Trade policy and regional inequalities**This article was written while I was a visiting research student at the LSE. I would like to thank Tony Venables for his continuous support during this period. I also thank Juan Tugores, Paul Krugman, Diego Puga, and two anonymous referees for their useful comments, as well as participants at the XXIII Simposi d'Analisi Economica (Bellaterra, December 1998); EUNIP International Conference, Rethinking Industrial Policy in Europe (Barcelona, October 1998); VI Jornadas de Economia Internacional (València, June 1999) and the 39thEuropean Congress, Regional Science Association International (Dublin, August 1999). This is an abridged version of chapter four of my Ph.D. dissertation presented at Universitat de Barcelona (1999). I would like to thank my thesis supervisor Joan Hortalà i Arau. Any errors that remain are mine. Financial support from La Caixa and the British Council is gratefully acknowledged

This article aims to analyze the effects of trade policies on the pattern of regional inequalities within a country. It is inspired, firstly, by the debate concerning the role of protectionist policies in the development of a pattern of striking regional inequalities during the Spanish industrialization process and, secondly, by current evidence of an increase in these inequalities following Spain's entry in the EU, in 1986. We employ an economic geography model comprising three regions: two domestic and one external. Labor mobility is permitted between the domestic regions but not with the external region. The model shows that trade liberalization increases regional inequalities.