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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. P Krugman & Anthony J. Venables, 1993. "Intergration," CEP Discussion Papers dp0172, Centre for Economic Performance, LSE.
  2. Borjas, George J. & Bronars, Stephen G. & Trejo, Stephen J., 1992. "Self-selection and internal migration in the United States," Journal of Urban Economics, Elsevier, vol. 32(2), pages 159-185, September.
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Cited by:
  1. 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.
  2. Ã…slund, Olof & Engdahl, Mattias, 2013. "Open borders, transport links and local labor markets," Working Paper Series, IFAU - Institute for Evaluation of Labour Market and Education Policy 2013:11, IFAU - Institute for Evaluation of Labour Market and Education Policy.
  3. Andrzej Cieslik, Bartlomiej Rokicki, 2013. "Regional structure of wages in Poland over the period 1995-2009," Equilibrium, Uniwersytet Mikolaja Kopernika, vol. 8, pages 65-78.
  4. Dascher, Kristof & Haupt, Alexander, 2011. "The political economy of regional integration projects at borders where poor and rich meet: The role of cross-border shopping and community sorting," Journal of Urban Economics, Elsevier, vol. 69(1), pages 148-164, January.
  5. 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.
  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. Peter Huber, 2007. "Did Previous EU Enlargements Change the Regional Distribution of Production? An Empirical Analysis of Three Enlargement Episodes," WIFO Working Papers, WIFO 283, WIFO.
  9. repec:hal:journl:halshs-00096821 is not listed on IDEAS
  10. Marius Brülhart, . "The Spatial Effects of Trade Openness: A Survey," Discussion Papers 10/10, University of Nottingham, GEP.
  11. 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.
  12. Harrison, Ann & Rodríguez-Clare, Andrés, 2010. "Trade, Foreign Investment, and Industrial Policy for Developing Countries," Handbook of Development Economics, Elsevier, Elsevier.
  13. repec:hal:wpaper:halshs-00586834 is not listed on IDEAS
  14. 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).
  15. Engel, Dirk, 1999. "Der Einfluß der Grenznähe auf die Standortwahl von Unternehmen: Eine theoretische Analyse und empirische Befunde für Ostdeutschland," ZEW Discussion Papers 99-18, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  16. 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 145, Universitat de Barcelona. Espai de Recerca en Economia.
  17. Hongbin Li & Lei Li & Binzhen Wu & Yanyan Xiong, 2012. "The End of Cheap Chinese Labor," Journal of Economic Perspectives, American Economic Association, vol. 26(4), pages 57-74, Fall.

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