This paper presents empirical tests of the hypothesis that firms cluster geographically due to Marshallian localization economies. The hypothesis implies that changes in employment in localized industries should be more closely related within the regions than across regions. We develop an...

This paper analyses the effects of regional integration on the location of increasing-returns industry and the resulting pattern of trade. Theoretically, it is shown that regional integration may initially lead to a dispersion of industry inside the customs union. Below a certain threshold of...