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Increasing Returns and Economic Geography

Paul Krugman
Journal of Political Economy
Vol. 99, No. 3 (Jun., 1991), pp. 483-499
Stable URL: http://www.jstor.org/stable/2937739
Page Count: 17
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Increasing Returns and Economic Geography
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Abstract

This paper develops a simple model that shows how a country can endogenously become differentiated into an industrialized "core" and an agricultural "periphery." In order to realize scale economies while minimizing transport costs, manufacturing firms tend to locate in the region with larger demand, but the location of demand itself depends on the distribution of manufacturing. Emergence of a core-periphery pattern depends on transportation costs, economies of scale, and the share of manufacturing in national income.

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