Economic geography tricks that make trade click

Von Thünen rings: most intensive land use closest to market

Von Thünen Model — Closest ring: market gardening and dairy (perishable, can't travel far). Next: forest. Next: crop rotation. Furthest: ranching. Based on transport cost minimization.

Comparative advantage: specialize in what you're relatively best at, then trade

Comparative Advantage — Even if Country A is better at making both goods, it should specialize in its relative advantage. Country B makes the other. Both trade → both gain. Developed by David Ricardo.

HDI (Human Development Index): Health + Education + Income = development level (0 to 1)

Human Development Index — Combines life expectancy (health), mean years of schooling (education), and GNI per capita (income). Scale 0–1. Norway consistently top. Better measure of human welfare than GDP alone.

Rostow's 5 stages: Traditional → Preconditions → Takeoff → Maturity → Mass Consumption

1Traditional society

2Preconditions for takeoff

3Takeoff — industrialization

4Drive to maturity

5High mass consumption

Core-periphery model: wealthy core exploits raw materials from poor periphery

Core-Periphery Model — Core nations (wealthy, industrialized): high-value manufactured goods. Periphery nations: export cheap raw materials. Semi-periphery: in between. Wallerstein: this structure maintains global inequality by design.

Special Economic Zones (SEZs): areas with different economic regulations to attract foreign investment

Special Economic Zones — SEZs offer: lower taxes, relaxed labor regulations, reduced trade barriers, streamlined bureaucracy. China's SEZs (Shenzhen, 1980): transformed fishing village into megacity. Export Processing Zones (EPZs): focused on manufacturing for export. Maquiladoras: Mexican factories near US border. SEZs drive industrialization in developing countries.

Commodity dependence: relying on raw material exports makes countries vulnerable to price swings

Commodity Dependence — Resource curse (Dutch Disease): natural resource wealth can harm broader economic development. Oil/mineral revenue: crowds out manufacturing, appreciates currency (hurts exports), funds authoritarian governments, fuels corruption. Norway exception: oil fund invested for future. Venezuela example: oil wealth, economic collapse.

Remittances: money sent home by migrant workers — often exceed foreign aid in developing countries

Remittances — Global remittances: ~$800 billion/year — dwarfs official development aid. Top recipients as % of GDP: smaller developing countries (Tonga, Tajikistan, El Salvador). Philippines, Mexico, India: top recipients in absolute terms. Counter-cyclical: increase when home country faces hardship. Household level: food, education, healthcare.

Globalization of production: global value chains. iPhone designed in US, components from 40 countries, assembled in China.

Global Value Chains — Global value chains (GVCs): production fragmented across countries based on comparative advantage. Apple iPhone: designed in US, chips from Taiwan/South Korea, rare earths from China/Congo, assembled in China. 'Made in China' misleading — China adds only a fraction of value. GVCs make trade statistics complex.

Informal economy: economic activity outside government regulation and taxation — up to 50% of GDP in some countries

The Informal Economy — Informal economy: unregistered businesses, undeclared workers, untaxed transactions. Street vendors, domestic workers, day laborers. Up to 50-60% of GDP in Sub-Saharan Africa. 30-40% in Latin America. 15% in developed economies. Pros: flexibility, entry point for poor. Cons: no worker protections, no tax contribution, no credit access.

Tourism geography: global north to global south flows. Ecotourism, heritage tourism, medical tourism.

Tourism and Geography — International tourism: ~1.4 billion arrivals/year (pre-COVID). France, Spain, US top destinations. Tourism can: provide foreign exchange, create jobs, fund conservation, but also: damage environments, create dependency, exploit local cultures. Ecotourism: low-impact, nature-based. Medical tourism: travel for cheaper/better healthcare.

Dependency theory: developing countries are poor because wealthy countries keep them dependent on raw material exports

Dependency Theory — Prebisch-Singer thesis: terms of trade favor manufactured goods over commodities — developing countries' export revenues buy fewer imports over time. Wallerstein's world-systems theory: core (wealthy, manufactures), semi-periphery (middle), periphery (poor, extracts resources). Structural inequality built into global economic system.