Is Holland a Lumpy Country? An application of the Lens-Condition to Dutch Cities

Abstract

Traditional trade theory assumes that countries are dimensionless points. Recent research, however, shows that the internal geography of countries is important for the trade structure of a country. One aspect of internal geography is the uneven spatial distribution of factors of production, which especially concentrate in urban locations. The so-called lens-condition (based on the Heckscher-Ohlin model) tests whether the (urban) distribution of factors of production is uneven enough to affect the national structure of trade and welfare. Our analysis, using firm export data and applying the condition to 22 cities and 4 regions within The Netherlands for 2007–2017, shows that the condition is fulfilled. We explain why.