Agglomeration Economies: A Bridge between the New Economic Geography and Malthusian Theory

The paper aims to build a bridge between the New Economic Geography and Malthusian theory. Both theories seek to explain the phenomenon of agglomeration processes: Malthusian theory through first nature effects; the New Economic Geography through second nature effects. Using a methodology based on analysis of variance applied to a panel data of Italian Local Labour Systems we reveal that although the gross second nature effect plays a major role in bringing about the agglomeration process, the net second nature effect appears relatively unimportant. By contrast, both first nature effects and the combined effect of the two forces are very important.