Trade shocks and industrial location2003

"This paper combines detailed production data (from the ARD) with international trade data by port to examine the impact of accession to the EEC on the location of UK manufacturing. The paper has two main objectives. The first is to test the implications of models of economic geography for the location of economic activity in a developed economy subject to a significant trade shock. The second is to shed new light on the implications of EEC accession for the UK economy. Our results suggest that accession did eventually encourage UK manufacturing to relocate towards the South-East but that within the aggregate some industries retreated north-westwards in the face of increased import competition. Methodologically we have found that proximity to the ports through which trade occurs is a proxy for export market access and import competition and thus helps to explain industrial location. We have also found that the port-composition of UK trade is partly determined by the country-composition of trade. UK accession changed the country-composition of UK trade and via the port-composition induced an exogenous shock to the relative degrees of export market access and import competition in different UK locations. Our results show that employment responded as predicted to these shocks"--London School of Economics web site.