Globalization: From Heckscher–Ohlin to the New Economic Geography

F. Gerard Adams

Published: June 2008

The rapid globalization of the world economy is causing fundamental changes in patterns of trade and finance. Some economists have argued that globalization has arrived and that the world is “flat”. While the geographic scope of markets has increased, the author argues that new patterns of trade and finance are a result of the discrepancies between “old” countries and “new”. As the differences are gradually wiped out, particularly if knowledge and technology spread worldwide, the traditional theoretical Heckscher and Ohlin comparative advantage basis for trade will fade. Trading relationships in the "new" economy will be based on the locational theories of the new economic geography.