The Spatial Effects of Trade Openness: A Survey

This paper surveys the literature on the implications of trade liberalisationfor intra-national economic geographies. Three results stand out. First, neitherurban systems models nor new economic geography models imply a robust predictionfor the impact of trade openness on spatial concentration. Whether tradepromotes concentration or dispersion depends on subtle modelling choices amongwhich it is impossible to adjudicate a priori. Second, empirical evidence mirrors thetheoretical indeterminacy: a majority of cross-country studies find no significanteffect of openness on urban concentration or regional inequality. Third, the availablemodels predict that, other things equal, regions with inherently less costlyaccess to foreign markets, such as border or port regions, stand to reap the largestgains from trade liberalisation. This prediction is confirmed by the available evidence.Whether trade liberalisation raises or lowers regional inequality thereforedepends on each country’s specific geography.