Working Paper: NBER ID: w4559
Authors: Paul Krugman; Anthony Venables
Abstract: In the United States, many industries have a Silicon Valley-type geographic localization. In Europe, these same industries often have four or more major centers of production. This difference is presumably the result of the formal and informal trade barriers that have divided the European market. With the growing integration of that market, however, there is the possibility that Europe will develop an American-style economic geography. This paper uses a theoretical model of industrial localization to demonstrate this possibility, and to show the possible transition costs associated with this shift.
Keywords: Industrial Localization; European Integration; Economic Geography
JEL Codes: F12; F15
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Reduced transport costs (R49) | Increased agglomeration of firms (R32) |
| Increased agglomeration of firms (R32) | Circular process of agglomeration (R11) |
| Circular process of agglomeration (R11) | Reduced costs for producers (L11) |