It is fairly common for an industrial cluster to break up and for production to move to

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It is fairly common for an industrial cluster to break up and for production to move to locations with lower wages when the technology of the industry is no longer rapidly improving—when it is no longer essential to have the absolutely most modern machinery, when the need for highly skilled workers has declined, and when being at the cutting edge of innovation conveys only a small advantage. Explain this tendency of industrial clusters to break up in terms of the theory of external economies.

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International Economics Theory and Policy

ISBN: 978-0273754206

9th Edition

Authors: Paul R. Krugman, Maurice Obstfeld, Marc J. Melitz

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