The Spatial Economy

Abstract

The authors show how a common approach that emphasizes the three-way interaction among increasing returns, transportation costs, and the movement of productive factors can be applied to a wide range of issues in urban, regional, and international economics. Since 1990 there has been a renaissance of theoretical and empirical work on the spatial aspects of the economy—that is, where economic activity occurs and why. Using new tools—in particular, modeling techniques developed to analyze industrial organization, international trade, and economic growth—this "new economic geography" has emerged as one of the most exciting areas of contemporary economics. The authors show how seemingly disparate models reflect a few basic themes, and in so doing they develop a common "grammar" for discussing a variety of issues. They show how a common approach that emphasizes the three-way interaction among increasing returns, transportation costs, and the movement of productive factors can be applied to a wide range of issues in urban, regional, and international economics. This book is the first to provide a sound and unified explanation of the existence of large economic agglomerations at various spatial scales.

Measuring entrepreneurial quality in southern Europe

“…This reasoning is partly supported both by the theory of the new economic geography (Fujita, Krugman, & Venables, 1999;Krugman, 1991) and the theory of endogenous growth (Romer, 1986). The problem with this point of view is that, as has been demonstrated in the case of Seville, the State investments (for example through the European Cohesion Funds or the organization of some international events such as Expo'92 or the World Athletic Championship in 1999), which were done to create those institutions, opportunities or infrastructures, have not significantly changed the relative position of Seville and Andalusia both in Spain and the European Union.…”

Political geography

“…On the latter, recent important progress has been made by the pathbreaking contribution of Krugman (1991) who has been able to describe phenomena of industrial and urban location, regional specialization and international trade (see also Fujita, Krugman & Venables, 1999). Spatial heterogeneity, density population and scale economies are crucial there as here, but the interdependence between political and economic choices and political and economic geography still remains to be studied.…”

Efficiency wages, agglomeration, and a developing dual economy

“…The utility increases as variety increases. With internal economies of scale we see the forward linkage effect when increased variety reduces the price index of the region of concentration (Fujita et al 1999). The backward linkage works through higher wage in the region of concentration.…”

“…The equilibrium is still an unemployment equilibrium. The literature on economic geography using internal economies of scale explains agglomeration without any form of wage distortion (Fujita et al 1999;Krugman 1993). In the studies of internal economies of scale, resources are fully employed all the time.…”