The Economic Geography of Trade Production and Income: A Survey of Empirics

48 Pages Posted: 16 Oct 2001

See all articles by Henry G. Overman

Henry G. Overman

London School of Economics (LSE) - Department of Geography and Environment; Centre for Economic Policy Research (CEPR)

Stephen J. Redding

Princeton University

Anthony J. Venables

University of Oxford; Centre for Economic Policy Research (CEPR)

Date Written: September 2001

Abstract

This Paper surveys the empirical literature on the economic geography of trade flows, factor prices, and the location of production. The discussion is structured around the empirical predictions of a canonical theoretical model. We review empirical evidence on the determinants of trade costs and the effects of these costs on trade flows. Geography is a major determinant of factor prices, and access to foreign markets alone is shown to explain some 35% of the cross-country variation in per capita income. The Paper documents empirical findings of home market (or magnification) effects, suggesting that imperfectly competitive industries are drawn more than proportionately to locations with good market access. Sub-national evidence establishes the presence of industrial clustering, and we examine the roles played by product market linkages to customer and supplier firms, knowledge spillovers, and labour market externalities.

Keywords: Economic geography, international trade, location of production, income inequality

JEL Classification: F10, F12, R12

Suggested Citation

Overman, Henry G. and Redding, Stephen J. and Venables, Anthony J., The Economic Geography of Trade Production and Income: A Survey of Empirics (September 2001). CEPR Discussion Paper No. 2978. Available at SSRN: https://ssrn.com/abstract=286595

Henry G. Overman (Contact Author)

London School of Economics (LSE) - Department of Geography and Environment ( email )

Houghton Street
London, WC2A 2AE
United Kingdom
+44 20 7955 6581 (Phone)
+44 20 7955 7412 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Stephen J. Redding

Princeton University ( email )

Princeton, NJ 08544-1021
United States

HOME PAGE: http://www.princeton.edu/~reddings/

Anthony J. Venables

University of Oxford ( email )

Mansfield Road
Oxford, Oxfordshire OX1 4AU
United Kingdom

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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