Economic geography and settlement dynamics

The new economic geography has its origin in the contribution made by a generation of economists towards the understanding of the spatial dimensions of economic development. Following on from Paul Krugman,1 they have drawn attention to the shift from an economic geography, based on the spatial distribution of natural endowments (elements of physical geography, exploitable resources, settlements, proximity to rivers and coasts, versus natural obstacles to trade), to a model that is more determined by interactions between economic agents, transport and communication infrastructure, which facilitates mobility and the concentration of activities, people and innovations. “The central idea is that the agglomeration of production is the result from arbitrage between transaction costs and scale economies” (Montaud, 2003). With circular causation, “manufactures production will tend to concentrate where there is a large market, but the market will be large where manufactures production is concentrated” (Krugman, 1991).