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Preferential Trading Arrangements and Industrial Location

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  • Puga, Diego
  • Venables, Anthony J.

Abstract

This paper considers the location effects of geographically-discriminatory trade policy. A preferential move towards a customs union attracts industry to 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. Closer integration can bring converging industrial development to the union. A hub-and-spoke arrangement favours location in the hub, with better reciprocal access to spoke nations than to each other. Further liberalization induces agglomeration in the hub and may trigger disparities between the spokes.

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Bibliographic Info

Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 1309.

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Date of creation: Dec 1995
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Handle: RePEc:cpr:ceprdp:1309

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Related research

Keywords: Agglomeration; Customs Union; Hub-and-spoke; Integration;

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References

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  1. 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.
  2. Venables, Anthony J, 1996. "Equilibrium Locations of Vertically Linked Industries," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 37(2), pages 341-59, May.
  3. 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.
  4. repec:fth:iniesr:430 is not listed on IDEAS
  5. 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.
  6. 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.
  7. Gordon H. Hanson, 1994. "Regional Adjustment to Trade Liberalization," NBER Working Papers 4713, National Bureau of Economic Research, Inc.
  8. 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.
  9. 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.
  10. Brülhart, Marius, 1996. "Regional Integration, Scale Economies and Industry Location in the European Union," CEPR Discussion Papers 1435, C.E.P.R. Discussion Papers.
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