Abstract
Abstract International and regional integration are accompanied by the fear that the reduction of trade barriers might change the spatial distribution of economic activity radically. In the past decade, the ‘New Economic Geography' has developed as a theory explaining some of the forces which might influence the spatial distribution of economic activity. Since trade costs play a crucial role in this new theory, it is natural to expect the New Economic Geography to contribute substiantially to the understanding of how regional integration might change the economic landscape. This paper reviews the New Economic Geography literature. It turns out that the literature's theoretical predictions are ambiguous and that the empirical evidence on the theory is very scant so far.
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