Marius Brülhart

Economic Geography, Industry Location and Trade: The Evidence

General-equilibrium models based on increasing returns, product differentiation and monopolistic competition have attained a prominent position in trade theory and, more recently, in economic geography. This paper surveys empirical studies on issues raised by the new wave of theoretical thinking. There is a growing literature documenting spatial distributions of industries at country and regional levels, which focuses predominantly on the United States and the European Union. This body of work has produced robust findings as well as puzzles. Particular ambiguity appears in studies of location trends in the European Union. In addition, empirical researchers have devised methods to separate and test alternative theoretical paradigms. Analytical work confirms the complementarity and relevance of both neo-classical and “new” models. Existing results, however, do not permit firm conclusions about the relative explanatory power of the main theoretical approaches for location patterns overall and in particular industries.

Trading Places: Industrial Specialization in the European Union

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.

Evolving geographical concentration of European manufacturing industries

Evolving Geographical Concentration of European Manufacturing Industries. — This paper analyzes the geographical concentration of 32 manufacturing sectors over the 1972–1996 period for 13 European countries. Concentration has increased continuously over the sample period in employment terms, while remaining roughly unchanged in export terms. On average, increases in concentration were stronger prior to the launch of the Single Market than afterwards. The sectors most sensitive to the Single Market however, showed an acceleration in concentration after 1986. There is also evidence that low-tech industries are the most strongly concentrated, and that center-periphery gradients across countries are losing importance for industrial location in the EU.

Adjustment to the European single market: inferences from intra-industry trade patterns

In the run‐up to the 1992 single‐market deadline, there were concerns that inter‐industry adjustment pressures among EU member countries would increase. Such expectations were due partly to a perceived reversal of the post‐Second World War growth in intra‐industry trade (IIT). Finds that average IIT levels continued to rise during the implementation of the single market. It is argued that the concept of marginal IIT(MIIT) is of greater relevance to adjustment than “static” IIT. Some evidence is shown to support this proposition, and a comprehensive set of intra‐EU MIIT indices is calculated for the 1980s. Since average MIIT levels in the 1988‐92 period were higher than in the early 1980s, this analysis also supports the conclusion that, on average, adjustment to the single market was no more disruptive than that experienced during earlier stages of European integration. It also appears that the forces for inter‐industry adjustment are stronger in traditional, declining industries, whereas the expansion of relatively advanced industries tends to be more evenly shared by the EU member countries.

Labour-Market Effects of Intra-Industry Trade: Evidence for the United Kingdom

Labor-Market Effects of Intra-Industry Trade: Evidence for the United Kingdom. — According to the “smooth adjustment hypothesis”, the labor-market adjustment costs entailed by trade liberalization are lower if trade expansion is intra-industry rather than inter-industry in nature. In this paper, we study the link between trade and labor market changes in UK manufacturing industries during the 1980s. We use industry-level measures of unemployment duration and wage variability as proxies for adjustment costs, and we relate them to various measures of intra-industry trade. Our evidence offers some support for the smooth adjustment hypothesis.

A Tale of Two Cycles: Co‐Fluctuations Between UK Regions and the Euro Zone

We examine the patterns and determinants of business-cycle correlations among eleven UK regions and six euro-zone countries over the 1966-1997 period, using GMM to allow for sampling error in comparing estimated correlations. The British business cycle is found to be persistently out of phase with that of the main euro-zone economies, and the trend is towards lower correlations. We detect only minor cyclical heterogeneity among UK regions. Differences in sectoral specialisation drive some of the asymmetry in GDP fluctuations, but they do not appear significant in explaining the observed reduction in UK-EU business-cycle correlations over time.

Marginal Intra-Industry Trade and Trade-Induced Adjustment: a Survey

Probably the greatest source of interest in intra-industry trade (IIT) has been its link with factor-market adjustment. Policy-oriented economists readily grasped the opportunity of an index which was simple to calculate and presumed to indicate relatively frictionless adjustment to trade liberalization.

Intra-industry trade and adjustment in Malaysia: puzzling evidence

The structure of Malysias trade expansion over the high-growth period 1970–1994 and its implications for labour-market adjustment is examined. An econometric analysis of trade and employment data suggests that intra-industry trade is related with relatively large inter-industry payroll changes. Results therefore cast doubt over the widely held smooth-adjustment hypothesis of intra-industry trade.

Marginal Intra-Industry Trade: Towards a Measure of Non-Disruptive Trade Expansion

When Verdoorn (1960) found that the formation of a customs union among the Benelux countries had stimulated large, two-way trade flows of similar products, and Dreze (1961) discovered the same phenomenon in the fledgling six-nation EEC, economists took note for one main reason:adjustment costs. Instead of inter-sectoral specialization according to countries’ comparative advantage, the national economies seemed to preserve their broad industrial structures and to specialize predominantly at the intra-sectoral level. A ‘smooth adjustment hypothesis’ (SAH) soon became firmly rooted in economic thinking, according to which intra-industry trade (IIT) expansion generally entails lower adjustment costs than does inter-industry trade.

How wages and employment adjust to trade liberalization: Quasi-experimental evidence from Austria

We study the response of regional employment and nominal wages to trade liberalization, exploiting the natural experiment provided by the opening of Central and Eastern European markets after the fall of the Iron Curtain in 1990. Using data for Austrian municipalities, we examine differential pre- and post-1990 wage and employment growth rates between regions bordering the formerly communist economies and interior regions. If the ‘border regions’ are defined narrowly, within a band of less than 50km, we can identify statistically significant liberalization effects on both employment and wages. While wages responded earlier than employment, the employment effect over the entire adjustment period is estimated to be around three times as large as the wage effect. The implied slope of the regional labor supply curve can be replicated in an economic geography model that features obstacles to labor migration due to immobile housing and to heterogeneous locational preferences.