Recent Developments in Urban and Regional Economics Paul Cheshire and Gilles Duranton, Department of Geography and Environment, London School of Economics Introduction The contrast between the literature available for the preparation of the first volume devoted to urban and regional economics in this series (Cheshire and Evans, 1991) and that available for this is of considerable interest. We have deliberately confined ourselves to papers published since 1990: the first volume covered 40 years. Since 1990 the divide between urban and regional economics as separate fields has all but disappeared. We have chosen not to have these separately represented here. Moreover urban and regional – perhaps we should better call it spatial economics now 1 - has become in large measure a part of the mainstream. In the first volume only 21 percent of the readings selected first appeared in leading mainstream economics journals (and none of those had been published within the previous 10 years); 58 per cent were from interdisciplinary journals. In this volume half the readings come from leading mainstream economics journals, all published over a period of only 12 years; only 11 percent of the readings we have chosen are from interdisciplinary journals. In our view this reflects the renewed interest of the economics profession in spatial economics, apparent over the past 15 years or so. Perhaps the convenient marker in this process was Krugman's 1991 classic [reading 21]. Why can this article be called a 'classic'? After all, in many ways it said nothing new. The foundation of Kaldor's (1970) analysis of regional growth was the existence of increasing returns to scale leading to economies of agglomeration and this general idea can be traced back to Myrdal (1957) and probably beyond that. But Krugman – who deliberately made no reference to these earlier contributions – approached the issue in an entirely different way. His concern was to have a theory of regional growth processes, which grew in an entirely consistent way out of modern analysis resting on the rigorous Dixit and Stiglitz (1977) model of monopolistic competition with increasing returns and explicit microeconomic foundations. Conceptually the behaviour of Krugman's regional economies (pretty spaceless places it must be acknowledged) was built up from individual consumers and firms. In terms of the phenomena that the model explained one probably got a better understanding from the verbal analysis of Anas and Moses (1978) but Krugman's contribution was seminal because it re- united urban and regional economics with the mainstream. Of course there had been much work in urban economics, in particular, that we readily recognise as rigorous economic analysis sitting comfortably within the broader development of modern economics, but it remained a specialised sub-field which did not attract much attention from the big research departments. From 1991, although not getting the attention of international trade or labour economics, spatial economics was back on the research agenda of economists in major research departments. It had become again respectable. Why did it largely disappear from the research agenda of mainstream economists from about 1970 to 1990? Perhaps part of the explanation is provided by the way in which the 1 Since it extends to the economics of real estate now perhaps even this is too confining. 1