The Spatial Economy: Cities, Regions, and International Trade.

• Author: Holmes, Thomas J.
• Position: Review

By Masahisa Fujita, Paul Krugman, and Anthony J. Venables.

Economic Geography has received substantial attention in recent years and the authors of this book have been at the forefront of this literature. In essence, this book is a revision and enhancement of journal articles written by subsets of these authors. In the time since the original works were published, the authors have figured out ways to sharpen their results and to add some new ones. With the additional space afforded by a book as opposed to a journal article, they have room to consider a wider set of cases. There are also more references to earlier work in regional science and geography. It is clear that if one wants to cover this material in a graduate course, one should use this book rather than the original journal articles.

Cambridge, MA: MIT Press, 1999. Pp. xiii, 367, $35.00.

Since the book aims to be a complete theoretical analysis, much of the book involves complicated derivations (many chapters have more than 30 equations). In no way is this book aimed at a popular audience or for any kind of typical undergraduate course. Nevertheless, those who have come to expect excellent writing in any manuscript with Krugman's name on it will not be disappointed. Serving the equations up along side nicely written prose makes the equations easier to swallow. Also, the authors do a good job of highlighting the key elements of the models in introductory chapters; by the time you start trudging through the equations you have a pretty good idea of what is in them.

The book has three main sections, each corresponding to a journal article antecedent. The first section looks at "regional economics" and is based on the famous Krugman (1991) Journal of Political Economy article. In the authors' view, a regional model is one where factors such as labor are free to flow across regions but other factors such as land are fixed. The point of the analysis is to show how with scale economies, product differentiation, and transportation costs, a core-periphery structure can emerge endogenously. The core will attract workers because of the appeal of the large variety of differentiated products found in the core. The core will attract firms because of the appeal of large markets for their goods and a large pool of potential workers (forward and backward linkages in the parlance of regional economics). Thus a gravitational pull of workers and firms to the core is endogenously created. The second...