The Increasing Returns Revolution in Trade and Geography

By Paul Krugman. 2009

266 citations recorded by the source corpus.

Thirty years have passed since a small group of theorists began applying concepts and tools from industrial organization to the analysis of international trade. The new models of trade that emerged from that work didn't supplant traditional trade theory so much as supplement it, creating an integrated view that made sense of aspects of world trade that had previously posed major puzzles. The "new trade theory"—an unfortunate phrase, now quite often referred to as "the old new trade theory"—also helped build a bridge between the analysis of trade between countries and the location of production within countries. In this paper I will try to retrace the steps and, perhaps even more important, the state of mind that made this intellectual transformation possible. At the end I'll also ask about the relevance of those once-revolutionary insights in a world economy that, as I'll explain, is arguably more classical now than it was when the revolution in trade theory began.

Subfields: Economics and Econometrics, Strategy and Management

View Paper: https://www.semanticscholar.org/paper/4016a2c27ddb4a5cd1e652d7a838be8c61b701e8

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Citations in the corpus

The network structure of economic output (2011, background): “Yet, as pointed out by Krugman (2009): “There is no good reason to believe that the assumptions of the DixitStiglitz model – a continuum of goods that enter symmetrically into demand, with the same cost functions, and with the elasticity of substitution between any two goods both constant and the…”
Country Diversification, Product Ubiquity, and Economic Divergence (2010, background): “As argued by Paul Krugman (Krugman 2009): “There is no good reason to believe that the Dixit-Stiglitz model – a continuum of goods that enter symmetrically into demand, with the same cost functions, and with the elasticity of substitution between any two goods both constant and the same for any…”
Does spatial agglomeration increase national growth? some evidence from Europe (2011, background): “It is perhaps also worth noting how in his most recent work (Krugman, 2009, 2010) he has suggested that perhaps in the advanced economies agglomeration may no longer a primary source of growth enhancing increasing returns that it once was.”