This paper surveys the empirical literature on the economic geography of trade flows, factor prices, and the location of production. The discussion is structured around the empirical predictions of a canonical theoretical model. We review empirical evidence on the determinants of trade costs and the effects of these costs on trade flows. Geography is a major determinant of factor prices, and access to foreign markets alone is shown to explain some 35 % of the cross-country variation in per capita income. The paper documents empirical findings of home market (or magnification) effects, suggesting that imperfectly competitive industries are drawn more than proportionately to locations with good market access. Sub-national evidence establishes the presence of industrial clustering, and we examine the roles played by product market linkages to customer and supplier firms, knowledge spillovers, and labour market externalities.

The aim of the paper is to investigate the process of spatial agglomeration of innovation and production activities and to assess the extent to which the degree of specialisation or diversity externalities in the area may affect the innovative output in a particular local industry. The analysis is carried out thanks to an original databank on innovation and production activity across 85 industrial sectors and 784 Italian Local Labour Systems, which are groupings of municipalities characterised by a high degree of self-contained flows of commuting workers. According to the global and local indicators of spatial association there are clear signs of spatial correlation in the distribution of innovation activities. The econometric analysis shows that the two types of externalities- specialisation and urbanisation economies- are both effective. Moreover, we find evidence for knowledge spillovers since technological activities of a local industry influence positively innovations of the same sectors in contiguous areas.

This article examines the location of manufacturing industries in the European Union. It draws on intra-industry trade measures for 1961–90 and on sectoral employment data by countries and regions. The analysis of employment data suggests that EU industry has become increasingly localized in the 1980s. Increasing-returns industries are strongly concentrated at the economic core of the EU and display low levels of intra-industry trade. High-tech industries are also strongly localized, but show no centre–periphery gradient and no specific pattern of intra-industry trade. The main potential for future specialization appears to remain in sectors sensitive to labour costs, which are still relatively dispersed and have high levels of intra-industry trade. Employment in these industries is shifting towards the EU periphery. ‘Neoclassical ’ determinants of international specialization are thus likely to dominate the ongoing adjustment process in EU manufacturing.

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Summary. Information and communication technologies (ICTs) offer potential to enhance the global competitiveness and local cohesion of emergent creative industries using virtual networks. This paper draws on a case study based on a pilot project in Manchester’s creative sector, the Northern Quarter. The aim was to introduce advanced ICTs to creative micro businesses and explore the relationship between physical and digital networking. ICTs were found to bring local businesses closer together in the development and training phases and to provide an impetus to the development of electronic trading. The lasting bene ts of the project for local cohesion are less clear and the reasons for this are discussed.

The paper explores the determinants of industry location across interwar Poland. After the political reunification of Poland at the end of 1918 its industry faced massive structural changes: the removal of internal tariff barriers and improved infrastructure strengthened the domestic market, while foreign market relations were cut off. Similarly, the geographical dispersion of factor endowments was changed through internal migration and new institutional arrangements (education system, patent laws, etc.). How did these forces interact to determine the location of industry? Did a new “interregional division of labour ” emerge after unification? We survey the dynamics of industrial location between 1925 and 1937 and estimate a model that nests market potential and comparative advantage to quantify their respective impact over time. The results point to a role for both, comparative advantage and market potential, but there was a dominating- and ever increasing- impact of the availability of skilled labour.

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SUMMARY: General equilibrium models estimated by various authors and institutions show that, alt-hough trade liberalization leads to aggregate welfare gains, there are winners and losers. The aim of this article is to determine to what extent rural regions have won or lost in the trade opening process that has been underway since the 1990s. The economic literature on international trade and regional development suggests the presence of opposing forces, making the global impact of international trade liberalization on rural areas ambiguous. Using a series of empirical studies, the author assesses the impact of trade ope-ning on the European regions, observing a significant proportion of losers in the trade liberalization pro-cess among the rural regions of Europe. The article concludes with an analysis of the negative effects of welfare losses on the environment and territorial ordering in many rural regions, and suggests the need to address the problem by modifying current EU policies.

Abstract: This paper evaluates the new theories of trade and economic geography in the light of the pattern of regional specialisation in Southern Africa. The analysis is applied to the nine South African provinces and the SADC member countries of 1995, except Angola. Based on Gini coefficients, the regional specialisation of provinces and countries and dispersion/concentration of manufacturing employment are revealed, reflecting the outcomes of import substitution, the export-oriented policy of Mauritius and, finally, the trade liberalisation within the Southern African Customs Union (SACU). Industry location and centrality of regions are analysed, and the findings indicate that industries subject to internal and external scale economies are geographically concentrated in regions with large home markets, while access to nearby regional markets appears to be of minor importance.

In many instances trade integration has led to the agglomeration of economic activity in a few core locations while other regions became deindustrialized, its population either unemployed or locked in traditional sectors. The exarcerbation of regional inequalities has been a permanent concern of the EU authorities whose regional policies have tried to mitigate this phenomenon. Building upon Venables (1996) core-periphery model, we examine the ability of different public policies to reverse the agglomeration market equilibria, yielding instead a geographically even distribution of economic activity. We consider policy instruments such as wage subsidies, consumption taxes, discriminatory expenditure and redistributive interregional transfers. We find that redistributive interregional transfers combined with non-discriminatory consumption taxes might do the job. If the transfers are mainly spent on projects in the upstream sector, this policy can deliver dispersed equilibria which are also stable. To a great extent, the European Structural funds fit intothistypeofpolicy. Theyare granted to lagging regions, basically those with per capita income below the European average, and they finance a wide range of projects, including infrastructures, communication systems and other investment projects that could be considered inputs to other sectors. Some basic regression analysis using data on the Structural Funds for the period 1994-98 suggests that the objective 1 funds are positively correlated with regional employment and especially manufacturing employment, while the other programs don’t seem to be correlated with employment. ∗I would like to thank Robert Feenstra and Deborah Swenson for useful discussions and comments on earlier versions of this paper. Similarly, I would like to thank seminar participants at U.C.Davis and Universitat de Barcelona. All remaining errors are my own. 1 1