IDEAS home Printed from
MyIDEAS: Log in (now much improved!) to save this paper

Regional convergence, trade liberalization and agglomeration of activities : an analysis of NAFTA and MERCOSUR cases

  • Nicole Madariaga



  • Sylvie Montout



  • Patrice Ollivaud



This study examines the theoretical and empirical link between trade integration, the density of activities and per capita income convergence within NAFTA members during the 1980-2000 period and within MERCOSUR partners from 1985 to 2000. We first build a two countries framework based on economic geography theory to explore this link. We introduce differences in wage levels between a rich and a poor region. We find that trade liberalization may have a positive impact on per capita income convergence if countries have initially similar wages and transaction costs are low. Second, the empirical approach refers to two different convergence concepts : homogenization and catch-up. We also determine activities' concentration trends within each trade agreement according to different measures of agglomeration. Afterwards, we use these measures to introduce an agglomeration variable in conditional convergence regressions. The analysis of the sigma and absolute beta-convergence concludes to a divergence between the two NAFTA partners. On the contrary, we observe a process of convergence in the MERCOSUR between 1985 and 2000 even if this process appears to slow down after 1991. Our conditional estimates also show that agglomeration plays a significant and positive role in growth after the implementation of treaties.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL:
Download Restriction: no

Paper provided by Université Panthéon-Sorbonne (Paris 1) in its series Cahiers de la Maison des Sciences Economiques with number bla04069.

in new window

Length: 27 pages
Date of creation: Apr 2004
Date of revision:
Handle: RePEc:mse:wpsorb:bla04069
Contact details of provider: Postal:
106 - 112 boulevard de l'Hôpital, 75647 Paris cedex 13

Phone: 01 44 07 81 00
Fax: 01 44 07 81 09
Web page:

More information through EDIRC

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. repec:hhs:iuiwop:430 is not listed on IDEAS
  2. Barro, R.J. & Sala-I-Martin, X., 1991. "Convergence Across States and Regions," Papers 629, Yale - Economic Growth Center.
  3. S. Dobson & C. Ramlogan, 2002. "Economic Growth and Convergence in Latin America," Journal of Development Studies, Taylor & Francis Journals, vol. 38(6), pages 83-104.
  4. Dixit, Avinash K & Stiglitz, Joseph E, 1975. "Monopolistic Competition and Optimum Product Diversity," The Warwick Economics Research Paper Series (TWERPS) 64, University of Warwick, Department of Economics.
  5. Krugman, Paul & Venables, Anthony J., 1995. "Globalization and the Inequality of Nations," Working Paper Series 430, Research Institute of Industrial Economics.
  6. Philippe Martin & Gianmarco Ottaviano, 2001. "Growth and Agglomeration," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00179826, HAL.
    • Martin, Philippe & Ottaviano, Gianmarco I P, 2001. "Growth and Agglomeration," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 42(4), pages 947-68, November.
  7. Martin, Philippe, 1999. "Public policies, regional inequalities and growth," Journal of Public Economics, Elsevier, vol. 73(1), pages 85-105, July.
  8. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
  9. Venables, Anthony J., 1999. "Regional integration agreements - a force for convergence or divergence?," Policy Research Working Paper Series 2260, The World Bank.
  10. Robert J. Barro, 1996. "Determinants of Economic Growth: A Cross-Country Empirical Study," NBER Working Papers 5698, National Bureau of Economic Research, Inc.
  11. Fujita, Masahisa & Thisse, Jacques-Francois, 1996. "Economics of Agglomeration," Journal of the Japanese and International Economies, Elsevier, vol. 10(4), pages 339-378, December.
  12. Philippe Martin, 1998. "Can Regional Policies Affect Growth and Geography in Europe?," The World Economy, Wiley Blackwell, vol. 21(6), pages 757-774, 08.
  13. James E. Rauch, 1991. "Economic Development, Urban Underemployment, and Income Inequality," NBER Working Papers 3758, National Bureau of Economic Research, Inc.
  14. Robert J. Barro, 1991. "Economic Growth in a Cross Section of Countries," The Quarterly Journal of Economics, Oxford University Press, vol. 106(2), pages 407-443.
  15. Hanson, Gordon H., 2001. "U.S.-Mexico Integration and Regional Economies: Evidence from Border-City Pairs," Journal of Urban Economics, Elsevier, vol. 50(2), pages 259-287, September.
  16. Dan Ben-David, 1993. "Equalizing Exchange: Trade Liberalization and Income Convergence," The Quarterly Journal of Economics, Oxford University Press, vol. 108(3), pages 653-679.
  17. Martin, Philippe & Rogers, Carol Ann, 1995. "Industrial location and public infrastructure," Journal of International Economics, Elsevier, vol. 39(3-4), pages 335-351, November.
  18. Hanson, Gordon H, 1998. "North American Economic Integration and Industry Location," Oxford Review of Economic Policy, Oxford University Press, vol. 14(2), pages 30-44, Summer.
  19. Sala-i-Martin, Xavier X., 1996. "Regional cohesion: Evidence and theories of regional growth and convergence," European Economic Review, Elsevier, vol. 40(6), pages 1325-1352, June.
  20. Martin, Philippe & Ottaviano, Gianmarco, 1996. "Growing Locations: Industry Location in a Model of Endogenous Growth," CEPR Discussion Papers 1523, C.E.P.R. Discussion Papers.
  21. Krugman, Paul & Elizondo, Raul Livas, 1996. "Trade policy and the Third World metropolis," Journal of Development Economics, Elsevier, vol. 49(1), pages 137-150, April.
  22. Alwyn Young, 1991. "Learning by Doing and the Dynamic Effects of International Trade," NBER Working Papers 3577, National Bureau of Economic Research, Inc.
  23. Krugman, Paul & Venables, Anthony J, 1990. "Integration and the Competitiveness of Peripheral Industry," CEPR Discussion Papers 363, C.E.P.R. Discussion Papers.
  24. Carlos R. Azzoni, 2001. "Economic growth and regional income inequality in Brazil," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 35(1), pages 133-152.
  25. Marius Brülhart, 2001. "Evolving geographical concentration of European manufacturing industries," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 137(2), pages 215-243, June.
  26. Vamvakidis, Athanasios, 1998. "Regional Integration and Economic Growth," World Bank Economic Review, World Bank Group, vol. 12(2), pages 251-70, May.
  27. Alwyn Young, 1991. "Learning by Doing and the Dynamic Effects of International Trade," The Quarterly Journal of Economics, Oxford University Press, vol. 106(2), pages 369-405.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:mse:wpsorb:bla04069. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Lucie Label)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.