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NearshoreABM: production network formation under infrastructure constraints and financial frictions
Alejandro Platas López | Published Thursday, August 20, 2026NearshoreABM simulates whether a region captures the production linkages that nearshoring makes available, or fails to capture them because physical infrastructure and credit supply bind first.
The model runs over the 32 Mexican states at quarterly frequency. Multinational anchor firms decide whether to enter and where to locate, following Melitz selection on heterogeneous productivity under trade-policy uncertainty. Domestic supplier firms decide whether to formalise and whether to invest in quality, and may or may not obtain a contract with an anchor. A banking sector allocates a finite regional credit supply according to observed default risk, serving anchor firms before suppliers.
Electricity and water capacity enter production as non-linear congestion penalties with an engineering-based threshold, so the response of output to demand growth is discontinuous rather than proportional: below the threshold there is no penalty at all, between threshold and capacity the penalty grows quadratically, and above capacity it decays exponentially. Congestion is rivalrous within the quarter, which makes the order of production economically meaningful rather than incidental.
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