Geographic Concentration and Increasing Returns: a Survey of Evidence
Increasing returns,market access,demand and cost linkages,large-scale agglomeration
Economy and Society
Gianmarco I.P. Ottaviano
Economic activities are highly clustered. Why is geographic con-centrationbecoming a predominant feature of modern economies? Onthe basis of the empirical models developed by the ‘new’ theories ofinternational trade, our answer is that increasing returns are the driv-ingforce of economic geography in the US as well as in Europe. Inso doing, we review econometric methods proposed in the literature toseparate and to test alternative theoretical paradigms.