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Lumpy Countries, Urbanization, and Trade

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  • Steven Brakman
  • Charles van Marrewijk

Abstract

Lumpiness of production factors within a country might overturn the predictions for the structure of trade by the factor-abundance (HO) model. Trade patterns, as predicted by this model, can both be magnified or reversed by uneven concentration of production factors within a country. Cities are the most characteristic manifestation of lumpiness of production factors and as a consequence different patterns of urbanization between countries might cause trade patterns to differ from HO predictions on the basis of the overall availability of production factors. We argue that urbanization indeed affects trade patterns. The consequence of this result is that urbanization should be included in empirical trade analysis; urbanization could, e.g. to the understanding of the ‘missing trade’ puzzle.

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Bibliographic Info

Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 3669.

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Date of creation: 2011
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Handle: RePEc:ces:ceswps:_3669

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Keywords: Heckscher-Ohlin; factor endowments; agglomeration; geographical economics;

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Cited by:
  1. Steven Brakman & Harry Garretsen & Charles van Marrewijk, 2014. "The Crisis and Regional Resilience in Europe: On the Importance of Urbanization and Specialization," CESifo Working Paper Series 4724, CESifo Group Munich.

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