NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Localization Economies, Vertical Organization and Trade

Gordon H. Hanson

NBER Working Paper No. 4744*
Issued in May 1994
NBER Program(s):   ITI

This paper develops a model of regional production networks based on localization economies. I consider an industry with two activities: one with location-specific external economies, the other with constant returns. Under autarky, localization economies imply the formation of an industry center. Agglomeration drives up wages in the center, causing the constant returns activity to disperse to outlying regions. Trade recreates the regional production network on a global scale. I apply the model to data from the Mexican apparel industry. Estimation results on Mexico's pre- and post-trade regional apparel wage structure are consistent with localization economies. Implications for the North American Free Trade Agreement (NAFTA) are discussed.

*Published: American Economic Review, vol.86, no.5, December 1996, pp.1266-1278.

You may purchase this paper on-line in .pdf format from SSRN.com ($5) for electronic delivery.

Information about Free Papers

You should expect a free download if you are a subscriber, a corporate associate of the NBER, a journalist, a site with your domain name in ".GOV", or a resident of nearly any developing country or transition economy.

If you usually get free papers at work/university but do not at home, you can either connect to your work VPN or proxy (if any) or elect to have a link to the paper emailed to your work email address below. The email address must be connected to a subscribing college, university, or other subscribing institution. Gmail and other free email addresses will not have access.

E-mail:

Machine-readable bibliographic record - MARC, RIS, BibTeX

 
Publications
Activities
Meetings
Data
People
About

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