Agglomeration or Dispersion? Industrial Specialization and Geographic Concentration in NAFTA

We analyze industrial specialization and geographic concentration patterns within the NAFTAregional integration area during 1988-2000 and examine the determinants of spatial concentration. Theresults indicate that NAFTA countries have become increasingly dissimilar over time. A changing spatialstructure of total NAFTA manufacturing is also evident. Manufacturing is increasingly relocating toMexico, which comes at the expense of the US. In addition, there is evidence of a general upward trendin the degree of relative geographic concentration of North American industries. Labor-intensive andlow-technology activities appear to be the most spatially concentrated industries, exhibiting a strongincreasing trend. Comparative advantage factors largely explain geographic concentration of industriesacross NAFTA countries, indicating the empirical relevance of traditional trade theory in the NAFTAcase.