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Comparative Advantage and the Location of Production

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  • Forslid, Rikard
  • Wooton, Ian

Abstract

We return to a familiar topic in international trade, comparative advantage, introducing it into a model of economic geography. We provide a clear counterexample to the familiar result that trade liberalization leads to increased industrial concentration. Instead, lower trade costs may lead to a dispersion of production. As trade barriers diminish, agglomerative forces weaken, leaving room for other influences on the location of production. When a pattern of comparative advantage exists, integration may lead to international specialization of production. This may be good news for peripheral countries, which may be able to retain industry despite the attraction of the core.

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Bibliographic Info

Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 2118.

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Date of creation: Mar 1999
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Handle: RePEc:cpr:ceprdp:2118

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Related research

Keywords: Comparative Advantage; Economic Geography; Factor Mobility; International Trade;

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  1. P Krugman & Anthony J. Venables, 1993. "Intergration," CEP Discussion Papers dp0172, Centre for Economic Performance, LSE.
  2. Venables, Anthony J., 1993. "Equilibrium Locations of Vertically Linked Industries," CEPR Discussion Papers 802, C.E.P.R. Discussion Papers.
  3. Krugman, Paul, 1993. "On the number and location of cities," European Economic Review, Elsevier, vol. 37(2-3), pages 293-298, April.
  4. Krugman, Paul & Venables, Anthony J., 1995. "Globalization and the Inequality of Nations," Working Paper Series 430, Research Institute of Industrial Economics.
  5. Rodney D. Ludema & Ian Wooton, 1998. "Economic Geography and the Fiscal Effects of Regional Integration," Working Papers 9809, Business School - Economics, University of Glasgow.
  6. Paul Krugman, 1990. "Increasing Returns and Economic Geography," NBER Working Papers 3275, National Bureau of Economic Research, Inc.
  7. repec:fth:iniesr:430 is not listed on IDEAS
  8. Ludema, Rodney D & Wooton, Ian, 1997. "Regional Integration, Trade, and Migration: Are Demand Linkages Relevant in Europe?," CEPR Discussion Papers 1656, C.E.P.R. Discussion Papers.
  9. Mary Amiti, 1998. "Will Labour Intensive Industries Always Locate in Labour Abundant Countries?," Working Papers 1998.02, School of Economics, La Trobe University.
  10. Masahisa Fujita & Paul Krugman & Anthony J. Venables, 2001. "The Spatial Economy: Cities, Regions, and International Trade," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262561476.
  11. Gianmarco I. P. Ottaviano & Diego Puga, 1998. "Agglomeration in the Global Economy: A Survey of the 'New Economic Geography'," The World Economy, Wiley Blackwell, vol. 21(6), pages 707-731, 08.
  12. repec:fth:latrob:90-02 is not listed on IDEAS
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