Two halfs of a whole

p. 250-253

When Robert Lucas traveled to Tel Aviv to present his new ideas on the spill overs of human capital, he came into contact with Paul Krugmans paper on increasing returns and trade. On the surface, the papers could not be any more different. But at the heart was a model that entire countries got ahead on the basis of manufacturing specialties usually incorporated only at the firm level. It helped bring to light that the spill overs arose from the history of any particular neighborhood rather than from the increasing returns of monopolistic competition characterized in Krugmans work in trade. The result of Marshillian spillovers.