DP4505 Does Staying out of the European Integration Process Shelter the Industrial Base of Small Countries?

• Rikard Forslid
23 Jul 2004

This Paper compares the effect of economic integration on industry location for a small country that goes ahead with an integration process, such as the European, and a country that stays out. Theoretical results, derived from a three-region new economic geography model, are compared to stylized facts on European manufacturing production. These are consistent with a scenario where further integration strengthens the industrial base of small countries that go ahead with integration.