Globalization and the Inequality of Nations

  title={Globalization and the Inequality of Nations},
  author={Paul R. Krugman and Anthony J. Venables},
  journal={IO: Theory},
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… 
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