Agglomeration in the Global Economy: A Survey of the "New Economic Geography"
Posted: 1 May 1998
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: Suggested Citation