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Jacques-françois Thisse - One of the best experts on this subject based on the ideXlab platform.
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New Economic Geography and the city
Social Science Research Network, 2019Co-Authors: Carl Gaigne, Jacques-françois ThisseAbstract:In this chapter, we provide a bird-eye overview of recent developments in NEG within a unifying framework. We build on the idea that the difference in the Economic performance of regions depend on the global and local interactions between and within regions through the locational decisions made by firms and households at the macro and microspatial levels. We also focus on settings that take into account the urban structure, the social and skill composition and the sectorial specialization of regional agglomerations, and the quality of urban life. Three types of spatial frictions are considered, that is, transport costs, commuting costs, and communication costs.
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New Economic Geography and the city
Research Papers in Economics, 2013Co-Authors: Carl Gaigne, Jacques-françois ThisseAbstract:New Economic Geography (NEG) has proven to be very useful in dealing with a large number of issues. Yet, in this paper we do not discuss the canonical NEG models and their vast number of extensions. Rather, we provide an overview of recent developments in the NEG literature that build on the idea that the difference in the Economic performance of regions is explained by the behavior and interactions between households and firms located within them. This means that we consider NEG models which take into account land markets, thereby the internal structure and industrial mix of urban agglomerations.
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a New Economic Geography model of central places
Journal of Urban Economics, 2011Co-Authors: Takatoshi Tabuchi, Jacques-françois ThisseAbstract:Abstract One of the most striking feature of the space-economy is that cities form a hierarchical system exhibiting some regularity in terms of their size and the array of goods they supply. In order to show how such a hierarchical system may emerge, we consider a model with monopolistically competitive markets for the industrial sectors. As transport costs steadily decrease from large values, the urban system formed by several small cities entails structural changes in that some cities expand at the expense of the others by attracting a growing number of industries. Beyond some threshold, some cities disappear from the space-economy. Such an evolution of the urban system describes fairly well what has been observed in various historical periods that have experienced major changes in transportation technologies and/or political unification.
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a New Economic Geography model of central places
LIDAM Reprints CORE, 2011Co-Authors: Takatoshi Tabuchi, Jacques-françois ThisseAbstract:One of the most striking feature of the space-economy is that cities form a hierarchical system exhibiting some regularity in terms of their size and the array of goods they supply. In order to show how such a hierarchical system may emerge, we consider a model with monopolistically competitive markets for the industrial sectors. As transport costs steadily decrease from large values, the urban system formed by several small cities entails structural changes in that some cities expand at the expense of the others by attracting a growing number of industries. Beyond some threshold, some cities disappear from the space-economy. Such an evolution of the urban system describes fairly well what has been observed in various historical periods that have experienced major changes in transportation technologies and/or political unification. (This abstract was borrowed from another version of this item.)
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New Economic Geography an appraisal on the occasion of paul krugman s 2008 nobel prize in Economic sciences
Regional Science and Urban Economics, 2009Co-Authors: M. Fujita, Jacques-françois ThisseAbstract:Paul Krugman has clarified the microEconomic underpinnings of both spatial Economic agglomerations and regional imbalances at national and international levels. He has achieved this with a series of remarkably original papers and books that succeed in combining imperfect competition, increasing returns, and transportation costs in New and powerful ways. Yet, not everything was brand New in New Economic Geography. To be precise, several disparate pieces of high-quality work were available in urban Economics and location theory. Our purpose in this paper is to shed New light on Economic Geography through the lenses of these two fields of Economics and regional science.
Bernard Fingleton - One of the best experts on this subject based on the ideXlab platform.
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evaluating china s road to prosperity a New Economic Geography approach
Regional Science and Urban Economics, 2012Co-Authors: Mark Roberts, Bernard Fingleton, Uwe Deichmann, Tuo ShiAbstract:Abstract Over the last two decades, China has embarked on an ambitious program of expressway network expansion. By facilitating market integration, this program aims to promote efficiency at the national level and contribute to the catch-up of lagging inland regions. This paper evaluates the short-run aggregate and spatial Economic impacts of network expansion. We adopt a counterfactual approach based on the hybrid estimation–calibration of a structural ‘New Economic Geography’ model. Overall, we find that aggregate Chinese real income was approximately 6% higher than it would have been in 2007 had the expressway network not been built, although this does not take into account the opportunity costs associated with expenditure on the network. Although there is considerable heterogeneity in the results, we find no significant reduction in disparities across prefectures and no reduction in urban–rural disparities. If anything, the expressway network appears to have reinforced existing patterns of spatial inequality; although, over time, these will likely be reduced by enhanced migration.
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neoclassical theory versus New Economic Geography competing explanations of cross regional variation in Economic development
Annals of Regional Science, 2010Co-Authors: Bernard Fingleton, Manfred M FischerAbstract:This paper uses data for 255 NUTS-2 European regions over the period 1995-2003 to test the relative explanatory performance of two important rival theories seeking to explain variations in the level of Economic development across regions, namely the neoclassical model originating from the work of Solow (Q J Econ 70:65-94, 1956) and the so-called Wage equation, which is one of a set of simultaneous equations consistent with the short-run equilibrium of New Economic Geography (NEG) theory, as described by Fujita et al. (The spatial economy. Cities, regions, and international trade. The MIT Press, Cambridge, 1999). The rivals are non-nested, so that testing is accomplished both by fitting the reduced form models individually and by simply combining the two rivals to create a composite model in an attempt to identify the dominant theory. We use different estimators for the resulting panel data model to account variously for interregional heterogeneity, endogeneity, and temporal and spatial dependence, including maximum likelihood with and without fixed effects, two stage least squares and feasible generalised spatial two stage least squares plus GMM; also most of these models embody a spatial autoregressive error process. These show that the estimated NEG model parameters correspond to theoretical expectation, whereas the parameter estimates derived from the neoclassical model reduced form are sometimes insignificant or take on counterintuitive signs. This casts doubt on the appropriateness of neoclassical theory as a basis for explaining cross-regional variation in Economic development in Europe, whereas NEG theory seems to hold in the face of competition from its rival.
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neoclassical theory versus New Economic Geography competing explanations of cross regional variation in Economic development
MPRA Paper, 2010Co-Authors: Bernard Fingleton, Manfred M FischerAbstract:This paper uses data for 255 NUTS-2 European regions over the period 1995-2003 to test the relative explanatory performance of two important rival theories seeking to explain variations in the level of Economic development across regions, namely the neoclassical model originating from the work of Solow (1956) and the so-called Wage Equation, which is one of a set of simultaneous equations consistent with the short-run equilibrium of New Economic Geography (NEG) theory, as described by Fujita, Krugman and Venables (1999). The rivals are non-nested, so that testing is accomplished both by fitting the reduced form models individually and by simply combining the two rivals to create a composite model in an attempt to identify the dominant theory. We use different estimators for the resulting panel data model to account variously for interregional heterogeneity, endogeneity, and temporal and spatial dependence, including maximum likelihood with and without fixed effects, two stage least squares and feasible generalised spatial two stage least squares plus GMM; also most of these models embody a spatial autoregressive error process. These show that the estimated NEG model parameters correspond to theoretical expectation, whereas the parameter estimates derived from the neoclassical model reduced form are sometimes insignificant or take on counterintuitive signs. This casts doubt on the appropriateness of neoclassical theory as a basis for explaining cross-regional variation in Economic development in Europe, whereas NEG theory seems to hold in the face of competition from its rival.
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The New Economic Geography versus urban Economics: an evaluation using local wage rates in Great Britain
Oxford Economic Papers, 2006Co-Authors: Bernard FingletonAbstract:This paper tests two major competing theories explaining the spatial concentration of Economic activity, namely New Economic Geography theory (NEG) which emphasizes varying market potential, and urban Economics theory (UE) in which the main emphasis is on producer service linkages. Using wage rate variations across small regions of Great Britain, the paper finds that it is UE theory rather than NEG theory that has most explanatory power. Evidence for this comes from encompassing both models within an artificial nesting model. Despite the popularity of NEG theory, this paper shows that although NEG works well using regional data, there is evidence that it does not necessarily provide the best explanation of local wage variations, since producer services inputs associated with UE theory and labour efficiency variations are important effects at a local level, and these are excluded from the formal NEG model.
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beyond neoclassical orthodoxy a view based on the New Economic Geography and uk regional wage data
Papers in Regional Science, 2005Co-Authors: Bernard FingletonAbstract:The article examines the performance of two competing non-nested models of regional wage variations in Great Britain, one motivated by the Solow-Swann neoclassical growth model which assumes constant returns to scale, the other by New Economic Geography theory, which assumes internal and external increasing returns. Both models also include controls for labour efficiency variations across regions. The empirical analysis, which is based on the bootstrap J test, shows that the neoclassical model does not reject the New Economic Geography specification, but the converse is not true and the model with a basis in New Economic Geography has significantly superior explanatory power. This adds support to the notion that in order to correctly understand differential regional Economic development, we should move beyond neoclassical orthodoxy and that an increasing returns stance is more appropriate. However, the article also highlights some limitations of New Economic Geography theory. Copyright RSAI 2005.
Marc Schramm - One of the best experts on this subject based on the ideXlab platform.
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adding Geography to the New Economic Geography bridging the gap between theory and empirics
Journal of Economic Geography, 2010Co-Authors: Maarten Bosker, Steven Brakman, Harry Garretsen, Marc SchrammAbstract:For reasons of analytical tractability, New Economic Geography (NEG) models treat Geography in a very simple way: attention is either confined to a simple 2-region or to an equidistant multi-region world. As a result, the main predictions regarding the impact of e.g. diminishing trade costs are based on these simple models. When doing empirical or policy work these simplifying assumptions become problematic and it may very well be that the conclusions from the simple models do not carry over to the heterogeneous geographical setting faced by the empirical researcher or policy maker. This paper tries to fill this gap by adding more realistic Geography structures to the Puga (1999) model that encompasses several benchmark NEG models. By using extensive simulations we show that many, although not all, conclusions from the simple models do carry over to our multi-region setting with more realistic Geography structures. Given these results, we then simulate the impact of increased EU integration on the spatial distribution of regional Economic activity for a sample of 194NUTSII regions and find that further integration will most likely be accompanied by higher levels of agglomeration.
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adding Geography to the New Economic Geography
Social Science Research Network, 2007Co-Authors: Steven Brakman, Harry Garretsen, Erik Maarten Bosker, Marc SchrammAbstract:For reasons of analytical tractability, New Economic Geography (NEG) models treat Geography in a very simple way: attention is either confined to a simple 2-region or to an equidistant multi-region world. As a result, the main predictions regarding the impact of e.g. diminishing trade costs are based on these simple models. When doing empirical or policy work these simplifying assumptions become problematic and it may very well be that the conclusions from the simple models do not carry over to the heterogeneous geographical setting faced by the empirical researcher or policy maker. This paper tries to fill this gap by adding more realistic Geography structures to the Puga (1999) model that encompasses several benchmark NEG models. By using extensive simulations we show that many, although not all, conclusions from the simple models do carry over to our multi-region setting with more realistic Geography structures. Given these results, we then simulate the impact of increased EU integration on the spatial distribution of regional Economic activity for a sample of 194-NUTSII regions and find that further integration will most likely be accompanied by higher levels of agglomeration.
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putting New Economic Geography to the test free ness of trade and agglomeration in the eu regions
Regional Science and Urban Economics, 2006Co-Authors: Steven Brakman, Harry Garretsen, Marc SchrammAbstract:For the NUTS II EU regions we estimate the wage equation that is central to the New Economic Geography literature. Our first main finding is that a spatial wage structure exists for the EU regions. Next, we analyze what our estimations imply for the link between the free-ness of trade and agglomeration for the EU regions. Based on multi-region simulations we find that the implied free-ness of trade is such that the degree of agglomeration is still limited. This conclusion is supported by evidence based on bilateral industry trade data. Our analysis also illustrates the current limitations of empirical research in New Economic Geography.
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putting New Economic Geography to the test free ness of trade and agglomeration in the eu regions
2005Co-Authors: Steven Brakman, Harry Garretsen, Marc SchrammAbstract:Based on a New Economic Geography (NEG) model by Puga (1999), we use the equilibrium wage equation to estimate two key structural model parameters for the NUTS II EU regions. These estimations enable us to come up with an empirically grounded free-ness of trade parameter. In line with NEG theory, the estimation results show that a spatial wage structure exists for the EU regions. By going back to the theoretical model we then analyze the implications of the free-ness of trade parameter for the degree of agglomeration. Our main findings suggest that agglomeration forces still have only a limited spatial reach in the EU. Agglomeration forces appear to be rather localized. At the same time, confronting our empirical results with the underlying New Economic Geography model also brings out the limitations of empirical research in New Economic Geography.
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the empirical relevance of the New Economic Geography testing for a spatial wage structure in germany
2000Co-Authors: Steven Brakman, Harry Garretsen, Marc SchrammAbstract:In this paper we want to shed some light on the empirical relevance of the New Economic Geography. Using one of the central features of the core New Economic Geography models, namely that wages have the tendency to fall the further one moves away from centres of Economic activity, we investigate the existence of a spatial wage structure for post-unification Germany. We find support for a spatial wage structure for German city-district wages, and hence indirectly for the relevance of a New Economic Geography model for Germany. We also find that demand linkages in Germany are strongly localised and that the "old" border still matters to the extent that Economic interactions between western and eastern Germany are still limited compared to the situation within these two parts of Germany.
Mark Andrew - One of the best experts on this subject based on the ideXlab platform.
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regional market size and the housing market insights from a New Economic Geography model
Journal of Property Research, 2012Co-Authors: Mark AndrewAbstract:The increased availability of information about housing and labour markets at finer spatial scales opens up possibilities for applied research to model various types of spatial relationships associated with housing affordability. The aim of this paper is to encourage empirical research to estimate the type of spatial relationships described by New Economic Geography (NEG) models. NEG models were designed to provide general equilibrium analysis of urban agglomeration, but may also be used to shed insights into the degree to which housing and labour markets could be integrated spatially. We extend the Helpman and Hanson NEG theoretical model by relaxing the stringent restrictions imposed on housing consumption and the size of the housing sector, so that it may be used to address the housing affordability issue. We highlight the differences that these refinements have on the implications for earnings, rents (house prices) and migration. In particular, simulations are undertaken to assess the conditions under...
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regional market size and the housing market insights from a New Economic Geography model
Journal of Property Research, 2012Co-Authors: Mark AndrewAbstract:The increased availability of information about housing and labour markets at finer spatial scales opens up possibilities for applied research to model various types of spatial relationships associated with housing affordability. The aim of this paper is to encourage empirical research to estimate the type of spatial relationships described by New Economic Geography (NEG) models. NEG models were designed to provide general equilibrium analysis of urban agglomeration, but may also be used to shed insights into the degree to which housing and labour markets could be integrated spatially. We extend the Helpman and Hanson NEG theoretical model by relaxing the stringent restrictions imposed on housing consumption and the size of the housing sector, so that it may be used to address the housing affordability issue. We highlight the differences that these refinements have on the implications for earnings, rents (house prices) and migration. In particular, simulations are undertaken to assess the conditions under which a responsive and non-responsive construction sector worsens or improves housing affordability and affects region size.
Harry Garretsen - One of the best experts on this subject based on the ideXlab platform.
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rethinking New Economic Geography models taking Geography and history more seriously
Spatial Economic Analysis, 2010Co-Authors: Harry Garretsen, Ron MartinAbstract:Abstract Two aspects of New Economic Geography models are often singled out for criticism, especially by geographers: the treatment of Geography, typically as a pre-given, fixed and highly idealized abstract geometric space; and the treatment of history, typically as ‘logical’ time (the movement to equilibrium in a model's solution space) rather than real history. In this paper we examine the basis for these criticisms, and explore how far and in what ways NEG models might be made more credible with respect to their representation of Geography and history, and particularly whether and to what extent the work of geographers themselves provides some insights in this regard. We argue that the conceptualization of space and time is in fact a challenge for both NEG theorists and Economic geographers, and that, notwithstanding their ontological and epistemological differences, both groups would benefit from an interchange of ideas on this front. Reinventer les (nouveaux) modeles de geographie economique: commen...
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adding Geography to the New Economic Geography bridging the gap between theory and empirics
Journal of Economic Geography, 2010Co-Authors: Maarten Bosker, Steven Brakman, Harry Garretsen, Marc SchrammAbstract:For reasons of analytical tractability, New Economic Geography (NEG) models treat Geography in a very simple way: attention is either confined to a simple 2-region or to an equidistant multi-region world. As a result, the main predictions regarding the impact of e.g. diminishing trade costs are based on these simple models. When doing empirical or policy work these simplifying assumptions become problematic and it may very well be that the conclusions from the simple models do not carry over to the heterogeneous geographical setting faced by the empirical researcher or policy maker. This paper tries to fill this gap by adding more realistic Geography structures to the Puga (1999) model that encompasses several benchmark NEG models. By using extensive simulations we show that many, although not all, conclusions from the simple models do carry over to our multi-region setting with more realistic Geography structures. Given these results, we then simulate the impact of increased EU integration on the spatial distribution of regional Economic activity for a sample of 194NUTSII regions and find that further integration will most likely be accompanied by higher levels of agglomeration.
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trade costs in empirical New Economic Geography
Papers in Regional Science, 2010Co-Authors: Maarten Bosker, Harry GarretsenAbstract:Trade costs are a crucial element of New Economic Geography (NEG) models. Without trade costs there is no role for Geography. In empirical NEG studies the unavailability of direct trade cost data calls for the need to approximate these trade costs by introducing a trade cost function. In doing so, hardly any attention is paid to the (implicit) assumptions and empirical consequences of the particular trade cost function used. Based on a meta-analysis of NEG market access studies as well as on the results of estimating the NEG wage equation for a uniform sample while using different trade costs functions, we show that the relevance of the key NEG variable, market access, depends nontrivially on the choice of trade cost function. Next, we propose an alternative way to approximate trade costs that does not require the specification of a trade cost function, the so called implied trade costs approach. Overall, our results stress that the specification of trade costs can matter a lot for the conclusions reached in any empirical NEG study. We therefore call for a much more careful treatment of trade costs in future empirical NEG studies.
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adding Geography to the New Economic Geography
Social Science Research Network, 2007Co-Authors: Steven Brakman, Harry Garretsen, Erik Maarten Bosker, Marc SchrammAbstract:For reasons of analytical tractability, New Economic Geography (NEG) models treat Geography in a very simple way: attention is either confined to a simple 2-region or to an equidistant multi-region world. As a result, the main predictions regarding the impact of e.g. diminishing trade costs are based on these simple models. When doing empirical or policy work these simplifying assumptions become problematic and it may very well be that the conclusions from the simple models do not carry over to the heterogeneous geographical setting faced by the empirical researcher or policy maker. This paper tries to fill this gap by adding more realistic Geography structures to the Puga (1999) model that encompasses several benchmark NEG models. By using extensive simulations we show that many, although not all, conclusions from the simple models do carry over to our multi-region setting with more realistic Geography structures. Given these results, we then simulate the impact of increased EU integration on the spatial distribution of regional Economic activity for a sample of 194-NUTSII regions and find that further integration will most likely be accompanied by higher levels of agglomeration.
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putting New Economic Geography to the test free ness of trade and agglomeration in the eu regions
Regional Science and Urban Economics, 2006Co-Authors: Steven Brakman, Harry Garretsen, Marc SchrammAbstract:For the NUTS II EU regions we estimate the wage equation that is central to the New Economic Geography literature. Our first main finding is that a spatial wage structure exists for the EU regions. Next, we analyze what our estimations imply for the link between the free-ness of trade and agglomeration for the EU regions. Based on multi-region simulations we find that the implied free-ness of trade is such that the degree of agglomeration is still limited. This conclusion is supported by evidence based on bilateral industry trade data. Our analysis also illustrates the current limitations of empirical research in New Economic Geography.
