Economic linkages across space

A diagrammatic framework is developed to study the economic linkages between regions or cities. Hitherto, such linkages have not been a focus of the literature. The framework is used to analyse the impact of shocks that occur in one region (for example, productivity improvements or increases in housing supply) on other regions, highlighting the key adjustment mechanisms and their long-run implications for incomes, the cost of living, and the spatial distribution of population. The approach is linked to both the New Economic Geography and urban systems literatures and empirical studies are reviewed that quantify the key mechanisms that are identified.