Book contents
- Frontmatter
- Contents
- List of figures
- List of tables
- List of boxes
- List of technical notes
- List of symbols and parameters
- Preface to the new edition
- Acknowledgments
- Part I Introduction
- Part II Core models and empirical evidence
- 3 The core model of geographical economics
- 4 Beyond the core model: solutions, simulations, and extensions
- 5 Agglomeration, the home market effect, and spatial wages
- 6 Shocks, freeness of trade, and stability
- Part III Applications and extensions
- Part IV Policy and evaluation
- References
- Index
6 - Shocks, freeness of trade, and stability
- Frontmatter
- Contents
- List of figures
- List of tables
- List of boxes
- List of technical notes
- List of symbols and parameters
- Preface to the new edition
- Acknowledgments
- Part I Introduction
- Part II Core models and empirical evidence
- 3 The core model of geographical economics
- 4 Beyond the core model: solutions, simulations, and extensions
- 5 Agglomeration, the home market effect, and spatial wages
- 6 Shocks, freeness of trade, and stability
- Part III Applications and extensions
- Part IV Policy and evaluation
- References
- Index
Summary
Introduction
Head and Mayer (2004a: 2644; emphasis in original) argue that the empirical studies on the relevance of geographical economics of the kind that were discussed in chapter 5
all consider the impact of geographic distribution of demand as an explanatory variable. While this empirical approach is useful and justifiable in certain contexts, it is also problematic. The key idea of new economic geography (NEG) is that the location of demand is jointly determined with the location of production. In particular, the opportunity to export at low costs to immobile sources of demand allows all the mobile consumers and producers to congregate in the so-called manufacturing core. The predicted relationship between the free-ness of trade and agglomeration motivated the title of this chapter. Indeed, a large part of European academic interest in agglomeration stems from the question of whether a more united European market will lead to more spatially concentrated industry.
This quote from the chapter entitled “The empirics of agglomeration and trade” by Head and Mayer in volume IV of The Handbook of Regional and Urban Economics nicely illustrates what is at stake in chapter 6. We discuss empirical work that deals with one central question: what do changes in the economic environment (e.g. large exogenous shocks, demand changes, or changes in trade costs) imply for the equilibrium degree of agglomeration? This question, as the above quote suggests, goes to the heart of geographical economics.
- Type
- Chapter
- Information
- The New Introduction to Geographical Economics , pp. 229 - 268Publisher: Cambridge University PressPrint publication year: 2009