The Effects of Offshore Assembly on Industry Location: Evidence from U.S. Border Cities
AbstractIn this paper, I examine how the growth of offshore assembly in Mexico has affected manufacturing activity in U.S. border cities. Under the offshore assembly provision of the U.S. tariff schedule, goods that are assembled abroad using U.S.-manufactured components receive preferential tariff treatment upon reentry into the United States. Foreign assembly plants in Mexico, most of which are owned by U.S.-based multinationals, are overwhelmingly concentrated along the border with the United States. I combine data on employment and earnings in two-digit manufacturing industries for U.S. border cities with data on employment and value added in foreign assembly plants in the corresponding Mexican border cities. I study the effect that the expansion of offshore assembly in a Mexican border city has on durable and nondurable manufacturing activities in the neighboring U.S. border city. The estimation results show strong support for the hypothesis that the growth of export assembly in Mexico increases the demand for manufacturing goods produced in U.S. border cities. Implications of the North American Free Trade Agreement for the U.S.-Mexico border region are discussed.
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Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 5400.
Date of creation: Dec 1995
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Publication status: published as Gordon H. Hanson. "The Effects of Offshore Assembly on Industry Location: Evidence from U.S. Border Cities," in Robert C. Feenstra, editor, "The Effects of U.S. Trade Protection and Promotion Policies" University of Chicago Press (1997)
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Other versions of this item:
- Gordon H. Hanson, 1997. "The Effects of Offshore Assembly on Industry Location: Evidence from U.S. Border Cities," NBER Chapters, in: The Effects of U.S. Trade Protection and Promotion Policies, pages 297-322 National Bureau of Economic Research, Inc.
- F15 - International Economics - - Trade - - - Economic Integration
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