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Journal of Economic Integration 2000 June;15(2) :294-313.
DOI: https://doi.org/10.11130/jei.2000.15.2.294
Firm Location when Countries Differ in Infrastructures or Incomes
Ana M. Martín-Arroyuelos and 
José M. Usategui 
Universidad del País Vasco (UPV-EHU)
Copyright ©2000 Journal of Economic Integration
ABSTRACT
This paper analyzes, in a linear market with two adjacent countries, how firm location and optimal plant size depend on differences in the quality of infrastructures and income levels between countries. The study considers also how a free trade agreement may change, in this context where geography is made explicit, the country where a firm locates and discusses when variations in infrastructures or incomes provide incentives for firm delocation. Among the results we obtain that an increase in income in the country with lower income may induce a firm to locate in the other country and that an increase in the difference in qualities of infrastructures between countries or a free trade agreement may move the optimal location of a firm from the country with worst infrastructure to the country with better infrastructure.
Keywords: firm location | infrastructure | income differences | linear market | economic integration
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Firm Location, Trade and Economic Integration  2002 April;17(4)
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