Feb 22, 2010
Technology with an anti-trade bias
Countries trade when the productivity difference between partners is big enough to cover transport costs. So technological progress everywhere can reduce trade, unless it has a transport bias. In other words, "real transport costs only fall if technological progress in transportation is faster than progress in rest of the economy". Trade boost in 1870-1913: all about steam. Big trade decline in interwar period: electrification of factories. This is Krugman theorizing on his blog.