Diffusion of municipal manufacturing specialization: Evidence from Mexico’s municipalities

Abstract We estimate contagion rates in the manufacturing sector across Mexico’s municipalities, conceptualized as the diffusion of municipal manufacturing specialization and reflected in the regional transmission of industrial expertise, technological capabilities, and skilled labor practices. High contagion rates indicate that specialized manufacturing capabilities are rapidly adopted by other regions. This can lead to the development of industrial clusters where knowledge sharing and advanced techniques drive economic growth. To analyze this issue, we begin by determining the specialization of Mexican municipalities in different manufacturing industry groups and study the diffusion of specialization over time by state and industry group in the periods 2004–2009, 2009–2014, and 2014–2019. JEL Classification: O14; O33.