Part Two: Reshaping Economic Geography

Abstract

In the past generation, there has been a slow revolution in economic thought, brought about by the recognition of imperfectly competitive markets, due mainly to increasing returns to scale, spillovers, and circular causation. A new way of thinking has transformed the classical analysis of industrial organization, economic growth, and international trade, and has delivered what were at fi rst controversial, but now widely accepted, implications for the progress of developing countries. Part two of the Report illustrates the interplay between scale economies, factor mobility, and transport costs to explain the formidable forces that shape the spatial transformation described in part one. Chapters 4, 5, and 6 are the stops in a tour of the “engine room,” each spotlighting a diff erent facet of the interactions among agglomeration, migration, and specialization.