Proximity effects and labour specialization transitions in Mexico: a spatial Markov chain analysis

This paper investigates the extent to which the manufacturing industries in Mexico exert positive proximity effects on neighbouring states when transitioning to higher levels of labour specialization. By using discrete and spatial Markov chains models, probability transitions of labour specialization and its associated proximate effect to leading states - in terms of either a higher level of specialization or technological intensity - are estimated. The results support the existence of states' positive (negative) proximity effects on achieving a higher (lower) labour specialization as neighbour states increase (decrease) either their labour specialization or technology intensity level.