Market potential estimates in history: a survey of methods and an application to Spain, 1867-1930

2014

New Economic Geography (NEG) models stress the importance of access to demand as a key driver of the spatial and temporal distribution of economic activity (Krugman, 1991). Therefore, in order to test the theoretical predictions emanating from NEG a sound measure of accessibility is required. In line with Crafts (2005b), this paper constructs market potential estimates for Spain at the province level (NUTS3) between 1867 and 1930 using Harris’s (1954) equation. This period is particularly appealing as it was during these years that the Spanish market became integrated thanks to the fall in transport and trade costs. A number of key processes, including the substitution of traditional transp…