Locational competition--the competition for economic activity--has important policy implications of the kind that Herbert Giersch has spent his life addressing.
As globalization has closely integrated world economy, even small changes in relative costs of doing business can induce producers to change location. Locational competition affects a higher and higher proportion of total economic activity at greater and greater distances.
For most of history, most people have had to obtain most of their goods and services from a relatively small geographical area close to home. Locational competition had little relevance for most activities.
With few exceptions, most long-distance trade was low-volume and high value-added. The high costs of transport insulated most activities from competition from those at distant locations.
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International Monetary Fund
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