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Agglomeration and the location choice of foreign direct investment: new evidence from manufacturing FDI in Mexico

  • Jacob A. Jordaan

    (Free University of Amsterdam)

In this paper, I estimate conditional logit location models to identify the regional characteristics that influenced the location choice of the large influx of manufacturing FDI into Mexico that occurred in the second half of the 1990s following the creation of NAFTA. The main findings of the analysis are three-fold. First, regional demand, labor costs, labor quality, agglomeration economies and regional distance to Mexico City and the US are all important location factors. Second, findings indicate that the location decision of export-oriented firms is not affected by regional demand. Third, I find evidence that agglomeration economies have a spatial dimension.

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File URL: http://codex.colmex.mx:8991/exlibris/aleph/a18_1/apache_media/AH433HDQATSBY3C4S6EJFEJXVD9RCB.pdf
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Article provided by El Colegio de México, Centro de Estudios Económicos in its journal Estudios Económicos.

Volume (Year): 27 (2012)
Issue (Month): 1 ()
Pages: 61-97

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Handle: RePEc:emx:esteco:v:27:y:2012:i:1:p:61-97
Contact details of provider: Web page: http://www.colmex.mx/centros/cee/
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  1. Jacob Jordaan & Eduardo Rodriguez-Oreggia, 2012. "Regional growth in Mexico under trade liberalisation: how important are agglomeration and FDI?," The Annals of Regional Science, Springer, vol. 48(1), pages 179-202, February.
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  8. Head, C. Keith & Ries, John C. & Swenson, Deborah L., 1999. "Attracting foreign manufacturing: Investment promotion and agglomeration," Regional Science and Urban Economics, Elsevier, vol. 29(2), pages 197-218, March.
  9. Head, Keith & Ries, John & Swenson, Deborah, 1995. "Agglomeration benefits and location choice: Evidence from Japanese manufacturing investments in the United States," Journal of International Economics, Elsevier, vol. 38(3-4), pages 223-247, May.
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  11. Hanson, Gordon H., 1998. "Regional adjustment to trade liberalization," Regional Science and Urban Economics, Elsevier, vol. 28(4), pages 419-444, July.
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  16. Alfredo Cuevas & Miguel Messmacher & Alejandro Werner, 2005. "Foreign Direct Investment in Mexico since the Approval of," World Bank Economic Review, World Bank Group, vol. 19(3), pages 473-488.
  17. Blomstrom, Magnus & Persson, Hakan, 1983. "Foreign investment and spillover efficiency in an underdeveloped economy: Evidence from the Mexican manufacturing industry," World Development, Elsevier, vol. 11(6), pages 493-501, June.
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  20. Christian Hilber & Ioan Voicu, 2010. "Agglomeration Economies and the Location of Foreign Direct Investment: Empirical Evidence from Romania," Regional Studies, Taylor & Francis Journals, vol. 44(3), pages 355-371.
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  22. Paulo Guimar�es & Richard C. Lindrooth, 2007. "Controlling for overdispersion in grouped conditional logit models: A computationally simple application of Dirichlet-multinomial regression," Econometrics Journal, Royal Economic Society, vol. 10(2), pages 439-452, 07.
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  24. Jordaan, Jacob A. & Sanchez-Reaza, Javier, 2006. "Trade Liberalization and Location: Empirical Evidence for Mexican Manufacturing Industries," The Review of Regional Studies, Southern Regional Science Association, vol. 36(3), pages 279-303.
  25. Cheng, Leonard K. & Kwan, Yum K., 2000. "What are the determinants of the location of foreign direct investment? The Chinese experience," Journal of International Economics, Elsevier, vol. 51(2), pages 379-400, August.
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