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Preferential trading arrangements and industrial location

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Author Info

  • Diego Puga
  • Tony 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://eprints.lse.ac.uk/2151/
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Bibliographic Info

Paper provided by London School of Economics and Political Science, LSE Library in its series LSE Research Online Documents on Economics with number 2151.

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Length: 28 pages
Date of creation: Oct 1995
Date of revision:
Handle: RePEc:ehl:lserod:2151

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Web page: http://www.lse.ac.uk/
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Keywords: integration; free trade area; hub-and-spoke; agglomeration;

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References

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  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.
  2. 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.
  3. Krugman, Paul & Venables, Anthony J., 1995. "Globalization and the Inequality of Nations," Working Paper Series 430, Research Institute of Industrial Economics.
  4. Gordon H. Hanson, 1994. "Regional Adjustment to Trade Liberalization," NBER Working Papers 4713, National Bureau of Economic Research, Inc.
  5. 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.
  6. repec:fth:iniesr:430 is not listed on IDEAS
  7. Anthony J. Venables, 1993. "Equilibrium Locations of Vertically Linked Industries," CEP Discussion Papers dp0137, Centre for Economic Performance, LSE.
  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.
  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. 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.
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