Thursday, May 14, 2015

The power of economic geographies visualized

The Growth Economics Blog points to a paper by Roy Elis and Stephen Haber which claims that "economic and political institutions depend, to some extent, on the natural level of transactions supported by the hinterland surrounding the core area of different economies". One dimension of transactions levels they identify is the transportation catchment - higher levels of transactions are associated with lower transportation costs and areas with plain topography or waterways benefit.

In this context, they point to the examples of New York and Mexico City, represented by the following maps, about how far you could get from the center of each city using 40 megajoules of energy.
As can be seen, the hinterland for New York at a 40 megajoules energy budget is 93,300 sqkm against 13,320 sq km for Mexico City. While the authors make their inference in the context of agricultural economy, the seven times difference in the economic geography (or hinterland size) would translate into much higher economic activity in any economy.

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