This paper analyses economic integration between two economies; one central, with a large local market, and the other peripheral, with a small local market. Each economy has an imperfectly competitive manufacturing sector. Trade liberalization creates a strong incentive for the imperfectly...

The paper considers a model in which an imperfectly competitive manufacturing sector produces goods which are used both for final consumption and as intermediates. Intermediate usage creates cost and demand linkages between firms and a tendency for manufacturing agglomeration. How does...