Gravity, market potential and economic development

Keith Head and Thierry Mayer

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Abstract: This article provides evidence on the long-term impact of market potential on economic development. It derives from the New Economic Geography literature a structural estimation where the level of factors' income of a country is related to its proximity to large markets, referred to as 'market potential'. The empirical part evaluates this market potential for all countries in the world with available trade data over the 1965-2003 period and relates it to income per capita. Overall results show that market potential is a powerful driver of increases in income per capita.

Date: 2011
Note: View the original document on HAL open archive server: https://sciencespo.hal.science/hal-01024204
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Published in Journal of Economic Geography, 2011, 11 (2), pp.281-294

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Journal Article: Gravity, market potential and economic development (2011)
Working Paper: Gravity, market potential and economic development (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-01024204

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