Constant unit manufacturing costs are lower (higher) in high wage North when inputs are (i) tradeable, (ii) country-specific and (iii) the elasticity of substitution between them is below (above) one. A two-country model of firm entry/location is considered.

Author's abstract. I exhibit a simple and realistic feature of technology and trade costs that influences the partition of manufacturing between the North and South depending on the degree of substitutability of internationally traded inputs in production. <p>In the presence of higher wages in the...</p>