Trade and Economic Geography: The Impact of EEC Accession on the UK

We combine establishment-level employment data with trade data by port to examine the impact of accession to the European Economic Community on the spatial distribution of UK manufacturing. We test the predictions from economic geography models of how external trade affects the spatial distribution of employment. We treat accession as a natural experiment which helps mitigate problems of endogeneity. Our results suggest that accession changed the country composition of trade and via the port composition induced an exogenous shock to different locations. In line with theory, we find that better access to export markets and intermediate goods increase employment while increased import competition decreases employment.