Agglomeration economies and urban manufacturing growth in the Northern Border Cities of Mexico

Abstract

The objective of this paper is to investigate the effect of agglomeration economies on the manufacturing sector of the northern border cities of Mexico. It is assumed that economic globalization is determining a trend towards the re-localization of manufacturing activities towards the northern border region. As a result, an increase in manufacturing and urban agglomeration is occuring in that region. The present research is based on the hypothesis that agglomeration has had a positive impact on urban manufacturing growth in the northern cities studied. An econometric model was established to relate agglomeration with manufacturing growth. The results of the study revealed that the externalities caused by industrial specialization among industries make up one of the explicative factors of manufacturing employment growh during 1988-1993. The study included control variables of total initial urban employment and total initial wage level for the 1988-1993 period. Finally, when including the effect of urban agglomeration, using the population as a proxy, a positive but small impact on manufacturing employment growth was found.