Regional Integration and Internal Economic Geography - an Empirical Evaluation with Portuguese Data

The effects of the reduction of international trade costs on the internal economic geography of each country have been very scarcely studied in empirical terms. With data for Portugal since its adhesion to the European Union, we test the hypotheses put forward by the new economic geography concerning the evolution of the spatial concentration of the manufacturing industry as a whole and of the different industries individually considered. We consider alternative concentration concepts and data disaggregated both at the level of NUTS III (28 regions) and concelhos (275 regions). Results show a dispersion of total industry as a consequence of the reduction of international trade costs, in line with Krugman and Elizondo (1996)’s prediction. Individual industries show a similar tendency, in contrast with the theoretical hypothesis.