PREFERENTIAL TRADING ARRANGEMENTS AND INDUSTRIAL-LOCATION

This paper considers the locational effects of geographically discrimi natory trade policy. A preferential move towards a free trade area pul ls industry into the integrating countries. Input-output links between imperfectly competitive firms amplify this effect and, when trade bar riers fall below some critical level, may lead to agglomeration with s ome member countries gaining industry at the expense of others. A hub- and-spoke arrangement favours location in the hub, with better recipro cal access to spoke nations than these have to each other. Further lib eralisation induces agglomeration in the hub and may trigger dispariti es between the spokes. (C) 1997 Elsevier Science B.V.