The role of location economics and local capabilities for economic growth

Abstract

This paper examines the effect of policies based on economic geography as applied in New Zealand. It focuses on three issues; a ‘Cluster Development Programme’, the debate to exploit agglomeration economies in Auckland, and its use to explain the difference between New Zealand’s and Australia’s economic performance. New Zealand is failing to achieve its growth goals. This paper highlights the danger of relying on concepts from economic geography in isolation of other academic work especially economic history. It is important to pay attention to the capabilities in agglomerations, as these drive innovation and economic growth. Governments need to focus more on capability development as a driver of economic growth.