Globalization and Urban Polarization

16 Pages Posted: 7 Oct 2018

See all articles by Anthony J. Venables

Anthony J. Venables

University of Oxford; Centre for Economic Policy Research (CEPR)

Date Written: November 2018

Abstract

External trade affects the internal spatial structure of an economy, promoting growth in some cities or regions and decline in others. Internal adjustment to these changes has often proved to be extremely slow and painful. This paper combines elements of urban and international economics to draw out the implications of trade shocks for city performance. Localization economies in production of internationally tradable goods mean that cities divide into two types, those producing tradables and those specializing in sectors producing just for the national market (nontradables). Negative trade shocks (and possibly also some positive ones) reduce the number of cities engaged in tradable production, increasing the number producing just nontradables. This has a negative effect across all nontradable cities, which lose population and land value. Remaining tradable cities boom, gaining population and land value. Depending on the initial position, city size dispersion may increase, thus raising the share of urban land rents in national income and reducing the share of labor.

Suggested Citation

Venables, Anthony J., Globalization and Urban Polarization (November 2018). Review of International Economics, Vol. 26, Issue 5, pp. 981-996, 2018. Available at SSRN: https://ssrn.com/abstract=3261552 or http://dx.doi.org/10.1111/roie.12366

Anthony J. Venables (Contact Author)

University of Oxford ( email )

Mansfield Road
Oxford, Oxfordshire OX1 4AU
United Kingdom

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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