Globalization and the Inequality of Nations
A monopolistically competitive manufacturing sector produces goods used for final consumption and as intermediates. Intermediate usage creates cost and demand linkages between firms and a tendency for manufacturing agglomeration. How does globalization affect the location of manufacturing and gains from trade? At high transport costs all countries have some manufacturing, but when transport costs fall below a critical value, a core-periphery spontaneously forms and nations that find themselves in the periphery suffer a decline in real income. At sill lower transport costs there is convergence of real incomes in which peripheral nations gain and core nations may lose. Copyright 1995, the President and Fellows of Harvard College and the Massachusetts Institute of Technology.
Volume (Year): 110 (1995)
Issue (Month): 4 (November)
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