New economic geography

An overwhelming feature of economic activity is its spatial unevenness. It shows up in income disparities between countries and regions, in clustering of industries, and in the formation of urban systems. Analysis of the spatial distribution of economic activity was, until recently, neglected by mainstream economics. It is now addressed in the 'new economic geography' literature, built on recognising spatial interactions between economic agents, and on analysing the reasons for and implications of the clustering of activity.

Much of the initial work on the subject was done in the CEP by Krugman and Venables (including their joint work with Fujita). The various theoretical contributions have been synthesised in:

• Fujita, M., P. Krugman and A.J. Venables (1999) 'The Spatial Economy: Cities, Regions and International Trade', Cambridge, MA and London, MIT Press.

The empirical work has been surveyed in:

• Overman, H. G., S. Redding and A.J. Venables (2001) 'Trade and Geography: A Survey of Empirics', Department of Economics, London School of Economics.[Full doc].