The division of labor between and within countries is driven by two fundamental forces, comparative advantage and increasing returns. We set up a simple Ricardian model with a Marshallian input sharing mechanism to study their interplay. The key insight that emerges is that the interaction...

This chapter provides a comprehensive view on the field of New Economic Geography (NEG). It starts by describing the background in adjacent fields of economics which made the surge of NEG possible. It lays out the necessary ingredients and fundamental forces at work that define any NEG framework...

Peaks and troughs in the spatial distributions of population, employment and wealth are a universal phenomenon in search of a general theory. Such spatial imbalances have two possible explanations. In the first one, uneven economic development can be seen as the result of the uneven distribution...

This paper delves into geographical agglomeration patterns of economic activities focusing on the connection between these agglomeration tendencies and sectoral patterns of innovative activities. Within a broad evolutionary perspective, we refine upon incumbent statistical models, trying to...

The New Economic Geography (NEG) has over the past decades become a leading paradigm in regional science and geography. This paper seeks to provide a retrospective and prospective look into its achievements and current challenges. Clearly, regions are not oases of tranquility. Uncertainty and...

Economic activities are highly clustered. Why is geographic concentration becoming a predominant feature of modern economies? On the basis of the empirical models developed by the 'new' theories of international trade, our answer is that increasing returns are the driving force of economic...