The Effects of Offshore Assembly on Industry Location: Evidence from U.S. Border Cities

Gordon Hanson

No 5400, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: In 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.

JEL-codes: F15 (search for similar items in EconPapers)
Date: 1995-12
Note: ITI
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

Published as The Effects of US Trade Pretection and Promotion Policies, R. Feenstra, ed. , pp. 297-32, (Chicago: University of Chicago Press, 1997).
Published as Hanson, Gordon H. "U.S.-Mexico Integration And Regional Economies: Evidence From Border-City Pairs," Journal of Urban Economics, 2001, v50(2,Sep), 259-287.
Published as The Effects of Offshore Assembly on Industry Location: Evidence from U.S. Border Cities , Gordon H. Hanson. in The Effects of US Trade Protection and Promotion Policies , Feenstra. 1997

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