Trade and Economic Geography: a Note on Krugman’s contribution to Economic Theory

The purpose of this paper is to present the major contributions of Paul Krugman to economic theory. It shows the contribution and influence that articles of 1979 and 1991 have exerted on the renewal of trade theory and the emergence of new economic geography. In these articles, Krugman successfully explains intraindustry trade, trade among developed countries and agglomeration processes, all these phenomena of great importance that had not been satisfactorily explained from the point of view of standard neoclassical models. To do so, he uses a theoretical framework that incorporates monopolistic competition and increasing returns to scale.