Integration, Specialization, and the Adjustment

Paul Krugman, Anthony Venables

NBER Working Paper No. 4559
Issued in December 1993
NBER Program(s):   ITI

In the United States, many industries have a Silicon Valley-type geographic localization. In Europe, these same industries often have four or more major centers of production. This difference is presumably the result of the formal and informal trade barriers that have divided the European market. With the growing integration of that market, however, there is the possibility that Europe will develop an American-style economic geography. This paper uses a theoretical model of industrial localization to demonstrate this possibility, and to show the possible transition costs associated with this shift.

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Document Object Identifier (DOI): 10.3386/w4559

Published: European Economic Review, Vol. 40, nos. 3-5 (April 1996): 959-967.

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