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Journal article

Globalization and the Inequality of Nations

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 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.

P Krugman and Anthony J. Venables

1 November 1995

The Quarterly Journal of Economics 110(4) 1995

DOI: 10.2307/2946642

This Journal article is published under the centre's Trade programme.

This publication comes under the following theme: Inequality: Winners and Losers