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Krugman’s Economic Geography of Development: Negs, Pogs, and Naked Models in Space

Krugman’s models of spatial resource allocation and trade convey robust theoretical insights with a parsimonious lucidity that appeals strongly to modern economists’ tastes. Those great pedagogical virtues also may limit the models’ utility in guiding empirical research on the dynamic processes ostensibly being addressed. Three reasons for this worry are elaborated in this comment: (1) they are meant to explain a set of “stylized” facts that abstract from important observed in homogeneities in the geography of development; (2) the modeling emphasis on demand-side externalities diverts attention from supply-side forces making for industrial localization; and (3) Krugman’s treatment of the role of the state ignores inefficiencies arising from locational tournaments involving local government subsidization of firms in footloose industries.