Traditional Trade Theory, New Economic Geography Theory And The Interplay Between Globalization And Competition

1602 Words7 Pages
This study identifies four strands of thought that outline the factors which can lead to the over-concentration of services; traditional trade theory, new trade theory, new economic geography theory and the interplay between globalisation and competition. It is from this four factors in which the negative effects of the over-concentration of services are created. These negative effects will be discussed and analysed in a bid to understand what can done to reduce them. Polycentricity and territorial cohesion policy, and the measures associated with their implications, are identified as the tools for reducing the negative effects of over-concentration. The study also questions the extent of success of these tools. Europe is viewed as the best platform to comprehend the relevant concepts and thus will provide the context in which to carry out the study.
Traditional trade theory explains the over-concentration of services through variations in labour skills and other contributions to production (Heckscher 1919; Ohlin 1933), or in productivity (Ricardo 1917). These differences establish ‘comparative advantages’ (Ricardo 1917) between cities, regions and countries. Thus, trade allows the concentration of services to grow and shrink in reaction to these advantages.
In reality, cities, regions and countries may have different production arrangements but similar production technologies (Krugman 1991a). Post-Fordist countries predominantly trade goods of a similar product type, i.e.
Get Access