Early effects of nearshoring in the manufacturing labor market in Mexico

We apply the synthetic control method to analyze the initial effects of nearshoring on labor outcomes in Mexico's manufacturing sector from July 2020 to June 2023. Our methodology compares jobs, earnings, and productivity among industry groups more likely to be affected by nearshoring, as identified through a propensity index, with a counterfactual constructed from less likely affected industries. Our results indicate that nearshoring is potentially generating early gains in manufacturing jobs but has not led to improvements in earnings. Furthermore, we do not observe a consistent impact on productivity, although some specifications suggest a modest positive effect in industries with a higher nearshoring propensity. While nearshoring effects may take longer to materialize, our findings highlight its initial implications for the Mexican manufacturing sector.