Economic Centrality: How Much is Economics and How Much is Geography?

Proximity to the markets is a key determinant of the location of firms because distance still matters, as recently reported in the literature. Based on an adapted version of the most standard centrality index we propose a decomposition method that allows isolating the influence of: (i) internal and external factors; (ii) economic and geographical aspects. In order to illustrate our methodology we consider data for 171 countries. This empirical work leads to the conclusion that the centrality level of the countries derives from different sources, therefore requiring different policy interventions in order to improve it.