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Preferential Trading Arrangements and Industrial Location

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  • Diego Puga
  • Anthony J. Venables

Abstract

This paper considers the location effects of geographically discriminatory trade policy. A preferential move towards a customs union pulls industry into the integrating countries. When internal barriers fall below some critical level, input-output links between imperfectly competitive firms lead some customs union countries to gain industry at the expense of others. A hub- and-spoke arrangement favours location in the hub, with better reciprocal access induces agglomeration in the hub and may trigger disparities between the spokes.

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File URL: http://cep.lse.ac.uk/pubs/download/DP0267.pdf
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Bibliographic Info

Paper provided by Centre for Economic Performance, LSE in its series CEP Discussion Papers with number dp0267.

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Date of creation: Oct 1995
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Handle: RePEc:cep:cepdps:dp0267

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Web page: http://cep.lse.ac.uk/_new/publications/series.asp?prog=CEP

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  1. Ethier, Wilfred J, 1982. "National and International Returns to Scale in the Modern Theory of International Trade," American Economic Review, American Economic Association, vol. 72(3), pages 389-405, June.
  2. Anthony J. Venables, 1993. "Equilibrium Locations of Vertically Linked Industries," CEP Discussion Papers dp0137, Centre for Economic Performance, LSE.
  3. Krugman, Paul & Venables, Anthony J., 1994. "Globalization and the Inequality of Nations," CEPR Discussion Papers 1015, C.E.P.R. Discussion Papers.
  4. 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.
  5. repec:fth:iniesr:430 is not listed on IDEAS
  6. 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.
  7. Hanson, Gordon H., 1998. "Regional adjustment to trade liberalization," Regional Science and Urban Economics, Elsevier, vol. 28(4), pages 419-444, July.
  8. Carsten Kowalczyk & Ronald J. Wonnacott, 1992. "Hubs and Spokes, and Free Trade in the Americas," NBER Working Papers 4198, National Bureau of Economic Research, Inc.
  9. Brülhart, Marius, 1996. "Regional Integration, Scale Economies and Industry Location in the European Union," CEPR Discussion Papers 1435, C.E.P.R. Discussion Papers.
  10. 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.
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