Trade liberalization and welfare: Differentiated-good versus homogeneous-good markets

► We examine the effects of liberalization on industrial location and national welfare. ► We incorporate trade costs in both differentiated-good and homogeneous-good sectors. ► The impacts of liberalization in these sectors on welfare are different from each other. ► If an industry is liberalized while the other is protected, a conflict might occur. ► Appropriate liberalization in both sectors is effective to alleviate such a conflict.