Economic integration and industrial location: the case of Spain before World War I

During the second half of the 19th century, Spain's industrial geography underwent radical change. In Jordi Nadal's words, Catalonia became Spain's factory. This gradual geographical concentration of industrial activity coincided with another process: the integration of the Spanish economy. The purpose of this paper is to analyse the determinants of the localization of industrial activity in Spain during the second half of the 19th century and the effects of economic integration on Spain's industrial geography. To this end, we first review the historical analysis of these changes and present evidence on the process of market integration and industrial concentration by constructing a range of measures of industrial specialization and geographical concentration. Second, we perform an econometric analysis of the determinants of industrial location at two points in time, 1856 and 1893, sing spatial econometrics techniques. Our results are consistent with the hypotheses of trade theories. During the second half of the 19th century, Spain became an integrated economy and industrial activity was concentrated in a limited number of territories characterized by a comparative advantage in h man capital endowments, a favorable geo-economic position, and initial specialization in sectors showing scale economies.