Perspectives from Spatial and Neoclassical Economics
Edited by Masahisa Fujita, Satoru Kumagai and Koji Nishikimi
Chapter 2: Regional Integration in East Asia: Perspectives of Spatial and Neoclassical Economics
Masahisa Fujita and Nobuaki Hamaguchi INTRODUCTION 2.1 Globalization has highlighted the importance of geography. Firms can choose locations more freely and internationally so as to produce and deliver more eﬃciently, taking into consideration locational advantages in labor cost, infrastructure quality and accessibility to major markets. The reduction of trade costs in the broad sense (Anderson and Wincoop 2004) has allowed ﬁrms to supply a much wider area of markets from a smaller number of production locations. This, in turn, has provoked a concern over widening regional income disparities because some regions seem to attract a disproportionately large share of productive employment while others are left with only a small share. In the early 1990s, concern about the future of European integration after the establishment of the European Union (EU) in 1993 encouraged some theorists to develop models of the location of economic activities; this has become known as ‘spatial economics’. A natural question of interest was, ‘Given the regional integration of the EU as a single market, what will be the spatial distribution of economic activities?’ Since then, spatial economics has reached a certain theoretical consolidation, as we can see in Fujita et al. (1999), Baldwin et al. (2003) and Henderson and Thisse (2004). This book examines the future of the economic geography of East Asia, which is also increasing its degree of integration. Casual observation identiﬁes a complex combination of both a dispersion of industries from higher-wage regions to lower-wage ones, and a concentration in larger...
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