1/28/2024 Explain why business services are disproportionately concentrated in global citiesRead Now![]() Empirical work has quantified many of the important relationships. Research over the past several decades has established the mechanisms that cause these changes and placed them in full general equilibrium models of the economy. In other circumstances falling barriers may enable activity to spread out, reducing inequalities within and between countries. In some circumstances falling trade barriers may trigger the deindustrialization of some areas as activity clusters in fewer places. It follows from this that-if there is a high degree of mobility-firms and economic activity as a whole may tend to cluster, providing an explanation of observed spatial unevenness. Modeling the location decisions of firms gives a theory of location of activity based on factor costs (as in classical theory) and also on proximity to markets, proximity to suppliers, and the extent of competition in each market. Gravity models tell us that distance is important, with each doubling of distance between places halving the volume of trade. Modern theory places this in a spatial context in which geographical considerations influence the volume of trade between places. What determines this spatial distribution, and how is it shaped by trade? Classical trade theory gives the insights of comparative advantage and gains from trade but is firmly aspatial, modeling countries as points and trade (in goods and factors of production) as either perfectly frictionless or impossible. Economic activity is unevenly distributed across space, both internationally and within countries.
0 Comments
Leave a Reply. |
Details
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |