Regional Integration, Scale Economies and Industry Location in the European Union

36 Pages Posted: 18 Nov 2001

See all articles by Marius Brülhart

Marius Brülhart

University of Lausanne - School of Economics and Business Administration (HEC-Lausanne)

Johan Torstensson

Lund University - Department of Economics

Multiple version iconThere are 2 versions of this paper

Date Written: July 1996

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

JEL Classification: F12, F15, R12

Suggested Citation

Brulhart, Marius and Torstensson, Johan, Regional Integration, Scale Economies and Industry Location in the European Union (July 1996). Available at SSRN: https://ssrn.com/abstract=291178

Marius Brulhart (Contact Author)

University of Lausanne - School of Economics and Business Administration (HEC-Lausanne) ( email )

Unil Dorigny, Batiment Internef
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HOME PAGE: http://www.hec.unil.ch/mbrulhar/

Johan Torstensson

Lund University - Department of Economics

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Sweden
00 46 46 222 4972 (Phone)
00 46 46 222 4613 (Fax)

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