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Comparative Advantage and the Location of Production

Author

Listed:
  • 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.

Suggested Citation

  • Forslid, Rikard & Wooton, Ian, 1999. "Comparative Advantage and the Location of Production," CEPR Discussion Papers 2118, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:2118
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    Keywords

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    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F15 - International Economics - - Trade - - - Economic Integration
    • F22 - International Economics - - International Factor Movements and International Business - - - International Migration

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