TY  - JOUR
AU  - Hanson,Gordon H.
TI  - Regional Adjustment to Trade Liberalization
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 4713
PY  - 1994
Y2  - April 1994
UR  - http://www.nber.org/papers/w4713
L1  - http://www.nber.org/papers/w4713.pdf
N1  - Author contact info:
Gordon H. Hanson
IR/PS 0519
University of California, San Diego
9500 Gilman Drive
La Jolla, CA  92093-0519
Tel: 858/822-5087
Fax: 858/534-3939
E-Mail: gohanson@ucsd.edu
AB  - 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.
ER  -