New Economic Geography after Thirty Years

Abstract

In this chapter we briefly discuss how the New Economic Geography literature follows from and builds on international trade theory. We then turn to the main empirical implications of New Economic Geography. We highlight that the main problem with empirical applications of New Economic Geography is that a single test of the implications of the model is illusive because of the structure of the model. As a result, the main consequences of the model are usually tested separately. Some of the implications of the model are also consistent with other models, notably models in urban economics. We stress therefore, that despite an initial surge in empirical research inspired by New Economic Geography as well as improved methods, the empirical evidence still remains rather sketchy. Moreover, up to now policy advise based on New Economic Geography is mostly qualitative.