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What Explains the International Location of Industry? -The Case of Clothing

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  • Tengstam, Sven

    () (Department of Economics, School of Business, Economics and Law, Göteborg University)

Abstract

The clothing sector has been a driver of diversification and growth for countries that have graduated into middle income. Using a partial adjustment panel data model for 61 countries 1975-2000, we investigate the global international location of clothing production by using a combination of variables suggested by the Heckscher-Ohlin theory and the New Economic Geography (NEG) theory. Our Blundell-Bond system estimator results confirm that the NEG variables do help explain the location of the clothing industry, and point to that convergence is not as inevitable as sometimes assumed. We find that closeness to various intermediates such as low-cost labor and textile production has strong effects on output. Factor endowments and closeness to the world market have inverted U-shaped effects. This is expected since above a certain level several other sectors benefit even more from closeness and factor endowments, driving resources away from the clothing industry.

Suggested Citation

  • Tengstam, Sven, 2009. "What Explains the International Location of Industry? -The Case of Clothing," Working Papers in Economics 423, University of Gothenburg, Department of Economics.
  • Handle: RePEc:hhs:gunwpe:0423
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    File URL: http://hdl.handle.net/2077/21651
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    Keywords

    global clothing industry; new economic geography; comparative advantages; industrial agglomeration;

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L67 - Industrial Organization - - Industry Studies: Manufacturing - - - Other Consumer Nondurables: Clothing, Textiles, Shoes, and Leather Goods; Household Goods; Sports Equipment
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)
    • R30 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - General

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