Trade Policy and the Third World Metropolis

38 Pages Posted: 27 Apr 2000 Last revised: 12 Aug 2010

See all articles by Raul Livas Elizondo

Raul Livas Elizondo

National Bureau of Economic Research (NBER)

Paul R. Krugman

Princeton University - Woodrow Wilson School of Public and International Affairs; Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER)

Date Written: December 1992

Abstract

Many of the world's largest cities are now in developing countries. We develop a simple theoretical model, inspired by the case of Mexico, that explains the existence of such giant cities as a consequence of the strong forward and backward linkages that arise when manufacturing tries to serve a small domestic market. The model implies that these linkages are much weaker when the economy is open to international trade -- in other words, the giant Third World metropolis is an unintended by-product of import-substitution policies, and will tend to shrink as developing countries liberalize.

Suggested Citation

Livas Elizondo, Raul and Krugman, Paul R., Trade Policy and the Third World Metropolis (December 1992). NBER Working Paper No. w4238. Available at SSRN: https://ssrn.com/abstract=227068

Raul Livas Elizondo (Contact Author)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Paul R. Krugman

Princeton University - Woodrow Wilson School of Public and International Affairs ( email )

Princeton University
Princeton, NJ 08544-1021
United States
609-258-4570 (Phone)
609-258-2809 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Register to save articles to
your library

Register

Paper statistics

Downloads
139
Abstract Views
3,188
rank
206,812
PlumX Metrics