Working Paper: CEPR ID: DP14157
Authors: Marius Brülhart; Klaus Desmet; Gianpaolo Klinke
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, and local density is gaining importance, as correlates of local growth. 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.
Keywords: regional growth; market potential; structural transformation; economic development
JEL Codes: O18; R11; R12
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Structural Transformation (L16) | Changes in Market Potential Importance (F61) |
| Market Potential (L10) | Employment Growth (Emerging Economies) (F66) |
| Market Potential (L10) | Employment Growth (Mature Economies) (O49) |
| Local Density (C49) | Employment Growth (Mature Economies) (O49) |
| Local Density (C49) | Employment Growth (Emerging Economies) (F66) |