by Nikolaus Wolf

Economic geography and its potential for economic history was a significant part of Nick Crafts’ work. His analysis into industrial growth in the UK and US showed the importance of interactions with the physical and social environment.

T he pivot around which Nick Crafts’ work turned was understanding modern economic growth. With the rise of new economic geography in the 1990s, spearheaded by Paul Krugman and Tony Venables, Nick was among the first to see its potential for economic history: how did modern growth evolve across regions And what can we learn from new economic geography about the fundamental factors driving growth? Tony Venables happened to be his colleague at the London School of Economics since 1997, and they coauthored a book chapter entitled: “Globalization in History: A Geographical Perspective”. According to them “…firms seeking profitable locations will be drawn to locations with good market access and proximity to clusters of related activities, as well as locations with appropriate factor endowments.” (Crafts and Venables 2003, p. 324). A key role is played by the market potential of a place, and positive feedback from external economies of scale.

Over the next years, Nick developed an ambitious research agenda on economic geography. Partly funded by an ESRC grant “Understanding the effects of different generations of large-scale technological change” (2001-2005) he set out to describe the economic growth of regions within the UK (2005a), their market potential (2005b), revisited the change in British transport infrastructure (Crafts and Leunig 2005) and examined the role of market potential (Crafts and Mulatu 2005, Crafts and Mulatu 2006), based on a model suggested by Tony Venables (Midelfart-Knarvik et al 2000). The main finding was that over the period 1871 to 1911, both forces of Neoclassical location theory such as the endowment with natural resources (coal) as well as forces of new economic geography are needed to explain the location of British industry (Crafts and Mulatu 2006, pp. 598ff). The role of market potential may have increased over time (ibidem, table 10), but this effect was modest for most regions and industries in Victorian Britain.

After his return to Warwick in 2006, Nick broadened his approach to consider the dynamics of the global economy and Britain’s role therein. A landmark was the establishment of CAGE. Here, Nick brought together a large group of researchers to study the determinants of success in a global economy, including trade and geography. Part of this research agenda was to understand the rise of the United States, particularly the deep roots of US-productivity advantages in manufacturing. Klein and Crafts (2012) established that new economic geography was essential to explain the location of US manufacturing. They show that the persistent dominance of the manufacturing belt, which produced 80% of US manufacturing output in 1900, was largely due to market potential.

Next, Crafts and Klein (2018) analysed how industrial agglomeration mattered for US productivity, distinguishing between external economies from specialisation and those from diversity. They find that specialisation had a strong positive effect on labour productivity, while the effect of diversity is less robust. In Crafts and Klein (2021) they trace the spatial concentration of manufacturing in the US over the entire 20th century, from 1880 to 2007 and conclude that concentration followed a secular decline.

Around 2009 I started a project with Nick to understand why the English cotton textile industry was so incredibly concentrated in Lancashire, with the aim to learn something about the driving forces behind the First Industrial Revolution. We used the detailed ‘factory return’ (BPP 1839), which documented the location and scale of operation of all the textile factories in England, Wales and Scotland as of 1838. Drawing on a (surprisingly) large literature on the factors that might explain the location of the British cotton industry, we collected data ranging from humidity, over access to coal, and waterpower, to market potential.

The major finding of our research (Crafts and Wolf 2014) is twofold: there is again evidence for both the more Neoclassical location factors such as the availability of waterpower and coal, and forces of new economic geography. Unlike earlier work, we found that for the cotton industry around 1838, market potential was decisive. Paul Krugman put it this way: “The two Nicks, Crafts and Wolf, have a piece right up my alley: they argue that the cutting edge of Britain’s Industrial Revolution, the cotton textile industry, benefited hugely from agglomeration.”

In a final project, Nick made a bold attempt to estimate how far new economic geography goes to explain global patterns of development during the long 19th century, based on a vast new dataset. For several reasons, the paper remained a draft, (Caruana Galiliza et al) entitled ‘Geography and the Great Divergence: Market Access and Economic Growth in the Nineteenth Century’.

Nevertheless, it would be worthwhile finishing this project. For sure, Nick would have loved to see how far new economic geography goes to understand modern economic growth, not only locally but globally.

About the author

Nikolaus Wolf is Professor of Economics and Economic History at Humboldt University, Berlin and a CAGE Associate

References

Caruana Galizia, P., Crafts, N.F.R., and Schulze, M.S. (n.d.): “Geography and the Great Divergence: Market Access and Economic Growth in the Nineteenth Century”, mimeo, Humboldt-Universität zu Berlin.

Crafts (2005a): “Regional GDP in Britain, 1871-1911: Some Estimates”, Scottish Journal of Political Economy, 52, 54-64.

Crafts (2005b): “Market Potential in British Regions, 1871-1931”, Regional Studies, 39, 1159-1166.

Crafts and Klein (2021): “Spatial Concentration of Manufacturing Industries in the United States: ReExamination of Long-Run Trends”, European Review of Economic History, 25, 223-246.

Crafts and Leunig (2005): “The Historical Significance of Transport for Economic Growth and Productivity”, (background paper for Eddington Report), Pp. 65.

Crafts and Mulatu (2005): “What Explains the Location of Industry in Britain, 1871-1931?”, Journal of Economic Geography, 5, 499-518.

Crafts and Mulatu (2006): “How Did the Location of Industry Respond to Falling Transport Costs in Britain before World War I?”, Journal of Economic History, 66, 575-607.

Crafts and Venables (2003): “Globalization in History: a Geographical Perspective” in M. Bordo, A. Taylor and J. Williamson (eds.), Globalization in Historical Perspective (NBER), 323-364.

Crafts and Wolf (2014): “The Location of the UK Cotton Textiles Industry in 1838: a Quantitative Analysis”, Journal of Economic History, 74, 1103-1139.

Klein and Crafts (2012): “Making Sense of the Manufacturing Belt: Determinants of US Industrial Location, 1880-1920”, Journal of Economic Geography, 12, 775-807.

Klein and Crafts (2018): “Agglomeration Externalities and Productivity Growth: U.S. Cities, 1880-1930”, Economic History Review, 73, 209-232.

Midelfart-Knarvik, K. H., Overman, H. G., Venables, A. J. (2000) “Comparative Advantage and Economic Geography: Estimating the Determinants of Industrial Location in the EU. CEPR Discussion Paper No. 2618, London