Agglomeration and Economic Development: Import Substitution vs. Trade Liberalization

29 Pages Posted: 8 Apr 1998

See all articles by Diego Puga

Diego Puga

IMDEA Social Sciences; University of Toronto - Department of Economics; Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER)

Anthony J. Venables

University of Oxford; Centre for Economic Policy Research (CEPR)

Date Written: January 1998

Abstract

This paper analyses a model of economic development in which international inequalities in the location of industry and income are supported by the agglomeration of industry in a subset of countries. Economic development may not be a gradual process of convergence by all countries, but instead involves countries moving sequentially from the group of poor countries to the group of rich countries. The role of trade policy in promoting industrialization is studied. While both import substitution and unilateral trade liberalization may be "successful" in attracting industry, they attract different sectors and welfare levels are higher under trade liberalization.

JEL Classification: F12, O14, R12

Suggested Citation

Puga, Diego and Venables, Anthony J., Agglomeration and Economic Development: Import Substitution vs. Trade Liberalization (January 1998). CEPR Discussion Paper No. 1782. Available at SSRN: https://ssrn.com/abstract=74696

Diego Puga (Contact Author)

IMDEA Social Sciences ( email )

Calle Veláquez 76
Madrid, 28001
Spain

University of Toronto - Department of Economics ( email )

150 St. George Street
Toronto, Ontario M5S 3G7
Canada
416-978-4375 (Phone)
416-978-6713 (Fax)

HOME PAGE: http://dpuga.economics.utoronto.ca/

Centre for Economic Policy Research (CEPR)

London
United Kingdom

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Anthony J. Venables

University of Oxford ( email )

Mansfield Road
Oxford, Oxfordshire OX1 4AU
United Kingdom

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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