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Chapter 4: Regional Growth and Trade in the New Economic Geography and Other Recent Theories
Kieran P. Donaghy 4.1 Introduction Trade, international or interregional, is essentially the exchange of goods and services over space. By deﬁnition, then, it involves transportation and, hence, some transaction costs. Perhaps since the time of the Phoenicians (circa 1200 BC), if not before, trade has been viewed as an engine of expansion of national and regional economies, and many growth theories and growth policies have been predicated on the assumption that growth is export-led. In this time of increasing global economic integration, it is perhaps an article of faith that, as Armstrong and Taylor (2000) put it: ‘Regions, like nations, must actively trade if they are to be prosperous’ (p. 119). But, even as regional economists have looked to international trade theory for accounts of trade-induced growth, growth per se has not been the featured explanandum of trade theory. Rather, the principal intent of trade theory has been to explain patterns of trade and why countries or regions tend to specialize in certain trade-oriented industries. Where interest has been shown in growth by trade theorists, it has more often than not been in how growth shocks – in the forms of technological progress or increased availability of a factor – have aﬀected trade patterns (Gandolfo, 1998). Of course, it is not diﬃcult to reason further from changes in trade patterns to inferences about what the implications may be for a regional economy, as such insightful if iconoclastic theorists as Hirschman (1958) have been ready and willing to do. From...
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