Krugman Model

The Krugman Model, developed by economist Paul Krugman, explains how economies can benefit from trade and the clustering of industries. It highlights that businesses tend to concentrate in certain areas to take advantage of shared resources, skilled labor, and customer bases, leading to increased efficiency and innovation. This clustering creates economic hubs, where firms can thrive together, ultimately boosting overall economic growth. The model also addresses how trade allows countries to specialize in producing goods they are efficient at, which enhances global economic interdependence and volume of trade.