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Comparative Advantage and the Location of Production

Author

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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.

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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    References listed on IDEAS

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    1. 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.
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    3. Venables, Anthony J, 1996. "Equilibrium Locations of Vertically Linked Industries," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 37(2), pages 341-359, May.
    4. Richard E. Baldwin, 1999. "The Core-Periphery Model with Forward-Looking Expectations," NBER Working Papers 6921, National Bureau of Economic Research, Inc.
    5. 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.
    6. Krugman, Paul, 1991. "Increasing Returns and Economic Geography," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 483-499, June.
    7. Ludema, Rodney D. & Wooton, Ian, 2000. "Economic geography and the fiscal effects of regional integration," Journal of International Economics, Elsevier, vol. 52(2), pages 331-357, December.
    8. repec:hhs:iuiwop:430 is not listed on IDEAS
    9. P Krugman & Anthony J. Venables, 1993. "Intergration," CEP Discussion Papers dp0172, Centre for Economic Performance, LSE.
    10. 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, August.
    11. Mary Amiti, 1998. "Will Labour Intensive Industries Always Locate in Labour Abundant Countries?," Working Papers 1998.02, School of Economics, La Trobe University.
    12. Krugman, Paul, 1993. "On the number and location of cities," European Economic Review, Elsevier, vol. 37(2-3), pages 293-298, April.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

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

    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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