This paper analyses industrial policy in a high wage open economy hosting an agglomeration consisting of vertically linked upstream and downstram firms. We show that optimal policy towards upstream in-dustries typically di¤er from the optimal policy towards downstream industries.

We test for internal and external economies of scale in European manufacturing employing a more disaggregated data set than what has been used in earlier analyses, and aim to separate externalities from common business cycle effects. Fifteen European manufacturing industries in Germany, France,...

The occurence of agglomerations raises several questions: How come that economic activity is agglomerated instead of evenly spread out across space? What implications do agglomerations have for welfare (earnings, employment, etc.) and economic policy? How do increased globalisation and...

The paper uses a full-scale CGE-model -calibrated on 1992 data- to investigate the effects of European integration on the location of industrial production. Our results reveal large differences among individual industries.