Trade Policy and the Third World Metropolis

Paul Krugman and Raul Elizondo

No 294813, Institute for Policy Reform Archive from Institute for Policy Reform

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 importsubstitution policies, and will tend to shrink as developing countries liberalize.

Keywords: International Development; Research Methods/Statistical Methods (search for similar items in EconPapers)
Pages: 36
Date: 1992-11
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Persistent link: https://EconPapers.repec.org/RePEc:ags:inpora:294813

DOI: 10.22004/ag.econ.294813

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