This Paper argues that a geographical perspective is fundamental to understanding comparative economic development in the context of globalization. Central to this view is the role of agglomeration in productivity performance; size and location matter. The tools of the new economic geography are...

We consider a Heckscher-Ohlin model in which goods and factors of production can be traded, but trade involves transactions costs. Goods trade alone will not equalize factor prices, so there is an incentive for trade in factors of production. Whether goods or factors are traded depends on...

An important element of the cost of distance is time taken in delivering final and intermediate goods. We argue that time costs are qualitatively different from direct monetary costs such as freight charges. The difference arises because of uncertainty. Unsynchronized deliveries can disrupt...

This Paper studies the size and number of industrial clusters that will arise in a multi-country world in which, because of increasing returns to scale, one sector has a propensity to cluster. It compares the equilibrium with the world welfare maximum, showing that the equilibrium will generally...

We consider a model with a continuum of industries in which agglomeration forces cause each industry to concentrate in a single country. We study the division of industries between countries and show that this division is not unique, so that even with identical countries and symmetric industries...

This paper develops a structural empirical general equilibrium model of aggregate bilateral trade with path dependence of country-pair level exporter status. Such path dependence is motivated through informational costs about serving a foreign market for first-time entry of (firms in) an export...

The response of an economy to a windfall of foreign exchange (be it aid or natural resource revenues) is often constrained by absorptive capacity. We provide a micro-founded analysis of absorption constraints, based on the idea that expanding the economy’s capital stock (in aggregate or...

The large reduction in tariff rates worldwide under several rounds of the GATT is commonly credited with being one of the most notable economic policy accomplishments since World War II. However, the remarkable progress towards free trade of goods is unparalleled in trade with services where...

This Paper surveys the empirical literature on the economic geography of trade flows, factor prices, and the location of production. The discussion is structured around the empirical predictions of a canonical theoretical model. We review empirical evidence on the determinants of trade costs and...

We develop and econometrically estimate a model of the location of industries across countries. The model combines factor endowments and geographical considerations, and shows how industry and country characteristics interact to determine the location of production. We estimate the model on...