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US manufacturing reallocation: Impacts on Mexican labor markets

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  • Estefan, Alejandro

Abstract

Recent protectionist threats have renewed policy interest in the effects of US manufacturing reallocation on Mexico’s labor markets. In this paper, I provide causal evidence that the effects of US demand shifts have historically materialized through Mexico’s export manufacturing sector, with US demand expansions increasing manufacturing employment in Mexico, reducing unemployment and inactivity instead of increasing wages. However, these gains fail to spill over to other formal economic sectors or industries within Mexico, leading only to expansions in informality in nonmanufacturing sectors. This finding highlights the fragility of industrial policies that rely on cost-saving offshoring as the main job source.

Suggested Citation

  • Estefan, Alejandro, 2026. "US manufacturing reallocation: Impacts on Mexican labor markets," World Development Perspectives, Elsevier, vol. 41(C).
    • Handle: RePEc:eee:wodepe:v:41:y:2026:i:c:s2452292926000111
    DOI: 10.1016/j.wdp.2026.100768
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    Keywords

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    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General
    • O54 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Latin America; Caribbean

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