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cost of serving an additional customer is virtually zero。 hence, location independent ? Includes information/knowledge industry ? Regional Ine Levels in Europe and North America have been diverging in the last 1520 years after an earlier period of convergence ? In Europe, this is partly due to a mon set of rules for regions at very different levels of development ? It is also partly due to the growth of the service sector as part of the tradeable goods sector ? Model developed by Krugman basically argues that concentration of manufacturing is based on the interaction of economies of scale with transportation costs. ? Finds that countries/regions with a larger home market tend to export manufactures and larger countries have a disproportionately larger share of manufacturing. ? Argues that agglomeration is more likely when the share of manufacturing is high and transport costs are low. ? Shows that sufficiently high transport costs make imports so expensive that home production is assured. ? Suppose three sectors, with information sector being added to manufacturing and agriculture. ? Assume that Information Sector has no or very low transport costs. ? Assuming that the transport costs for manufacturing and agriculture do not otherwise change, then the absence of transportation costs in the information sector will reinforce the concentration of economic activity in the largest regions/countries and give them a disproportionate share of information sector firms/activities. The conclusion then is that the rise of knowledgebased industries is likely to enhance existing regional ine disparities, ., the growth of information industry activities will produce a divergence of regional per capita ine levels within countries. ? Dell Computers North American Customer Support Division is located in India ? The Chief Procurement Officer for IBM now resi