry location and it is changed by taxation and by public expenditures; we show that – for the high tax region – this effect dampens capital losses under the source principle and causes them under the residence principle. The sharp difference between the two taxation principles blurs and, unsurprisingly, both principles are found in taxation laws.