Migration And The Newworld
The nineteenth century saw mass emigration from Europe to the new worlds of the
Americas and Australasia. Just one of these booming regions—the northeast of the
USA—made a successful transition from agriculture to manufacturing.Why was this
so? The historical literature gives a number of explanations, largely based around
institutional quality. Differing colonial legacies are important (North, Summerhill,
andWeingast 2000), as are the different patterns of land tenure supported by climatic
as well as colonial factors (Engerman and Sokoloff 1997). What additional and complementary
mechanisms are provided by new economic geography?
Once again, it is helpful to think in a very stylized way in order to draw out some
possibilities.6 Suppose that there is an established economic center with manufacturing
activity (Europe) and some number of other locations (in the New World) that
can trade with the centerThe new locations have high land–labor ratios, so export
primary products and import manufactures. This endowment ratio also means that
they offer high wages, attracting an inflow of migrants. The question is, at what
stage—if at all—do these new economies attract manufacturing activity? The answer
depends on trade costs (including tariff policies), market size, and competition
from other sources of supply. Suppose that all New World economies are identical
to each other, and all attracting immigrants at the same rate. Then there comes a
point at which the local market is large enough to support manufacturing. However,
simultaneous growth of manufacturing in all of these regions is not a possible outcome—there would be oversupply of manufactures.
Given the presence of agglomeration
forces, what happens is that if one region gets just slightly ahead (perhaps
by random chance) then cumulative causation forces take over. This region attracts
manufacturing at the expense of the others, and is the only one of the New World
regions to industrialize. The region also becomes more attractive for migrants, so
attains larger population and economic size. The world supply of manufactures is
then met by two clusters (Europe and northeast America) with the rest of the world
specialized in agriculture, as in the example of the preceding sub-section. Comparing
Argentina and the USA, North, Summerhill, andWeingast (2000) comment that “no
deus ex machina translates endowments into . .
. outcomes;” in this simple story one
does, and it plays dice.
Of course, this picture is oversimplified. Competing regions are not identical
ex ante; market size, location, endowments, and institutions are all important
in determining the success of the modern sector. However, the insight from
the theory is that even if differences in initial conditions are small, they may
translate into large differences in outcomes. A small advantage can give a location
the advantage of being the next to start industrializing. The industrialization
process is then rapid—a “take-off” as increasing returns and cumulative causation
cut in.
Furthermore, the industrialization of one New World region depresses
the prospects for others, due simply to the overall supply of manufactures in the
world economy. These other regions may experience failed industrialization, or industrialization
that serves only the domestic market and remains internationally
uncompetitive..
We outline one further application of this line of reasoning, extending the arguments
developed above. As globalization reduces trade costs it breaks down some (although
not all) of the clustering mechanisms outlined in Section 3, thereby facilitating movement
of industry to low wage regions.What fo...
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We commented earlier that economic geography insights apply at different sectoral
and spatial levels. Sectorally, it offers approaches to thinking about the location of
modern activity as a whole, and also about sectoral clusters of financial, R&D, or
industrial activities. Spatially, it provides in...
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Perhaps the earliest approach to IPE was dependency theory, developed largely by
Latin American scholars writing in the 1960s and popular in North America and
Europe in the 1970s.5 Described even by its adherents as a school rather than a single
theory (Palma 1978), the many variants of dependency t...
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Out of these early currents, and as a direct descendant of the domestic interest
approach, OEP emerged and came to dominate the study of IPE in the 1990s. OEP
adopts the assumptions of neoclassical economics and international trade theory. But by incorporating political variables more explicitly int...
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With domestic interests aggregated through institutions into a national “policy”—
or, more accurately, a national interest or ideal point—states then bargain when
necessary to influence one another’s behavior and to determine the joint outcome
of their actions.12 This is the third and fina...
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