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New Economic Geography: Real or Hype?

Author

Listed:
  • Jun Koo

    (Department of Public Administration, Korea University, Seoul, Korea, jkoo@korea.ac.kr)

  • Somik Lall

    (Development Research Group, World Bank, Washington, DC, slall1@worldbank.org)

Abstract

New economic geography has become a mantra for many economists, geographers, and regional scientists. Many recent studies have tested the importance of economic geography for production activities and found a significant association between them. Most of these studies, however, have not taken into account that productivity gains from economic geography, if any, are conditional on firm-location choice. This article illustrates a potential bias that can arise when firm-location choice is not considered in estimating the contribution of economic geography to firm performance. An analysis using microdata of Indian manufacturing firms shows that there is an upward bias in the contribution of economic geography to productivity when firm-location choice is not jointly taken into account as part of production decisions.

Suggested Citation

  • Jun Koo & Somik Lall, 2007. "New Economic Geography: Real or Hype?," International Regional Science Review, , vol. 30(1), pages 3-19, January.
    • Handle: RePEc:sae:inrsre:v:30:y:2007:i:1:p:3-19
    DOI: 10.1177/0160017606296730
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    References listed on IDEAS

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    6. Joshua Drucker, 2012. "The Spatial Extent of Agglomeration Economies: Evidence from Three U.S. Manufacturing Industries," Working Papers 12-01, Center for Economic Studies, U.S. Census Bureau.

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