This paper, authored by Paul Krugman and Raul Livas Elizondo, explores the relationship between trade policy and the growth of large cities in developing countries. The authors argue that the rise of giant metropolises in these regions can be attributed to import-substituting industrialization policies, which create strong backward and forward linkages within the domestic market. These linkages make it economically advantageous for firms to locate near large population centers, leading to the concentration of industry and population. However, as these countries liberalize their trade policies, the openness of the economy weakens these linkages, leading to a shrinkage of the central metropolis and a more decentralized urban system. The paper uses a theoretical model to illustrate how these forces interact and provides numerical examples to support its findings. The authors conclude that closed domestic markets are a key factor in the emergence of large cities in developing countries, and that trade liberalization can lead to the decline of these metropolises.This paper, authored by Paul Krugman and Raul Livas Elizondo, explores the relationship between trade policy and the growth of large cities in developing countries. The authors argue that the rise of giant metropolises in these regions can be attributed to import-substituting industrialization policies, which create strong backward and forward linkages within the domestic market. These linkages make it economically advantageous for firms to locate near large population centers, leading to the concentration of industry and population. However, as these countries liberalize their trade policies, the openness of the economy weakens these linkages, leading to a shrinkage of the central metropolis and a more decentralized urban system. The paper uses a theoretical model to illustrate how these forces interact and provides numerical examples to support its findings. The authors conclude that closed domestic markets are a key factor in the emergence of large cities in developing countries, and that trade liberalization can lead to the decline of these metropolises.