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Impact of trade liberalization on the location of firms: NAFTA and the automobile industry

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  • Ho Yeon Kim

Abstract

This study investigates the short-term impact of NAFTA on automobile production patterns by constructing a multiregional monopolistic-competition model, which accommodates three types of vehicle assembler and two classes of vertically linked parts supplier. By revealing the changes in potential profits of the firms in each region, the partial equilibrium model allows us to identify the types of automobile that will most likely be produced in Mexico as a result of reductions in tariffs and non-tariff barriers. The simulation results indicate that as trade barriers fall, ceteris paribus, producers of small cars will find it more desirable than large-car manufacturers to operate in Mexico. Recent developments seem to support the results of this model. Copyright Springer-Verlag Berlin Heidelberg 2003

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  • Ho Yeon Kim, 2003. "Impact of trade liberalization on the location of firms: NAFTA and the automobile industry," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 37(1), pages 149-173, February.
    • Handle: RePEc:spr:anresc:v:37:y:2003:i:1:p:149-173
    DOI: 10.1007/s001680200102
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    Cited by:

    1. Ho Kim, 2005. "The Locational and Functional Behavior of U.S. Autoparts Suppliers," Small Business Economics, Springer, vol. 24(1), pages 79-95, February.

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