Economic Geography

Course taught at Aix-Marseille University (AMSE Master 2), ENSAE (3), EHESS-PSE (APE Master 2)

Does European integration favor the development of peripheral regions or does it increase regional disparities? Are physical geography or the mobility of goods and production factors (labor and intermediate inputs) the main determinants of the spatial distribution of income? These are some of the questions tackled by recent developments in economic geography and presented in this course.

Economic theory under perfect competition is not able to explain the endogenous formation of cities or the persistence of income disparities across countries or regions. By contrast, this course presents the economic geography models (relying on industrial organization and trade theory under imperfect competition) that explain how spatial concentration may emerge. The trade-off between economies of scale and inter-regional trade costs is detailed as well as the role played by the mobility of factors. These models characterize the determinants of the firms and people location choices. Therefore they allow a better understanding of the impact of economic integration on regional inequality. The role of regional public policies is emphasized.

The second half of the course is devoted to the empirical studies based on these recent theories. Theoretical predictions are confronted to the real world, in the US as well as in Europe or at the World level. Reduced-form approaches based on sophisticated individual data techniques are presented first. Then more structural strategies directly testing the economic geography models are detailed.

Course main textbook:

Combes, P.-P., T. Mayer, and J.-F. Thisse, 2008. Economic Geography, Princeton University Press. In Chinese at Remnin University Press 2011. In French at Economica, 2006.

Slides (password needed, contact me, also if you want the tex version):

1 Economic geography: An overview (PDF)

2 Economic geography under monopolistic competition (PDF)

    2-1 Monopolistic competition la Dixit and Stiglitz

    2-2 Trade and the home market effect

    2-3 The Krugman [1991] core-periphery model

    2-3 Krugman and Venables [1995] and the Bell-shaped curve

3 Economic geography with strategic interactions (PPT)

    3-1 The market-share / competition trade-off: Hotelling revisited

    3-2 Agglomeration under Cournot competition: Combes [1997]

4 The determinants of spatial concentration and local productivity (PDF)

    4-1 Spatial concentration

    4-2 Local productivity

    4-3 Regional dynamics

5 Structural estimations of monopolistic competition economic geography models (PDF)

    5.1 A general framework

    5.2 Factor prices and economic geography

    5.3 Location of firms

    5.4 Migrations

6 Theory with numbers (PDF)

    6.1 Predictions based on the Dixit-Stiglitz-Krugman model

    6.2 Simulations in an estimated model of the French space-economy

References (PDF)

 

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