Learning about economic geography

Paul Krugman recently wrote a superb paper on one of the topics he knows best – economic geography. After all his work on International Trade and international geography got him the Sweden prize.

In a typical Krugman style he titles the speech as The New Economic Geography- Now Middle Aged 🙂 In this paper, Krugman tells you about how economic geography became mainstream and how there was opposition from economists and geographers. He addresses the criticisms and then says how is his broad idea still relevant:

In 1990, when I gave those initial lectures on geography, I focused entirely on advanced economies, and mainly the United States. That was largely a matter of convenience: the data were easy to find, as were the historical cases. But I could also defend it as reflecting the world’s economic center of gravity. The new economic geography was mainly a story about manufacturing, and in 1991 high-income nations accounted for 84 percent of the world’s manufacturing value-added.

Today that fraction is below 70 percent, with most of the growth in manufacturing taking place in emerging nations, above all China. And here’s the thing: as I’ve said, new economic geography has a kind of steampunk feel, so that the stories it tells seem more suited to the U.S. economy of 1900 than that of 2010. Well, China is an economic powerhouse, but it’s still quite poor; allowing for the vagaries of purchasing power parity estimates as well as GDP comparisons between very different eras, China today appears to have roughly the same level of per capita GDP as the United States at the beginning of the 20th century.

And guess what? Chinese economic geography is highly reminiscent of the economic geography of advanced nations circa 1900 – and it fits gratifyingly well into the new economic geography framework.

First of all, a dramatic core-periphery pattern has emerged, with massive migration from central and western China to the coastal region, and within that region to the manufacturing belt in the southeast (plus a secondary migration toward the Beijing area) (World Bank 2009). Admittedly, the picture is complicated by the fact that much of China’s industrial production is aimed at the external world market, rather than the domestic market. Still, the differentiation of regions is a clear cousin to the emergence of the U.S. manufacturing belt in the 19th century.

And then there are the industrial localization stories. China is home to hundreds if not thousands of local industrial clusters, from the cigarette lighter town of Wenzhou, producing 95 percent of world output, to Yanbu, the underwear capital (the 21st century Cohoes). Case studies reveal the classic forces of localization at work; for example, the motorcycle cluster in Pengjiang consists of three cycle factories and about 30 factories producing accessories, and it’s that local supply of specialized inputs that appears to be the main driving force behind agglomeration (Arvantis and Haijiang 2009).

In sum, it turns out that the concepts and approaches of the new economic geography aren’t backward-looking after all. They’re utterly relevant to understanding developments in the world’s fastest-growing economies. Localization in America has become a subtle affair, but in China and other emerging economies, it’s anything but subtle, and there’s wide scope for the use of no-dormitive-properties models to make sense of what we see.

In the end he says eco geography has a field has progressed:

A generation ago, mainstream economists hardly thought at all about the location of production within countries; they hardly looked at local and regional data for evidence on such matters as the strength and nature of external economies. The new economic geography was conceived as an effort to change all that, bringing economists into an area the best way I knew how: by developing cute, nifty models.

That effort has succeeded. There are many ways in which the ongoing work in new economic geography can be criticized; one of these valid criticisms is the failure to pay sufficient attention to the work of more traditional economic geographers. But getting economists to think about location and spatial structure is nonetheless significant progress.

To carry the discussion forward, I would also like to point to this conference on economic geography held by San Francisco Fed. I could not locate any of the papers though.

Its economic letter summarises the papers:

At the conference, four leading experts on economic geography and urban economics gave talks spanning a wide set of economic geography topics that are relevant in the aftermath of the recent economic crisis. These included the outlook for urban structure in the United States in the wake of the housing downturn, urban policy changes in the United Kingdom, how the geography of China’s economic development may have been affected by the global downturn, and the widespread trend toward “green” construction in the face of global warming.

Read the brief of papers. Very good stuff. Giving eco geography a crisis perspective is very interesting. For instance, authors point how this crisis would lead to changes in society in US with a decline in social capital. In UK it was felt that regions having finance industry would be affected more but North UK which is an industrial belt was most affected. The local policies in Uk are slow and policies need to focus on poor people and not poor regions.

In China’s case, its urban population is lower than other countries. This crisis has hit exports and could stem more people coming from rural regions to urban China.

Finally, in what looks like a very interesting paper, authors show green buildings is not just hype and demand higher premium for the cost savings they provide.

Very exciting work. Giving the implications of the crisis a very different perspective. And all this is pretty basic as well and could mean structural changes in the economy. Take the case of China for instance. Would more rural people migrate as crisis situation has eased? What should Chinese policymakers do to plan for increased migration to cities?  The US case of  (if true) social capital could have more serious ramifications on the economy.

5 Responses to “Learning about economic geography”

  1. Learning about economic geography « Mostly Economics « Rubber Tyres –> Smooth Rides Says:

    […] Learning about economic geography « Mostly Economics Blogged with the Flock Browser ▶ No Responses /* 0) { jQuery('#comments').show('', change_location()); jQuery('#showcomments a .closed').css('display', 'none'); jQuery('#showcomments a .open').css('display', 'inline'); return true; } else { jQuery('#comments').hide(''); jQuery('#showcomments a .closed').css('display', 'inline'); jQuery('#showcomments a .open').css('display', 'none'); return false; } } jQuery('#showcomments a').click(function(){ if(jQuery('#comments').css('display') == 'none') { self.location.href = '#comments'; check_location(); } else { check_location('hide'); } }); function change_location() { self.location.href = '#comments'; } }); /* ]]> */ Click here to cancel reply. […]

  2. unicon india Says:

    Economic geography is the study of the location, distribution and spatial organization of economic activities across the world. The subject matter investigated is strongly influenced by the researcher’s methodological approach.

  3. select your broker Says:

    Economic geography is usually regarded as a subfield of the discipline of geography, although recently economists such as Paul Krugman and Jeffrey Sachs have pursued interests that can be considered part of economic geography.

  4. select your broker Says:

    Economic geography is the study of the location, distribution and spatial organization of economic activities across the world. The subject matter investigated is strongly influenced by the researcher’s methodological approach. Neoclassical location theorists, following in the tradition of Alfred Weber, tend to focus on industrial location and use quantitative methods. Since the 1970s, two broad reactions against neoclassical approaches have significantly changed the discipline

  5. unicon india Says:

    Economic geography is usually regarded as a subfield of the discipline of geography, although recently economists such as Paul Krugman and Jeffrey Sachs have pursued interests that can be considered part of economic geography.[1] Krugman has gone so far as to call his application of spatial thinking to international trade theory the “new economic geography”, which directly competes with an approach within the discipline of geography that is also called “new economic geography”.[2] The name geographical economics has been suggested as an alternative.[3]

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