Sharpshooting the Target? The Theory, Techniques and Evidence of Micro-Geographic Economic Analysis

Over the last twenty years, and particularly in the last ten, there has been a growing amount of economic and policy research conducted at a micro-geographic scale. This trend reflects both the continuing popularity of targeted spatial policies and the availability of new data and techniques to accommodate analysis at a refined spatial level. However, while research utilizing micro-geographic economic analysis (MGEA) has risen sharply, little is known about the theory, techniques, or evidence from this body of literature outside of a small group of researchers. There have been no reviews of this strand of literature and no formal discussions on the lessons it can offer for economics, policy, or development. The goal of this paper is to provide the first review highlighting the theoretical foundations, key methodological approaches, and the empirical evidence for those unfamiliar with it. It begins by clarifying key conceptual and theoretical issues and by providing an overview of the historical and theoretical development of MGEA in order to set the research and policy context. The paper then details the key methodological contributions and technical features and presents the evidence from the empirical literature. The paper finds three crucial technical elements to MGEA – the use of a differencing strategy, the approaches to selecting controls, and the treatment of geography in analysis – all of which are discussed in detail. To conclude the paper draws several lessons on how to continue advancing MGEA and how to better incorporate it within the broader literature