NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Globalization and the Inequality of Nations

Paul Krugman, Anthony J. Venables

NBER Working Paper No. 5098
Issued in April 1995
NBER Program(s):   ITI   IFM

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 pattern spontaneously forms, and nations that find themselves in the periphery suffer a decline in real income. At still lower transport costs there is convergence of real incomes, in which peripheral nations gain and core nations may lose.

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Document Object Identifier (DOI): 10.3386/w5098

Published: Quarterly Journal of Economics, Vol. 110, no. 4 (1995): 857-880. citation courtesy of

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