Trade liberalisation and its impact on regional development: theoretical and experimental studies

Abstract

The existing theoretical and empirical literature focusing on interconnections between international trade, trade liberalisation, and economic development provides ample evidence pertaining to nations and industries. However, another dimension of trade liberalisation - the assessment of the level of national or regional development — needs further research. This article sets out to analyse theoretical and empirical research works focusing on a varied spatial effect of expanding international trade on national economies and identifies factors affecting regional development. Firstly, it is established that expanding international trade is a more important source of growth for the regions of developing countries than for those of developed ones. Secondly, in terms of the regional impact of liberalisation, expanding trade has the most positive effect on border regions and those associated with lower cost of access to international markets. Thirdly, the analysis of regions having different industrial specialisatio n suggests that expanding international trade contributes to higher growth rates in the regions, having globally competitive national industries. The conclusions presented in this article can be used for formulating an industrial policy and a regional development policy for both small export-oriented economies, namely, the Baltic Sea states, and larger economies having uneven distribution of production resources.