New economic geography and economic history: a survey of recent contributions through the lens of the Spanish industrialization process

A Correction to this article was published on 16 September 2020

This article has been updated

Abstract

This paper aims to provide a synthesis of a number of articles that over the last few years have explored the industrialization process in Spain from the perspective of the new economic geography (NEG). To this end, we present some of the seminal theoretical papers of the NEG literature from which originated the main theoretical predictions that have been tested through empirical analysis applied to the case of Spain. We also look at those papers on the economic history of Spain that—through the use of an economic geography framework—have analysed how the location and regional concentration of manufacturing has evolved over the years. Altogether, this paper aims not only to present the determinants of the industrial map of Spain, but also to highlight the positive externalities that stem from the interaction between the NEG and economic history, showing the usefulness of a cliometric approach based on economic theory and empirical testing to give us a more detailed knowledge of the past.

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Fig. 1

Source: Paluzie et al. (2004)

Change history

  • 16 September 2020

    The authors would like to thank the editor and two anonymous referees for their comments.

Notes

  1. 1.

    The theoretical and empirical NEG literature has continued to grow since the 1990s. Nevertheless, in the present paper it is enough to present just a few of the early models from this literature, since these cover the main predictions that have been empirically tested in research exploring the case of Spain and are included here. For some of the more recent contributions and surveys that summarize the main lines of research and results within the NEG literature of the last few years, see, for example, Redding (2013), Combes and Gobillon (2015), Karlsson et al. (2015), Redding and Rossi-Hansberg (2017), Gaspar (2018), Henning (2019), and Brakman et al. (2019).

  2. 2.

    See Rosés et al. (2010, p. 245 and 246) for a detailed account of the integration of the Spanish market between 1860 and 1930.

  3. 3.

    According to calculations made by Herranz (2005), in 1878 haulage costs fell by up to 86% thanks to the introduction of the railway.

  4. 4.

    Although the Cánovas tariff (1892) was characterized by the imposition of a high duty on imports of cereals, textile products, and iron and steel goods, the tariffs of 1906 (the Salvador tariff) and 1922 (the Cambó tariff) focused especially on the protection of a growing group of industrial production sectors (Sabaté 1995; Tena 1999).

  5. 5.

    A more complete view of the Spanish economy’s integration into the international markets between 1860 and 1930 can be found in Tirado et al. (2013, pp. 301–304).

  6. 6.

    In 1910, over two-thirds of the total active population of Spain still worked in the agricultural sector. The evolution of different regional economies can be found in Nadal and Carreras (1990) and Germán et al. (2001).

  7. 7.

    For more details on the origins of Catalan industrialization in the late eighteenth century, see Martinez-Galarraga and Prat (2016).

  8. 8.

    Together with the market crowding effect, a further force could lead to the dispersion of manufacturing activities; since unskilled farm workers are immobile, a proportion of them will be located on the periphery and their demand for manufactured goods has to be satisfied.

  9. 9.

    By assuming that regions are symmetric, the NEG does not take primary geographical elements into account, and therefore, the theory does not establish which region will become the industrialized core and which the periphery.

  10. 10.

    As well as this externality, Marshall (1890) noted a further two: informational spillovers and the formation of a skilled labour market.

  11. 11.

    Unlike new trade theory, the NEG can explain the mechanisms whereby sizeable differences can be generated in regions’ productive structures and income levels, even when these regions present similar factor endowments. What makes the NEG models attractive is the fact that the cost parameters and level of demand are endogenous and vary between locations as they depend on location decisions taken by all the agents. This distinguishes these models from those of international trade with imperfect competition, in which the location of the factors of production is given and fixed (exogenous) Combes et al. (2008a, b, p. 47).

  12. 12.

    It is interesting that, when considering the presence of urban costs (Ottaviano et al. 2002) and the heterogeneity of individual attitudes as regards migration (Tabuchi and Thisse 2002), to which we can add the transport costs that are positive for agricultural goods (Picard and Zeng 2005), not only are some of the more restrictive or less realistic assumptions from earlier NEG models relaxed, the existence of a bell-shaped evolution in the relationship between economic integration and inequality in different contexts is also confirmed.

  13. 13.

    On this matter, see also Rodríguez-Pose (2018, p. 200).

  14. 14.

    The Ginis for the period 1856–1929 are calculated using information from fiscal sources, while for 1955–1995 they come from direct estimates of gross value added. Therefore, they are not directly comparable, and this makes it more practical to divide the presentation of the results into two blocks and analyse the tendencies within each. Nevertheless, given what we know qualitatively and quantitatively about the evolution of Spanish industry, it would not be too unrealistic to assume that the geographical distribution of industry in 1955 was not very different from that of 1929 (Carreras 1990).

  15. 15.

    Combes and Gobillon (2015) survey the existing literature and report that the elasticity of productivity with respect to density usually ranges between 4 and 7%. Recent studies show that agglomeration economies seem to have more impact in developing economies such as China and India (Chauvin et al. 2014).

  16. 16.

    This hypothesis is confirmed by Díez-Minguela et al. (2016), who, following an alternative empirical strategy based on a Barro-style empirical analysis (Brülhart and Sbergami 2009), stress the importance of agglomeration economies in the manufacturing sector between 1870 and 1930.

  17. 17.

    Agglomeration effects were also present in the population, helping to shape Spain’s particular spatial demographic pattern characterized by a population concentrated on the coast and a growing depopulation process in the interior except for Madrid, which just keeps on growing. Ayuda et al. (2010), González-Val et al. (2017), and Beltrán Tapia et al. (2018) stress the importance of increasing returns, market potential, and the existence of an agglomeration effect, respectively, in the spatial distribution of the population since the beginning of the twentieth century.

  18. 18.

    This empirical strategy relies on a measure of market access. Following Harris (1954) and Crafts (2005), a measure of market potential for Spain’s provinces was calculated (see Martinez-Galarraga 2014).

  19. 19.

    Using a similar framework but in an investigation over the long term at NUTS2 level, Betrán (2011) finds that comparative advantage (agricultural and mining resources) was important between 1856 and 1955, and skilled labour from 1965, while NEG factors were important between 1929 and 1973, although even then their impact was smaller than the impact of factor endowments and was decreasing over time. The same kind of approach has been employed for analysing the Polish case in Wolf (2007), for UK in Crafts and Mulatu (2005 and 2006) and Crafts and Wolf (2014), for the USA in Klein and Crafts (2012) and Crafts and Klein (2017), for the Italian regional industrialization in Daniele et al. (2016), Basile and Ciccarelli (2017) or Missaia (2018), or for the former Yugoslavia in Nikolic (2018).

  20. 20.

    For more recent periods, the importance of agglomeration economies is underlined in various papers, including Alonso et al. (2004), Viladecans (2004), Alañón-Pardo and Arauzo-Carod (2013) and García-López et al. (2015).

  21. 21.

    By focusing on interregional inequality, he assumed labour mobility as in Krugman (1991) and replaced the agricultural good in household consumption with housing costs as in Helpman (1998). Redding and Venables (2004), on the other hand, sought to explain differences in cross-country wages in terms of GDP per capita within the NEG framework.

  22. 22.

    However, the parameters estimated show that agglomeration forces are limited to geographical scale. The economic influence of wages in the neighbouring areas of any county falls rapidly with distance and is only effective in a radius of less than 1000 kilometres. Income in areas outside this limit does not exert a positive influence on the determination of local wages.

  23. 23.

    See Roos (2001) and Brakman et al. (2004) for Germany, Knaap (2006) for the US, Combes et al. (2008a) for France, Mion (2004) for Italy, and Head and Mayer (2006) and Niebuhr (2006) for the European Union.

  24. 24.

    While Crozet (2004) combines an NEG model based on Krugman (1991) with a discrete choice model of migration à la Tabuchi and Thisse (2002) to obtain a tractable migration equation, Kancs (2005) derives a similar equation from another NEG model, devised by Pflüger (2004), which is an analytically solvable version of Krugman (1991).

  25. 25.

    Rates of internal migration rose in the early 1980s, in particular those over a short distance. However, unlike in previous decades, and due to the increase in the spatial dispersion of emigration and immigration (that is, the increase in the number of important places of both destination and origin), the increase in the gross number of migrations was not accompanied by an increase in net migrations.

  26. 26.

    …the new fundamental ingredient that a multi-regional setting brings about is that the accessibility to markets varies across regions. In other words, spatial frictions between any two regions are likely to be different, which means that the relative position of the region within the whole network of interaction matters”. Behrens and Thisse (2007, p. 462).

  27. 27.

    A survey of this literature can be found in Brülhart (2011). For studies that analyse this subject from a different perspective, see Ades and Glaeser (1995), Behrens (2003) and Behrens et al. (2006).

  28. 28.

    A similar analysis, but in the context of European integration, can be found in Brülhart et al. (2004) and Crozet and Koenig (2004b).

  29. 29.

    An overview of the integration of the Spanish economy into international markets before the Civil War (1936–39) can be found in Tirado et al. (2013, 301–308).

  30. 30.

    As shown in Table 1, the participation of Madrid in total industrial production in Spain remained stable between 1860 and 1900. However, this participation virtually doubled between 1900 and 1930. In the theoretical debate, these results come close to the predictions deriving from the model proposed by Crozet and Koenig (2004a).

  31. 31.

    In line with the strengthening of the wage gradient centred on Barcelona, Table 1 shows that the participation of Catalonia in total industrial production in Spain rose from 24.5% in 1960 to 26.1% in 2000. Nevertheless, the Madrid region’s participation also continued to increase, rising from 10.5% in 1960 to 11.6% in 2000, overtaking the Basque Country to become the second biggest industrial region in Spain.

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Correspondence to Julio Martinez-Galarraga.

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Martinez-Galarraga, J., Paluzie, E., Pons, J. et al. New economic geography and economic history: a survey of recent contributions through the lens of the Spanish industrialization process. Cliometrica (2020). https://doi.org/10.1007/s11698-020-00214-1

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Keywords

  • Economic history
  • Economic geography
  • Manufacturing
  • Spain

JEL Classification

  • N9
  • 01
  • R1