The impact of the reform of international trade on urban and rural change

Trade has an impact on the spatial pattern of production, employment and residence in countries, which can be altered by changes to policy. This Working Paper explains the ways in which trade policy and rural– urban balance may be linked, and suggests areas in which further enquiry may be particularly fruitful. Trade theory identifies the factors that endow a country with a comparative advantage in producing types of goods that are likely to have distinct spatial associations. The new economic geography addresses more directly the causes and consequences of the spatial distribution of activity. There is some empirical evidence regarding the links between the liberalisation of a country’s trade regime and the rate of urbanisation. It is also possible to identify major changes in trade policy that are likely to have broad impacts on rural–urban balance. Stylised country groups can be identified according to the ways in which their rural–urban balance will be affected by changes to their partners’ trade policies. There are two priorities for further research into the spatial effects of trade change in specific contexts. One is to identify the countries where imminent trade policy change is most likely to have implications for rural–urban balance, and to select from this group those for which adequate data are available. The other is to measure the extent of geographical mobility and spatial redistribution in a sub-set of these countries. Keywords: urban-rural balance; trade policy; New Economic Geography