Localization Economies, Vertical Organization and Trade / Gordon H. Hanson.

By:

Hanson, Gordon H

Contributor(s):

National Bureau of Economic Research

Material type: Text

TextSeries: Working Paper Series (National Bureau of Economic Research) ; no. w4744.Publication details: Cambridge, Mass. National Bureau of Economic Research 1994.Description: 1 online resource: illustrations (black and white)Subject(s):

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Abstract: This paper develops a model of regional production networks based on localization economies. I consider an industry with two activities: one with location-specific external economies, the other with constant returns. Under autarky, localization economies imply the formation of an industry center. Agglomeration drives up wages in the center, causing the constant returns activity to disperse to outlying regions. Trade recreates the regional production network on a global scale. I apply the model to data from the Mexican apparel industry. Estimation results on Mexico's pre- and post-trade regional apparel wage structure are consistent with localization economies. Implications for the North American Free Trade Agreement (NAFTA) are discussed.

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Item type	Home library	Collection	Call number	Status	Date due	Barcode	Item holds
Working Paper	Biblioteca Digital	Colección NBER	nber w4744 (Browse shelf(Opens below))	Not For Loan

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Previous	nber w4741 Downsizing and Productivity Growth: Myth or Reality? /	nber w4742 The Effects of Minimum Wages on Employment: Theory and Evidence from the US /	nber w4743 Information, Trading and Stock Returns: Lessons from Dually-Listed Securities /	nber w4744 Localization Economies, Vertical Organization and Trade /	nber w4745 Trade Politics and the Semiconductor Industry /	nber w4746 The Political-Economy of U.S. Automobile Protection /	nber w4747 The Political Economy of U.S. Export Subsidies for Wheat /	Next

May 1994.

This paper develops a model of regional production networks based on localization economies. I consider an industry with two activities: one with location-specific external economies, the other with constant returns. Under autarky, localization economies imply the formation of an industry center. Agglomeration drives up wages in the center, causing the constant returns activity to disperse to outlying regions. Trade recreates the regional production network on a global scale. I apply the model to data from the Mexican apparel industry. Estimation results on Mexico's pre- and post-trade regional apparel wage structure are consistent with localization economies. Implications for the North American Free Trade Agreement (NAFTA) are discussed.