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U.S.-Mexico Integration and Regional Economies: Evidence from Border-City Pairs

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  • Hanson, Gordon H.

Abstract

In this paper, I examine whether U.S.-Mexico economic integration is causing economic activity in the United States to relocate to the U.S.-Mexico border region. The approach I take is to study U.S.- Mexico border-city pairs. Border cities are natural laboratories in which to study the effects of trade policy. To the extent transport costs are the main non-trade policy barriers to trade, we expect regional economic integration to cause economic activity in border cities to expand. I exploit the fact that U.S.-Mexico integration has effectively been underway since the early 1980s. A large portion of U.S.-Mexico trade is the result of U.S. multinationals establishing export assembly operations in Mexico. Mexico's export assembly plants are concentrated in cities on the U.S.-Mexico border. The question I ask is whether the growth of export manufacturing in Mexican border cities increases the demand for goods and services produced in neighboring U.S. border cities. I estimate demand links between Mexican and U.S. border cities using data on the six largest border- city pairs over the period 1975-1989. The results indicate that the growth of export manufacturing in Mexico can account for a substantial portion of employment growth, in general, and of manufacturing employment growth, in particular, in U.S. border cities over the sample period. This suggests that NAFTA will contribute to the formation of binational regional production centers along the U.S.- Mexico border.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Urban Economics.

Volume (Year): 50 (2001)
Issue (Month): 2 (September)
Pages: 259-287

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Handle: RePEc:eee:juecon:v:50:y:2001:i:2:p:259-287

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Web page: http://www.elsevier.com/locate/inca/622905

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  1. Krugman, Paul & Venables, Anthony J., 1996. "Integration, specialization, and adjustment," European Economic Review, Elsevier, Elsevier, vol. 40(3-5), pages 959-967, April.
  2. George J. Borjas & Stephen G. Bronars & Stephen J. Trejo, 1992. "Self-Selection and Internal Migration in the United States," NBER Working Papers 4002, National Bureau of Economic Research, Inc.
  3. Brown, Drusilla K & Deardorff, Alan V & Stern, Robert M, 1992. "North American Integration," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 102(415), pages 1507-18, November.
  4. P Krugman & Anthony J. Venables, 1993. "Intergration," CEP Discussion Papers, Centre for Economic Performance, LSE dp0172, Centre for Economic Performance, LSE.
  5. Krugman, Paul & Elizondo, Raul Livas, 1996. "Trade policy and the Third World metropolis," Journal of Development Economics, Elsevier, Elsevier, vol. 49(1), pages 137-150, April.
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Citations

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Cited by:
  1. Åslund, Olof & Engdahl, Mattias, 2013. "Open borders, transport links and local labor markets," Working Paper Series, Uppsala University, Department of Economics 2013:9, Uppsala University, Department of Economics.
  2. Marius Brülhart, . "The Spatial Effects of Trade Openness: A Survey," Discussion Papers, University of Nottingham, GEP 10/10, University of Nottingham, GEP.
  3. Nicole Madariaga & Sylvie Montout & Patrice Ollivaud, 2004. "Regional convergence, trade liberalization and agglomeration of activities : an analysis of NAFTA and MERCOSUR cases," Cahiers de la Maison des Sciences Economiques, Université Panthéon-Sorbonne (Paris 1) bla04069, Université Panthéon-Sorbonne (Paris 1).
  4. Kristof Dascher & Alexander Haupt, 2008. "The Political Economy of Regional Integration Projects at Borders where Rich and Poor Meet: The Role of Cross-Border Shopping and Community Sorting," CESifo Working Paper Series, CESifo Group Munich 2280, CESifo Group Munich.
  5. Peter Huber, 2008. "Did previous EU-enlargements change the regional distribution of production? An empirical analysis of three enlargement episodes," International Journal of Public Policy, Inderscience Enterprises Ltd, Inderscience Enterprises Ltd, vol. 3(3/4), pages 187-206.
  6. Gordon H. Hanson, 1995. "The Effects of Offshore Assembly on Industry Location: Evidence from U.S. Border Cities," NBER Working Papers 5400, National Bureau of Economic Research, Inc.
  7. Baylis, Kathy & Garduño-Rivera, Rafael & Piras, Gianfranco, 2012. "The distributional effects of NAFTA in Mexico: Evidence from a panel of municipalities," Regional Science and Urban Economics, Elsevier, Elsevier, vol. 42(1-2), pages 286-302.
  8. Chintal Desai & Andre Mollick, 2014. "On Consumer Credit Outcomes in the U.S.-Mexico Border Region," Journal of Financial Services Research, Springer, Springer, vol. 45(1), pages 91-115, February.
  9. Thomas M. Fullerton Jr & Azucena González Monzón & Adam G. Walke, 2013. "Physical Infrastructure and Economic Growth in El Paso," Economic Development Quarterly, , , vol. 27(4), pages 363-373, November.
  10. repec:hal:wpaper:halshs-00586834 is not listed on IDEAS
  11. Harrison, Ann & Rodríguez-Clare, Andrés, 2010. "Trade, Foreign Investment, and Industrial Policy for Developing Countries," Handbook of Development Economics, Elsevier, Elsevier.
  12. Miren Lafourcade & Elisenda Paluzie Hernandez, 2005. "European Integration, FDI and the Internal Geography of Trade: Evidence from Western European Border Regions," Working Papers in Economics, Universitat de Barcelona. Espai de Recerca en Economia 145, Universitat de Barcelona. Espai de Recerca en Economia.
  13. Engel, Dirk, 1999. "Der Einfluß der Grenznähe auf die Standortwahl von Unternehmen: Eine theoretische Analyse und empirische Befunde für Ostdeutschland," ZEW Discussion Papers, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research 99-18, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  14. Hongbin Li & Lei Li & Binzhen Wu & Yanyan Xiong, 2012. "The End of Cheap Chinese Labor," Journal of Economic Perspectives, American Economic Association, American Economic Association, vol. 26(4), pages 57-74, Fall.
  15. repec:hal:journl:halshs-00096821 is not listed on IDEAS
  16. Andrzej Cieslik, Bartlomiej Rokicki, 2013. "Regional structure of wages in Poland over the period 1995-2009," Equilibrium, Uniwersytet Mikolaja Kopernika, Uniwersytet Mikolaja Kopernika, vol. 8, pages 65-78.
  17. Yushi Yoshida & Hiro Ito, 2005. "Distance on FDI and Trade: The Roles of China and Mexico in the Pacific Basin," Discussion Papers, Kyushu Sangyo University, Faculty of Economics 24, Kyushu Sangyo University, Faculty of Economics.

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