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Industrial Location and Public Infrastructure

  • Martin, Philippe
  • Rogers, Carol Ann

This paper examines the impact of public infrastructure on industrial location when increasing returns are present. Poor infrastructure implies costs of Samuelson's `iceberg' form and alter trade both within and between countries. Trade integration implies that firms tend to locate in countries with better infrastructure so that regional policies that affect the level of public infrastructure influence economic geography. The effectiveness of such policies decreases when infrastructure improves, however, because a high level of infrastructure and strong economies of scale magnify the concentration effects of differentials in infrastructure, market size and capital-labour ratios. Infrastructure policies that facilitate intra-regional trade in the poor country lead to regional convergence but policies that facilitate intra-regional trade lead to regional divergence. We also analyse the incentives for countries to inhibit industrial relocation.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 909.

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Date of creation: Feb 1994
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Handle: RePEc:cpr:ceprdp:909
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  1. Vickerman, R W, 1989. "Measuring Changes in Regional Competitiveness: The Effects of International Infrastructure Investments," The Annals of Regional Science, Springer, vol. 23(4), pages 275-86.
  2. Krugman, Paul, 1991. "Increasing Returns and Economic Geography," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 483-99, June.
  3. Wheeler, David & Mody, Ashoka, 1992. "International investment location decisions : The case of U.S. firms," Journal of International Economics, Elsevier, vol. 33(1-2), pages 57-76, August.
  4. Robert J. Barro, 1988. "Government Spending in a Simple Model of Endogenous Growth," NBER Working Papers 2588, National Bureau of Economic Research, Inc.
  5. Martin, Philippe & Rogers, Carol Ann, 1994. "Trade Effects of Regional Aid," CEPR Discussion Papers 910, C.E.P.R. Discussion Papers.
  6. Krugman, Paul R, 1993. "On the Relationship between Trade Theory and Location Theory," Review of International Economics, Wiley Blackwell, vol. 1(2), pages 110-22, June.
  7. Krugman, Paul & Venables, Anthony J, 1990. "Integration and the Competitiveness of Peripheral Industry," CEPR Discussion Papers 363, C.E.P.R. Discussion Papers.
  8. Bertola, Giuseppe, 1992. "Models of Economic Integration and Localized Growth," CEPR Discussion Papers 651, C.E.P.R. Discussion Papers.
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