Regional Industrialization: Determinants of Industrial Location
Economic historians became increasingly interested in using a quantitative, empirical framework to study industrialization patterns in the nineteenth and twentieth centuries and to test the relative importance of two main location theories: the Heckscher-Ohlin theory, linking location to regional endowments of economic resources, and the new economic geography that implies that under intermediate transportation costs, economic activity concentrates near regions with a high market potential. In this respect, the Midelfart-Knarvik (2000) model became the central reference. After a brief presentation of economic location theory and the main features of the Midelfart-Knarvik (2000) model, we review the representative studies of economic location based thereupon. Overall, it is concluded that both categories of determinants matter. However, we notice the contrast in the determinants of location between the United States and European countries, as well as the substantial singularity of the estimation results across countries and over time. We discuss the methodological pitfalls these studies may face.