New economic geography: Thirty years later

Abstract

In the past three decades, many analytical and quantitative models have been developed that seek to explain the inequalities in the spatial distribution of wealth and people, from international and regional to urban. We show that a number of theoretical and empirical works have shaped the New Economic Geography, whose framework is defined by general equilibrium models, heterogeneity, and microeconomic data of quantitative models. Early theoretical work focused on stylized analytical models that made empirical research difficult. The transition to empirical research required a revision of the canonical assumptions that are used in the basic models. Quantitative models focus mainly on applied issues of spatial economics with significant public policy implications. Quantitative models validate the results of analytical models using classic micro-foundations borrowed from urban and transport economies. The challenge for the New Economic Geography is an interdisciplinary dialogue with institutional economics, economic sociology, and endogenous growth theory to explore the problems of institutional heterogeneity and inequality of opportunity. In fact, we can talk about the fusion of disciplines, which will allow us to apply the provisions of the New Economic Geography to the analysis of historical, geographical and other modes of functioning of institutions.