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Labor Market Adjustment to Third Party Competition: Evidence from Mexico

Author

Listed:
  • Robertson, Raymond

    (Texas A&M University)

  • Halliday, Timothy J.

    (University of Hawaii at Manoa)

  • Vasireddy, Sindhu

    (University of Hawaii at Manoa)

Abstract

China's exports reduce wages in importing countries, but few studies have looked at competition in third party markets. We examine labor market outcomes in Mexico's apparel and textile sectors associated with U.S. apparel and textile imports from China. Using data on U.S. imports in conjunction with quarterly Mexican labor force surveys, we show that U.S. imports from China are associated with a reduction of employment in Mexico's textile and apparel sectors. These effects are the most pronounced for the least educated. Wages were not impacted on net except for the poorest indicating stronger local labor market ties in the left tail of the wage distribution. Notably, reductions in labor demand due to reduced textile imports had spill-overs beyond these sectors. Finally, the effects of trade-induced demand shocks dissipate after about two quarters indicating low firm-level adjustment costs.

Suggested Citation

  • Robertson, Raymond & Halliday, Timothy J. & Vasireddy, Sindhu, 2018. "Labor Market Adjustment to Third Party Competition: Evidence from Mexico," IZA Discussion Papers 12002, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp12002
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    Cited by:

    1. Óscar Rodil-Marzábal & Ana Laura Gómez Pérez & Hugo Campos-Romero, 2022. "The Global Textile and Apparel Value Chain: From Mexico–US–China Linkages to a Global Approach," Economies, MDPI, vol. 10(10), pages 1-18, October.
    2. Sónia Cabral & Pedro S. Martins & João Pereira dos Santos & Mariana Tavares, 2021. "Collateral Damage? Labour Market Effects of Competing with China—at Home and Abroad," Economica, London School of Economics and Political Science, vol. 88(350), pages 570-600, April.
    3. Sandra Orozco-Aleman & Heriberto Gonzalez-Lozano, 2021. "Return Migration and Self-Employment: Evidence from Mexican Migrants," Journal of Labor Research, Springer, vol. 42(2), pages 148-183, June.

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    More about this item

    Keywords

    apparel; China; Mexico; trade; wages; inequality;
    All these keywords.

    JEL classification:

    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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