 Regional Integration, Scale Economies and Industry Location in the European UnionNo 1435, CEPR Discussion Papers from Centre for Economic Policy Research Abstract: This paper analyses the effects of regional integration on the location of increasing-returns industry and the resulting pattern of trade. Theoretically, it is shown that regional integration may initially lead to a dispersion of industry inside the customs union. Below a certain threshold of internal trade costs, however, industry concentration in the central member country will again increase. This non-monotonic relationship with regional integration also applies to equilibrium levels of intra-industry trade (IIT). A strictly monotonic negative relationship is found between, on one hand, the degree of scale economies and, on the other hand, industrial concentration both in the central country and intra-union IIT. Empirical evidence for the European Union lends support to some of the theoretical predictions. Employment in scale-intensive industries tends to be concentrated at the centre of the EU, and IIT is relatively low in these sectors. An IIT growth reversal is detected for the scale-intensive industries, which supports the non-monotonicity predicted by the model. Keywords: Economic Geography; European Union; Regional Integration; Scale Economies (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:cpr:ceprdp:1435 Ordering information: This working paper can be ordered from Access Statistics for this paper More papers in CEPR Discussion Papers from Centre for Economic Policy Research 33 Great Sutton Street, London EC1V 0DX, UK. |
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