Economic Integration and Spatial Location of Production

Abstract

Where economic activity will locate in the future is one of the most important and challenging questions in economics. Progress in technology, changes in demand and moves towards a liberal economic policy and international economic integration create new challenges for theorists, policymakers and business executives. As a number of economic activities became 'footloose' and highly mobile, one of the most demanding and intricate questions in such a situation is where firms and industries would locate, re-locate or stay.

The paper is structured as follows. Section 2 outlines the basic theoretical strands, while the gains of economic integration are presented in section 3. Sections 4 and 5, respectively, discuss production geography with trade barriers and the situation when these barriers are reduced. Experiences and possible gains for the new European Union (EU) member countries are the subject matter of section 6. At the end, there are conclusions and policy implications.

Keywords: Location, local, multiple equilibria, integration, links

JEL Classification: F15, F23, R12