Agglomeration in the Global Economy: A Survey of the "New Economic Geography"

World Economy

Posted: 1 May 1998

See all articles by Gianmarco I.P. Ottaviano

Gianmarco I.P. Ottaviano

Bocconi University - Department of Economics and Paolo Baffi Centre on Central Banking and Financial Regulation

Diego Puga

IMDEA Social Sciences; University of Toronto - Department of Economics; Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER)

Abstract

Note: Below is a description of the paper and not the actual abstract.

This literature review uncovers common conclusions about the effects of integration on location. When high trade costs prevent strong spatial interactions, the size and characteristics of the local market and factor availability determine what is produced where. Initially economic integration diminishes the importance of such considerations, and for intermediate trade costs creates a "putty clay" geography: there is a priori great flexibility on where particular activities locate, but once spatial differences take shape, pecuniary externalities make these quite rigid. However, for low trade costs the weight of location shifts back to local underlying characteristics. But what matters then is good local availability, not of all goods and factors but of those whose mobility has been less improved by globalization.

JEL Classification: L16, O10, R40, R10

Suggested Citation

Ottaviano, Gianmarco I.P. and Puga, Diego, Agglomeration in the Global Economy: A Survey of the "New Economic Geography". World Economy, Available at SSRN: https://ssrn.com/abstract=82110

Gianmarco I.P. Ottaviano

Bocconi University - Department of Economics and Paolo Baffi Centre on Central Banking and Financial Regulation ( email )

Via Gobbi 5
Milan, 20136
Italy

Diego Puga (Contact Author)

IMDEA Social Sciences ( email )

Calle Veláquez 76
Madrid, 28001
Spain

University of Toronto - Department of Economics ( email )

150 St. George Street
Toronto, Ontario M5S 3G7
Canada
416-978-4375 (Phone)
416-978-6713 (Fax)

HOME PAGE: http://dpuga.economics.utoronto.ca/

Centre for Economic Policy Research (CEPR)

London
United Kingdom

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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