Geography and development

Abstract

Background The recent (re-)discovery of geography by economists through the lens of the new economic geography literature (Krugman, 1991) has had its counterpart in policy making with the promotion of the idea that economic geography is central to understanding and influencing actual economic development. The culmination of this was the publication of the World Development Report (WDR) 2009 by the World Bank in late 2008 (World Bank, 2008). In this report, aptly titled Reshaping Economic Geography, the World Bank basically makes two related claims. Firstly, and very much based on the new economic geography literature, understanding and shaping economic geography is crucial for economic development. So, after its earlier emphasis on development factors such as governance and institutions or human capital, in the WDR, the World Bank adds economic geography to the list of key drivers of economic development. Secondly, once the crucial role of economic geography for development is recognized, the WDR forcefully argues that this has far-reaching policy implications. In particular, in as far as geography is a hindrance to development, policies should be aimed at stimulating economic integration, especially between countries. Within countries, the WDR advises policy makers to focus less on, using their terminology, place-based policies and more on people-centered policies. The WDR’s policy recommendations have generated a considerable amount of debate as to whether governments should stop using placebased policies to tackle the problems of their more slowly growing areas. Central to the discussion has been the observation that the geography of economic development is uneven reflecting the economic advantages to nations and their populations of large agglomerations of economic activity. To try and stimulate the development of relatively lagging areas in a country outside these core agglomerations has been argued to be at best ineffective and at worst damaging to the economic growth of the nation as a whole. Thus, in his recent article on the blog www.voxeu.org, Indermit Gill, the World Bank’s Chief Economist for Europe and Central Asia and the Director of the WDR, argues: