Deck 13: New Economic Geography

Question 1

With respect to economic geography, explain centripetal and centrifugal forces. Why does production concentrate in geographic space?

Answer 1

An agglomeration force promotes geographical concentration (centripetal force), while a dispersion force pushes economic activity away from a geographic center (centrifugal force). Additionally, when manufacturing firms choose a location for production, they hire workers who live and consume in that region, thus, over time, more people are essentially 'pulled' to that location. Finally, a large local market and economies of scale create sites that are conducive for production, support the production of intermediate inputs, and decrease costs for downstream producers.

Question 2

What are the components of the model of new economic geography? Explain the role of transportation cost.

Answer 2

The components of the model of new economic geography consist of two regions - manufacturing, and agriculture/rural areas. While farmers are immobile (they cannot simply move their farms on a whim, nor can they easily switch to working a different farm), manufacturers (and their laborers) are often incentivized to move locations according to demand. This means that farmers are often beset by transportation costs well out of their control, while manufacturing firms are able to better negotiate such costs by operating in geographical spaces conducive to avoiding them. Given that both agricultural (farms), and big-city manufacturing firms are profit maximizers, the logistical element of transportation (both of their products and their workforce) must be considered. For farmers, there is essentially negligible cost associated with the latter - they rise and shine, walk outside, and are at the reception desk of their office. By contrast, urban manufacturing firms generally have a widespread workforce, for whom transportation to the worksite signifies a substantial cost every day.

Question 3

With respect to transportation cost, explain how the model of new economic geography argues for economic diversification and agglomeration. What are the roles of the sustain point and the break point?

Answer 3

In the model, the difference in real wages depend on the distribution of manufacturing between regions. Between high and low levels of T, two important threshold values exist. A high level of T encourages diversification between regions; however, as T declines from a high level it reaches the sustain point (TS). Diversification between regions ceases to serve as an equilibrium. When transportation costs decline, producers evaluate opportunities in the other region. As T decreases further, transportation costs reach the break point (TB), at which the diversified equilibrium breaks down. As transportation costs decrease below TB, the conditions are sufficient for core-periphery organization (agglomeration). To summarize, the following threshold conditions motivate the establishment of one equilibrium or several equilibria:

Question 4

Explain why globalization, uneven development, and place serve as important components of economic geography.

Question 5

Explain the process of urbanization. Why does it occur? What is the implication of urbanization for the potential spread of global diseases?

Question 6

Cities achieve different degrees of smart city status, depending on the indicators. Should the smart city framework include the variable for pandemic resilience? Why?

Question 7

How does a factor-driven model differ from a model of network-driven contagion? What are the models trying to estimate? What are the approaches to estimation?

Question 8

How does a model of social vulnerability identify areas that may experience inferior outcomes from a pandemic?

Question 9

How should policymakers formulate responses to pandemic outcomes in rural areas? What unique characteristics of rural areas impact policy implementation?

Question 10

How should policymakers formulate responses to pandemic outcomes in urban areas? What unique characteristics of urban areas impact policy implementation?