Determinants of industrial location: Kingdom of Yugoslavia in the interwar period

Abstract

What determines the location of industry? Using panel data econometrics and a new dataset on interwar Yugoslavia the predictions of three theories - Heckscher-Ohlin, New Economic Geography, and Path Dependence - are quantified and compared. Results show that all three theories mattered and that New Economic Geography forces played a dominant role. The consensus view that several theories can simultaneously explain the distribution of industrial activity is thus reinforced. The main novelty is that Path Dependence can affect the location of industry in addition to Heckscher-Ohlin and New Economic Geography forces.