New Economic Geography and Economic Development

We find a transition from a manufacturing-based economys to the digital economy
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With the rise in the process of globalisation and New Economy or New Economic Geography, there is increase in the  spatial economic inequalities. New Economic Geography by and large characterizes digitalization, liberalisation, privatisation, and globalization.

Moreover, it is beyond what is seen and observed since we find that increased use of information and communications technology, the growth of knowledge goods, gender economics and feminization has enabled economic and social geographers to analyse social, economic, and spatial divisions caused by the rising New Economy, including the emerging digital divide.

The new economic geographies take account of fundamentally service-based sectors of the economy making use of  the novel technology, such as  industries or sectors where people are dependent upon information and communication technology (computers and the internet facility).

Within New Economic Geography, we find a transition from a  manufacturing-based economies to the digital economy. In knowledge based sectors, competitive forces drive technological advancements.

New Economic Geography has a great bearing upon these high technology sectors relying greatly on interpersonal relationships and trust. In the age of globalisation, it is very difficult to develop things like software which is very different from other kinds of industrial manufacturing demanding intense levels of knowledge and cooperation between many different people, as well as the use of tacit knowledge. 

As a result of knowledge and cooperation becoming a necessary good or simply a necessity, there is a clustering or agglomeration in the New Economic Geography or new economy.

Agglomeration effects or economies of agglomeration are very prominent in New Economic Geography and is most often discussed in terms of efficiency levels or firm productivity.

Nonetheless, agglomeration effects also explain social segregation, and some social phenomenon such as clustering of large proportions of the population in metropolitan cities and big urban centres. It also emphasize on the firm as the most important unit.

However, the focus on the firm as the main entity creates a stumbling block in the debate of New Economic Geography and Spatial Economic Structure.

There is a bi-way causal relationship between New Economic Geography and different sectors of the economy: primary sector, secondary sector, tertiary sector, and quaternary sector.

How good New Economic Geography is in a global village? How good is the interface between New Economic Geography and different sectors of the economy? Good New Economic Geography regime turns all sectors of the economy in a better condition and vice versa, especially knowledge based sector. Better condition of different sectors of the economy will in turn contribute to the growth and development process of the new economy with minimal trade restrictions.

However, spatial divisions within these arising New Economic Geographies are very much apparent in the form of the digital divide and creative class as a result of regions attracting talented workers instead of developing skills at a local level. The creative class theorists argue that it is the main driving force for economic development of post-industrial cities in the United States. But the fact is that this class widens disparity, spatial disparity too.

The contemporary world continues to be looked through its widening social and spatial divisions which by and large are increasingly gendered despite mounting globalization which integrates national economy with the rest of the world and  inter-connectivity through developing information communication technologies.

Many researchers,  Danny Quah in particular, explain these spatial divisions through the knowledge goods attributes in the New Economy: unlimited expansibility, weightlessness, and non-rivalry.

There are more challenges for women and ethnic minorities with the rise of New Economic Geography. Social divisions are expressed through new spatial segregation showcasing spatial sorting by skills, knowledge, income, ethnicity, needs, tastes, and lifestyle preferences.

Employment segregation is an important characteristic of New Economic Geography which is very much evidenced by the over-representation of ethnic minorities  and women  in lower-paid service sector jobs. It is very difficult to overcome these challenges cum divisions in the new economy as a result of some limited but clear doors of development to higher-skilled work.

Dr. Binish Qadri, Assistant Professor Economics, Cluster University Srinagar.

DISCLAIMER: The views and opinions expressed in this article are the personal opinions of the author.

The facts, analysis, assumptions and perspective appearing in the article do not reflect the views of GK.

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