Over the past two decades, the rapid integration of many developing countries into global markets has contributed to a convergence of incomes across countries, pulling large economies like China, India, and Indonesia into the middle-income ranks. On the other hand, these same factors have contributed to widening income disparities within countries. One of the principal manifestations of these intra-country disparities is spatial, with growth accelerating in well-located, typically metropolitan regions, while more peripheral regions fall further behind.
The Internal Geography of Trade: Lagging Regions and Global Markets explores the nexus between trade and location to inform policies that address the challenge of lagging regions. The pattern of leading and lagging regions matters not just for social and political cohesion, but also because the failure to integrate lagging regions may have a dampening effect on national growth. In addition, it contributes to the massive rural-urban shifts that are overwhelming the infrastructural, environmental, and institutional capacities of metropolitan regions in many developing countries.
With policymakers, academics, and researchers in mind, the authors combine empirical analysis with rich case studies in two of the largest and most dynamic developing countries: India and Indonesia. They provide unique evidence as to how location shapes the participation and performance of individual firms in trade through the business environment, agglomeration, market access, and institutional arrangements. In analyzing decades of diverse (and largely unsuccessful) attempts to close the gap between leading and lagging regions, the authors set out a series of policy recommendations to improve the efficacy of these efforts. At the heart of these policies is a focus on interventions targeted at two objectives: building the competitiveness of the region and its firms and improving its connectivity with domestic and international markets.