DP2072 What Determines the Economic Geography of Europe?

Author(s):	Jan I. Haaland, Hans Jarle Kind, Karen-Helene Ulltveit-Moe
Publication Date:	February 1999
Keyword(s):	Agglomeration, Comparative Advantage, Economic Geography, Industrial Localization
JEL(s):	C21, F14, F15
Programme Areas:	International Trade and Regional Economics
Link to this Page:	cepr.org/active/publications/discussion_papers/dp.php?dpno=2072

This paper focuses on what the driving forces behind industry localisation in Europe are. Based on traditional as well as new trade theory and new economic geography our cross-sectoral empirical analysis seeks to explain the pattern of relative and absolute concentration of manufacturing activity. By comparing impact over time, we also consider whether the single market has had an influence on factors determining localisation. The results indicate that the by far most important determinant of economic geography in Europe is localisation of demand. There is also evidence of cumulative causation in the sense that absolute concentration of production and expenditure mutually influence each other.