Location of the productive activity in Portugal and Spain : a research note

• Autor(a) principal: Pontes, José Pedro
• Data de Publicação: 2001
• Tipo de documento: Artigo
• Idioma: eng
• Título da fonte: Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos)
• Texto Completo: http://hdl.handle.net/10400.5/25814
• topic: Economic Integration; Location; Portugal; Spain; Integração económica; Localização; Portugal; Espanha

Trade and direct investment flows between the two 1berian countries have risen dramatically after the adhesion of both countries to the European Community in 1986 so that Spain is currently the main economic partner of Portugal. However the relation between the two countries is asymmetrical. The trade deficit of Portugal towards Spain is very high and Spain remains a most preferred location for the productive activity o fmultinational firms. This asymmetry can be assigned to the core-periphery nature of the relation between the two countries, because Spain is a larger market, it is more developed and is nearer than Portugal to the core of the European market. However this is not the unique explanation because Portugal is also peripheral with relation to the other members of the European Union (with the exception of Greece) and the trade disadvantage is much smaller with them. The explanation seems to follow from the combination of two factors. First, the comparative advantages of Portugal with relation to Spain seem modest in comparison to the advantages that it enjoys with other members of the EU Productive specializations and wage levels are more similar with Spain. Second, the decline of trade costs following the European integration was more drastic between the Iberian countries than between Portugal and the other countries of the EU due to geographic proximity, to linguistic similarity and to the fact that protectionism between the two lberian countries was more severe. A numerical example in the spirit of the "New Economic Geography" approach is used to make this explanation more systematic.