Regional theory is an area of economic geography that studies the spatial varation between regions and the economic processes that shape them. The term region has been used to describe a variety of geographical scales, ranging from the smallest neighbourhood to large nations. Regional theory investigates processes such as migration, capital flows, industrialization, and economic development in order to understand how they affect the economic development of particular regions.
Regional economic theory is related to, but distinct from, two other major fields of economic geography: urban and rural theory. Urban theory focuses on how cities are structured and on how different regions within cities interact with each other economically and socially. Rural theory looks at the impacts of agricultural changes and the transformation of rural landscapes on communities and the environment.
The development of regional theory is largely a result of the globalization of economies and the emergence of new regional blocs in the late 20th century. In the 21st century, regional theory has come to include an increasing range of topics including regional integration, regional networks, or regionalisms. These topics are often studied from a micro-level perspective which looks at the economic and spatial dynamics of individual regions.
The cornerstone of regional economic theory is the theory of economic agglomeration. This theory focuses on the idea that different areas can have different economic performance that is determined by their connections and interactions with neighbouring areas. Economic agglomeration theory is used to explain the formation and development of clusters, as well as the competitive advantages some regions have over others.
An important area of regional economic theory is the study of local and regional clusters. A cluster is an aggregation of economic activities located in close proximity. Clusters often have particular competitive advantages over similar activities located elsewhere, including access to specialized resources, information and technology, shared infrastructure, and a better quality of life. The study of clusters includes research into the formation of clusters and their growth, the linkages between clusters and their spatial patterns, and the competitive advantages of clusters.
Another important area of regional theory is the study of regional networks. Regional networks are networks of geographically dispersed people, organisations and/or firms that exchange resources such as labour, technology, and ideas. Regional networks create strong ties between regions, and offer the potential for improved economic performance. Research into regional networks examines the characteristics of networks, how they are formed and affect economic performance, and how they are affected by economic policies.
The economic integration of national and regional economies has been researched extensively within regional theory. Economic integration can provide mutual benefits to member countries by increasing investment, enhancing efficiency in the production and consumption of goods and services, and facilitating the mobility of resources. Researchers have studied the effects of economic integration on economic development and global governance, as well as the economic impacts of regional organisations and institutions.
In summary, regional economic theory is a broad field of research that has seen significant developments over the past decades. The field has grown in scope and scale as the global economy has become increasingly interconnected. Research in regional economics has focused on the formation and development of regional clusters, regional networks, regional integration, and global governance. These topics, and the theoretical frameworks underpinning them, continue to be relevant and important to the study of regional economic dynamics and their effect on economic development.
