lowered trade costs, with dual effects. They permit dispersion of routine activities, while encouraging agglomeration of complex productive activities by improving matching between producers and consumers. For instance, merchants in the 3,202 “Taobao villages” across 24 provinces, municipalities, and autonomous regions of China sell clothing and other consumer items, mostly obtained from small local factories, on Alibaba platforms. Broadband access is viewed as a new source of productivity and jobs for displaced workers, from coal miners in the US state of West Virginia to the farmers in the Sahel region. The COVID-19 (coronavirus) experience has shown the potential of new technologies to enable teleworking from regions that were previously excessively remote—such that some observers have even forecast the demise of the city. However, the “dislike of distance” remains a potent force. For instance, the banks of servers undergirding the digital network in the United States remain concentrated around established cities, even though they could be more economically located near cheap energy and in colder climes, Greenstein and Fang (2020) show. This chapter first examines the implications of globalization for the allocation of growth within regions of countries (what this chapter calls regional growth). It next examines the role of trade costs, infrastructure conditions, and supporting institutions within countries in limiting the extent to which gains from trade can reach distant places. Finally, the chapter considers the role of digital connectivity in mitigating spatial disparities.
Globalization and Regional Growth within Countries As discussed in chapter 2, even in the least developed countries, industry and services tend to be concentrated in dense metropolitan areas, and productivity rises with the density of economic activity. The centripetal forces of agglomeration economies can drive a virtuous cycle of economic concentration and higher productivity (Duranton and Puga 2020). In this context, globalization has powerful, and varied, impacts on agglomeration forces within countries. This section examines the implications of globalization for the spatial allocation of activity within countries. In particular, it discusses recent evidence developed as part of this project, centering on global value chains (GVCs) (Grover and Lall 2021). Anecdotal evidence suggests that cross-country cooperation in GVCs may provide opportunities for secondary cities and help disperse economic activity. For instance, collaboration on integrated supply chains in manufacturing, whereby each city is assigned a specialized role in production, could boost the global competitive advantage of secondary cities. The successful cooperation between Singapore and secondary cities in Malaysia (Johor Bahru) and Indonesia (Batam and Bintan) offers one such example (Toh 2006).
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Place, Productivity, and Prosperity
