The Effects of Regional Free Trade Agreements on Industrial Structure

The Effects of Regional Free Trade Agreements on Industrial Structure: An Extension of Krugman s Economic Geography Model (1991)

Extending Krugman`s (1991) economic geography model, this paper examines the stability of an industrial structure resulting from the production shifting-in effect of the formation of regional trade agreements. This paper claims that nonhigher external trade costs against non-member countries may be needed in order to secure the divergence of industries into the area of a regional trade agreement.

Ⅰ. Introduction

Ⅱ. The Model of Economic Geography with Multiple Countries

Ⅲ. Regional Trade Agreement and the Location of Firms

Ⅳ. A Firm’s Incentive to Defect from Local Manufacturing Concentrations

Ⅴ. Concluding Remark

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