Regional Specialization in the Colombian Manufacturing Industry: A New Economic Geography Approach

Abstract

The New Trade Theory(NTT) and New Economic Geography (NEG) explain production specialization of countries or regions by benefits stemming from economies of scale, which are available even when trade partners are in similar economic conditions and with even resource endowments. Conversely, the traditional trade theory relies on comparative advantages that emerge from differences in technology and costs. Recently, some authors propose to combine both theories. After discussing the theoretical background, the paper presents an empirical analysis based on panel data which tries to explain the branch and regional structure of manufacturing industry in Colombia. The results confirm the importance of natural advantage, resource endowments, transport costs and the access to national and international industrial circuits in shaping the spatial structure of manufacturing and its development trends.