Firm Location when Countries Differ in Infrastructures or Incomes

Ana M. Martín-Arroyuelos () and José M. Usategu ()
Additional contact information
Ana M. Martín-Arroyuelos: Universidad del País Vasco (UPV-EHU), Postal: Dep. Economía Aplicada III (Martín-Arroyuelos)-Dep. Fundamentos, del Análisis Económico (Usategui). Universidad del País Vasco. Avda., Lehendakari Agirre, 83. 48015 Bilbao. Spain
José M. Usategu: Universidad del País Vasco (UPV-EHU), Postal: Dep. Economía Aplicada III (Martín-Arroyuelos)-Dep. Fundamentos, del Análisis Económico (Usategui). Universidad del País Vasco. Avda., Lehendakari Agirre, 83. 48015 Bilbao. Spain

Journal of Economic Integration, 2000, vol. 15, 294-313

Abstract:

This paper analyzes, in a linear market with two adjacent countries, how firm location and optimal plant size depend on differences in the quality of infrastructures and income levels between countries. The study considers also how a free trade agreement may change, in this context where geography is made explicit, the country where a firm locates and discusses when variations in infrastructures or incomes provide incentives for firm delocation. Among the results we obtain that an increase in income in the country with lower income may induce a firm to locate in the other country and that an increase in the difference in qualities of infrastructures between countries or a free trade agreement may move the optimal location of a firm from the country with worst infrastructure to the country with better infrastructure.

Keywords: firm location; infrastructure; income differences; linear market; economic integration (search for similar items in EconPapers)
JEL-codes: F23 R30 (search for similar items in EconPapers)
Date: 2000
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:ris:integr:0134

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