Reviewing the Incisive Influences of the Theories on Regional Economics

24 Pages Posted: 17 Feb 2009

Date Written: April 4, 2007


Numerous theoretical expositions have been investigating concepts by means of more quantified and stylized methodologies in addition to taking into account the geographical considerations even though they confront considerable confusion with regional policy fundamentals. They have enhanced the thinking about sources and factors of varied patterns of growth, the determinants of endogenous regional economic development, and mechanisms of different production structures. As a consequence, remarkable developments have been made in the field of regional literature, for instance: Romer has endogenized Solow's exogenous technical progress accounting for a large proportion of growth process, and thus, technology has begun to be considered as the major source of income differences, New Economic Geography models are on the way of the formalization of mechanisms of regional competitive advantage.

Comprehensive approaches mainly suggest that the process of convergence may be more complex and occur in slower pace than found in early models. In addition, the New Economic Geography and the New Trade Theories predict a more differentiated convergence view suggesting that location matters and those different sectors might exhibit different dynamics over time. The former also stress national convergence, but regional divergence as the most likely outcome of a process of economic integration. On the other side of the coin, regional literature has reintegrated geography into their formulations so as to investigate local dynamics. The New Trade Theories and the New Economic Geography models are marked expositions in line with this trend. Strong emphasis has been placed on drawing up tailor-made combinations of policy objectives and regionalisation for successful systematic structures. Essentially, local and regional governments/authorities and their abilities are viewed as crucial for deploying a whole series of public and private units. In this regard, Porter sets out that the public and private sectors play different but intertwined roles in building such an environment.

During the 1990s, a relocation of power has taken place alongside the establishment of network structures fostering learning processes, and programming encapsulating endogenous and knowledge-promoting growth strategies have come to the fore. The determinants of such approaches involve a systematic process to build strong institutional and social capital under the shifting responsibilities for economic development and a collaborative process involving government at multiple levels. There has also been a revolution in thinking on how regional policy should operate in a sustainable pattern. The literature of industrial districts and innovative milieux conceptualise the ways of successful collective learning, a set of competences or capabilities needed by firms/organizations in innovative networks. This literature proposes that durable civic traditions tend to be difficult to change; supporting such self-organising innovation-oriented systems require powerful social/cultural premises in association with a network of public and private institutions in a region. Therefore, it ought to be incorporated highly targeted efforts and well-chosen instruments in the policies of regional governments and local authorities. The new industrial district and innovative milieu literature give invaluable insights for developing a policy in this respect.

Keywords: neoclassical growth theory, comparative advantage, intra-industry trade, new trade theory, new economic geography, endogenous development, new industrial districts, learning regions, innovative milieux

JEL Classification: B1, B4, F12, O4, R58, R59

Suggested Citation

Bilen, Gulhan, Reviewing the Incisive Influences of the Theories on Regional Economics (April 4, 2007). Available at SSRN: or

Gulhan Bilen (Contact Author)

Development Bank of Turkey ( email )

Necatibey Cad 98
Ankara, 06100
00903122318400 (Phone)
00903122296811 (Fax)

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