Empirical studies in geographical economics

Abstract

We discuss recent empirical studies in Geographical Economics / New Economic Geography models. We focus on four main issues addressed in this literature: how market access affects factor mobility, how market access affects factor prices, how reductions in trade costs affect core-periphery dynamics, and the shock sensitivity of the spatial distribution of economic activity. In general, our overview finds strong empirical support for the main theoretical implications of the geographical economics literature. We argue that future works needs to incorporate urban aspects in geographical economics models, allow for heterogeneity, and focus more attention on services sectors and networks.