Location of economic activities within countries : the case of Argentina an Mercosur members

Abstract

Motivated by the striking spatial reality of my country, Argentina, this thesis contributes to the body of research known as New Econornic Geography (NEG) and to the underdeveloped study of economic geography in Argentina and MERCOSUR. The dissertation aims at understanding how location and agglomeration of economic activities have occurred within the country ?and, in addition, inside the bloc? during the last decades of re-opening of the economy to intemational trade and regional integration. The introductory chapter lays out the motivation and objectives of this thesis, and presents its plan. Chapter 1 puts it into the perspective of the existing literature. It is a very complete and rather detailed revision of the NEC framework, focusing on theoretical and empirical contributions that address the impacts of trade costs changes on domestic economic landscapes. Chapter 2 is a motivating chapter that studies location within Argentina trying to find out stylized facts describing its evolution during the last decades. Specifically, it carnes out an explanatory spatial data analysis of the Argentinean economic landscape after MERCOSUR formation and shows that some spatial concentration of manufacturing activities may have happened within border and initially more industrialised territories within the country. Taking those stylized facts as an inspiration, Chapter 3 introduces a NEC model extended to deal with different `pre-integration` scenarios in order to evaluate the spatial effects that regional integration may provoke within a member country. The main findings are that preferential trade liberalisation tends to foster domestic divergence favouring location within the region with access advantage to the bloc and to make trade liberalisation desirable in terms of location to some regions which would have been, however, against unilateral liberalisation. Chapter 4 builds a model that, introducing some more realistic features such as comparative advantage differences across regions and intra-industry linkages, accounts for the role of transport costs and infrastructure in determining intra- country location and, hence, export performance. This setting contributes with the literature in allowing to separate the effects of transport infrastructure from those of production infrastructure and to split transport costs by edges, namely domestic transport costs vis-á-vis external ones. Opening the empirical part of this thesis, Chapter 5 assesses whether regional export performance in Argentina, between 2003 and 2005, can be explained based on the theoretical framework developed in the previous chapter. In this regard, the chapter estimates a model-based gravity equation that highlights the role of transport costs and production infrastructure. The main finding suggests infrastructure enhancement and/or internal transport-costs reductions should be adequate policies in order to boost regional export performance. Chapter 6 accomplishes a related assessment for MERCOSUR regions. Proposing a more policy-oriented exercise, it attemps to identify where the resources of the Fondo de Convergencia Estructural del MERCOSUR (FOCEM) for infrastructure investment should be directed to. The main conclusion is that improving physical infrastructure in less advantaged regions within Paraguay and Uruguay would help fostering exports of certain competitive products. Finally, the concluding chapter sumarises the contributions of this thesis and presents potentially interesting topics related to the subject of the thesis that, having been put aside, will be among the objectives of future research.