Geography and Trade
"I have spent my whole professional life as an international economist thinking and writing about economic geography, without being aware of it," begins Paul Krugman in the readable and anecdotal style that has become a hallmark of his writings. Krugman observes that his own shortcomings in ignoring economic geography have been shared by many professional economists, primarily because of the lack of explanatory models. In Geography and Trade, he provides a stimulating synthesis of ideas in the literature and describes new models for implementing a study of economic geography that could change the nature of the field. Economic theory usually assumes a distance. Krugman argues that it is time to put it back—that the location of production in space is a key issue both within and between nations.
Paul Krugman advocates a geographical approach to international trade theory.
This book presents economies of scale in manufacturing as an explanation underlying international trade.
Paul Krugman employs two basic ideas of cumulative feedback: internal economies of scale and the externality of demand.
His approach emphasizes increasing returns to scale, positive feedback, path-dependent dynamics, and the importance of historical accidents which may justify protectionist policies in certain circumstances.
The book is a collection of three lectures: The market dynamics engender geographical polarization between center and periphery; Sources of localization of industry; and National boundaries and policy questions.