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

1 comment:

Sebastian said...

Wait a moment. Wasn't he the guy with the IRS / love for variety reason? How does that square? Can only be complementary and of minor importance in my view...