Regional policy in the global economy: Insights from new economic geography

So far the contribution of new economic geography (NEG) has been mainly positive. Normative analysis and policy implications have lagged behind. The reason is the fear of the consequences of taking too literally the neat structure of the models. In this respect the somewhat incautious aim of this paper is precisely to take NEG models literally and ask what their exact policy implications are. This is viewed as a necessary though preliminary step towards bringing NEG insights to the policy domain.