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Offshoring and volatility: more evidence from Mexico's maquiladora industry

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  • Roberto A. Coronado

Abstract

In recent papers, Bergin, Feenstra, and Hanson (2007 and 2009, hereafter BFH) analyze the impact that offshoring has in employment and output volatility, particularly on the Mexican maquiladora industry. Their empirical results indicate that employment and output in the offshoring manufacturing plants in Mexico are more volatile than their counterparts in the U.S. Such empirical results suggest that the maquiladora industry (offshoring) can help the U.S. industrial sector to better absorb shocks. In this paper, I expand BFH's empirical analysis in different directions. The empirical results I provide here suggest that the volatility in employment and output in Mexico's maquiladoras is greater than the one estimated by BFH. Therefore, offshoring via the maquiladora industry in Mexico can act as a greater cushion for business cycle fluctuations in the U.S.

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Paper provided by Federal Reserve Bank of Dallas in its series Working Papers with number 1106.

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Date of creation: 2011
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Handle: RePEc:fip:feddwp:1106

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Keywords: Business cycles ; International trade;

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  1. Baxter, Marianne & Kouparitsas, Michael A., 2005. "Determinants of business cycle comovement: a robust analysis," Journal of Monetary Economics, Elsevier, vol. 52(1), pages 113-157, January.
  2. Linda Tesar & Ariel Burstein & Chris Kurz, 2005. "Trade, Production Sharing and the International Transmission of Business Cycles," 2005 Meeting Papers 304, Society for Economic Dynamics.
  3. Paul Bergin & Robert Feenstra, 2006. "Outsourcing and Volatility," Working Papers 628, University of California, Davis, Department of Economics.
  4. Cogley, Timothy & Nason, James M., 1995. "Effects of the Hodrick-Prescott filter on trend and difference stationary time series Implications for business cycle research," Journal of Economic Dynamics and Control, Elsevier, vol. 19(1-2), pages 253-278.
  5. Julian di Giovanni & Andrei A. Levchenko, 2006. "Trade Openness and Volatility," Development Working Papers 219, Centro Studi Luca d\'Agliano, University of Milano.
  6. Jesus Canas & Roberto Coronado & Robert W. Gilmer, 2005. "Texas border employment and maquiladora growth," Monograph, Federal Reserve Bank of Dallas, number 2005tbeam.
  7. Jose Joaquin Lopez, 2007. "Production sharing and real business cycles in a small open economy," Globalization and Monetary Policy Institute Working Paper 05, Federal Reserve Bank of Dallas.
  8. Andrei Zlate, 2010. "Offshore production and business cycle dynamics with heterogeneous firms," International Finance Discussion Papers 995, Board of Governors of the Federal Reserve System (U.S.).
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