Working Paper: CEPR ID: DP1230
Authors: Paul Krugman; Anthony J. Venables
Abstract: This paper is an effort to do international trade theory without mentioning countries. Nearly all models of the international economy assume that trade takes place between nations or regions which are themselves dimensionless points. We develop a model in which economic space is instead assumed to be continuous, and in which this `seamless world' spontaneously organizes itself into industrial and agricultural zones because of the tension between forces of agglomeration and disagglomeration. One might expect such a model to be analytically intractable, but we are able to gain considerable insight through a combination of simulations and an analytical approach originally suggested in a biological context by Alan Turing.
Keywords: location; agglomeration; regions; linkages; self-organization
JEL Codes: F1; F12; F15; R3
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| higher concentration of manufacturing (L69) | more manufacturing activities (L69) |
| initial small perturbations in labor allocation (J29) | significant variations in manufacturing employment (L69) |
| decrease in transport costs (R41) | reorganization of manufacturing regions (L23) |
| initial distribution of labor (D39) | growth of manufacturing regions (O14) |
| costs associated with transportation (L91) | growth of manufacturing regions (O14) |
| changes in parameters (C51) | abrupt shifts in the equilibrium structure of manufacturing regions (F12) |