Advanced Search
MyIDEAS: Login

Is the downturn in maquiladora employment cyclical or structural?

Contents:

Author Info

  • Kusum Mundra
  • Jim Gerber

Abstract

Purpose – The purpose of this paper is to examine the effect of cyclical and structural factors on the decline of maquiladora employment. In addition to the US industrial production, the cyclical factors examined are relative Mexican US wages, the Mexican exchange rate relative to the US, and US foreign direct investment (FDI). The paper also explores the effect of competition from China, a structural effect, on the decline of maquiladora employment. Design/methodology/approach – A vector error correction (VEC) model of maquila employment for the period 1980-2002 is estimated and controlled for US industrial production, FDI flows, relative wage rates of Mexico and USA. To empirically investigate the structural differences of lower costs in Mexico vs China a seemingly unrelated regression (SUR) is estimated across three sectors: apparel and textile, electronic, and transportation. Findings – From the VEC maquila employment model it is found that, in addition to the strong effect of US industrial production on the maquila employment, there exist significant short- and long-run effects of Mexico US exchange rate and Mexican wages relative to USA on maquila employment. The sectoral (SUR) model shows that competition from China has a bigger adverse effect on relatively labor-intensive good and commodities which are cheaper to transport (such as textiles) over more bulky transportation goods. The transportation sector has a location advantage, though is more sensitive to the cyclical fluctuations in the US industrial production. Research limitations/implications – Future research should investigate the role of USA and world FDI exclusively into Mexico and maquiladora sector. Practical implications – Well designed controls, output choice, and location advantage are important for the growth and viability of small scale manufacturing industries. Originality/value – The VEC model for maquila employment and the SUR framework across main maquila sectors is the first to account for wages, exchange rate, and FDI in addition to the US industrial production in understanding the decline in maquiladora employment.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.emeraldinsight.com/Insight/viewContentItem.do;jsessionid=55655697980354FEB1EA78DE97C5280D?contentType=Article&contentId=1858375
Download Restriction: Cannot be freely downloaded

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Bibliographic Info

Article provided by Emerald Group Publishing in its journal Indian Growth and Development Review.

Volume (Year): 3 (2010)
Issue (Month): 1 ( April)
Pages: 21-35

as in new window
Handle: RePEc:eme:igdrpp:v:3:y:2010:i:1:p:21-35

Contact details of provider:
Web page: http://www.emeraldinsight.com

Order Information:
Postal: Emerald Group Publishing, Howard House, Wagon Lane, Bingley, BD16 1WA, UK
Email:
Web: http://www.emeraldinsight.com/igdr.htm

Related research

Keywords: China; Exchange rates; Maquiladora production; Mexico; Pay; United States of America;

References

No references listed on IDEAS
You can help add them by filling out this form.

Citations

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:eme:igdrpp:v:3:y:2010:i:1:p:21-35. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Jade Turvey).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.