Trade and the location of industries in the OECD and European Union

Trade and location theory identifies forces that could lead to locational dispersion (comparative advantage) or locational concentration (scale economies) in the face of globalizing markets, each with different consequences for specialization and the adjustment costs associated with integration. However, these forces can play themselves out in very complex ways if locational change principally affects intermediate production. Moreover, effects of history may be important, if locational patterns which exist prior to integration reflect either strong external economies or, as we argue, strong institutionalized capacities to respond to more open markets. This could especially be the case in the context of Europe, whose territories are generally less specialized than the states of the USA. To see how these different effects are operating today, empirical measurement is required. Using a data set which allows changes in locational distribution of manufacturing industries in the OECD to be measured, we show that Europe does not seem to be 'Americanizing' its economic geography. Many sectors are actually spreading out in Europe, implying that the effects of history have remained strong up to this point. Specialization increases are weak in most European economies as well. The OECD has a more complex picture of spread and concentration. Some of the implications for further research on agglomeration, intra-industry trade, and integration are brought out in the conclusion. Copyright 2002, Oxford University Press.