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Trading Arrangements and Industrial Development

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  • Diego Puga
  • Anthony J. Venables

Abstract

This paper outlines a new approach for analysing the role of trade in promoting industrial development. It offers an explanation as to why firms are reluctant to move to economics with lower labour costs, and shows how trade liberalisation can change the incentives for firms to locate in developing countries. Unilaterally liberalising imports of manufcatures can promote industrialisation, but membership of a preferential trading arrangement is likley to create larger gains. South-South PTAs will be sensitive to the market size of member states, while North-South PTAs seem to offer better prospects- for participating Southern economies, if not for excluded countries.

Suggested Citation

  • Diego Puga & Anthony J. Venables, 1996. "Trading Arrangements and Industrial Development," CEP Discussion Papers dp0319, Centre for Economic Performance, LSE.
  • Handle: RePEc:cep:cepdps:dp0319
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    References listed on IDEAS

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    1. Puga, Diego & Venables, Anthony J., 1996. "The Spread of Industry: Spatial Agglomeration in Economic Development," Journal of the Japanese and International Economies, Elsevier, vol. 10(4), pages 440-464, December.
    2. Antonio Spilimbergo & Gordon H. Hanson, 1999. "Illegal Immigration, Border Enforcement, and Relative Wages: Evidence from Apprehensions at the U.S.-Mexico Border," American Economic Review, American Economic Association, pages 1337-1357.
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    5. Krugman, Paul, 1980. "Scale Economies, Product Differentiation, and the Pattern of Trade," American Economic Review, American Economic Association, vol. 70(5), pages 950-959, December.
    6. Jaime De Melo & Arvind Panagariya & Dani Rodrik, 2015. "The New Regionalism: A Country Perspective," World Scientific Book Chapters,in: Developing Countries in the World Economy, chapter 14, pages 323-357 World Scientific Publishing Co. Pte. Ltd..
    7. 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.
    8. Puga, Diego & Venables, Anthony J., 1997. "Preferential trading arrangements and industrial location," Journal of International Economics, Elsevier, vol. 43(3-4), pages 347-368, November.
    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. Hanson, Gordon H, 1997. "Increasing Returns, Trade and the Regional Structure of Wages," Economic Journal, Royal Economic Society, vol. 107(440), pages 113-133, January.
    11. Richard Baldwin, 1993. "A Domino Theory of Regionalism," NBER Working Papers 4465, National Bureau of Economic Research, Inc.
    12. repec:hhs:iuiwop:430 is not listed on IDEAS
    13. Venables, Anthony J., 1996. "Trade policy, cumulative causation, and industrial development," Journal of Development Economics, Elsevier, vol. 49(1), pages 179-197, April.
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    Citations

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    Cited by:

    1. Hoekman, Bernard & Saggi, Kamal, 1999. "Multilateral disciplines for investment-related policies," Policy Research Working Paper Series 2138, The World Bank.
    2. Sanguinetti, Pablo & Traistaru, Iulia & Volpe Martincus, Christian, 2004. "Economic integration and location of manufacturing activities: Evidence from MERCOSUR," ZEI Working Papers B 11-2004, University of Bonn, ZEI - Center for European Integration Studies.
    3. Volpe Martincus, Christian & Siedschlag, Iulia, 2010. "The Impact of South-South Preferential Trade Agreements on Industrial Development: An Empirical Test," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 25, pages 69-104.
    4. Henri Ngoa Tabi & Henri Atangana Ondoa, 2011. "Industrialization of the Manufacturing Sector and Trade Opening in Cameroon," Research in World Economy, Research in World Economy, Sciedu Press, vol. 2(1), pages 58-68, April.
    5. Cristobal, Adolfo, 2007. "Trade and migration: a U-shaped transition in Eastern Europe," MPRA Paper 3446, University Library of Munich, Germany.
    6. Hugues JENNEQUIN & Isabelle RABAUD, 2006. "Location of services industries in MENA countries, in EU and NMS: a comparative analysis?," LEO Working Papers / DR LEO 1161, Orleans Economics Laboratory / Laboratoire d'Economie d'Orleans (LEO), University of Orleans.
    7. World Bank, 2012. "From Political to Economic Awakening in the Arab World : The Path of Economic Integration - Deauville Partnership Report on Trade and Foreign Direct Investment, Volume 1. Overview Report," World Bank Other Operational Studies 11886, The World Bank.
    8. Joseph F. Francois & Douglas Nelson, 2002. "A Geometry Of Specialisation," Economic Journal, Royal Economic Society, vol. 112(481), pages 649-678, July.
    9. Volpe Martincus, Christian & Siedschlag, Iulia, 2010. "The Impact of South-South Preferential Trade Agreements on Industrial Development: An Empirical Test," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 25, pages 69-104.
    10. Corinne Bagoulla, 2006. "Localisation industrielle et spécialisation. Les rôles des infrastructures, des coûts de production et de la taille de marché dans un cadre Nord Sud," Revue économique, Presses de Sciences-Po, vol. 57(4), pages 705-726.
    11. Fugazza, Marco & Robert-Nicoud, Frédéric, 2006. "Can South-South trade Liberalisation Stimulate North-South Trade ?," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 21, pages 234-253.
    12. Xinyi Li, 2009. "Free trade agreements and vertical-specialisation in East Asia," Asia Europe Journal, Springer, vol. 7(1), pages 145-160, February.
    13. 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.
    14. Blomström, Magnus & Kokko, Ari, 1997. "Regional Integration and Foreign Direct Investment," CEPR Discussion Papers 1659, C.E.P.R. Discussion Papers.
    15. 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.
    16. Ottaviano, Gianmarco I. P. & Puga, Diego, 1997. "Agglomeration in a global economy: a survey," LSE Research Online Documents on Economics 20324, London School of Economics and Political Science, LSE Library.
    17. Jaime MELO DE, 2005. "Regionalism and Developing Countries: A Primer," Working Papers 200510, CERDI.
    18. Kurt A. Hafner, 2011. "Trade Liberalization and Technology Diffusion," Review of International Economics, Wiley Blackwell, vol. 19(5), pages 963-978, November.
    19. repec:got:cegedp:31 is not listed on IDEAS
    20. Umber, Marc P. & Grote, Michael H. & Frey, Rainer, 2014. "Same as it ever was? Europe's national borders and the market for corporate control," Journal of International Money and Finance, Elsevier, vol. 40(C), pages 109-127.
    21. 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.

    More about this item

    JEL classification:

    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)
    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation

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