Countries invest in international infrastructure in an effort to attract firms. Acquiring the position of a hub would make this effort successful. We use a model of international trade with monopolistic competition, increasing returns to scale and transport costs to analyse policy competition...

Opening up to trade exposes firms to new competitors. If foreign and domestic firms produce close substitutes, their interaction in the product market forces prices below the monopolistic level. This increased competition induces a shift of demand from monopolistic to oligopolistic varieties and...

The falling cost of international business travel and communication motivates highly-skilled workers who live in developed countries to spend more of their time co-operating with less-skilled workers in developing countries. This tends to narrow the gap between developed and developing countries...