Economic geography meets psychology: Motivation, results, design and agenda

Abstract

Economic differences across space are only partially be explained by economic determinants. One reason might be the neglect of the psychological make-up of regions and its citizens. Recent research under the heading of ‘geographical psychology’ highlights the potential of a psychological approach to enhance our understanding of the uneven spatial distribution of economic activity. To assess the value added of incorporating psychological factors, we will use the inclusion of personality traits as an example in this commentary. It turns out that the regional variation in these traits does not only help to explain regional growth differences, but also regional differences in political outcomes and in resilience to shocks. When discussing various promising results, the importance of a proper research design looms large with notably causality issues and explaining behavioral mechanisms being real concerns. The commentary will close with policy implications and a research agenda.