NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Regional Adjustment to Trade Liberalization

Gordon H. Hanson

NBER Working Paper No. 4713
Issued in April 1994
NBER Program(s):   ITI

In this paper, I study the effect of economic integration with the United States on state-industry employment growth in Mexico. I disentangle the effects of two opposing forces on regional labor demand: transport-cost considerations, which, all else equal, encourage firms to relocate their activities to regions with relatively good access to foreign markets, and agglomeration economies, which, all else equal, reinforce the pre-trade pattern of industry location. I find that trade liberalization has strong effects on industry location. Consistent with the transport-costs hypothesis, post-trade employment growth is higher in state-industries that are relatively close to the United States. The results on agglomeration effects are mixed. Employment growth is higher where agglomeration in upstream and downstream industries is higher, but not where the agglomeration of firms in the same industry is higher. The results suggest trade liberalization has contributed to the decomposition of the manufacturing belt in and around Mexico City and the formation of broadly specialized industry centers located in northern Mexico, relatively close to the United States. The North American Free Trade Agreement is likely to reinforce these movements.

download in pdf format
   (704 K)

email paper

This paper is available as PDF (704 K) or via email.

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w4713

Published: Regional Science and Urban Economics, Vol. 28 (1998): 419-444. citation courtesy of

Users who downloaded this paper also downloaded these:
Elizondo and Krugman w4238 Trade Policy and the Third World Metropolis
Hanson w6587 North American Economic Integration and Industry Location
Hanson w5425 U.S.-Mexico Integration and Regional Economies: Evidence from Border- City Pairs
Hanson w6429 Market Potential, Increasing Returns, and Geographic Concentration
Hanson w4744 Localization Economies, Vertical Organization and Trade
 
Publications
Activities
Meetings
NBER Videos
Data
People
About

Support
National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us