Trade policy and regional inequalities

This article aims to analyze the effects of trade policies on the pattern of regional inequalities within a country. It is inspired, firstly, by the debate concerning the role of protectionist policies in the development of a pattern of striking regional inequalities during the Spanish industrialization process and, secondly, by current evidence of an increase in these inequalities following Spain's entry in the EU, in 1986. We employ an economic geography model comprising three regions: two domestic and one external. Labor mobility is permitted between the domestic regions but not with the external region. The model shows that trade liberalization increases regional inequalities. Received: 4 March 1999 / Accepted: 17 February 2000