Abstract
How does a country's economic geography evolve along the development path? This paper documents recent employment growth in 18,961 regions in eight of the world's main economies. Overall, market potential is losing importance as a correlate of local growth, while local employment density is gaining importance. In mature economies, growth is strongest in low-market-potential areas. In emerging economies, the opposite is true, though the association with market potential is also weakening there. Structural transformation away from agriculture can account for some of the observed changes. The part left unexplained by structural transformation is consistent with a standard economic geography model that yields a bell-shaped relation between trade costs and the growth of centrally located regions.
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