New Theory of International Trade and New Economic Geography
(Nobel Price in Economics 2008) The paper reviews Paul Krugman’s contributions that earned him Nobel Prize in Economics of 2008 and grounded two fields of economic theory – new theory of international trade and new economic geography. The paper shows how the assumption of internal increasing returns to scale and monopolistic competition borrowed by Krugman from the industrial organization theory changed the conclusions of standard models and enriched our understanding of international trade and spatial distribution of economic activity.
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