A U-shaped Europe? : a simulation study of industrial location

摘要

This paper uses a full-scale CGE-model - calibrated on 1992 data - to investigate the effectsof European integration on the location of industrial production. Our results reveal largedifferences among individual industries. Industries with high scale elasticities typicallydisplay a non-monotonous relationship between trade liberalisation and concentration, withmaximal concentration for intermediate trade costs. Other industries, more driven bycomparative advantage, become more and more concentrated as trade costs are lowered. Onthe aggregate European level we find an (inverse) U-shaped relation between trade costs andconcentration, with Europe 1992 close to the peak of concentration. The results also show aclose correlation between real income gains and growth in manufacturing production; welabel this an “externality shifting” effect – gains from pecuniary externalities in themanufacturing sectors. Finally, we note that nominal factor prices co-vary as regions specialise, while in relative terms there are traces of the Stolper-Samelson theorem.