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Agglomeration and Economic Development: Import Substitution versus Trade Liberalisation

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Listed:
  • Diego Puga
  • Anthony J. Venables

Abstract

This paper analyses a model of economic development in which international inequalities in the location of industry and income are supported by the agglomeration of industry in a subset of countries. Economic development may not be a gradual process of convergence by all countries, but instead involve countries moving sequentially from the group of poor countries to the group of rich countries. The role of trade policy in promotion industrialization is studied. While both import substitution and unilateral trade liberalisation may be 'successful' in attracting industry, they attract different sectors and welfare levels are higher under trade liberalisation.

Suggested Citation

  • Diego Puga & Anthony J. Venables, 1997. "Agglomeration and Economic Development: Import Substitution versus Trade Liberalisation," CEP Discussion Papers dp0377, Centre for Economic Performance, LSE.
  • Handle: RePEc:cep:cepdps:dp0377
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    File URL: http://cep.lse.ac.uk/pubs/download/DP0377.pdf
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    References listed on IDEAS

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    1. 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.
    2. Murphy, Kevin M & Shleifer, Andrei & Vishny, Robert W, 1989. "Industrialization and the Big Push," Journal of Political Economy, University of Chicago Press, vol. 97(5), pages 1003-1026, October.
    3. Paul Krugman & Anthony J. Venables, 1995. "Globalization and the Inequality of Nations," The Quarterly Journal of Economics, Oxford University Press, vol. 110(4), pages 857-880.
    4. Puga, Diego, 1999. "The rise and fall of regional inequalities," European Economic Review, Elsevier, vol. 43(2), pages 303-334, February.
    5. repec:hhs:iuiwop:430 is not listed on IDEAS
    6. 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.
    7. Syrquin, M. & Chenery, H.B., 1989. "Patterns Of Development, 1950 To 1983," World Bank - Discussion Papers 41, World Bank.
    8. Scotchmer, Suzanne & Thisse, Jacques-Francois, 1992. "Space and Competition: A Puzzle," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 26(3), pages 269-286, September.
    9. Lluch, Constantino & Powell, Alan, 1975. "International comparisons of expenditure patterns," European Economic Review, Elsevier, vol. 6(3), pages 275-303, July.
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    Cited by:

    1. Abbott, Philip & Bentzen, Jeanet & Huong, Thi Lan & Tarp, Finn, 2007. "A Critical Review of Studies on the Social and Economic Impacts of Vietnam’s International Economic Integration," MPRA Paper 29789, University Library of Munich, Germany.
    2. BEHRENS, Kristian, 2004. "Population growth and manufacturing real wages in 18th century England: a spatial perspective," CORE Discussion Papers 2004025, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).

    More about this item

    JEL classification:

    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology
    • 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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