Did NAFTA really cause Mexico's high maquiladora growth?

Although Mexico's maquiladora or in-bond plant system is an important and well-recognized component of Mexico-U.S. trade, the connection between the acceleration in maquiladora growth and NAFTA is less clearly understood. A broad cross-section of maquiladora observers - including journalists, political activists, industry analysts, and professors -- argue that Mexico's maquiladoras have been strongly influenced by NAFTA and have grown rapidly as a result. There are reasons to wonder if these conjectures are correct. I test for the contribution of NAFTA to fluctuations in maquiladora employment and find evidence that no such connection exists. Instead, maquiladoras post-NAFTA growth is connected to changes in Mexican wages relative to those in Asia and in the United States, and to fluctuations in U.S. industrial production. Indeed, for ever 1 percent change in U.S. industrial production I find a change in maquiladora employment of between 1.2 and 1.3 percent. This connection is consistent with declining maquiladora employment in 2001, as U. S. industrial production has fallen, but is not consistent with the NAFTA-caused-maquiladora growth story typically found in newspapers and magazines. ; Economic Research Working Paper 0106