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The impact of the maquiladora industry on U.S. border cities

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  • Jesús Cañas
  • Roberto Coronado
  • Robert W. Gilmer
  • Eduardo Saucedo

Abstract

For decades, the maquiladora industry has been a major economic engine along the U.S.–Mexico border. Since the 1970s, researchers have analyzed how the maquiladora industry affects cities along both sides of the border. Gordon Hanson (2001) produced the first comprehensive study on the impact of the maquiladoras on U.S. border cities, considering the impact of these in-bond plants on both employment and wages. His estimates became useful rules of thumb for the entire U.S.–Mexico border. These estimates have become dated, as Hanson's study covered the period from 1975 to 1997. The purpose of this paper is to update Hanson's results using data from 1990 to 2006 and to extend the estimates to specific border cities. For the border region as a whole, we find that the impact of a 10 percent increase in maquiladora production leads to a 0.5 to 0.9 percent change in employment. However, we also find that the border average is quite misleading, with large differences among individual border cities. Cities along the Texas–Mexico border benefit the most from growing maquiladora production. We also estimate the cross-border maquiladora impacts before and after 2001 when border security begins to rise, the maquiladora industry entered a severe recession and extensive restructuring and global low-wage competition intensified as China joined the World Trade Organization. Empirical results indicate that U.S. border cities are less responsive to growth in maquiladora production from 2001 to 2006 than in the earlier period; however, when looking into specific sectors we find that U.S. border city employment in service sectors are far more responsive post-2001.

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Bibliographic Info

Paper provided by Federal Reserve Bank of Dallas in its series Working Papers with number 1107.

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Date of creation: 2011
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Handle: RePEc:fip:feddwp:1107

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Keywords: International trade ; Labor market ; Economic development - Latin America;

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  1. Jesus Canas & Roberto Coronado & Robert W. Gilmer, 2005. "Trade, manufacturing put Mexico back on track in 2004," Houston Business, Federal Reserve Bank of Dallas, issue Mar.
  2. Thomas M Fullerton Jr, 2004. "Currency Movements and International Border Crossings," Urban/Regional 0407008, EconWPA.
  3. Keith Phillips & Jesus Cañas, 2008. "Regional business cycle integration along the US–Mexico border," The Annals of Regional Science, Springer, vol. 42(1), pages 153-168, March.
  4. Jorge Blázquez-Lidoy & Javier Rodríguez & Javier Santiso, 2006. "Angel or Devil? China's Trade Impact on Latin American Emerging Markets," OECD Development Centre Working Papers 252, OECD Publishing.
  5. André Mollick & Abigaíl Cortez-Rayas & Rosa Olivas-Moncisvais, 2006. "Local labor markets in U.S.–Mexican border cities and the impact of maquiladora production," The Annals of Regional Science, Springer, vol. 40(1), pages 95-116, March.
  6. Gary Clyde Hufbauer & Jeffrey J. Schott, 1993. "NAFTA: An Assessment, Revised Edition," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 70.
  7. Jesus Canas & Roberto Coronado & Bill Gilmer, 2004. "Maquilador downturn: structural change or cyclical factors?," Business Frontier, Federal Reserve Bank of Dallas.
  8. Thomas M Fullerton Jr, 2004. "Cross Border Business Cycle (Impacts on Commercial Electricity Demand," Urban/Regional 0407010, EconWPA.
  9. Jesus Canas & Roberto Coronado & Robert W. Gilmer, 2005. "Texas border employment and maquiladora growth," Monograph, Federal Reserve Bank of Dallas, number 2005tbeam.
  10. Jesus Cañas & Roberto Coronado & Keith Phillips, 2006. "Border benefits from Mexican shoppers," Southwest Economy, Federal Reserve Bank of Dallas, issue May, pages 11-13.
  11. Keith R. Phillips & Jesus Canas, 2004. "Business cycle coordination along the Texas-Mexico border," Working Papers 0502, Federal Reserve Bank of Dallas.
  12. Gallagher, Kevin P. & Moreno-Brid, Juan Carlos & Porzecanski, Roberto, 2008. "The Dynamism of Mexican Exports: Lost in (Chinese) Translation?," World Development, Elsevier, vol. 36(8), pages 1365-1380, August.
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