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Trading Arrangements and Industrial Development

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Author Info
Puga, Diego
Venables, Anthony J

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Abstract

This article outlines a new approach for analyzing the role of trade in promoting industrial development. It offers an explanation as to why firms are reluctant to move to countries with lower labor costs and shows how trade liberalization can change the incentives for firms to locate in developing countries. It models economic development as the spread of concentrations of firms from country to country. Different trading arrangements may have a major impact on this development process. By changing the attractiveness of countries as a base for manufacturing production, they can potentially trigger--or postpone--industrial development. The analysis shows that unilaterally liberalizing imports of manufactures can promote industrialization but that membership in a preferential trading arrangement is likely to create larger gains. South-South preferential trading arrangements will be sensitive to the market size of member states, while North-South arrangements seem to offer better prospects for participating southern countries, if not for excluded countries. Copyright 1998 by Oxford University Press.

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Publisher Info
Article provided by Oxford University Press in its journal World Bank Economic Review.

Volume (Year): 12 (1998)
Issue (Month): 2 (May)
Pages: 221-49
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Handle: RePEc:oup:wbecrv:v:12:y:1998:i:2:p:221-49

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Krugman, Paul, 1980. "Scale Economies, Product Differentiation, and the Pattern of Trade," American Economic Review, American Economic Association, vol. 70(5), pages 950-59, December. [Downloadable!] (restricted)
  2. Richard Baldwin, 1993. "A Domino Theory of Regionalism," NBER Working Papers 4465, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  3. Puga, Diego & Venables, Anthony J., 1995. "Preferential Trading Arrangements and Industrial Location," CEPR Discussion Papers 1309, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  4. Krugman, Paul R & Venables, Anthony J, 1995. "Globalization and the Inequality of Nations," The Quarterly Journal of Economics, MIT Press, vol. 110(4), pages 857-80, November. [Downloadable!] (restricted)
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  5. Diego Puga, 1996. "The Spread of Industry: Spatial Agglomeration in Economic Development," CEP Discussion Papers dp0279, Centre for Economic Performance, LSE. [Downloadable!]
  6. Hanson, Gordon H, 1997. "Increasing Returns, Trade and the Regional Structure of Wages," Economic Journal, Royal Economic Society, vol. 107(440), pages 113-33, January. [Downloadable!] (restricted)
  7. Puga, Diego & Venables, Anthony J., 1996. "The Spread of Industry: Spatial Agglomeration in Economic Development," CEPR Discussion Papers 1354, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  8. Baldwin, Richard E. & Venables, Anthony J., 1995. "Regional economic integration," Handbook of International Economics, in: G. M. Grossman & K. Rogoff (ed.), Handbook of International Economics, edition 1, volume 3, chapter 31, pages 1597-1644 Elsevier. [Downloadable!] (restricted)
  9. Hanson, Gordon H., 1998. "Regional adjustment to trade liberalization," Regional Science and Urban Economics, Elsevier, vol. 28(4), pages 419-444, July. [Downloadable!] (restricted)
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  10. Gordon H. Hanson & Antonio Spilimbergo, 1999. "Illegal Immigration, Border Enforcement, and Relative Wages: Evidence from Apprehensions at the U.S.-Mexico Border," American Economic Review, American Economic Association, vol. 89(5), pages 1337-1357, December. [Downloadable!] (restricted)
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  11. Venables, Anthony J., 1996. "Trade policy, cumulative causation, and industrial development," Journal of Development Economics, Elsevier, vol. 49(1), pages 179-197, April. [Downloadable!] (restricted)
  12. Dixit, Avinash K & Stiglitz, Joseph E, 1977. "Monopolistic Competition and Optimum Product Diversity," American Economic Review, American Economic Association, vol. 67(3), pages 297-308, June. [Downloadable!] (restricted)
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Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Jörg MAYER, 2004. "Industrialization In Developing Countries: Some Evidence From A New Economic Geography Perspective," UNCTAD Discussion Papers 174, United Nations Conference on Trade and Development. [Downloadable!]
  2. Fugazza, Marco & Robert-Nicoud, Frédéric, 2006. "Can South-South Trade Liberalisation Stimulate North-South Trade?," CEPR Discussion Papers 5699, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  3. Jaime MELO DE, 2005. "Regionalism and Developing Countries: A Primer," Working Papers 200510, CERDI. [Downloadable!]
  4. Hoekman, Bernard & Saggi, Kamal, 1999. "Multilateral disciplines for investment-related policies," Policy Research Working Paper Series 2138, The World Bank. [Downloadable!]
  5. Matías Berthelon, 2004. "Growth Effects of Regional Integration Agreements," Working Papers Central Bank of Chile 278, Central Bank of Chile. [Downloadable!]
  6. Kurt Hafner, 2004. "Economic Development and Agglomeration: Research Activity and Tax Competition in a Static Equilibrium Model," DEGIT Conference Papers c009_023, DEGIT, Dynamics, Economic Growth, and International Trade. [Downloadable!]
  7. Pablo Sanguinetti & Iulia Traistaru & Christian Volpe Martincus, 2004. "Economic Integration and Location of Manufacturing Activities: Evidence from Mercosur," ERSA conference papers ersa04p609, European Regional Science Association. [Downloadable!]
  8. Xinyi Li, 2009. "Free trade agreements and vertical-specialisation in East Asia," Asia Europe Journal, Springer, vol. 7(1), pages 145-160, February. [Downloadable!] (restricted)
  9. Kurt Hafner, 2004. "Industrial Agglomeration and Economic Development," cege – Center for European, Governance and Economic Development Research Discussion Papers 31, cege – Center for European, Governance and Economic Development Research, University of Goettingen (Germany).. [Downloadable!]
  10. Madani, Dorsati H., 2001. "Regional integration and industrial growth among developing countries - the case of three ASEAN members," Policy Research Working Paper Series 2697, The World Bank. [Downloadable!]
  11. Madani, Dorsati H., 2001. "South-South regional integration and industrial growth : the case of the Andean Pact," Policy Research Working Paper Series 2614, The World Bank. [Downloadable!]
  12. Olga Alonso Villar, . "El analisis economico de los procesos de urbanizacion," Documentos de trabajo - Análise Económica 0004, IDEGA - Instituto Universitario de Estudios e Desenvolvemento de Galicia. [Downloadable!]
  13. Joseph F. Francois & Douglas Nelson, 2002. "A Geometry Of Specialisation," Economic Journal, Royal Economic Society, vol. 112(481), pages 649-678, July. [Downloadable!] (restricted)
    Other versions:
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